Post-Cabinet briefing & media discussion
24 Feb 2010
After the Cabinet meeting of 25 February 2010, Mr Themba Maseko, Government Spokesperson, read out a post-Cabinet briefing document. He along with Minister of Energy, Dipuo Peters, and Minister in the Presidency, Collins Chabane, then fielded questions from the media.
Panel: Themba Maseko, Government Spokesperson, Dipuo Peters, Minister of Energy, Collins Chabane, Minister in the Presidency
Question and answers
Journalist: Two questions regarding the funding [of electricity provision]. Is Government prepared, have they been in discussion with Treasury to give more assistance to Eskom to help fund the bill? The question of privatisation, some energy analysts have said that Government is considering giving an entire stake at one of the new power stations, let’s say the Kusile or Madupi power station, selling it in its entirety to the private sector. Can you give us an update on what’s happening there?
Journalist: Minister, what would Government have liked to see in terms of increasing? In terms of your own wish list?
Journalist: You say that Eskom initially started by requesting a 146% increase - that is actually new to me, when did that happen and what happened to that request. Secondly you say the domestic sector shouldn’t expect any increase above 15% while the average tariff will rise about 25% over the MYPD2 [Multi-Year Price Determination 2010/11 to 2012/13] that is not the case for the domestic users because the increase will be below that. As I understood what happened there is going to be an increase of 25% for everybody each year for the next three years? That is more than 25% over the period.
Journalist: Eskom last year said they face R30 billion funding shortfall should they be granted the 35% increase to carry on all their infrastructure projects. How do you propose addressing that matter in dealing with the short fall?
Journalist: I want to know whether commercial farmers will receive any help from Government to cushion them from these high increases because most of them buy their electricity from Eskom and obviously these increases will go through to consumers and it will have an effect on food production and food prices.
Journalist: You say the private sector should be leveraged to also invest in the energy sector. How do you propose to do that?
Minister Dipuo Peters: The first question is related to the role of National Treasury giving guarantees. We have an inter-ministerial- committee (IMC) in which Energy, Public Enterprises as well as National Treasury are full members and that is the committee dealing with the particular issues in relation to the additional guarantees that might be needed in relation to the areas that’s going to be a shortfall in this particular situation. I believe if you go into the next question it will be able to address the issue related to the first question. I want to indicate that the Department of Public Enterprises will very soon give an indication about the impact of the tariff increase on Eskom. The department has already put out a request for interest for the 30% stake they want to solicit for Kusile and we will very soon be getting an outcome from that process.
What would Government want to see as an ideal tariff? I want to indicate that the issue related to the 146%, I want to say with the engagement of Eskom and the Department of Energy they indicated to us for them to be able to make it possible that they can conclude on their programme that would be an ideal percentage that they would want to receive from the tariff. We engaged them extensively as the two Departments together with National Treasury to be able to indicate to them the impact of 146% on the economy but generally also on society. That is why they came up with an initial application that indicated they would request for 45% as a smoothened out approach to the tariff. But still that indicated that at the end of the MYPD2 they would still have a shortfall. At this particular moment as Government we have not concluded our process of discussing a proper and finalised funding model for Eskom and we can’t comment on an ideal particular type of tariff at this particular moment.
The issue of the commercial farmers to be cushioned, like I have indicated earlier on, we have this process of the IMC which is also dealing with the IRP, the funding model and other matters related to the security of electricity supply in the country but also including the diversification of energy sources. Within that we have a working group that is dealing in particular with matters on how to make it possible that we can then develop a system in which we can fund Eskom adequately as a public utility but also encourage the development of independent power producers (IPPs) while at the same time being able to make sure South Africans have secure electricity supplies.
The issue of the commercial farmers also is located within the working group that is dealing with the engagement of intensive energy users. So it would be during that process that we would be able to deal with those farmers together with the Department of Agriculture and Forestry and Fisheries to be able to look at a particular type of tariff that would be able to address the challenges of the commercial farmers. I want to indicate within the working groups we have established we have also a working group that is dealing with how to make it possible that we can cushion the poor from the impact of the rising tariffs.
