Energy: Minister's Budget Vote Speech & Responses by DA and ANC

Minister of Energy, Ms Dipuo Peters, gave her Budget Vote Speech on the 14 May 2013

___________________________________________________________________
Honourable Chairperson
Deputy Minister of Energy, Ms Barbara Thompson
Honourable Chairperson and Members of the Energy Portfolio Committee
Honourable Members
Diplomats
Director-General and the Senior Management of the Department of Energy
Chairpersons and CEO’s of Public Entities
Guests and Stakeholders
Ladies and gentlemen.

Our first democratically elected President, Dr Nelson Mandela once said, “For to be free is not merely to cast off one's chains, but to live in a way that respects and enhances the freedom of others.”

It is an instructive remark, enjoining us all to work hard to not only to cast of the chains – but to respect and enhance the freedom of others.

It is therefore fitting that, four years since President Jacob Zuma, through a stand-alone department assigned us the task of translating the African National Congress (ANC)’s policies on energy into implementable government programmes, we must reflect on the progress made and the road traversed thus far.

The ANC Policy on Energy is approached from the perspective of how energy resources can be effectively used to meet national development goals. It should also be implemented within an integrated energy plan, balancing the goals of economic efficiency, environmental sustainability and social equity. The Policy also aims at ensuring efficient use of energy and the substitution of more appropriate fuels.

Madiba further guided us when he said that, “freedom alone is not enough without lights to read books at night.”

The ANC mandated the Department of Energy (DOE) to ensure the secure and sustainable provision of energy for socio-economic development. In essence, this enables us to enhance the freedom of others by making the light to read books are always available to all the people of the RSA.

Chairperson,

Tabling our Budget Vote in June 2009, we made various commitments on how we as Team Energy plan to transform the country’s energy landscape to be the ANC-led governments vehicle for economic development and job creation.

I am pleased that today I can report on the progress we made:

• Pursuant to the ANC’s Resolution of “ensuring security of supply of energy resources and pursuing an energy mix that includes clean and renewable sources”, we delivered the country’s first integrated energy mix plan for electricity, known as the Integrated Resource Plan. It has a deliberate bias towards cleaner energy and it is in line with the Long Term Mitigation Scenarios as espoused by President Jacob Zuma at COP15 in 2009.
• We created regulatory certainty in the energy sector which is bearing fruit through significant investments in energy infrastructure.
• We have made significant inroads into making electricity accessible to all South Africans. We have achieved over a million household connections over the past four years, increasing access to over 84% as per Census 2011.
• The Independent Systems and Market Operator Bill was approved by the Portfolio Committee on Energy and will soon be debated in the National Assembly. This will create the framework for the restructuring of the electricity supply industry and create the necessary space for the participation of the private sector power generation.
• Through the RE IPP Programme, 47 Bid Companies were contracted to produce 2450 MW of Mini Hydro, Wind, PV and CSP.
• To date we have installed over 350 000 solar water geysers, and through the Green Economy Accord, we have ensured that the Solar Water Heating (SWH) programme strictly enforces the inclusion of a minimum of 70% local content threshold, in an effort to optimise the benefits of localisation and create the much needed jobs. We have continued to improve on the challenges experienced with the roll out of Solar Water Heating programme. The biggest beneficiaries of the SWH program are the women who are relieved of the chores cooking water heating every morning.
• We have promulgated the bio-fuels blending specifications and regulations, and are working within the government system to finalise the outstanding matters to facilitate the emergence of this industry with its promising job creation potential.
• We set a course towards improving wages of retail and forecourt workers in the liquid fuels sector.
• Through our persistence on issues of transformation in the energy sector, we witnessed the achievement of an unencumbered 25% BEE stake in total, through a consortium led by Calulo Investments of Mr Mkhuseli Faku. Calulo’s stake in Total South Africa and its leadership within the consortium is an excellent example of the strides that are being made in ownership transformation in the local petroleum industry.
• The EDIH has been closed down as per Cabinet’s directive. Capacity is created in DOE to deal with the Approach to Distribution Asset Management.
• The National Radioactive Waste Disposal Institute has been established and will be operationalised during 2013/14. Seed capital to this effect has been secured and the Board of Directors are being recruited.

Honourable Members,

You will recall that during COP17, the development of the energy resources from the mighty Congo River, popularly known as Grand Inga, was identified as one of the legacy projects. To fulfil this aspiration, you will also recall that the President of the Republic, President Jacob Zuma and the President of the Democratic Republic of Congo, President Kabila witnessed the signing of a Memorandum of Understanding, that sought to pave way for the development of the treaty.

I am pleased to announce that we have finalised the treaty that will guide the development of this project, and it has paved the way for bringing clean energy to South Africa.

It was Amilcar Cabral who once implored humankind to “Hide nothing from the masses of our people. Tell no lies. Expose lies whenever they are told. Mask no difficulties, mistakes, failures. Claim no easy victories.”

It is therefore important that we admit that there are certain areas where progress has not been achieved as expected.

One of these is Energy Efficiency. As a country, we have not been able to get together and resolve our Energy Demand Side problems. Although we have initiatives such as 49m, Energy Conservation Scheme, Energy Efficiency Leadership Network, the distribution of CFL’s and others, this is not enough, and we need to redouble efforts in this regard.

The Integrated Energy Plan was deferred for completion in the year to 2013/14, mainly to facilitate alignment to the National Development Plan (NDP).

Honourable Members,

We are all aware of the negative developments within the national oil company, PetroSA. I wish to assure South Africa that I have taken these governance and procurement challenges seriously, which is why late in 2012, upon the alleged transgressions coming to my attention, I instructed the Chairperson of CEF to initiate an investigation immediately.

We have received the report and we are in the process of taking the investigation forward whilst implementing some of the recommendations made to clean up PetroSA. We need a credible National Oil Company; there will no compromise on this.

Honourable Members,

The report on the audit of refineries has revealed that our refineries are operating below nameplate capacity. This is an indication that investment by the private sector has not taken place to maintain maximum capacity, let alone improve capacity. This information has assisted us in improving management of the liquid supply situation.

The audit also indicates the need for investment in the refinery sector which is part of the responses to the call by the NDP and the Liquid Fuels Infrastructure Roadmap. The Roadmap will be presented to this House in the second quarter of the 2013/14 financial year.

The capacity constraints in the refining sector as well as the pending tightening of fuel specifications under the Clean Fuels II program, point to the need for the decisions to be made on the building of the new refinery.

The Liquid Fuels Infrastructure Roadmap also indicates the need for additional refining capacity and the expansion of the Petroleum Products import, transportation and storage facilities.

For the 2012/13 financial year, the DoE was appropriated R 6,7 billion and has spent 98.9% of the allocated budget.

The Integrated Energy Plan, a planning instrument to determine the most appropriate approach to meeting our energy needs up to 2050, is ready to be taken through a robust public stakeholder consultation process. The process will precede the consultation on the constituent parts of the IEP, including the IRP and Liquid Fuels and Gas Infrastructure Plans.

We targeted to electrify 150 000 households, and achieved 175 474 connections, which is 25 474 above the target.

The MYPD3 was concluded in March this year, with NERSA allowing tariff increases of 8% per annum over the next five years. This provides certainty about electricity pricing and facilitates relatively longer term planning for much needed investment by municipalities, Eskom, and industry.

Projects that are indicated in the IRP are expected to be largely funded from tariff increases. The Eskom build programme and other IRP programmes can now proceed to improve our energy security.

In December 2009, The President, His Excellency, Mr Jacob Zuma announced at the Copenhagen (COP 15) a target to reduce greenhouse gas emissions by 34% and 42% below ‘business as usual’ emissions levels by 2020 and 2025 respectively, subject to availability of resources.

In line with this the commitments made by President Zuma at COP15, our focus for last year has been on taking forward the clean energy initiatives. The positive outcome of our efforts in this area has been witnessed by more than R70 billion investments in new generation capacity, with a total of 2 450 MW of renewable energy capacity to come on stream from 2014, which forms part of the SIP 8 initiative of the PICC.

I am proud to say that today, amongst the G20 countries, we are now recognised as the ninth most attractive investment destination for the green economy, and our renewable energy programme was voted by the Global Leadership Infrastructure Programme in New York as the best green energy infrastructure programme in the world for 2012.

In addition to this, we have also received two additional awards from the Africa Investor CEO Infrastructure Investment Summit held recently in Cape Town, namely, the “Infrastructure Regulator of the Year” and “Power Deal of the Year” Awards.

Clearly, Honourable Members, we are contributing to the collective effort to implement the national climate change response strategy, the Green Economy Accord and the NDP’s move to less carbon intensive electricity production through procurement of renewable energy sources.

Honourable Chairperson, we pride ourselves with milestones scored. We acknowledged areas that need improvement. Going forward, allow me point out to some of the key initiatives.

