Economic Cluster II: Infrastructure (Public Enterprises; Minerals and Energy; Transport; Communication)

Briefing

11 Feb 2008

The Minister of Public Enterprises and The Minister of Minerals and Energy dealt with the predominant issue of electricity supply. Questions centering on foreign investor opinion, duration of the crisis and solutions were asked. The government envisaged that the current crisis would continue for six months, followed by a period of tight electricity availability for four years. The undersea cable was stated as significant component to the reduction of communications costs and would be partially operational by 2009. The type of electricity plant was another common theme, to which The Minister of Public Enterprises provided a breakdown that saw nuclear power as contributing to half of the envisaged 40 000 MW capacity needed in the near future. Renewable resources were being looked at, but in the short term the focus was on gas –turbines and nuclear power. Efficiency in conjunction with increased capacity was focused on a major component in managing electricity use more efficiently.

Minutes

 

Briefing by the Ministers of Public Enterprises, Communications and Minerals and Energy and The Director General of Transport
Hon Alec Erwin, Minister of Public Enterprises, Hon Buyelwa Sonjica, Minister of Minerals & Energy, Dr Ivy Matseppe-Casburri, Minister of Communications, and Ms Mpumi Mpofu, Director General of Department of Transport, briefed the media on the energy crisis, focusing on the implementation of The National Electricity Emergency Plan (NEEP) It was stated that the counter-measures taken thus far were paying dividends.

The Director General of Transport explained the transport provisions for 2010, as well as the upgrading of road infrastructure.

The Minister of Communications addressed the issue of the rollout of digital television transmission and outlined how it would work, as well as the construction of an undersea cable on the western coast of South Africa. The rollout of digital signals would begin this year.


Discussion
Q: The Minister of Minerals and Energy, Hon Buyelwa Sonjica, was asked whether the figure of one million solar water heaters was comprised of government facilities or public households.

A: The Minister answered that it primarily focused at households, but as it was an Eskom initiative she could not furnish further details. She added that an incentive of a 20 – 30% subsidy would be implemented according to the cost of the solar heaters and the income bracket of the households concerned. The Minister added that that they were in detailed discussion with Treasury in order to establish how to implement the incentive package.

Q: The Minister of Public Enterprises, Hon Alec Erwin, was asked what kind of projects he anticipated being slowed down as investors turned away.

A: The Minister replied that existing binding contracts to provide energy to industry would be honoured; he added that new projects would need to be discussed in order to establish the best energy solution. He added that he had not picked up two or three-3 years in advance, as it was simply normal procedure. The Minister stressed that commitments would be honoured.

Q: A journalist asked which undersea cable was referred to, as well as how far the subsidisation of set-top-boxes for digital television (STBs) for the poor had proceeded.

A: The Minister of Communications, Hon Ivy Matsepe-Casaburri, replied that there were two cables in question; an East Coast and a West cable and that they were focusing on the Western cable currently. She stated that the Department was going to Cabinet within the next month in order to discuss the issue of STBs, she added that the experiences of roll out in other countries were being used as case studies. The Minister stressed the importance of including the poor, in order to enfranchise them through digital service delivery.

A: The Minister of Public Enterprises added that there was not focus on the Brazil link currently.

Q: A journalist asked whether the government was looking at the potential for large companies to start producing their own power, effectively becoming part of the energy industry and thus driving privatisation. He asked about the functioning efficiency of the hydroelectric power plant at Cahora Bassa in Mozambique. An update on the progress of the Khulani Corridor Public Transport project was requested.

A: The Minister of Minerals and Energy responded that Cahora Bassa was not operating at optimum efficiency. On the private sector issue, she added that there was an announcement during 2007 concluding that a 30% portion of the electricity industry could be privatised. She added that it was difficult to attract investors due to the high operational costs.

A: The Minister of Public Enterprises added, in relation to Cahora Bassa, that the plan was to receive 1200 MW. He added that it was an important supplier. He added that due to the energy stretch, large companies were getting interested in power generation, for the simple reason that it was in their interests to maintain adequate supply. The Minister stated that he was in discussion with industry. He added that the government’s first target was the quickest one, namely the building of gas turbines.