So long as we invest in infrastructure to support electricity generation and transmission we would generally need quite substantial amounts of capital to be able to invest as Government. So we are looking at alternative sources but also saying how we ensure that the poorest of the poor and household consumers are not going to be burdened by the rising tariffs.
You would know we have a policy of at least 30% of power generation being produced by private partners. We see this as an opportunity to make it possible that we can encourage private partner participation in electricity generation. We indicate here that coal generation is one of the areas that we will be investigating not investigating that is actually indicating that there is available 400 megawatts of electricity from the paper, sugar industry as well as the petrol chemical industries. We believe that we could actually be able to bring on board that particular electricity from these industries so as to support the grid from Eskom. Thank you.
Journalist: I didn’t get an answer to my question on 25%. You say it should be less for the domestic. The domestic should not experience any increase above 15% while the average tariff will rise about 25% over MYPD2. This is not the case for domestic users because the increase will be below that, how does that happen and what happened to the idea that it’s going up by 25% a year for three years anyway?
Journalist: Is there a deadline for putting in place of a revised policy for free basic electricity or other ways of cushioning the poor?
Journalist: On the question of ideal tariff, when this was still being discussed Government was very firm on what will be too high and now you are saying you haven’t really discussed that yet. So this figure that we are ending up now, I mean surely you must have a feel if it’s still too high or too low because it’s a positive spin you are putting on the tariff rise now compared to a couple of months ago. To say that we have had cheap electricity forever and now we are on par with the rest of the world. I mean
Journalist: You say domestic users should not expect any increases of above 15%? I don’t get where that figure comes from and how you can say if it’s a municipal function to a very large extent. I mean this sphere of Government that deals with this is surely not specifically you and if it is, why don’t you just tell them what it should be. What we need to do is tell the public what is going on and arising from your reply, I think we can’t. Also on the same issue basically, commercial farmers, the point that Liezel was making is that if you were a commercial farmer, Minister of Energy. What would you be doing right now, how would you plan if this is up in the air being discussed by some working group in which you have no impact between Agriculture, Public Enterprises, yourself or whoever. We need to tell those readers that are farmers what is going to happen to their electricity tariffs and we can’t on this information. My other question is are we seeing very slowly some sort of privatisation of electricity supply and have you discussed it with the other members of the ruling alliance?
Journalist: Minister on a point of clarity, does it mean the commercial farmers will receive help or not? Or will that decision come at a later stage?
Journalist: COSATU and some other unions reacted quite angrily about the raise yesterday and they have threatened to take to the streets and Vavi has also called for the restructuring of the National Energy Regulator (Nersa). Has Cabinet considered this and are there ways that Government would engage the unions in order to explain why this rise is beneficial?
Journalist: When do you expect to release your proposals for encouraging greater efficiency, particular punitive tariffs to be imposed on people using above a certain quantum of electricity?
Journalist: A point of clarity, is the inter-ministerial team looking at further guarantees to Eskom?
Minister Dipuo Peters: The issue related to the 25% and the 15% that I referred to in the statement, we all consider the statement that Nersa has on their website (http://www.nersa.org.za) in relation to the municipal increases which indicates 15.3% is approved for implementation with effect from the 1st of July 2010 which [is] followed by 16.3% from 1st July 2011 and another 16.3% from 1st July 2012. For those municipal distributors who implemented a different tariff increase in the last round when Nersa gave the 31%, the regulator will consider applications on a case by case basis.
The issue of free basic electricity, we have made an appeal as a Department of Energy based on the study that was done about the electricity utilisation by the poorest of the poor an indication from Eskom itself that 50kw hours per month is a bit low for the low income or the poorest of the poor. There is a recommendation that we are doing as part of the package that we would be presenting when we deal with the funding model that would be able to speak to whether we increase what we do with free basic electricity. Government’s policy on free basic electricity to the poorest of the poor still stands and that is why we encourage our communities, especially those in areas where you find people are still not connected, to make it possible that they register with their municipalities as indigents. It’s only when they are registered that it can be determined if they qualify for the free basic electricity.