For 2013/14, the DoE has been allocated a budget of R 6.5 billion, which is 2% less than last year’s allocation. 93% of the budget is earmarked for transfers to Municipalities and State Owned Entities. 7% is to be utilised for operational and capital expenses.

Honourable Members,

Despite the success of installing over 5.6 million new electricity connections since 1994, the Census 2011 shows us the glaring examples of areas with serious lack of access to Energy, s, such as, Mbizana, Matatiele, uMsinga, uMhlabuyalingana, uMkhanyakude and informal settlements in Tshwane, Johannesburg and Ekurhuleni Metros, amongst others.

We remain committed to increase access to modern energy in the fastest possible way. In support of the initiatives under SIPs 6 and 8 of the PICC, we intend to publish the National Household Electrification Strategy, incorporating grid and off-grid solutions.

In the medium term, we will roll out a comprehensive energy solution in both informal and new housing developments incorporating grid electricity, non-grid electricity, solar water heating and LP Gas for formal dwellings. For informal settlements, this will involve LP Gas for thermal needs, plus a PV-technology solution for lighting and small power.

This year we will finalise our position regarding the appropriate pricing approach for LP Gas. Our objectives in this regard are driven mainly by the need to increase the usage of LP Gas for domestic thermal needs. LP Gas can be a meaningful instrument for cushioning the poor from the impact of the rising electricity prices.

In the last 4 years, three Integrated Energy Centres were constructed in Qunu, Mbizana and Ulundi. We have three sites in the pipeline to be completed during the course of 2013/14.

The Integrated National Electrification Programme receives an allocation of R3.8 billion. Eskom and municipalities will receive R 2.1billion and R1.6 billion respectively. W, and we are confident of delivering 220 000 new connections in this budget cycle.

Electrification by political affiliation created islands of darkness in KwaZulu-Natal and about 15 000 households were left un-electrified. To date 10 200 of these haves since been electrified. The Premier of KwaZulu-Natal and Treasurer General of the ANC has confirmed that elimination of these so called islands has affirmed that working together, we will be able to improve lives of all South Africans, irrespective of their political affiliation.

The challenges of lack of access to safe forms of energy lead to our communities using unsafe forms of heating, cooking and lighting. We will bring energy safety to the centre stage and will enter into collaborative agreements with the Household Energy Safety Association, the LP Gas Safety Association, local government and the Department of Social Development. The CEF will play a leading role in this regard.

Honourable Chairperson,

The IRP remains the blueprint of our future energy mix and electricity capacity requirements, and forms part of the SIP 8 and 9 PICC programmes. Various determinations to implement the technology programmes under the IRP has been made and these include amongst others, 2 600MW gas to power, 2 200MW coal and 800MW cogeneration.

The procurement framework for these programmes will be completed this year to coincide with the third window of the Renewable Energy IPP programme.

We, as Team Energy, have decisively demonstrated that we are champions of the Green Economy and implementers of its Accord.

Apart from the Renewable Energy IPP Programme, we have more green economy programmes in the pipeline. This year, we will prioritise the following:

We will conclude negotiations with the sugar and timber industries to harness about 800MW of power by capturing the value that is currently lost due to dumping biomass from these industries as waste.

This is in line with the determination we made under the Electricity Regulation Act late last year. Mpumalanga, Eastern Cape and KwaZulu-Natal with their sugar cane and timber plantations have been identified as the hub for this initiative. We urge these industries to recognise the importance of using this programme to facilitate agrarian reform. We expect them to empower communities that could form complementary supply chains through sugar cane farming, and ensure BEE partnerships, as an integral part of their project companies.

About 350 000, mostly low pressure systems, were installed to date with the overwhelming majority of the systems installed being imported. We have made the point that the continued importation of systems is untenable, particularly if the systems are procured using public funds.

In line with the undertaking made last year, we have intervened to ensure that we create local jobs by enforcing that solar water heaters funded under fiscal allocations have minim maximum local content.

We are aware of the quality problems afflicting some of the installed systems and we will soon be able to identify all the problematic installations from a central point, which will help blacklist those service providers who do shoddy work.

A new implementation model was developed and is in the process of being implemented. The transition to the new contracting model will happen during 2013, to allow for new factories to be put in place. The verification of local content of the manufactured systems will be in accordance with the standard promulgated by the South African Bureau of Standards ISO 1286.

Financing of Solar Water Heaters has until now been a challenge. In addressing the funding challenge, an additional R4.7 billion has been allocated to complete the installation of one (1) million solar water geysers.

Financing of Solar Water Heaters has until now been a challenge. However, Minister Gordhan has indicated that this is about to change when he announced during the 2012 Budget Vote that: “The levy on electricity generated from non-renewable sources will increase by 1c/kWh as from 1 July 2012 and will replace the current funding mechanism for energy efficiency initiatives such as the solar water geyser programme. An additional R 4.7 billion is allocated to complete the installation of one million solar water geysers.”

There will also be a larger focus on high pressure systems, since higher energy efficiency gains can be achieved by replacing electric geysers in the high electricity consumption market. Members of Parliament must also start leading by example and install SWH at their residences.

Honourable Members,

The deteriorating state of the electricity distribution infrastructure is adversely affecting service delivery. High tariff increases drive inflation upwards, and our economy will slow down as input costs increase. Socio-political hardship will increase with the poor taking the biggest brunt. We therefore appeal to municipalities to collaborate with us as we define this retail tariff framework.

With regard to electricity distribution infrastructure, we will work with NERSA to provide a tight framework for using tariffs for infrastructure rehabilitation or the Approach to Distribution Asset Management (ADAM), as well as the energy efficiency or standard offer initiatives.

The ADAM project has been launched in line with SIPs 6 and 10 of the PICC National Infrastructure Plan. An initial amount of R 320 million has been allocated for 2013/14 to pilot the ADAM projects in seven municipalities and two metros.

The roll-out of these pilots will be overseen by a steering committee that will assist the respective local government entities in the planning and implementation of these projects. We believe this will be a solution to infrastructure maintenance problems as we have witnessed successes the department achieved with the “front loading“ of severe backlog municipalities with infrastructure for electrification projects such as Mbizana, Matatiele, Thulamela to name a few.

In addition, the success of working in a holistic manner as part of the Presidential Revitalisation Intervention within the King Sabata Dalindyebo Local Municipality is also an example of how electricity network challenges will be addressed in the ADAM programme.

It is also envisaged that more local authorities will, in support of in support of SIP 6, 8 and 9, become involved in renewable energy generation initiatives through Waste to Energy and Roof Top PV systems. Such initiatives are already under consideration in various centres in Gauteng such as Johannesburg Metro and Mogale City.

In line with his commitment at COP15, President JG Zuma called on us to “prove to ourselves and the world that Renewable Energy especially Solar can be a base-load power generator”.

After experiencing setbacks that delayed the Solar Park feasibility study, I am pleased to indicate that this is back on track. We will complete the feasibility study this year and then define the implementation scheme for the concept. In fact, it is exciting that the solar park corridor concept is taking shape with different areas along the corridor getting ready for implementation, for example Prieska in the Northern Cape, and this truly proves its corridor approach.

Honourable Members,

The IRP2010 also takes into consideration the retiring of the old base load coal-fired power stations.

The retirement of this base load capacity is inevitable, and therefore, its substitution is extremely time sensitive. It is incorrect to assume that the replacement of this coal base load source will be triggered by the demand projection alone. Irrespective of the demand, it is anticipated that the supply of power through these old coal plants will fall away around 2023, and replacements are critical if we are to ensure our energy security.

Nuclear power carries tremendous benefits for South Africa in terms of:

• Being the lowest clean base load levelised cost;,
• Broadens the energy mix;,
• Is in alignment with our beneficiation strategy.;,
• Contributes to industrialisation and localisation;,
• Central to mitigation of CO2 emissions, and; importantly,
• To leap-frog South Africa into the knowledge economy as well as massive industrial development.

We also believe that the Youth Accord will be given expression through massive skills development and career opportunities in this programme.

The National Nuclear Energy Executive Coordination Committee (NNEECC) was established Cabinet in line with the Nuclear Energy Policy of 2008, as the Executive Structure to lead, monitor and ensure oversight of the implementation of the policy.

The NNEECC approved a Phased Decision Making Approach for implementing the nuclear programme and has designated Eskom as the Owner and Operator of Nuclear Power Plants, again, in South Africa in line with the Nuclear Policy.

We have set an international example after doing our own country assessment, by conducting the International Atomic Energy International Nuclear Infrastructure Review and we are the first country with operating nuclear power plant and reactors to conduct such a readiness assessment.

R 710 million has been allocated to the department and its nuclear State Owned Companies for amongst others;

• research and development,
• safety regulation;
• the control of source and special material in terms of international obligations, and;
• the development of nuclear policies and legislation to ensure the peaceful use of nuclear energy.

