Department of Minerals & Energy: Strategic Plan & Energy presentation

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Mineral Resources and Energy

09 June 2009
Chairperson: Ms E Thabethe (ANC) & Mr FM Gona (ANC)
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Meeting Summary

At the start of the meeting, the Department of Minerals and Energy gave responses to questions posed on the previous day relating to creation of jobs through the beneficiation programme, their sustainability, the bursaries and learnerships of the Department, and the need for a focus session to talk to where and when the jobs would be created. Members asked some further questions around mine health and safety, and identification of causes of death.

The Department then gave a presentation on Energy. The energy legal and public entity framework was set out. Other public entities fell outside the Central Energy group, and there were other key players, including State Owned Enterprises and private suppliers, as well as transport companies, associations and other Government departments. It was noted that Energy Security Master Plan for liquid fuels had been approved by Cabinet during September 2007. There were a number of infrastructure areas needing improvement, and supply chain issues were long and short term. An integrated energy plan was needed urgently, addressing local production and foreign policy, as well as climate change and the economic framework. The projects under this Plan were listed. Challenges included limited local refinery capacity, the estimates in future years, port and shipping issues, storage facilities, and the need to use both road and rail.
The Department listed some of its key performance areas in the previous cycle, including improvement in enforcement, promulgation of legislation, and the setting up of the National Emergency Response Team was set up. There were some projects underway to increase refinery capacity within the country. Work was being done on creating new generation biofuels which would not compromise food supply. The electricity supply had stabilised due to decreased demand. However, it was urgent that more generating capacity be created. This would be a mixture of coal-fired stations, nuclear energy and renewable energy. Energy efficiency had to be improved to ease the demand for power.

The Department then moved to discuss the electricity tariff increase requests, including the cross-subsidisation issues and the need to improve the regulatory framework, increase generation capacity, and address supply and demand side management. South Africa was amongst the top seven emitters, worldwide, of greenhouse gas and needed to look at both urgent and long-term strategies. Nuclear power was critical, as were renewable energy sources. A nuclear policy was adopted by Cabinet, but management of radioactive waste was a major concern. There were still concerns over the financial viability of Eskom, which could not meet its financial obligations without assistance. There should be incentives to independent power producers. Initiatives were in place to install solar water heaters and financial frameworks for biofuels were established. Research was being conducted on the second generation of these fuels. The use of compact fluorescent lighting was promoted although people tended to revert to replacement with non-CFL bulbs because of cost. Interventions had been made to improve the situation at the 2010 host cities. Fifteen Clean Development Mechanism projects were registered. There had been concern over the impact of using food products on food security. 2014 was the target date for universal electrical access. The informal settlements were still problem areas, and poverty tariffs must be set. There was a challenge in the availability of skills to manage the project. The Department needed to provide increased access to free basic electricity.

Members asked about biofuels, suggested the introduction of daylight saving time, commented that timelines needed to be provided, and asked why South Africa was calling for higher specifications than other countries on cleaner fuels. The contribution of Independent Private Producers, the policy on nuclear energy, the challenges in achieving poverty relief and the actual inputs at wind farms were questioned. Members also asked a variety of questions to do with the Pebble Bed Modular Reactor and the old power stations, as well as the policy implications of nuclear power. Members noted the need to be kept abreast of developments and said that the Department would be asked to present again to the Committee after the budget speech.

Meeting report

Department of Minerals and Energy (DME or Department): Responses to questions asked on the Strategic Plan 2009-12
Representatives from the Department of Minerals and Energy (DME) commenced by responding to issues raised on the previous day.

In relation to a question of the creation of jobs by way of the beneficiation programme, Mr Michael Oberholzer, Deputy Director General: Mineral Regulation, DME, said that the beneficiation programme would create approximately 50 000 jobs over the next eighteen months.

Mr Thabo Gazi, Acting Director General, DME, said that the DME would like to engage with the Committee on the sustainability of these jobs.