 
A: With regard to the Khulani Corridor in the Nelson Mandela Bay area, The Director-General of Transport, Ms Mpumi Mpofu, responded that the Department was looking at a rapid public transport system, with the idea to link a station behind the Nelson Mandela Bay Stadium to the inland transport network. This would aim for a 18 to 42 hour operation, with five-minute departures.

Q: The point was made that the President had described the energy situation as a national emergency. Business people in the United Kingdom with business links in South Africa were expressing uncertainty on how long the situation would continue, and clarification was needed.  The status of electricity supply to Zimbabwe was questioned.

A: The Minister of Public Enterprises responded that the problem would continue for the next six-month, followed by a four-month period of rationing, and employing various pricing mechanisms. He added that the Department was envisaging a period of tight energy for four years, which was the same position faced by many other developing countries. He replied that Zimbabwe was a customer, but that no supply had been sent through to Zimbabwe for quite some time.

Q: A journalist asked what the reserve margin was.

A: The Minister of Public Enterprises replied that it was at 8% and it would rise to 16% if all strategies were implemented. It would remain tight especially for large-scale power users.

Q: A journalist asked about the change in road systems in Gauteng, the role of Telkom in the undersea cable initiative and whether double illumination for television signals would realistically only take three years.

A: The Director General of Transport stated that there would be some disruption in the Gauteng road system and that the first phase’s current priority included the upgrading of difficult interchanges, where design solutions existed. The second priority of this phase was the building of new lanes on key networks (the R21 and R24). A new toll system would also be introduced. The second phase involved building new roads. The first phase would be concluded before 2010.

A: The Minister of Communications indicated that there was interest from all communications companies, fixed line and mobile, in the cable, and that Telkom was very interested. The issue of dual illumination differed from the United Kingdom and other countries, in that the government would be actively promoting and educating the masses on the need to switch to digital in order to improve the quality and variety of programming, which included enfranchising marginalised language groups and thus providing everyone with access. The public incentive was that the public would have a vested interest. Digital content production opened up the possibility of indigenous people being able to produce programming on a scale not seen yet.

Q: A journalist asked whether this meant more free-to-air channels.

A: The Minister of Communications replied that the market would determine this and that Independent Communication Authority of South Africa (ICASA) would assess the market.

Q: The cost of this was questioned.

A: The Minister of Communications added that she did not know this as it was still being finalised and that she would get back to him.

Q: A journalist asked how compact fluorescent lights (CFLs) would be rolled out and whether the energy saving of 10% would come from households or business.

A: The Minister of Minerals and Energy replied that power rationing was identified as a quick solution and that the saving was from industry. Municipalities and community development workers would be used to roll out CFLs, starting with government buildings.

A: The Minister of Public Enterprises added that there had been a significant saving from industry and that big business had come to the table. Mining had been built back up to 90%. He added that the plans seemed to be on track.

Q: A journalist asked whether the 10% saving included the enforced closing of mines and whether the Inga Dam, in the Democratic Republic of the Congo, was still a feature of the long term strategy for power generation.

Q: It was stated that it seemed that other metros were worse off than Cape Town and the question was asked how the skills shortage would be addressed.

A: The Minister of Public Enterprise responded that the 10% did include the closure of mines, and that Inga Dam did feature and was potentially one of the quicker projects to implement. He added that they were looking at a co-generation capacity of 3000 MW.

Q: A journalist stated that it seemed that even if Eskom speeded up production and growth, demand would outstrip supply. He asked whether government envisaged nuclear energy as a stop-gap.

A:  The Minister of Public Enterprises replied that that was incorrect. Currently there was a position where the reserve margin was at 10%, which was too low. The problem was the year-on-year peak demand. He added that they would fast track building projects; and gas turbines, co-generation and 10% saving would put the country in a stronger position. Nuclear projects would be part of a doubling strategy, aimed both at increasing capacity to 40 000 MW, as well as moving away from coal due to emissions. Half of the 40 0000 MW would come from nuclear plants, being the Pebble Bed Modular Reactor (PBMR) and Light Water Reactors (LWR). PBMRs would be in position by 2013 and LWRs by 2015. The introduction of pump storage of emissions from coal plants would be implemented in future coal plants. A 100 MW wind farm in the Cape was being built to determine feasibility. He added that at a later date a full overview of renewable resources would be provided.

