South Africa: IPP Procurement Programme Framework In South Africa

Last Updated: 3 March 2016
Article by Simla Ramdayal

Most Popular Article in South Africa, March 2016

In 1998 the Government of South Africa indicated that it is an objective of the State to encourage the entry of multiple players into the generation market. This would ensure both diversification and security of electricity supply.

In 2003, a White Paper on Renewable Energy was approved in South Africa in terms of which it was stated that a target of 10,000GWh of energy is to be produced from renewable energy sources such as biomass, wind, solar and small-scale projects by 2013. Since 2011, independent power producer ("IPP") procurement programmes have been conducted with great success in South Africa, and it is likely that the Department of Energy will continue relying on these programmes to procure electricity from IPPs. This has attracted many international and local private project developers and investors to South Africa.

In this blog post we provide an overview of the IPP procurement programme framework in South Africa.


Eskom, a state-owned utility company, currently generates about 95% of electricity used in South Africa.

In line with the objectives of creating efficient, effective, sustainable and orderly development and operation of electricity supply infrastructure in South Africa, the Electricity Regulation Act 4 of 2006 ("Electricity Regulation Act") was enacted. The Electricity Regulation Act provides that the Minister of Energy may publish determinations for new generation capacity. In these determinations, the Minister can specify the amount of new generation capacity required to ensure the continued uninterrupted supply of electricity, the types of energy sources from which this electricity must be generated and the procurement procedure for such new generation capacity.

The Electricity Regulations on New Generation Capacity GNR.399 of 4 May 2011 (GG: 34262), published under the Electricity Regulation Act ("Regulations"), further provide that the abovementioned determinations must set out whether the new generation capacity will be established by an IPP and who will be responsible for the procurement of the new generation capacity. These Regulations do not apply to the purchase of new electricity generation capacity and electricity by persons other than organs of state.

These Regulations also specify that the Minister of Energy must develop an Integrated Resource Plan ("IRP") together with the National Energy Regulator of South Africa to determine long and medium-term plans for the provision of clean, reliable and cost-effective electricity. The Integrated Resource Plan was launched in 2010 and updated in 2013 (see This provides for a twenty year projection of electricity supply in South Africa and stipulates that 40% of South Africa's electricity must be generated from renewable sources. The Minister of Energy issues determinations based on the new power generation requirements in the IRP.

In 2012, the Minister made determinations for the procurement of electricity from:

On 18 August 2015, the Minister of Energy published a determination for the Department of Energy to procure electricity from renewable resources. This specified that the electricity will be procured from IPPs through one or more IPP procurement programmes, tendering processes, direct negotiations with one or more project developers or other procurement procedures. In December 2015, a determination in respect of nuclear energy was made (see

The REIPPP Programme is generally regarded as being one of the most successful public-private partnership initiatives in Africa and the Department of Energy refers to it as its flagship programme.

According to the "Overview of the IPP Procurement Programme" published by the IPP Office on 31 March 2015, the REIPPP Programme has resulted in the investment of approximately $14 billion in South Africa's renewable energy sector, of which approximately 28% constitutes foreign direct investment.

Overview of IPP Procurement Programmes

Under IPP procurement programmes a competitive tender process is followed. This is structured in rolling bid-windows which allows for continued participation.

The exact bid rules for each IPP procurement programme depends on the request for proposals issued in respect of that programme. However, generally the bid rules relate to (i) commercial, legal, financial and technical requirements, and (ii) socio-economic development criteria.

The socio-economic development criteria aim to broaden the positive impact that the IPP procurement programme will have, particularly in the area where projects will be undertaken by successful bidders.

The socio-economic development criteria include the following.

  • Local Ownership – Generally, a certain percentage of the project must be owned by South Africans. Under the REIPPP Programme of 2012, 40% of each project was required to be owned by South Africans and 2.5% of each project was required to be owned by the local communities. Local communities would normally hold their ownership through community trusts or Communal Property Associations. Under the Coal Baseload IPP Procurement Programme of 2012, 51% of each project was required to be owned by South Africans.
  • Socio-Economic Development – Bidders may be required to propose socio-economic development projects that it will contribute to if the bid is successful. Under the REIPPP Programme of 2012, the proposed socio-economic development projects varied from education, social and welfare, health care, enterprise development and infrastructure projects. Successful bidders are required to contribute a minimum of 1% of their revenue to the Socio-Economic Development projects and to submit quarterly reports to the Department of Energy on the initiatives they have engaged in.
  • Local Content – Successful bidders are required to spend a certain percentage of the project value in South Africa.

The 2015 Determinations

As indicated above, the Minister of Energy published a number of determinations on 18 August 2015. The table below provides a summary of the amount of electricity to be procured and from which sources such electricity can be generated under each of these IPP procurement programmes.

Gas IPP Procurement Programme 2015 Cogeneration IPP Procurement Programme 2015 Renewable Energy IPP Procurement Programme 2015
Generation capacity needed 3,126 MW 1,800 MW 6,300 MW
Source types
  • Natural gas
  • LNG
  • Coal bed methane
  • Synthesis gas
  • Shale gas
  • Any other gas type or source
  • Waste heat or furnace off gas
  • Simultaneous generation of electricity and useful thermal energy from a common fuel source
  • An energy source which is a co-product, by-product, waste product or residual product of an industrial process and/or sustainable agricultural or forestry activity
  • Concentrated solar power
  • Wind
  • Solar photovoltaic
  • Biogas
  • Biomass
  • Landfill gas
  • Small hydro (<40MW)
  • Small projects (<5MW)

The IPP office postponed the bid submission date for bids pursuant to the 2015 Cogeneration IPP Procurement Programme pertaining to its 1,800MW generation capacity from 1 October 2015 to 11 November 2015. The successful bidders of this programme have not yet been announced.


South Africa has an energy shortage and is required to substantially increase its generation capacity in an environmentally sustainable manner. The REIPPP Programme has been able to provide for additional energy to be fed into the grid within a reasonably short period of time. Following the success of the REIPPP Programme, the Minister of Energy has published determinations for electricity from other sources to be procured by IPP procurement programmes and has published a determination for further electricity to be procured from renewable sources.

In addition to ensuring additional generation capacity, the IPP procurement programmes will also increase the entry of multiple players in the generation market.

About Dentons

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
8 Nov 2016, Webinar, Washington, United States

Join Dentons government contracts lawyers for a Public Contracting Institute (PCI) webinar series involving the most current industry analysis in government contract cost accounting from a team of leaders in the field with unparalleled experience

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.