Mr Musa Mabuza, Acting Deputy Director General: Mineral Policy and Promotion, DME, referred to the Human Resources Development Plan. He noted that of the eleven bursaries awarded by the DME, three had gone to female students and eight to male students. Of the 22 learnerships, fifteen had been awarded to men and seven to women. Of the 34 interns who had been appointed, 26 were men and eight women.

Mr E Lucas (IFP) said that there was a need to look at beneficiation from all angles. It was a question of what to do with the minerals once they had been mined.

Mr J Selau (ANC) said that this was an exciting prospect at face value. When the Members were in their constituencies they would be asked where and when these jobs would be created. He asked if the figures were not too ambitious. He asked if there were any activities launched to date to achieve the creation of these jobs, or whether it was just still theoretical.

Mr Gazi said that this was an important observation. A focus session would be held to talk to these issues.

Co-Chairperson Gona said that the figures presented on the previous day and today could be compared to studies from countries such as India and China, where millions of jobs had been created, in some cases without the benefit of vast mineral deposits. There was great potential benefit to the people of the country. There was a reference to the review of the Mining Charter (MC). The number of mining operations, cited as 34%, which were not yet in compliance with regulations, had to be dealt with. Mine health and safety was a concern. The Minerals and Petroleum Resources Development Amendment Act (MPRDAA) had put the DME on a proper footing. He appreciated the difficulty in recruiting and retaining scarce skills. Fortunately there had been a reduced number of fatalities compared to previous years.

Mr H Schmidt (DA) asked if the causes of deaths had been identified. He asked if the number of deaths of illegal miners had been included in the figures. He thought this was probably not the case. He asked if remedial steps had been taken.

Co Chairperson Gona said that these questions should be considered and responded to later by the DME.

He noted that regulatory gaps had been pointed out. He asked the DME delegation to proceed to the presentation on energy. It was coincidental that the National Energy Regulator of South Africa (NERSA) was simultaneously considering the “whopping” increase of 34% requested by Eskom. This was steep by any reckoning and would be a burden to the people of the country.

Department of Minerals and Energy: Presentation on Energy
Mr Tseliso Maqubela, Acting Deputy Director General: Hydrocarbons and Energy Planning, DME, said that the current DME was on its way to forming a single Department of Energy. These were exciting but challenging times. Energy was the lifeblood of the economy. The split of the DME was encouraging as the necessary focus could now be brought on to energy issues. Imaginative solutions were needed to meet the challenges. There could no longer be business as usual. Eskom would have to dig deep into their wisdom, rather than into the pockets of the people. In the past the country had become comfortable with its energy needs and there had been incorrect investment in infrastructure. This had allowed certain lapses to occur.

He described the energy legal framework. There were a number of Acts relating to liquid and gas fuels as well as electricity generation. There were several Acts relating to nuclear energy. These were aimed at ensuring the security of supply both by developing the country’s own resources and by the importation of fuel. The National Energy Act of 2008 had created a framework for integrated planning and energy efficiency. The Electricity Regulation Act empowered the Minister to channel investments. The Nuclear Energy Act covered research and development of nuclear technology. It also gave the Minister the authority to approve the import and export of nuclear materials and technology.

Mr Maqubela said that there were a number of public entities, which reported to the Minister. A number of them fell under the CEF Group. These included iGas, which maintained the infrastructure of gas pipelines. The State held a 25% share of this company. The Strategic Fuel Fund Association controlled stocks of crude oil. They owned a storage facility at Saldanha Bay which had the capacity for storing up to 45 millions barrels of crude oil. Oil Pollution Control of South Africa monitored and prevented oil spillages. South Africa was doing well in this aspect as there had been no massive spills for some time. The South African National Energy Research Institution (SANERI) would soon be moving out of the CEF Group and would be incorporated into South African National Energy Development Institute (SANEDI), which would be established in terms of the Act. Their activities included the study of wind patterns, with a view to erecting wind farms in suitable areas and the identification of areas to store captured carbon emissions. African Exploration was currently dormant. CEF Carbon was a trading company with an office in London. Overseas companies could work through them to buy carbon credits, which would be used to make renewable energy projects viable. The Petroleum Agency of South Africa was concerned with exploration. The South African Supplier Development Agency (SASDA) encouraged the development of local suppliers and small, medium and micro-enterprises (SMMEs). The Energy Development Corporation (EDC) was developing sources of renewable energy. One of their major projects was a sugar beet farm in the Cradock area that would produce biofuel. Finally, the Petroleum and Gas Corporation of South Africa (PetroSA) was the commercial arm of CEF Group. They owned a refinery at Mossel Bay.