Over and above this, there is a stakeholder engagement process which we have already started as per ANC directives on transparency and openness, and public’s right to know. Our approach is informed by the need to demystify nuclear energy.

The department will continue working towards the rollout of the nuclear programme, including reaching a final investment decision towards the procurement of nuclear power plants.

The Department of Energy participated in the BRICS summit held in South Africa in March, 2013. The Summit noted the importance of energy cooperation and mandated that the South African government through the Department of Energy explore the possibility of forming an energy cooperation forum of the BRICS member countries.

The cooperation will benefit from the complementary nature of the BRICS member countries reflected in the characteristics of the energy sector and the resource potential from each country. It is our intention to meet with the BRICS Energy Ministers during this financial year to establish the terms of reference for the Energy Cooperation Forum to be considered at the next BRICS Summit in Brazil in 2014.

Our dialogue with partners will continue in the continent to help Africa to strategise on how best to raise, mobilise and administer funding to deliver energy access to those in need. The UN SG’s SE4ALL initiative demands of us to address the serious challenges of energy poverty.

We will continue to engage with our counterparts in the SADC to strengthen the Southern African Power Pool.

We will also continue to play a leading role in the organisations and platforms such as the Clean Energy Ministerial, the International Renewable Energy Agency and the International Energy Forum, the IAEA and IEA, as well as CEMA.

Honourable Chairperson,

The legislative programme this year involves the introduction of the Gas Amendment Bill, the Electricity Regulation Amendment Bill and the National Energy Regulator Amendment Bill.

Honourable Chairperson, in conclusion:

As the Department of Energy we have managed to maintain exceptional financial standing, achieved unqualified audits for the last two years and plans are well underway to improve and achieve a clean audit.

I would like to point out that the path towards sustainable energy resources has been long and sometimes difficult, but we believe our journey is not complete until all South Africans have access to reliable, cleaner, safer and affordable energy.

We have committed ourselves to this task, and we will continue to work hard to “enhance the freedom of others” and “ensure all have lights to read a book in the dark” through our interventions.

Let me take this opportunity to thank my family for their support and understanding, the Deputy Minister, Ms Barbara Thompson, Director General, Ms Nelisiwe Magubane, Senior management and entire Team Energy, the Chairpersons and Members of both the Portfolio and the Select Committees of Parliament, our State – Owned‐ Entities, as well as all other stakeholders who continue to take active interest in the development of the structure and mandate of the department.

Let me express gratitude to President Zuma for leading the charge at the frontline and the progressive forces that are championing the cause of energy. We continue to be encouraged by his leadership and support, and that of my colleagues in Cabinet.

Finally, no one must doubt our intention as a Department of Energy to work together and even better, to lead the charge in energy planning, modelling, forecasting and delivery in a bid to safeguard our country’s security of supply.

We do so, as President Mandela has said – “not merely to cast off one's chains, but to live in a way that respects and enhances the freedom of others.”

Honourable Members, I commend to this august House the 2013/14 Budget of the Department of Energy.

Thank you.

 

2013 Budget Vote Speech by the Deputy Minister of Energy, Ms Barbara Thompson, MP, Old Assembly Chamber, Parliament, Cape Town

Honourable Chairperson,
Honourable Minister of Energy, Ms Dipuo Peters,
Honourable Chairperson of the Energy Portfolio Committee, Mr Njikelana,
Honourable Members of Cabinet,
Honourable Members of Parliament,
Members of the Diplomatic Corp present,
Directors-General,
Representatives of State Owned Entities,
Invited Guests and Stakeholders,
Ladies and Gentlemen and,
Last but not least Team Energy.

Ugesi ubalulekile ezimpilweni zayinoma ibaphi abantu abaphilayo ezweni elithuthukayo.  Ngaphandle kwawo, konke kungacishe kufikelele kwanqhiketshe. Amandla awumgogodla wawonke umnotho oqinile.

We are very proud of the fact that over 84% of our people have access to modern energy today. This is a far cry from the terrible situation in 1994 where approximately only 36% of the population had access to electricity.

There will be those that will try and deny our achievements, but the facts speak for themselves. Let me add that we are also coming to those 15% who do not yet have electricity.

Ngaphansi kobuholi obuqotho bukaNqgonqgoshe weZamandla, uNkosikazi Dipuo Peters, asiyi ezindaweni ezino gesi, kodwa siya lapho okungena gesi khona, sifike sishiye ukumamatheka kubantu bakithi abantulile. Sikwenzile lokhu entombini endala enamashumi ayisishiyagalombili ububudala, okuthe okokuqala nqa yahlomula ngokuba nogesi endlini yayo.

This is the impact which the Department of Energy and our ANC led government leaves on the lives of our people.

Honourable Members,

Allow me to elaborate on the number of initiatives that the department will embark upon to position itself to extend even further this positive impact on the lives of our people.

Integrated electrification programme

Last year, we hosted the Electricity Indaba where shortcomings were identified in the current Electrification Programme. In addressing these challenges, we have introduced the Household Electrification Strategy.

The key focus areas of this Strategy include the Electrification Master Plan based on the least cost approach that combines grid and high-quality non-grid solutions to support high backlog, low-delivering municipalities.

The DoE together with the Development Bank of Southern Africa (DBSA) will continue with implementing the agreement to accelerate the Electrification Programme in our country.  The so called “Front-End Loading” applies to municipalities with large electrification backlogs, which in turn will apply to the DBSA for funding. The Bank will conduct bank credit assessments and we will only support bank approved applications that are within the Integrated National Electrification Programme.

We must also acknowledge the support of our international partners in supporting our electrification programme. Assistance has been received from International Finance Corporation which is part of the World Bank group in the development of the new Household Electrification Strategy.

Energy efficiency

As we enter the winter period, we have to be more vigilant about the risk posed by increasing electricity demand to the extent beyond our supply capability. We have to revert back to the mechanisms that we relied upon in 2008, including non-Eskom generation, fuel switching through LP Gas and other appropriate customer behavioural changes.

These are the things that we can do together, in the spirit espoused by the ANC of achieving more by working together:

• We have initiated a campaign urging communities to ensure that their cylinders are filled up. The LPG suppliers have assured the Department that they will produce adequate LPG and import the short fall where needed.
• We have kept the lights on for the past 7 years without any major disruptions and we remain committed to keeping the lights on. We need to remember to switch off the geysers, lights, heaters and all other electrical appliances not in use, particularly during the evening peak from 5pm to 9pm.
• We have affirmed our collaboration with the business sector,  particularly the Chief Executives Officers as the captains of industry through National Business Initiative and Business Unity South Africa on the Energy Efficiency Leadership Network to ensure that we stick to our commitments on Renewable Energy and Energy Efficiency through the signed Accords with our social partners (i.e. Green Economy, Local Procurement  and National Skills Development) are translated into tangible outputs through the whole value chain in order to realise our national objectives.
• We have embarked on a robust engagement on this Leadership Network with the Mayors, Councillors and Municipal Managers to make sure that we address the bottle necks for service delivery on these programmes. In this regard, we will be holding further workshops in the next two months.

State Owned Entities

Honourable Speaker, Honourable Members, the restructuring of CEF and its subsidiaries is a process will that ensure that each individual entity within the group is strengthened and able to operate to its maximum.

I am happy to announce that the re-organisation process has gone a long way towards integrating the mandate of energy security and we anticipate finalizing it by the end of this financial year. Governance and management challenges within the group have also been addressed, as we now have appointed CEOs for both CEF and Strategic Fuel Fund (or SFF).

We have sought to reposition the SFF as a dependable custodian of the strategic stocks policy to enhance and manage the petroleum reserves for the country. SFF is also working towards enhancing its capacity to deal with oil spills and protect our marine environment.

State Owned Companies

Ladies and gentlemen, additional funding has been allocated to SANEDI, which will enable them to finalize the Solar Road Map, also complete the Carbon Capture Storage project, and implement the outcome of the Shale Gas Investigation Work Plan, amongst others.

I would also like to thank NERSA for the hard work done during the public consultation process and the completion of a very tough MYPD3. The 8% tariff increase has created much-needed certainty about electricity tariffs over the next 5 years.

Energy sector as a tool for empowerment

Honourable Members, it is essential, as we pursue our energy policy objectives, that we maximize its return to historically disadvantaged sectors of our society such as women, youth and persons with disabilities. We need their contribution in the transition to clean energy solutions and overall developments in the Energy Sector. 

Let me outline the programmes that we have initiated in respect of these designated groups:

Clean Energy Education and Empowerment (C3E) initiative

Firstly, in support of women empowerment and building the Energy sector’s skills base, particularly in women, the Department has commenced with the implementation of the international clean energy education and empowerment initiative, born out of the Clean Energy Ministerial.

The Clean Energy Ministerial is a body of Energy Ministers throughout the world that has formed a coalition in the drive towards clean and sustainable energy.