The issue related to the privatisation of the electricity sector, I just wanted to indicate that the policy of about 30% participation for private or the independent power producers was taken four years ago and we are starting to implement that to make it possible that we can then address the impact of Eskom’s build program on Eskom itself. So the final discussion about whether it’s being privatised or not and all those things will be something for a debate at a later stage.
The issue of the farmers, whether they will be subsidised, I indicated that the President was very clear when he gave us the mandate as the Ministers responsible for both the economy as well as those responsible for the energy sector to say that we need to come up with a plan that is going to be sustainable. That is why we developed that Inter-Ministerial Committee with all the working groups. The working groups have started working and they are going to be presenting their different models and different suggestions to the team that is led by Energy and DPE in which we have the Minister responsible for National Planning Commission, the Minister of Finance as well as the Minister responsible for Economic Development. So as to make it possible that all factors are considered we are also saying that whilst we are busy with this process in developing our integrated resource plan, we are going to consider the inputs that will be made by the intensive energy users and agriculture is one of those. If we arrive at the stage where there are recommendations related to particular subsidies we would then be able to make that presentation to Cabinet and based on the available resources there would be a particular position that emanates from there. We should wait for that process to run that course and then deal with the recommendations that would come from the working groups.
Minister Dipuo Peters: There was a question about punitive measures for excessive users. The inclining block tariff in itself I would say is a particular structure that would punish those who use electricity excessively. The more you use the more you will pay, and that is why we are calling on people to become more and more energy efficient. If you don’t use electricity why would you be having your heaters running? Why would you have your pool pumps? Those who have pools, pool pumps running throughout winter when you are not even swimming! Why would you keep your air-conditioning on throughout the day and night when you are not even in the house? Those are type of things that are simple but teach us to start using electricity in a different way. We are also saying that as Government we want to make sure that people can reduce the amount of electricity they use in heating water and that is why the solar water heating framework that we have developed and the massive programme that we are talking about with the solar water heating systems that we want people to introduce and to buy into.
The Minister for Evaluation and Monitoring in his statement about Cabinet did indicate that we are giving the preliminary report about what we are saying about the outcome of the determination. There is a process that I indicated that Treasury together with Energy and DPE will be engaged to determine the issue of the guarantees. I am sorry for missing out on that one.
Minister Collins Chabane: As all would know that
The issue of farmers have been raised - a lot of people are going to be impacted differently but all of them in most cases will say the increases is too high and therefore we need to find the mitigating factors to do that, but as I said those are the issues which I think the relevant stakeholders and departments will deal with as they move forward.
Journalist: Was there anything said on the lifestyle audits that the opposition parties are asking for? Anything more that was brought up or could it be something that will be revived in discussions at least? Minister of Energy, when will the solar water heaters be issued?
Journalist: When we go to the Cites meeting in
Journalist: Reports out of
Journalist: I wanted to know about the Black Authorities Act repeal Bill, has Black Authorities Act of 1951 become a dead letter or is it still in operation in its shape, form or otherwise and what has its effect been recently?
Journalist: I don’t know whether the question of the alleged involvement of the South African Revenue Service (SARS) in undertaking lifestyle audits of a list of politicians as the ANC Youth League is alleging, whether there has been some security breach and whether Cabinet has discussed that and what is its view?
Journalist: You say that President Zuma joined other African leaders in condemning the coup in
Minister Collins Chabane: Let me deal with two questions at the same time, the lifestyle audit and the SARS or the alleged SARS list. The agenda for Cabinet is set different so that was not an agenda item for Cabinet. If there’s any issue that arise the various departments or institutions that have the responsibility to deal with those issues, they will deal with the matters themselves.
With regard to the issue of Cites you would know that
With regard to the arms seizure, Cabinet have not discussed the seizure of arms either as an agenda item or bringing it as a form of notice to Cabinet, but the institutions who have been dealing with, they are in charge of the situation.