He mentioned the other public entities which were not part of the CEF Group. These included SANEDI, which was still to be established. The South African Nuclear Energy Corporation (NECSA) was responsible for research and development (R&D) in nuclear energy and legacy programmes. The National Nuclear Regulator (NNR) was tasked with ensuring the safety of the environment. NERSA controlled the electricity sector as well as pipelines and gas sources. Electricity Distribution Industry (EDI) was the company tasked with the distribution of electricity.

Mr Maqubela listed a number of key players in the energy sphere. There were a number of State-Owned Entities (SOEs) such as SASOL, as well as private companies who owned refineries. They also had depot structures and storage facilities. PetroSA was the only one that did not operate in the retail market.

He said that there were other, less obvious, role players. The Transnet group of companies played an important role. Their pipelines carried 70% of the liquid fuel requirements from the coast to the interior of the country. Rail transport was used to distribute fuel to areas not served by the pipeline and rural areas. All jet fuel was carried by rail. The ports played a crucial role in getting fuel to refiners and retail routes. If these were not available there would be a massive impact on energy security,

Mr Maqubela said that the National Association of Automobile Manufacturers of South Africa (NAAMSA) was also a key player. Motor vehicles used fuel of a particular specification. The Department would be engaging with the oil industry, as there was a need to align the current specifications with international best practice. The Fuel Retailers Association had played a role in introducing changes to the legislation, which made provision for motorists to pay for fuel using debit and credit cards. This would assist in limiting the amount of cash handled by petrol stations, with a corresponding decrease in their vulnerability to criminals. The Nuclear Fuels Corporation (NUFCOR) was a spin-off of Ashanthi. It dealt with uranium ore. The Pebble Bed Modulator Reactor (PBMR) company fell under the ambit of the Minister of Public Enterprises. Organised labour had a say in health and safety issues.

He mentioned other government departments that also played a key role. The Department of Public Enterprises (DPE) was the responsible department for SOEs. There could be no policy that would take South Africa backwards. National Treasury (NT) was also important. The Department of Transport (DoT) was striving to improve public transport with the aim of reducing the number of private cars on the roads. This would lead to better fuel security. The Department of Water Affairs and Environmental Affairs (DWAEA) was responsible for water permits and Environmental Impact Assessments (EIAs). The Department of Trade and Industry (dti) was concerned with the prevention of negative impacts on the motor industry. A serious fuel shortage had been experienced in December 2005, and an investigation into this had been commissioned by the Minister.

Mr Maqubela said that an Energy Security Master Plan (ESMP) for liquid fuels had been approved by Cabinet during September 2007. There were a number of infrastructure areas needing improvement. This was a public document, whose purpose was to ensure that there would never be a recurrence of the fuel shortage crisis. Issues around the supply chain needed to be resolved in the short term. A new multi-product pipeline was under construction, and was due to be completed in 2011. An integrated energy plan was needed urgently. There were many facets to this. Local production had to be encouraged. Foreign policy should be aligned to energy supply needs. Climate change issues had to be considered. The energy infrastructure had to be within a macro-economic framework. Diversity of supply had to be addressed.

He listed several projects being conducted in terms of the ESMP. A feasibility study was being conducted into building a refinery at Coega. This was also happening with a new proposed coal to oil plant for Sasol. Transnet was constructing a new pipeline to service the interior from Durban. Oil companies had applied to build more storage facilities. There was insufficient progress on the provision of cleaner fuels. The Minister would make an announcement on this topic during the budget speech. A strategic stocks policy was in place but needed to be revised. A proposal would be submitted to Cabinet.