This initiative aims to attract and inspire women to pursue careers in Energy and support their advancement into leadership positions. It is designed to offer a complete empowerment package from high school level to employment level in the Energy sector and advancement into leadership positions.

The package includes recruitment of high achieving students in Science, Technology, Engineering, and Mathematics (or STEM) subjects. This initiative targets girls in Grade 10 -12, tertiary students and graduates in the area of STEM, women employed in the Energy sector; and women doing business in Energy.

I am pleased to announce that among others, on the business side of the Renewable Energy IPP programme bidders are committing approximately R1billion rand to be spent on women vendors. This is an opportunity for women located close to the targeted areas to position themselves in terms of the services that may be required. I must say, we remain concerned about the level of women participation in this programme and I hope it will improve over time.

Youth indaba and launch of youth in energy forum

Secondly, the young people of today will be tomorrow’s leaders in the Energy Sector. It is important, therefore, that we equip our youth with knowledge about the sector and encourage them to acquire skills as they venture into business in the Energy Sector.

It is also imperative that we assist young entrepreneurs and the unemployed youth to gain access to comprehensive business development support services to grow and sustain their enterprises. The Youth Indaba and Youth in Energy Forum are among the initiatives we are planning to host this year in order to achieve our goal of creating a platform of growth for young entrepreneurs.

We will also continue to embrace the “Take a Girl Child to Work Day” Initiative as a means of enabling girl children, especially from disadvantaged communities, to acquire transformational experience in the workplace and ensuring continuous development of women and young people and their participation in the economy of the country. We will also host the annual Learners’ Focus Week for Grades 9 and 10 as an introduction of the Energy Sector’s work to the learners.

HIV and AIDS forum for energy sector

Thirdly, through our Special Programmes and Outreach Projects, the combating of HIV and AIDS, particularly its impact on the Energy Sector, will continue to be an area of focus for the department. We will be working towards the establishment of an HIV and AIDS Forum within the Energy Sector to consolidate the work of individual role players in the Energy Sector and to augment the work of other government departments and civil society in dealing with this challenge.

The forum will assist us in monitoring, evaluating and reporting on HIV and AIDS in the Energy Sector.

Let me conclude by thanking Minister Peters, Chairpersons and members of the Portfolio Committee on Energy and the Select Committee on Economic Development for their leadership and support; our donor partners, Team Energy; the guidance of the Director General, Ms Nelisiwe Magubane, State Owned Companies and energy sector partners for their commitment to bettering the lives of ordinary South Africans.

Sengiphetha  ngiyathemba ukuthi kubangani abango somabhizinisi bethu, nakwizinkampani zikahulumeni siyohlala njalo siyiphela endlebeni.  Kwande lapho bethatha khona, ukwanda kwaliwa umthakathi yena ongafuni abantu bande ukuze basizane.

Ngiyabonga kakhulu ukungipha indlebe.

Lance Greyling, Shadow Minister of Energy
 

Highlights:
-    Government has failed in ensuring energy security and needs to break the monopoly stranglehold that Eskom enjoys over energy generation in South Africa;
-    Spare generating capacity must be utilised and companies that are able to build co-generation plants must be properly incentivised;
-    Our twenty year energy plan needs to be urgently reviewed and revised;
-    A proper study into the economic feasibility of the nuclear programme needs to be undertaken in a transparent manner;
-    Outdated assumptions in the IRP need to be reviewed and a new plan needs to be modelled on these revised assumptions before any major investment decisions are entered into.

Honourable Minister, in the short time available to me I will concentrate on just two issues,  resolving our short term energy crisis and ensuring that our long term energy planning represents the best mix of investments for our country. 

It is clear that this government has failed woefully in its primary duty of ensuring energy security. The delays in bringing on line Medupi and Kusile and the massive cost over-runs on both these projects have pointed to the need for the government to finally break the monopoly stranglehold that Eskom enjoys over energy generation in South Africa. We now need to involve all South Africans in finding solutions to what is essentially a government induced crisis. We must develop a comprehensive household energy strategy that can incentivise households to reduce their peak demand usage. This would entail the roll-out of smart meters that incorporate time of use tariffs, rigid enforcement of the regulation regarding solar water heaters and financing schemes to reduce their upfront capital cost. A proper gas strategy that can see households migrating from electric and paraffin stoves to gas fired ones also needs to be implemented. 

We must also ensure that all spare generating capacity is utilised and companies that are able to build co-generation plants must be properly incentivised to do so. Keeping the lights on is going to be a difficult task, we are prepared to assist as much as possible and we have already implemented what measures we can in the Western Cape and the municipalities that we control to achieve this aim.

In terms of long term planning though, it is patently obvious to everyone except this department that our twenty year energy plan needs to be urgently reviewed and revised. The department and it seems Cabinet has preposterously already deemed the 9600 megawatt nuclear programme non-negotiable. 

This, Minister, is what should be deemed non-negotiable: 
-    Firstly, in line with the National Development Plan a proper study into the economic feasibility of this programme needs to be undertaken in a transparent manner. The public needs to be made aware of what a programme like this will cost and the impact it will have on future energy prices. Already Eskom has conservatively stated that it would need increases of 20 % year on year to pay for such a programme. 
-    Secondly, the outdated assumptions in the IRP need to be reviewed and a new plan needs to be modelled on these revised assumptions before any major investment decisions are entered into. 

We will not allow this government to lock South Africa into a costly nuclear programme without first ascertaining whether we can truly afford it and whether the long term demand projections actually require it. The fight has just begun! 

 

David Ross, Shadow Deputy Minister of Energy
 

Highlights:
-    SA needs, as soon as possible, enough power at as low a price as possible;
-    South Africa’s Integrated Resource Plan (IRP) 2010 is out of date and could lead to the building of unneeded power stations at great cost - and higher electricity prices;
-    Eskom’s Second Application to NERSA is extremely problematic as it includes for building a fleet of six nuclear power stations;
-    The cost of power and the reliability of its supply should be the basis for the next integrated resource plan;
-    Government’s confusion and indecision on energy policy is costing the country.

Honourable Chairperson, 

What SA needs, and needs as soon as possible, is enough power at as low a price as possible.

Honourable Minister,

Public Enterprises Minister Malusi Gigaba last week said Cabinet is set on embarking on a nuclear plan, with Eskom at the helm.

This endorses the Integrated Resource Plan (IRP) 2010 in terms of the percentage allocation for Nuclear in our energy mix.

A study, “Towards a New Power Plan”, commissioned by the National Planning Commission (NPC) indicates however, that we should consider the delay of the proposed expansion of nuclear power stations.

The plan indicates that more nuclear power would not be needed before at least 2029, and perhaps not until 2040. 

South Africa’s IRP 2010 plan is there for out of date and could lead to the building of unneeded power stations at great cost - and higher electricity prices. The 2010 plan cannot continue to be the basis for investment decisions as the Study for a new power plan indicates that little further investments in power generation would be needed. 

The DA has called repeatedly for an urgent review of the country’s twenty year energy plan – a continuation of the current plan will result in South Africa being left with “surplus, stranded, expensive” power plants. 

The investment government has already made into the overdue Medupi, as well as Kusile and Ingula power stations coupled with lower demand for electricity and progress in renewable energy, endorses the findings of the study. 

The Study by the NPC indicates the following:

·         Growth in electricity demand is still below 2007 levels;

·         Future growth in electricity demand is expected to be lower than those forecast in the 2010 plan;

·         Natural Gas generation should be commissioned now ,to add extra power to the grid within three years;

·         It is economical to bring imported hydro online as soon as possible; 

The IRP is meant to be revised every two years, and is due for revision this month, but the Department of Energy has said it will not be done until the Integrated Energy Plan has been finalised.

Chairperson, acknowledging that the IRP is out of date we now need clarity with regards to our Energy Mix and confidence in the ESKOM pricing applications.

With regards to the Eskom Multi Year Price Determination, MYPD3, pricing application, Eskom has in effect made two applications to the National Energy Regulator of South Africa (NERSA).

The first Application: A formal application through to 2018 and the completion of the current ‘new build’. In this application the ‘standard’ tariff rises by 16% a year from 61c/kWh now to 128c/kWh in 2017/18. 

The DA was also painfully alive to the negative impacts that the huge electricity price increases of the MYPD2 have had on both households and businesses that are struggling to remain globally competitive.

Our position was that Eskom should only be granted an inflation-linked price increase per annum for the next five years in order to avoid negative impacts on consumers and businesses. 

In our presentations to NERSA the DA took particular issue with two components of the Eskom’s pricing application: 
1.    The return on Equity: The % return here for Government (Eskom’s Shareholder) was increased from 0.9% to 7.8%.  This simply was not realistic. Government cannot expect this kind of return on an investment in a depressed economy, especially not at the expense of economic growth. 
2.    Depreciation:  Eskom claims that a further 17% of its revenue is attributable to ‘depreciation of assets increasing at 10% a year’.