A: The Minister of Minerals and Energy added that upscaling of projects was occurring and that the biggest project was in Kwazulu -Natal for co-generation.

Q: A journalist asked whether the Minister of Public Enterprises was concerned that Eskom could face legal action.

A: The Minister of Public Enterprises replied that as before, customer rights were determined by contract. He added that mines required uninterrupted power and that if the supplier could not provide that a clause in the contract was invoked. Contracts were now redefined using the concept of Firm Power. There may be some cases launched. However, generally the contracts did address supply issues.

Q: An elaboration on Firm Power was requested.

A:  The Minister of Public Enterprises responded that this principle varied according to customers, and that it mandated that supply warnings would be explicit and standardised according to an agreed temporal frame.

Q: A journalist asked why the Minister of Public Enterprises was answering questions on Eskom. He asked whether it would be fair to say that the Department of Communications had failed to reduce the cost of telecommunications.

A: The Minister of Public Enterprises replied that Eskom reported to him. and overall policy and energy saving lay with the Department of Minerals and Energy (DME). He added that the three organizations of Department of Public Enterprises, DME and Eskom worked as a close team.

A:  The Minister of Communications responded that a number of factors were involved and that to a large extent the cost of telecommunications had been reduced.

A: The Director General of Communications, Ms Lyndall Shope-Mafole, replied that the cost of communications had gone down, but not dramatically. She cited the use of undersea cables as a reason why other countries’ prices had dropped and said that once Africa implemented the new cables it would follow suit. She added data communication costs were very low from mobile providers.

Q: A journalist asked for an update on the regulation on the price of gas. He alluded to an article stating that South Africa did not want to invest in the undersea cable unless it had a majority stake.

A: 
The Minister of Minerals and Energy responded that they were in negotiations with The World Gas Forum, but that by placing large orders, stability of price should be reached.

A: The Minister of Communications replied that she did not know where the story about investment in the undersea cable emanated, and added that without the involvement of the South African government the project would not be possible.

Q: The Minister of Communications was asked what the amount of the investment was.

A: The Minister of Communications replied that a number of foreign companies wanted to land cables in South Africa and the decision had been taken that one of the requirements would be that there must be a majority South African or African stake.

A: The Minister of Public Enterprises added that further announcements would be made as they finalised agreements.

Q: The Minister of Public Enterprises was asked whether the French company Ariva would get the bid for the new nuclear reactors.

A: The Minister replied that both companies who submitted bids used PBMR technology, and that a decision would be made by the end of the year. President Sarkozy’s impending visit to South Africa would have no bearing on whether the French bid would be successful.

Q: A journalist asked how they were going reach a decision, leaving cost aside.

A: The Minister of Public Enterprises responded that South Africa had substantial links with the French nuclear industry, as this had been involved in building Koeberg.

Q: The potential of using the four new corvettes to generate electricity was alluded to as they could produce 700 KW each.

A: The Minister of Public Enterprises replied that this had not yet been considered, but it seemed unlikely as navy ships had other obligations.

The briefing was adjourned.

 

Appendix

 

Media Briefing on the Economic, Investment and Employment Cluster's Programme of Action by the Honourable Minister of Public Enterprises, Alec Erwin
11 February 2008

Introduction
The President’s State of the Nation has set the tone for the pace with which we must work this year. As the Economic Cluster we certainly have our work cut out for us. The efficient and timeous roll-out of all infrastructure programmes is crucial to the economic growth and poverty alleviation goals we have set for ourselves as government.
We have made great strides in the implementation of projects in the transport and logistics infrastructure.
Taxi Recapitalisation Programme (TRP)
TRP aims to improve safety in the taxi industry, and has provided an opportunity to formalise the industry. Government has allocated R7.7Bn for the TRP rollout. The target is to scrap 80% of the old taxi fleet by 2010.

The scrapping of taxis commenced on 28th October 2006 and to date more than 13 261 Old Taxi Vehicles have been scrapped amounting to payments of over R663 Million.