Mr Maqubela described some of the challenges. Local refinery capacity was limited and the country was therefore incurring a huge bill for importing refined products. He estimated that between eight and ten billion litres of fuel would be required annually by 2012. Given South Africa’s location it was a long haul for suppliers. In certain areas on the route ships faced danger. The port infrastructure needed an upgrade. There was little room for unplanned incidents at the ports. A lot of road transport was being used to transport fuel inland. Storage facilities were inadequate. An overhaul of the rail infrastructure was needed, as road transport was inefficient.

He highlighted aspects of the DME’s performance in the previous cycle. The Energy Act had been promulgated. The network of integrated energy centres was expanding. The net was closing on illegal retailers. There was an Implementation Plan for the ESMP. The DME had engaged with the DoT, oil companies and the Local Organising Committee (LOC) ahead of the 2010 World Cup. Plans had to be in place to ensure sufficient fuel supplies during the tournament.

Mr Omphi Aphane, Chief Director: Electricity and Nuclear, DME, said that there had been a history of blackouts and brownouts. The global economic meltdown had as a consequence reduced demand for electricity in South Africa, which had reduced the load on the system. Power outages had occurred mainly to municipal supplies, but were now affecting Eskom as well. In response to this crisis Cabinet had put the National Emergency Response Team (NERT) in place. One of the responses was to encourage industries to use wasted heat to generate electricity. Answers to the crisis were needed on the demand side. South Africa was historically a wasteful country in terms of electricity.

He said that Government’s policy position was to allow price rises to cover the cost of maintaining a sustainable energy sector. An average price was used. However, there were over two thousand different tariffs in the country, ranging from domestic tariffs to heavy industrial users. It was necessary to raise the cost to key customers, which could then cross-subsidise indigent users. It was a very controversial matter and the different choices needed to be debated.

Mr Aphane said that there was a need to improve the regulatory framework. The previous Electricity Act had been repealed. The Department had to modernise the way in which regulations were applied. There were three critical regulatory areas. Firstly, a planning framework was needed. This had never been done on an integrated basis before. Secondly, new generating capacity had to be created. This was supply side management. New coal-fired stations were being planned but some diversification was needed as well. Finally, customers needed to practice energy efficiency. This was demand side management.

He said that the Department was projecting a 2.5% annual growth in demand. Failure to match this increased demand would lead to a return to load-shedding. South Africa was one of the top seven emitters of greenhouse gases in the world. A big meeting was to be held in Europe in December 2009 in this regard. South Africa needed to adopt a long-term strategy. A number of scenarios had been adopted. Nuclear energy would play a critical role, but there was a long lead time in developing a nuclear power station. If the Department decided on building a new nuclear station immediately it would not be commissioned before 2018. Urgent decisions were needed. Coal was a cheaper option, but it was not clean. In the short term the reliance on coal-fired power generation would reach a plateau and eventually decline. During that time, however, increased reliance on coal-fired power stations would lead to more emissions.

Mr Aphane said that 76% of South African households now had access to electricity. The free basic energy dispensation was an opportunity to provide poverty relief but this did not seem to be working out at present.

He said that the policy and legal framework was based on the principles contained in the White Paper of 1998. While 90% of the country’s energy needs were being met by coal-fired stations, there was a movement towards nuclear and gas power as well as renewable energy sources. In terms of this policy, by 2013 10 000 GW/hr of energy should be supplied by renewable energy sources. Eskom would be creating 70% of new energy sources and independent producers would provide the balance. This included everyone who could generate electricity, as well as imported energy.

Mr Aphane said that the nuclear policy had been approved by Cabinet. It provided for all phases in the handling of nuclear materials. The management of radioactive waste was a major concern.