But Eskom had not provided any evidence for how it arrived at this figure or of how it has evaluated its assets. The Modern Equivalent Asset (MEA) valuation method has severely inflated the cost of replacement of these assets.

The DA argued that the consequences of revising the Price formula and extending the Time Frames should be seriously considered, and we have made 3 presentations to the Regulator.

Chairperson, the Regulator pulled no punches in its decision to curb tariffs and rejected a 16% a year tariff hike for 5 years.

NERSA granted Eskom an 8% a year hike for 5 years explaining that ESKOM could be more efficient:

·         It could no longer pass the cost of its electricity buyback programme on to consumers!!

·         It also did not need a higher credit rating than the Government.

·         The regulator stated it has stripped out a number of items that ESKOM has double counted in its original application!

Eskom’s Second Application to NERSA is extremely problematic

It is an Integrated Resource Plan (IRP 2010) application that takes account of the expansion of the power sector beyond MYPD 3 and includes building a fleet of six nuclear power stations totalling 9,600 MW.

In this case, Eskom says it needs 20% increases in each year from 2013 to 2017 followed by 9% rises in each of the following five years. This would bring the ‘standard’ tariff to over 150c/kWh in 2017. This is the current bad news.

Eskom argued that government must make decisions on expansion beyond the current new build soon. If Nersa considers only the formal application, Eskom says it will have to ask for more when those decisions are made.

This will have profound negative implications for our struggling economy. The issue of administered prices as one of the main drivers of Inflation and leading to Stagflation in our economy should also be considered. Did the Cabinet consider it Honourable Minister of Energy?

What SA needs, and needs as soon as possible, is enough power at as low a price as possible.

Chairperson the cost of power and the reliability of its supply should be the basis for the next integrated resource plan. 

The integrated resource plan is outdated and has caused justified uncertainty regarding the sound management of issues relating to our energy mix and energy pricing. 

At this point in time Chairperson, we have no certainty in security of supply because of the inefficiency of Eskom and uncertainty in pricing created by Cabinet with regards to nuclear pronouncements.

Government’s confusion and indecision on energy policy is costing the country dearly and if the 2nd application from Eskom is implemented it will be a massive unaffordable burden which government ads to the taxpayer and consumer.

Jacques Smalle, Shadow Deputy Minister of Energy
 

Highlights:
-    Without energy security, we can forget about quality health services, education, economic growth and job creation;
-    The DA welcomes the investigation into PetroSA by the Hawks and the Public Protector;
-    To realise energy security in South Africa we need to increase our gas footprint;
-    The Department has still not made any progress on implementing the South African Renewables Initiative (SARi);
-    There is a need to commission and license all 39 tanks at Milnerton, to come online and once again become economic viable.

Chairperson, before I get into the technicalities of my speech, I would like to state, for the record, that the single most important challenge South Africa faces is energy security and independence. Without sustained energy supply, all the goals encapsulated in the National Development Plan (NDP) will fail. Without energy security, we can forget about quality health services, education economic growth and job creation.

At the post cabinet briefing on 2 May 2013, South Africans were assured that there would not be any loadshedding taking place across the country this winter. South Africans were left in the dark on exactly how this will be avoided. Just these last two weeks parts of the West Rand experienced electricity blackouts. This does not inspire confidence.

Honourable Minister, Eskom claimed that it would not be able to keep the lights on should it not be able to secure a 16% year on year electricity tariff increase from the National Energy Regulator of South Africa (NERSA). It is here that I would like to commend the DA for its submissions to NERSA which ultimately resulted in approval of only an 8%. Once again it is the DA that placed the poor first.

The Medupi project is severely delayed. The only reason for this continuous and disastrous delay is the inability of Hitachi SA, of which the ANC through its investment arm Chancellor House is a major shareholder, to deliver on its contractual obligations.

But it is becoming increasingly obvious that the Department of Energy and its entities are more concerned with the money laundering of taxpayer money through vanity projects. We would not be surprised if the money intended to ensure energy security ends up in the coffers of the ANC and its interconnected patronage network of loyal and money-hungry cadres.

Honourable Minister, the reason why I can make such accusations is entirely your fault. I have asked you many parliamentary questions about projects PetroSA are pursuing with your replies returning the obfuscating answers that this information is commercially sensitive. I have written to you on two occasions requesting a meeting to discuss these issues, requests which you completely ignored. Is it then a surprise that we read of the billions of rands wasted through corrupt PetroSA activities in the media?

In one instance we are aware that PetroSA purchased crude oil for ESKOM from India. We know that the tanker transporting this crude drifted off our coast for three months before offloading, incurring an additional daily fee of $25 000 per day. That is $2,250,000 of wasted taxpayer money! But you replied that this information is commercially sensitive. Rather it is extremely embarrassing that PetroSA can waste money like this.

Honourable Minister, how can information on the expenditure of taxpayer money in a severely regulated and government created and supported energy monopoly be commercially sensitive?
The DA welcomes the investigation into PetroSA by the Hawks and the Public Protector. For too long have the Department and its entities evaded accountability!

The lame excuse that Mr Kaizer Nyatsumba, Head of Corporate Affairs and Shared Services, gave following the ‘OilGate 2’ scandal that in this business swift decision making is required in order to prevent the loss of profitable opportunities. I have two questions, profitable opportunities for whom and when last did PetroSA secure a profitable opportunity for South Africa?

It is vital that we review South Africa’s 20 year energy plan. The DA does not believe that South Africa needs a nuclear build to complement its energy mix. In fact the programme could cost the taxpayer up to one trillion rand. A project of this magnitude is completely unaffordable. And we are certain that the corruption through the nuclear build would dwarf that of the Arms Deal! 

The National Planning Commission’s Anton Eberhard argued against the nuclear build programme, only for the Deputy-General of the Department of Energy to come out strongly here in Parliament stating that the nuclear build programme is non-negotiable.

Honourable Minister, instead of pursuing a nuclear build programme what we should do in order to secure energy security in South Africa is to increase our gas footprint. We must increase our capability to import Liquefied Natural Gas (LNG). We need a LNG import terminal that will cater for the off load and storage of gas. We must be more proactive in negotiating access to the gas deposits in Mozambique and Tanzania.

The total gas reserves as audited March 2012 stood at about 770 billion standard cubic feet, and total contingent gas resources at 1020 billion standard cubic feet. These gas basins are on our own door step. Block 9 of the Bredasdorp and the Mozambique basins are estimated at 50 trillion cubic feet, not to mention that Namibia has an estimated crude oil reserve of 11 billion barrels. Where is PetroSA in accessing these deposits? Instead PetroSA is wasting billions in places like Egypt, Equatorial Guinea, Ghana and Nigeria. 

Honourable Minister, we have however made great progress in building up our emerging renewable energy sector and it is encouraging to see the Pew Charitable Trust recognise us as a world leader within the green energy sector. We still have a long way to go though Minister, and if this programme is to be financially sustainable in the long term we have to draw on the commitments of developed countries to help finance the costs of renewable energy in line with their international climate change commitments. In this regard, the DA is alarmed that the department has still not made any progress on implementing the South African Renewables Initiative (SARi), despite signing the Memorandum of Understanding (MOU) to great fanfare at COP 17. We need to urgently access the Billions of rands set aside by those progressive European countries otherwise they will simply be shifted to countries that show a greater willingness to utilise these funds effectively.

Honourable Minister, the role of state should be to create an environment that will allow the private sector to play a greater role within the energy sector, but Government cannot be the referee and the player at the same time. On one hand Government controls the application of licences and the regulation of the sector and on the other it wants to compete within the same sector. Have you got the expertise presently to manage such a portfolio? 

We cannot even think of building the state refinery Mtombo when other refineries are running at capacities of around 70%. South Africa uses 500 000bbl/d of crude oil and 195 000bbl/d of coal to liquids synthetic fuel. As long as South Africa is importing a refined product, the marginal cost of liquid fuels will be set by what it costs to import it. We must create a situation where local demand is greater than the refining capacity or create new markets outside the borders of South Africa. 

The inability of PetroSA not being transparent before the portfolio Committee on their downstream attentions in trying to acquire Engin's downstream portfolio, raises the questions on their attentions and the functions of government and its capabilities. 

There is a need to commission and license all 39 tanks at Milnerton, to come online and once again become economic viable.

We have to operate our storage capacities to its full potential as well as reposition Small Form Factor (SFF) for the next three decades.

1.     Free the tank that stores the strategic stock at Saldana and transfer the function of storing to Milnerton as to increase the balance sheet of SFF;

2.     Start hedging our strategic stock piles with strategic partners of course with certain guarantees in place, by doing so we will increase the economy viability of SFF;

3.     Diversify the Milnerton tanks to hold not only crude oil but refined products;

4.     Change some of the volume tanks to store Bitumen.

With specific attention to bitumen, honourable Minister, you said in a parliamentary reply that bitumen does not fall within your mandate. But bitumen is a direct product from this industry. We will once again face a shortfall of bitumen of 20%. South African refineries produce near 79 million kilogram of Bitumen annually. With a 20% shortfall we need to import bitumen, this carries a R1 500 per ton premium on imported bitumen placing an additional burden on the state and companies by inflating construction costs unnecessarily. Bitumen storage is a problem, and honourable minister, it is your problem. 

