Reducing demand trumps creating capacity
The IDC's Green Industries business unit is at the forefront of South Africa's efforts to encourage all industries to invest in measures and technologies that reduce our dependence on predominantly coal-fired power.
This has been addressed at a household level with the rollout of the government's solar water-heater programme, which aims to install a million of these units in low-cost housing.
Although the IDC co-funded industries involved in this programme, its main focus is on supporting the transition to more energy-efficient and self-powered sources within industry and business.
"The reason we've decided to make it a priority is because we have so many clients coming to us looking for extra working capital, specifically to cover the increase in electricity costs," explains Rentia van Tonder. "We decided that instead of giving them more money to pay their electricity bills, we should be proactive and find a way for them to invest in energy efficiency."
This has led to the establishment of the R500-million Green Energy Efficiency Fund (GEEF), which was launched in October last year as a joint project with German development bank Kfw.
This fund offers favourable terms to companies looking to improve their efficiencies and reduce -carbon emissions by investing in green and self-use renewable energy technologies. Eligible projects range from equipment that improves production or reduces waste (such as high efficiency boilers, compressors or insulation materials) to equipment that uses renewable sources rather than fossil fuels.
"The intention is to support entrepreneurs to become more energy efficient.
In some of these cases the payback period is three or four years, so it's worthwhile doing it," says Van Tonder. "We try to match the payback of the intervention, so the loan period could go up to 15 years.
"Rooftop photovoltaic solar, for example, has a longer payback period because it's quite capital intensive, so the GEEF does provide long-term funding."
She adds that this fund has already committed 18% of the R500-million, with a significant pipeline building. "The preference is for the funding to go to small and medium enterprises, so we generally look at capital expenditure from around R2-million to R10-million. We don't want to spend more than R50-million per transaction, in order to spread the impact wider."
In addition to financial support, the IDC is also able to provide technical support through local and international experts who can conduct energy assessments, calculate financial benefits and support the selection of appropriate equipment and technologies.
How the Green Energy Efficiency Fund works
All sectors that fall within the IDC's funding mandate will be considered for funding. Primary sectors include:
- Green industry
- Agricultural value chain
- Manufacturing activities
- Mining value chain
- Tourism and high-level services
- Media and motion pictures
- Knowledge economy.
Types of projects
Financially viable energy efficiency projects that provide significant energy and/or emissions savings and that offset grid-connected electricity through self-use renewable energy are eligible for financing through the IDC.
- Qualifying equipment and technologies include those that:
- Benefit from variable controls to produce the same output with less energy
- Produce a higher quantity of products with less defects/wastage
- Use less energy to provide the same amount of useful work
- Make use of renewable sources rather than fossil fuels
- Optimise energy use.
Loans from R1-million to R50-million are available at prime -2% interest.
The term is up to 15 years, depending on the payback period of the technology used.
Standard IDC fees apply
All standard credit policies and procedures will apply
The Green Energy Efficiency Fund is only available to private sector companies registered and operating in South Africa that plan to:
- Implement a financially viable energy efficiency project that provides significant energy and/or emissions savings
- Offset grid-connected electricity through self-use renewable energy. Priority will be given to companies that have less than or equal to:
- R51-million turnover or
- R55-million assets or
- 200 employees
Applicants are required to submit the Green Energy Efficiency Fund application form available on idc.co.za and at the IDC regional offices. The form must be accompanied by an executive summary providing project background information and the reason for the funding.
The IDC will then conduct a basic assessment and determine the eligibility of the project within five working days.
If the project is eligible, a detailed business plan is required, including financials and cash flow statements, which will be used in the due diligence and credit approval process.