Roads Infrastructure

Rehabilitation, maintenance and reservation of roads infrastructure: Government has worked on more than 600 000km of new roads since 1994. The budget allocation has been raised from R600Million to R2.2 Billion. R63Bn has been committed for roads in the current MTEF period. Cabinet approved the Gauteng Freeway Improvement Scheme at a cost of R23Bn.

Rail Infrastructure.

The South African Rail Commuter Corporation is working closely with metros and some municipalities to ensure that rail services are delivered in a manner that supports the integrated transport plans (ITPs) developed by Government. Metrorail Express Services will be deployed effectively as part of our transport operation plans for both the Confederations Cup in 2009 and ultimately the World Cup games in 2010. By 2010 there should be a train available every five minutes. We will need to ensure that train services are available at least 14-18 hours a day. We have committed almost R10 Billion to upgrade both rolling stock and infrastructure over the next three years. This will also be coupled by investment worth more than R6 Billion, rising to R16Billion.

Passenger Rail Safety
Implementation of the Rail Safety Management System and construction of security contact points for SAPS:
Over 1700 SAPS rail police have been deployed countrywide;
5 000 SAPS rail police to be deployed by 2010; and
Investments of R16Bn for refurbishment & overhaul of coaches.     

The SARCC is calling on all law enforcement agencies to be tough and have no mercy on those burning trains. The SARCC has drafted an ambitious plan of action, pronouncing on key interventions:

Customer focused improvements;
Accelerated rolling stock program;
Development of a safety management system;
Roll-out of the National Rail Safety Ambassador Program with special focus on train surfing and staff riding; and
A new business philosophy on a planned program of preventative maintenance to eliminate the backlog.

Public Transport Strategy
Cabinet approved the Public Transport Strategy with key projects aimed at achieving the goal of mass transit public transport networks. An essential feature of our Public Transport Strategy (2007 – 2020) deals with phased extension of the mode-based vehicle recapitalisation into Integrated Rapid Public Transport Networks. These networks comprise an integrated package of Rapid Rail and Bus Rapid Transit priority corridors especially in major cities.

Public Transport Infrastructure and 2010 Action Agenda. Public Transport Infrastructure & System Fund has been allocated an amount of R9.2 Billion for 2010.

Projects include:
Khulani Corridor  - Eastern Cape – R321 Million
The N1 and N2 Toll Highway – R5 Bn (3200 jobs)
Rea Vaya BRT – Johannesburg – R1.3 Bn
Public Transport Interchange – Ethekwini – R309 Million
Sani Pass Road  between SA and Lesotho Border – R200Million
EPWP – countrywide – R3Bn
Gauteng Freeway Improvement Scheme- R23Bn
BRT Networks in Tshwane – R107 Million
Gautrain Rapid Rail – R27 Bn

Freight Logistics & Corridor Development
In line with the National Freight Logistics Strategy, the first draft of the Branchline Strategy was developed to articulate a vision and strategic approach to revitalising non-core rail lines to ensure economic sustainability of small towns and rural communities. Our plans take into account the efficiency of the branch line strategy, the Nkwalini in KwaZulu-Natal, Belmont – Douglas in the Northern Cape and Kei Rail in the Eastern Cape branch line revitalisation projects.

Aviation
Implementation of the Airports Development Plan;
Implementation of the Airlift Strategy;
ACSA is developing airport infrastructure in line with passenger growth through its R19.3 Bn;
Passenger numbers expected at 31 million by 2012; and
Provincial airports are being upgraded to meet growth demands.

Energy
Energy supply is an area where great effort has been concentrated recently. We have begun to implement the National Electricity Emergency Plan, and the impact of some of the interventions being made will have an impact in the immediate term, while some will start having an impact in the medium to long term.

The Department of Minerals and Energy recently launched the national Energy Efficiency campaign as part of government’s response to the current national energy emergency.

Energy efficiency is central to the government response’s plan, announced last month, to reduce energy demand and electricity consumption. Government is embarking on the public awareness campaign in order to ensure that all energy consumers save energy. Promotion of energy efficient consumption patterns proved successful when the Western Cape recently experienced unprecedented power outages.