In conclusion, honourable Minister, your Departments, and the entities that you are politically responsible for does not inspire confidence. Within your Department and its entities there is widespread corruption. There is no transparency and accountability. Wasteful expenditure is rampant. 

Honourable Minister, you have no idea how to manage your portfolio not to mention that you do not understand, or refuse to understand, how the energy sector works. 

A Vhari Ndi fhedzise nga uri . Muhulise vha muhasho. Wavho wa vhushumela vhathu na milayo zwitshiya khavha mushasho vhovheya lilayo ine ya langa vhane vha sadisi tutuwedzo zwitshiya kha tshiimiswa tsha muvhuso tshilangago vhuyado kha muvhuso.

 

Speech by Hon Bulelwa Tinto during the National Assembly Debate on Energy

14 May 2013

Budget Vote Speech – Hon B Tinto
Honourable Chairperson
Honourable Minister of Energy, Ms Dipuo Peters,
Honourable Deputy Minister, Ms Barbara Thompson
Honourable Chairperson of the Energy Portfolio Committee, Mr Njikelana
Honourable Members of Cabinet
Honourable Members of Parliament
Director – General of the Department of Energy, Ms Neliswe Magubane
Representatives of State Owned Entities
Invited Guests and Stakeholders
Ladies and Gentlemen

The ANC supports Budget Vote No 29 of the Energy Department.

The Integrated Energy Centre Programme was introduced in 2002 to contribute to the Integrated Sustainable Rural Development Programme. It is considered an appropriate mechanism to deliver affordable energy to mostly low-income communities in remote areas and to be a one stop offering services of energy goods.

The ANC applauds PetroSA for launching the latest Integrated Energy Centre in Mbizana in the Eastern Cape in November 2012; it will be a source of petrol, diesel, paraffin and LPG gas to the community and it will employ about 15 people.

In the words of our Honourable Energy Minister; Minister Dipuo Peters; "IECs are not just about the integration of energy services. Rather they are primarily about integration and co-operation among the three tiers and structures of government, for improved delivery of energy services to the poorest of the poor."

Rural development and rural communities are at my heart so it is also heartening when we consider another IEC launched in 2011 by Petrochemicals firm Sasol and the South African government. The R8-million Integrated Energy Centre in the rural Eastern Cape town of Qunu in January 2011.

It was launched to assist with poverty alleviation and assist with the communities’ energy needs, but in addition the centre also offers services such as a library, information centre and a community room for the use of the community. The Integrated Energy Centre also has a village vendor network of people and these are mainly women and youngsters, People can purchase energy products from these vendors who come to them.

It is interventions like this that is needed to assist the Rural communities we care so much about. That assists the women and children that need to be protected in our communities. It assists in giving the access to the warmth that they so desperately need in winter and assist in putting that hot meal on the table. We applaud the Honourable Minister for taking the lead in addressing the needs of the poor rural communities.

Moving on but keeping on the theme of programmes on youth, women, people with disabilities we applaud the Honourable Minister on some of the programmes that currently are running at her department that addresses this topic.

PetroSA – has the Accelerated Development Programme and 30 out of 91 employees on the Leadership Development Programme are women. Further, the study assistance and bursary programmes also aim to ensure sufficient female representation. The company`s numbers on gender equity are in the order of 50 percent.

With regard to people with disabilities, PetroSA has taken an approach to identifying students living with disabilities to participate in the programmes and make progress through the ranks.

Necsa is also finding ways to bringing in young talent by partnering with various institutions. Further, the Nuclear Skills Development Centre (NSD) aims to train 218 apprentices at its facilities.

Members acknowledge and thank NERSA for the Techno Girl programme and its success in Limpopo. We encourage them to keep up the good work, especial in rural areas.

Further SANEDI, with it idea of including e-learning in its smart grid technology. The idea of using tablet computers to control the smart grid and independently make this available to our learners is the kind of efforts needed to help develop communities lacking in these resources.

Moving onto Public Participation for energy related issues. It is crucial that communities be given a hearing on issues that affect them and more importantly have their input considered in the deliberations.

In this regard, for example, Nersa’s handling of Eskom’s Multi Year Price Determination, where public hearings were held around the country, is commendable. Communities need to be heard. Sure Nersa admits they learned a few lessons and will keep these in mind going forward, but it is commendable.

We are also awaiting the Department on regulations that would facilitate the formation of consumer forums by Municipalities. We are aware the Director General Nelisiwe Magubane, instructed her team to ensure that the regulations are finalised, but we are watching this space non the less.

We are also watching the space of alternative energy developments, especially for the benefit of rural communities.

Hence research into alternative energy sources needs to be enhanced.

The ethanol gel was one such alternative fuel which are safe to utilize in rural homes rather than paraffin; and research and development into such fuels which could be safer and cleaner than paraffin needs to continue.

Further, the issue of bio-digesters is also of importance as it is a possible mechanism of converting biomass into energy for the utilization of communities and even rural schools. Continuous research is needed in these areas to assist rural communities to access alternative energy sources.

The distribution of solar powered lights to rural schools in Limpopo, Kwazulu Natal and the Eastern Cape is an excellent example as to how the Honourable Minister and her department are finding solutions to some of the energy problems of our country.

Further, the Basa Njengo Magogo had been rolled out in the Gauteng province. We are waiting in the other provinces.
Speech by Hon Aurthur Moloto during the National Assembly Budget Vote Debate on Energy

14 May 2013

Honourable Chairperson of the House
Honourable Minister of Energy and Deputy Minister
Honourable Members
Officials from Department of Energy and
Senior leadership of Entities reporting to the Department of Energy
Distinguished Guest

The recent extensive media coverage of alleged corporate governance lapses and possible corrupt practices in PetroSA are a source of great concern to all South Africans. It laid bare to all South Africans the procurement practices within our National Oil Company, PetroSA.

It will be a lack of appreciation and honour to duty on my part, if I were to fail to congratulate the Minister of Energy and the Board of the Central Energy Fund for the courageous leadership they displayed by initiating a forensic audit in the procurement practices of PetroSA after being alerted to possible serious transgressions in the procurement practices of our National Oil Company. The full might of the law has to be bought to bear on those who might have participated in such corrupt practices. The Board of PetroSA has members have to give a full account on why such practices occurred under their watch given that the Board Charter of PertoSA is aligned with the new Companies Act and King III principles. The critical question they have to answer is whether the Board committees are fully functional and acting independently of the Executive.

Honourable Members, I am raising this issue, because we have given a clear mandate to the National Oil Company to assist government in ensuring the uninterrupted security of supply of liquid fuel.

PetroSA cannot afford to lose focus and drop the ball at this critical moment especially when they are required undertake massive infrastructure projects and secure the much needed feedback for the Mosselbay refinery.

Last year in my contribution in the budget vote debate on behalf of the ANC, I indicated that International Oil Companies have existed from down stream activities in the rest of the Continent. The trends are becoming even much clearer now. The International Oil Companies have sold their stakes in refineries across the continent with the exception of South Africa. The stakes sold by International Oil Companies in downstream activities in Africa were bought by National Oil Companies with the exception of Kenya, Ivory Coast and Senegal. The Kenya refinery was bought by Essar (Indian Company), Ivory Coast refinery was bought by Sonagolo. Kenya refinery was bought by Essar (Indian Company); Ivory Coast refinery was bought by Sonagol. The Senegal refinery stake was purchased by the Bin Laden Group of Saudi Arabia.

We note with great appreciation the announcement made by BP to invest R2.5 billion for the purpose of upgrading to Sapref refinery in Durban. The Department of Energy has committed itself to support the upgrading of refineries through the adjustment of the basic fuel price without unduly overburdening the consumers. We encourage all the refineries to follow the example of BP.

There are those amongs us in this House, which want to suggest that PetroSA should forego opportunities available in the downstream activities. Such a view is not anchored by reality and true facts. A national oil company cannot continue to play a marginal role in the domestic downstream sector. It has to be fully integrated and capture value throughout the whole chain.

The Mandate that we give to PetroSA is very clear. Get your act together and build a true national oil company worthy to occupy a place of pride amongs our people.

National Oil Companies in other jurisdictions integrate to determine their business decision in the interest of their country and encourage other economic activities linked to the refining of crude. We need the development of a significant petrochemical industry in South Africa.

The decision made by BP is critical to building the efficiency and competitiveness of our refineries. Our existing refineries are not competitive when compared to their peer group refineries in South East Asia, Europe and the new generation of upcoming Middle East refineries.