With regard to the recognition of the Niger Government as constituted after the coup, obviously you know South Africa is a signatory of a number of international instruments but central to this one is the commitment of South Africa with regard to the protocol of the African Union (AU) and the Southern African Development Community (SADC) with regard to the change of Government by non-democratic means, especially by military means. South Africa wishes that the incident which happened which led to the change of Government, they should speed up the return to civilian government but as a form of recognition as you know South Africa don’t recognise governments which came through military coup and the AU is very strong on that. The AU is also looking at the matter to see how they resolve the issue around that.
Journalist: Will you therefore send the
Minister Collins Chabane: That decision has not been taken so I think the Department of International Relations would regard the protocols because it’s not the first time that a coup takes place in
Themba Maseko: The question about the Black Authorities Act, basically it’s one of the few remaining pieces of legislation in our books - it was a piece of law that was created to manage the affairs of black people during apartheid. Obviously it has become redundant so this piece of legislation basically seeks to remove it from our books. Well the cleanup of apartheid legislation is an ongoing process so as you put your legislation in order you do realise that there is still a piece of law that is still there but the fact of the matter is that the cleanup operation will take place over a long period of time.
Journalist: The previous bit of legislation which I can’t recall the name of but which dated from 1928 was repealed in Parliament two or three years. But it was done so sloppy that at this stage Parliament annually has to sort of extend that bit of legislation, have we done our homework a bit better this time around so that such an embarrassment is not visited upon us again?
Themba Maseko: Government always does its homework in repealing legislation and I can assure you it has been done this time around. So rest assured we also talked about the law review by the Judicial Commission so this is ongoing work. It is important work but you could also end up creating gaps that are not necessarily in legislation. So you have to make sure you do it properly. So, that’s what happening. Let’s not forget we agreed to go back to the energy question in closing now.
Journalist: I am not sure if my memory serves me correctly but I thought the 30% privatisation applied to generation and not also to transmission and will it be extended to distribution as well? And given the creepy privatisation if we can call it that how will we prevent in future interest of the ANC through Chancellor House in power projects and do you think it appropriate at all for the ruling party to have interest in privatised power?
Journalist: I am still wrestling with this paragraph, you say we shouldn’t get an increase above 15% but your average works out slightly above 15-16% thereabout. But you average tariff you say will rise by about 25% so someone in there is paying well over 25% for their electricity. If the rest of us is only paying 15% then someone is paying more than 25% if the average is going to be 25%, it has to be mathematically, who is paying more than 25%?
Journalist: Someone has to pay more if everybody else is paying less, will that someone be the farming community in this country and if you are a farmer does this mean that you have to wait for that committee that you were talking about to reach its conclusion? What do they do in the interim practically understanding full well that this is a long process? What do they do once these decisions by Nersa go into effect?
Minister Dipuo Peters: Eskom will definitely be engaging with the different industrial role-players or customers, they are called key customers of Eskom, in relation to the issue of the tariff and they buy directly from Eskom so they need, and you would remember that there was a discussion about engagement of Eskom with the different industry role-players in relation to the tariff long even before the revised 35% was initiated, that process is still ongoing.
The farmers are equally industrial role player that are intensive energy users and they are engaging also with Eskom at that level and I would believe that Eskom would be able to respond to that particular question adequately. The issue you raised about the 30% generation, you are right it is 30% generation because the transmission, the grid, belongs to Eskom. If I had insinuated that I think I made a mistake so it’s 30% power generation not transmission.
The interest of African National Congress (ANC) in privatised power, I just want to indicate I haven’t applied my mind to that particular issue but I would believe at a later stage I could respond to it.