The roll-out of the energy efficient light bulbs (CFLs) will be done on a national level with the indigent and the poor either receiving them free or at a subsidised price.  The campaign will commence with an exchange program for CFLs for all government buildings and followed by the replacement of energy inefficient light bulbs in all households. One of the recommendations in the new electricity regulations that have been published for comment by the DME is, amongst other things, a ban of incandescent light bulbs. The deadline for the public to submit comments is 25th February.

Government wants to add other energy sources to take the pressure off the electricity sector through the introduction of the solar water heating system and solar lighting traffic lights. Government envisages one million solar water heating installations in the next three years.  

To enhance the successes of the energy efficiency, a smart metering programme will be introduced to manage energy through remote connection and disconnection of customers who exceed threshold levels set by Eskom.

Increasing uptake and usage of ICTs by government and individuals

The Apex priority related to increasing access to, usage and uptake of ICTs relates to initially connecting health centres, libraries, district office and post offices in the coverage area of, and including,  500 Dinaledi schools - schools designed to significantly contribute to a number of learners passing high grade maths and science in grade 12. In this regard R500 million has been allocated for Sentech to rollout of the wireless broadband infrastructure which will also prioritise  government connectivity to under-serviced areas.

Broadcasting Digital Migration
Sentech is also on track to replace old analogue transmitters and have digital terrestrial television (DTT) coverage to reach 50% of the country’s population by the end of the year. 

DTT is the first step in achieving the Broadcasting Digital Migration aimed at replacing the current analogue broadcasting infrastructure thus enabling allocation of broader spectrum to deliver broadcasting channels as well as more government services.

Broadcasting Digital Migration is a result of the resolution taken at the Regional Radio Communications Conference held in Geneva where member states committed to migrate from the current analogue to digital broadcasting by June 2015.  However, South Africa will start switch-on of the digital signal in November this year and have switch-off of the analogue signal by November 2011. This allows for a three year dual illumination period thus facilitating a smooth transition.

Set-Top Boxes (STB) will be required to enable the public to view digital transmission on their analogue TV sets. An added advantage is that STBs will be manufactured in South Africa, thus revitalising the set top box manufacturing sector and thus creating jobs and other opportunities for SMMEs as well as increase South Africa’s competitiveness in this sector. Work has already begun by the Department of Communications, Trade and Industry and the manufacturing sector.

The Department of Communications will undertake an extensive broadcasting digital migration awareness campaign to inform the consumers about the migrations and the benefits thereof.

Local Content
Local and digital content strategy is being developed in conjunction with other stakeholders such as the Department of Arts and Culture. The strategy will ensure that digital content is being created, preserved, accessed, and understood thereby contributing to building national identity and social cohesion. In addition, it is expected that the strategy will map out the mechanism to unlock the potential of the South African production industry thus, creating jobs, particularly for SMMEs.   

Reducing the Cost Of Telecommunication
The construction of the undersea submarine fibre optic cable is expected to commence in the first half of 2008.  This private-public partnership between governments of the region, telecom operators and private sector investors is expected to provide accessible, affordable and reliable telecommunications to South Africa and the continent.  Part of the cable is expected to be operational by end of 2009 so it could provide additional capacity for the 2010 FIFA World Cup.
 
Benchmark Telecommunications Costs And Usage
As part of sharpening Governments efforts of reducing the cost to communicate, a programme of action to not only telecommunication cost but also with respect of quality, availability, accessibility and usage of ICTs in South Africa will be developed and implemented.  

Roll-Out of The National Address System

The lack of addresses particularly in informal settlements poses a challenge to government to meet its social obligations and protect and serve its citizens.  The roll out of the National Address System will for example, not only enable postal, but also emergency services and the ability of the police to respond effectively and efficiently to life threatening situations and help combat crime.
Although significant progress has been made in the work of the Cluster, we cannot afford to be more complacent. Much more can and should be done. Following the July Cabinet Lekgotla later this year, we will be able to give an update on some of the programmes and interventions outlined above.
ENDS.
Issued by the Economic Cluster
Contact person:
Vimla Maistry
Department of Public Enterprises


 

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