Refineries that enjoy economies of scale and complexity will survive in this highly competitive industry. PetroSA has to focus on ensuring their Project Mthombo has economies of scale, complexity and the necessary finding to ensure the uninterrupted security of supply for South Africa.

We have stated before in this house that around 2020, South Africa will be importing about 200 000 barrels per day of refined products if we do not succeed with building Project Mthombo. The consequence thereof are just too ghastly to comtemplate. Our current account deficit will just shoot the roof. PetroSA has to keep the eye on the ball. They dare not fail the country. They owe it to all South Africans.

PetroSA must ensure that they secure the feedstock for the Mosselbay refinery. Our local gas feedstock will be depleted soon. They must to focus on these activities.

We have given a mandate to PetroSA to procure at least 30% of crude for South Africa by 2020. They need to assist government in diversifying the sources of crude oil for this country. PetroSA is fully aware of the implications of sourcing crude predominantly from one region.

The Strategic Fuel Fund has to work jointly with Transnet to ensure adequate port facility to secure consistent supply of crude oil to the inland refineries.

There are 39 tanks of 200 000 barrels each in Milnerton for the purpose of crude storage that are currently in use. SFF need to ensure that remaining 37 are put to good use.

NERSA deserves to be commended for the transparent manner in which they conducted the MYPD 3 application submitted by Eskom. It had a difficult of balancing the interest of Eskom and that of the consumers. We have to keep the lights on but at the same time not hurt the competitiveness of South African industries and protect the poor from high electricity tariffs and the provision of Free Basic Electricity goes a long way in protecting the poor.

However one need to state that the practice of Municipalities procuring 60% of their funding from electricity distribution is unsustainable as it results in prohibitive electricity tariffs being imposed on industry and consumers within the jurisdiction of municipalities. Funding municipal budget mainly through electricity tariffs will prove problematic in the long run. We need to move to standardisation of tariffs in South Africa.

It has come to our attention that certain municipalities are adding mark-ups of several hundred percent to Eskom`s megaflex tariffs. Last year I had an engagement with resident on one of the local radio station in the Free State. They indicated that the municipal electricity tariff they are made to pay in vastly different from those consumers who were supplied electricity directly by Eskom.
Speech by Hon Sisa Njikelana during the National Assembly Budget Vote Debate on Energy 14 May 2013

Sihlalo, hayi obekekileyo kuphela, kodwa nothandekayo, Malungu e Palamente kunye ooMinister bobabini bakwaEnergy nabo bonke abanye abaPathiswa abakhoyo Directors-General, Executive Management of the DoE and State-owned Entities Nditsho kuzo zonke iindwendwe zethu ikakhulu abafundi abasuka e Nani nonke base Mzantsi ndihlanganisa noosomashishini abasebenzi nabahlali Ndinibulisa ngezona zishushu xa ndinika inxaso yebudget vote no 29 for Energy.

A special welcome to all my guests in the gallery i.e.:

1. CPUT - Prof E Uken
2. UCT - Dr Andrew Marquard as well as Ms Jesse Burton
3. Grade 12 Learners from Vista High school (3 students and 1 educator) - other schools writing tests
4. Russian Consulate General (1) - Mr. Andrey Borovik, Consular Attache
5. Brazil Consulate General (1) - Joäo André Silva de Oliveira, stand-in Consul General
6. Bishop Davies and his wife (also involved in energy efficiency) - SAFCEI
7. Ms M Dlulani - Community Leader
8. Ms Ms W Mangxilana - Community Leader

In my 3rd budget speech in this august house I wish salute the celebrations of the 50th Anniversary of OAU/AU by not only our government but the whole of Africa. We however celebrate this 50th anniversary at a time when the spotlight is on, amongst a host of global challenges, the risk of inadequacy of supply of energy to ever-increasing needs as well as the cost and appropriate technology thereof. The globalization of energy demand, as Daniel Yergin claims, reflects interesting patterns of consumption whereby in the developed world the average is 14 barrels per person and in the developing world it is only 3 barrels per person. A glaring disparity that warrants fundamental change not only in the socio-economic sphere but also in the political system that create the framework for energy industries.

Coming to the SADC Region we can confidently assert that our regional power pooling arrangement is currently the only formalized in Africa -and attribute which reflects a high level of organization that indicates great prospects progressive development as well as a firm base for a formidable supply of energy in future especially when taking into account regional integration on trade and industrialization. The Department continues participating through CEMA within the African Union and regional structures such as SADC Regional Power Pool System, The All Africa Energy Week in Addis Ababa Ethiopia 12 November 2012 noted that as Africa`s increasingly strong economic performance continues, the continent needs to generate enough energy to power the development.

The DoE has and is still expected to participate in various continental and global bodies such as CEMA, African Petroleum Producers` Association-APPA, IBSA, CEM, IEA, IAEA, etc. Furthermore partnerships with countries such as Norway as well as participating in BRICS present stronger prospects of tapping from partners who have formidable resources. Given the country`s predicament of finding alternative sources of oil due to the unilateral imposition of sanctions by USA against Iran, the Department did a sterling job to ensure such interruption is minimised. This is a lesson worth remembering and preparing for in future especially when there are claims that trade between Iran and USA on other areas is growing. Admiral Rickover once asserted that: "High-energy consumption has always been a prerequisite of political power".

With regards to the impact of global politics on oil trade may I share what Elliot Abraham asserted that "No other commodity has influenced global affairs as much as oil has. Till this day, oil still remains a major influence in international politics." He further stressed that "Oil has influenced many countries foreign relations in major ways." Essentially how will DoE benefit from global energy trade whilst at the same time contributing to it as well. Nevertheless we need acknowledge that the ANC-led government has steadfastly ensured resonance of and compatibilty between energy trade and its foreign policy throughout.

The government has ultimately expressed its position on the New Nuclear Build Programme and we are clear about what the way forward is now. We then need to take note of the government`s recognition of the growing demand for energy/electricity supply and the commitment to address environmental challenges facing the nation and the benefits of clean and safe nuclear energy that are increasingly apparent.

Not only is the government expected to roll out the NNBP but to strongly integrate the industrialisation and localisation strategy, appropriate information sharing, as well as requisite training and skills development. With regards to nuclear energy localisation increase of industrial capacity; promotion of technology and skills transfer from main nuclear vendors and suppliers of nuclear-grade components to the South African industry; promotion joint ventures, consortiums and partnerships; enhancements exports into the global nuclear supply chain; creation of high-level direct jobs and intellectual property; as well as making a significant contribution to GDP growth in the manufacturing sector must be part of the agenda on nuclear energy.

When the manufacture of heavy components is integrated with the manufacture of light and medium-size components, a deeper level of localisation can be achieved. The development of policy and measures that support the nuclear industry designation development, which will be followed by a strategy and plan on localisation to support local industry development has to be on the cards if not already developed.

The ANC definitely takes note of the Department`s commitment to establish the National Radioactive Waste Disposal Institute in the near future. Such strengthens confidence on ensuring responsible management of nuclear waste. The ANC is aware of a lot of differing views on the programme but equally concerned by dissension by individuals who are part of a collective i.e. government institutions whose position is publicly known. Whilst we all have the right to differ ad dissent such should be exercised with the prudence it deserves. Furthermore the debate on costs as well as considerations of baseload power through nuclear energy is very much encouraged with a rider of ensuring a discourse based on facts not propaganda.

At this stage we await the Energy Efficiency Strategy with great expectations from the Department given the vitality of energy efficiency against the growing demand of power which at this stage is difficult to meet.

The few initiatives such as Industrial Energy Efficiency Project driven by National Cleaner Production Centre of SA - NCPC and Energy Efficiency Leadership Network are examples of platforms for a formidable public awareness campaign to make energy efficiency an integral part of the domestic, commercial and industrial activity whilst being mindful that working together will achieve the much-needed gains out energy efficiency.

Study and oversight tours conducted last year on energy efficiency focused on security of energy supply and quality assurance. The Aurecon office building, companies such as Saint Gobain, Creda Communications, Nampak, Hose Manufacturers, Kuyasa CDM Project, traffic centre as well as PetroSA Synthetic Fuels Research Centre at UWC were visited in Cape Town. What we learnt during such visits was highly valuable and instructive about the importance of energy efficiency in our journey towards sustainable provision of energy. I must express my highest gratitude to the CSIR for the role it played during such visits.

In every aspect such good work resonates with the call by the Polokwane Resolutions of the 52nd Conference of the ANC to ensure "energy efficiency improvements in industry, in households and by setting vehicle fuel efficiency standards" as well. However it is also anticipated that the Department will be allocating "significant additional resources for the research and development of innovative clean and low-carbon technologies, including by retrofitting existing technologies" as the very same conference directed.

Inspite such challenges the ANC expresses its admiration of various efforts in promoting and advancing energy efficiency and the undying hope that the overall 12% targets that were set in 2005 will be met or at least our performance will be quite close.