The issue of the solar water heaters, I just want to indicate that we will soon as a Department advertise for the registration of suppliers and also to indicate that you would remember that solar water heating system, Eskom had a subsidy system that didn’t generate the desired outcome because of the costs of the units themselves and in line with the Industrial Policy Action Plan (IPAP) which the Department of Trade and Industry under Minister Rob Davies is driving has identified the local manufacturing of solar water heating systems as one of the key areas of intervention for job creation but also to grow jobs locally and make sure there is local manufacturing in that regard. We are going to be launching publicly so we have been having connections to solar water heating by households and different industry. Early next year the Department of Trade and Industry would be releasing regulations for the hospitality to revert to solar water heating in particular for the hotels and all those others that are intensive water users. But also we want to make sure that by the end of the year we would have connected through this system more than 50 000 and we believe going forward we would have ensured that there is local manufacturing and would be able to massify the roll-out because as we speak the challenge has been the different price structures with the imported units from different parts of the country. We are working together with the South African Bureau of Standards to make sure that the units that are being imported are not of low quality, they must have a ten year guarantee for each one to be able to install on a household in
Statement on the Cabinet meeting of 24 February 2010 in Cape Town
Cabinet held its ordinary meeting in Cape Town on 24 February 2010.
Cabinet welcomed the release of data this week, which indicated that the economy had exceeded expectations by growing at 3.2 % compared to the expected figure of 2.6 %. This is an indication that government, with its partners in business, labour and the community sector had responded and handled the recession appropriately and that the worst of the recession might be behind us. We are particularly pleased that important sectors in the economy such as manufacturing, mining and financial services recovered well and had made significant contribution to the GDP figures.
The national budget that was tabled in Parliament by the Minister of Finance will serve to strengthen the economy even further by focussing on that which will sustain and grow the economy in the short and long term. Government is committed to channelling our efforts towards developing a new growth path that will ensure that the economy grows at a higher level and creates jobs. The suggestions that this budget is not pro poor are not true. Evidence that this budget, like previous budgets, is pro-poor can be found in the fact that significant resources have been directed to the poorest of the poor, for example social grants, health, education, human settlements, basic services and rural development.
Government would like to invite South Africans to participate in the process of crafting a new growth path that would boost productivity and competitiveness in key sectors of the economy. Let us work together to grow the economy, to create large numbers of jobs and tackle the roots of poverty.
Cabinet discussed the NERSA decision and announcement on the ESKOM tariff application. The Minister of Energy is here with us to give the government initial response on the decision.
The protest action taking place in some parts of the country was discussed and Cabinet wishes to re-assure communities throughout the country that we have heard your concerns. Government has already declared 2010 as the year of action to deal with the most urgent needs of our communities. We have a plan to increase the capacity of local government to enable them to expedite service delivery to all our communities. At the meeting President Jacob Zuma urged Ministers to prioritise all areas that still lack basic services as it is very difficult for government to justify the tough conditions communities are experiencing. However, violent protests and general lawlessness cannot and will not be tolerated. Communities are urged to protest peacefully and within the framework of the law.
Cabinet received a progress report on the preparations for the 2010 FIFA World Cup which indicated that its ‘all systems go’. The highlights of the report include the following: all stadia are ready for the World Cup Finals; upgrades at OR Tambo airport, Cape Town international and Mangaung have been completed to world class standards. The new Durban airport will be completed just before the start of the finals; 570 additional busses are being procured and driver training is underway; discussions are taking place with the taxi industry to look at how they will be part of the transport system; sites have been selected for fan parks with public viewing areas. There will be a total of 46 public viewing areas around the country; additional power substations and generators have already been installed at the stadia to ensure adequate power supply; six stadiums have already been fitted with ‘last mile’ fibre optic broadcasting infrastructure and the remaining four stadia will be completed in March.
All of these milestones will be part of the lasting legacy that will be enjoyed by generations of South Africans for many decades, long after the World Cup has come and gone.
Cabinet condemns the coup d’etat that toppled Niger’s President Momadou Tandja’s government on the 18th February 2010. This coup, which also condemned by the African Union and the Economic Community of West African States (ECOWAS), undermines the progress already made in promoting democracy and political stability in the continent.
The meeting discussed President Jacob Zuma’s state visit to the United Kingdom on 2 March 2010. President Zuma will be accompanied by a delegation of Cabinet Ministers and 170 business leaders. This visit will go a long way to strengthen the historic bilateral and economic ties between the two countries.