Let me also share the outcomes of public hearings on energy efficiency that were held by this committee in 2012 as follows:

Energy efficiency programmes have a potential to create jobs as well as a catalyst for economic growth although local manufacture of energy efficient products represents a challenge
Some municipalities incorporated energy efficiency into the normal institutional arrangements.
The Department (DPW) is incorporating energy efficient techniques into all new and renovated buildings albeit slow.
The Energy Efficiency Leadership Network (EELN) is a leading network in driving continuous improvement in energy efficiency, with members taking the lead by showing best practice.
The Green Building Council was promoting energy efficiency as an easy and low cost opportunity to save on energy consumption. NOTE: the Council has offerd to actively support our Parliament in its greening campaign.
There are not sufficient number professionals in South Africa to cope with the demand for energy efficient
Internationally tax incentives seem to be the way to go as they were binding if people defaulted.
EEDSM programmes and corresponding funds must be ring-fenced.
Clearer government policies, policy integration and alignment based on sound knowledge base are critical including the role and obligations of NERSA and energy labeling of appliances
Co-ordination is needed between government departments, policies and institutional mechanisms.
It is appropriate that we examine the extent to which the government`s efforts have fulfilled commitments related to energy in so far as the 2009 Manifesto is concerned. For example in 2009 the electrification programme had covered 80% of the country`s households. We now stand at 85%.

Chairperson, honourable members, ladies and gentlemen, out of the current18 Strategic Integrated Projects (SIPs) the Minister of Energy chairs one of the projects (i.e. Integrated Municipal Infrastructure project)

; co-chairs two projects (i.e. Green energy in support of the South African economy and Electricity transmission and distribution for all); participates in 10 projects; and has observer status in five projects. Without any doubt such expresses the daunting task and enormous load on the department`s shoulders. This is a journey that also put a challenge to this committee to monitor fairy closely in short, medium and long term.

Recently this committee adopted the ISMO Bill for consideration by the National Assembly. The core purpose of this bill is wholesale electricity trading including buying of power from Independent Power Producers (IPP) , system operations as well as contributing to planning for new generation capacity

The Master Plan of 2007 took forward the Energy White Paper of 1998 to ensure security of supply as one of the critical considerations of government. The Master Plan proposed interventions necessary to achieve adequacy given projections about demand growth. Part of the Master Plan addresses the Independent Power Producers (IPP`s) a matter that has direct bearing on why the ISMO Bill was introduced.

The ISMO Bill was drafted in consultation with the affected government departments and subjected to public participation by both the Department and the Committee. During the public consultation process the issue of the independence of Transmission Grid, among other things, was raised.

The response of the Committee was to refer this important matter to further scrutiny given its significance. Even now I am making a passionate appeal to allow government to explore various options of addressing the future of the transmission assets. Furthermore the Committee is going to recommend to the Minister through the NA for overall restructuring of the electricity sector as a whole and such will include addressing the dilemma of the transmission grid. Such reinforces the Cabinet decision to restructure the electricity industry as far back as April 2001. The introduction of this bill signifies the need for intensifying operational efficiency in the electricity sector which in turn presents, inter alia, better prospects of sustainability and affordability of supply of electricity.

Honourable Chairperson the importance of regulation in the energy sector is one of the fundamentals that the country has to constantly attend to. The recent performance by NERSA in determination of both the electricity and gas tariff prices invites nothing less than high praise. In both instances NERSA reduced the proposed tariffs by half. This undoubtedly resonates with ANC Government`s conviction to ensure sustainable, affordable and accessible supply of energy.

However the issue of administered prices triggers an interesting debate of which is the best route to determine electricity prices between market forces and the process driven by NERSA. The question that arises now: is it the mysterious market forces or is it a trnaparent and democratic process as initiated by NERSA that is most appropriate to facilitate the best model of determination of electricity prices? Unfortunately the forthcoming municipal increase of tariffs expose an unfinished chapter in the overall price determination practice which needs serious overhauling in the not so-distant future. Let us remember Polokwane Conference directed that "the developmental state [which is our aspiration] should maintain its strategic role in shaping the key sectors of the economy, including the … energy complex..."

In the context of thrusts on energy programmes within IPAP the frist to consider is Upstream Oil and Gas Services and Equipment signifying that SA is set to become a major hub for the entire region, which currently imports the bulk of its requirements from Europe, North America and Asia.

These opportunities lie in the following broad categories:

Upstream Ship Repair: Saldanha Bay IDZ and a similar opportunity exists in KwaZulu-Natal as oil and gas activity grows on the east coast of Africa.
Oil and gas logistics and distribution: South Africa has the potential to build major logistics points for the burgeoning growth across the Sub-Saharan region.
Engineering services that design, fabricate or construct specialised modules or facilities for the oilfields
General and technical support services for the upstream industry.
Growth of the oil and gas logistics industry is a substantial opportunity that also opens up further procurement opportunities into the regional oil and gas supply chain.
Key constraints such as infrastructure, availability of port space, inconsistent and high pricing of facilities, poor scheduling of facilities, in the ports with regard to integrated operations in support of the sector by the TNPA remain unresolved.

The emergence and promotion of the Green Industries within IPAP also confirm issues of climate change that have increasingly moved to the centre of the global stage in a wide range of multilateral and bilateral fora, agreements, policy perspectives and programmes. Processes under focus include:

1. Solar and Wind Energy
2. Renewable Energy Independent Power Producer Procurement Programme
3. Energy efficiency
4. Waste Management
5. Solar Water Heaters

Key Action Programmes that focus, inter alia, on the development of local wind and solar industry through the REIPPP procurement programme have a few interesting highlights viz.:

* Increased local content of renewable energy projects linked to the REIPPP;
* Continuous roll-out of renewable energy to sustain the industry around1 000MW per annum;
* Strengthened industrial financing programmes to promote the local components industry,

The IRP 2010 spells out the need to support the development of a local industry for renewable technologies, in particular wind and solar. Such extends to manufacturing of SWH components and support the roll-out to create a sustainable industry.

This has a potential to increase demand and develop local supply which may be enhanced through regulation and development of local manufacturing thus creating more employment and technical skills on installation, maintenance and services.

The biofuels sector which has strong linkages to agriculture, manufacturing and distribution also has the potential to create substantial numbers of labour-intensive jobs in the agriculture sector in particular. Government is already committed to a 2% blend target for biofuels inclusion into the national fuel supply. Unfortunately developments in the biofuels sector have been slow.

Were South Africa to increase its blending target to 10%, about 125 000 direct jobs could be created, many of which would be based in rural areas, where the deepest pockets of poverty occur. In addition, second-generation biofuel technology will also contribute to South Africa meeting its renewable energy targets in a sustainable manner.

In a preliminary report of the Portfolio Committee on Trade and Industry on the implementation of the Industrial Policy Action Plan with specific reference to the state of the manufacturing sector, dated 29 November 2012, emerging issues on electricity tariffs were:

The perceived negative impact of Eskom`s transition to a cost reflective pricing regime on the economy despite Eskom`s efforts to increase tariffs at a lower rate than initially indicated.
The DPE and Eskom explained that the lack of infrastructure investment in prior years led to aged infrastructure, if not adequately maintained and replaced, could lead to energy supply constraints.
Other cost drivers related to the production of electricity included the cost of coal which has been increasing significantly above inflation.
Concerns were raised with regard to the widening differential between Eskom and municipal electricity tariffs.
Stakeholders were concerned that the current and future municipal tariffs would threaten the viability of the manufacturing sector, particularly energy-intensive industries.
There was a need for all energy consumers to shift towards more energy efficient usage.
No doubt the IPAP has been responsive to ANC`s call for "security of supply of energy resources, and pursing an energy mix that includes clean and renewable sources to meet the demands of our fast growing economy".

I trust this august gathering will agree with me that fraud, corruption and uncompetitive behaviour in the energy sector are 3 evils which have to be fought with all the might we can gather as South Africans. It is on such basis that the Minister and her team as well as the Competition Commission must be applauded on the gallant efforts to rid this sector of the 3 evils. I refer to their recent and current efforts in fighting the 3 evils. It is worth mentioning and even admiring current government policies and systems that have assisted in uncovering those 3 evils.

In conclusion as a tribute to Comrade Iphraim Nkwe, one of the gallants of our struggle who left this world quite recently, I want us to be alert to the fact that as part of our efforts for supply of energy for economic and social transformation we also ensure social justice and particularly a more equal SA society emerges.

Let me thank the DoE, the support for the committee, all those who worked with the committee throughout the past financial year through public hearings and energy stakeholders meetings, those who hosted us during study and oversight visits as well as diplomats who were benevolent enough to share their countries experiences plus in particular the ordinary people who were part of public engagements especially feedback on energy issues.

The ANC support Budget Vote 29

IYABULELA ILALI