Cabinet noted that South Africa will participate in the 54th Session of the United Nations Commission on the Status of Women (UNCSW) which will take place from 01-12 March 2010 at the UN Head Quarters in New York. The Ministry for Women, Children, and Persons with Disabilities is in the process of finalising the national country report that will be tabled at the meeting. This report is being compiled in consultation with the all the stakeholders. The South African Delegation to the session will consist of government and representatives of civil society.
The introduction of The Seventh National Orders was approved. The new Orders will be bestowed on a Foreign Head of State by The President of the Republic. This Order will be called the Order of South Africa.
The meeting discussed and noted the progress report on the South African Law Reform Commission’s (SALRC’s) project on Statutory Law Revision. The project will include a review of statutes relating to the Traditional Leaders Governance Framework Act, amongst others, dealing with issues relating to the Khoi-San and other indigenous groups of South Africa. The SALRC envisages that the statutory law revision project will ultimately result in the amendment of legislation.
Cabinet supported the African Union Conference of the Ministers of Health who proposed that South Africa to host the official launch of the Southern African Development Community (SADC) lifestyles Day on 26th February. The healthy lifestyle day will also provide an excellent platform for the youth to draw a link between physical activity, fitness and high performance and achievement in sports as well as educate the adult population on the benefits of physical fitness for their well being. The event will take place on 26 and 27 February 2010 in the Western Cape Province. The launch of the Lifestyle Day will include a 5-kilometre walk, which will include Ministers and other dignitaries from the other countries in the continent.
Cabinet noted South Africa’s participation at the fifteenth Meeting of the Conference of the Parties to the Convention on International Trade in Endangered Species (COP 15 CITES) of Wild Fauna and Flora to be held from 13 to 25 March 2010 in Doha, Qatar.
South Africa’s participation in the International Conference on Rural Territorial Development was approved. This conference, under the theme sharing lessons between middle income countries, will be held in New Delhi, India from 14 to 16 April 2010.
The African Union’s endorsement of South Africa’s candidacy was for the non-permanent seat on the United Nations Security Council for 2011-2012 was welcomed.
The Minister of Higher Education tabled a report on the Review of the National Student Financial Aid Scheme (NSFAS). The fund was established to facilitate access to institutions of higher learning. The report was noted and Cabinet approved that the report be released to the public for public comment in Mid March 2010. The matter will be brought back to Cabinet before the end August 2010.
The Black Authorities Act Repeal Bill was approved for introduction to Parliament in due course. This Bill proposes to repeal and remove the Black Authorities Act of 1951, which created ‘tribal’, regional and territorial authorities to administer the affairs of Black people.
The following appointments were approved:
- Mr Mangisi George Mahlalela was appointed to the post of Director General in the Department of Transport.
- Mr Tshepe E Motumi was appointed to the post of Director General in the newly created Department of Military Veterans in the Ministry of Defence and Military Veterans.
- Ms Sizakele Mzimela’s appointment to the post of Chief Executive Officer (CEO) of the South African Airways (SAA) was noted.
- Mr Jabulani Ndhovu and Professor David Lewis were appointed to the Board of South African Airways (SAA).
- The following were appointed to the Council of Robben Island Museum: Ms T Modise (Chairperson); Mr B Martins (Deputy Chairperson); Ms L Callinicos; Mr L Mpahlwa; Ms R Abdullah; Dr MS Mogoba; Mr OB Nqubelani; Dr N Motete; Mr M Dada; Ms MO Morata; Mr MS Gwavu; Mr MM Gasela; Ms GM Masuku and Mr Pandelani Nefolovhodwe.
- The following were reappointed to the Board of Khula Enterprise Finance Limited for a period of 3 years: Mr I Tayob; Ms N Matyumza and Mr N Greenhill.
The following were appointed to the Board of Khula Enterprises for a period of three years commencing from the next Annual General Meeting: Mr M Ferreira; Mr V Twala; Mr D Jackson; Dr Z Lees; Mr N Swana; Mr M Kekana (Chairperson); Ms S Rensburg (Deputy Chairperson); Ms D Thabede; Mr M Mohoto (representative of DTI) and Mr S Molepo
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