He said that Cabinet had adopted some Long Term Management scenarios (LTMS). The country could not follow international norms to its own cost. It was anticipated that 27% of the power requirement would have to be supplied by nuclear energy by 2030, rising to 50% by 2050. At present, renewable energy sources only contributed 4% to the national grid. By 2013 90% of power would still be provided by coal-fired stations. A mitigation plan would be needed to the standards that would be set at the Copenhagen conference later in 2009.

Mr Aphane mentioned some of the interventions that were under way. Eskom had asked for R500 billion for a build programme. There was still debate over a new nuclear power station, but two coal-fired plants were already being built and there was question about the need for a third. There had to be consideration into the question of retaining the reliance on coal or following a policy of diversification. There was concern over the financial viability of Eskom, which could not meet its financial obligations without assistance.

He said that there should be incentives to independent power producers (IPP). Feed-in tariffs had to be set. Popular options were wind and solar power. The latter was a viable option in a country blessed with so much solar radiation. A wind farm was proposed, which would generate over 100 MW/hr. There were a lot of developments in the solar pipeline. There was already a scheme in place that had provided subsidies for projects of less than R100 million. The philosophy had been changed, and the subsidy was now R1 million for each MW/hr which would be produced. To date only 24MW/hr had been subsidised.

Mr Aphane said that there was an initiative to install over 500 thousand solar water heaters. This would have both an energy diversity and demand side management capability. At present expensive gas turbines had to be run to boost power output during peak periods, when much of the demand emanated from people using hot water for washing. Only about one thousand heaters had been installed to date under this programme. It was planned that 1.75 million high usage consumers would convert to solar water heating during the Medium Term Expenditure Framework (MTEF) period.

He said that the financial framework for biofuels had been established. Research was being conducted on the second generation of these fuels. There had been concern over the impact of using food products on food security. Another energy intervention was the use of compact fluorescent lighting (CFL). Up to 20 million CFL bulbs had replaced incandescent bulbs. The strategy was being rolled out and the loops were being closed. The problem was that when the CFL globe failed people tended to revert to an incandescent replacement, due to cost. A policy was needed to limit the import of incandescent bulbs into the country. People committed to energy saving should be rewarded while there should be some penalty for those wasting energy.

Mr Aphane said there had also been interventions with the 2010 host cities. There was a debate on traffic lights. Firstly they should be fitted with CFL to save energy. Secondly, if there was an outage in the area, then these lights would be inoperative, which would result in traffic jams and a waste of fuel. Solar power for the lights was a possible option.

He said that the Clean Development Mechanism (CDM) projects were a United Nations initiative to combat climate change. Fifteen projects had been registered in the country to date and another 120 were in the pipeline. The Tradeable Renewable Energy Certificate (TREC) framework was being finalised. This would have several benefits.

The Co-Chairperson asked that Mr Aphane merely summarise the rest of his presentation to allow time for interaction.

Mr Aphane said that 2014 was the target date for universal electrical access. The informal settlements were still problem areas. There was a challenge in the availability of skills to manage the project. A poverty tariff had to be structured. The Department needed to provide increased access to free basic electricity. The greatest backlogs were in Limpopo, KwaZulu-Natal, the Eastern Cape and in the informal settlements of Gauteng.

Mr Lucas complimented the DME on a thorough presentation. In the past there had been an oversupply of energy. South Africa had reached agreements with neighbouring countries. He asked if these had been renewed and if there had been any adjustment to the costs.

Mr Lucas commented that the solar water heater programme was a most positive way of helping the situation.

Mr Lucas said that there had been a scramble towards biofuels when the oil price had increased dramatically in 2008, but this had died down as the oil price had subsequently dropped. The price was now back to $70 a barrel and he expected there would be another scramble to move to biofuel.

Mr Lucas promoted the introduction of daylight saving time. It might be a bit confusing at first but people would get accustomed to it in due course.

Mr H Schmidt asked when SANEDI would be established, as there were no timelines mentioned in the presentation. Every aspect of planning had to be timelined.

Mr Schmidt noted that he had observed the cleaner fuels policy in Brazil. All car engines were adapted to operate on any ratio of biofuel to conventional fuel. He asked why South Africa needed a higher specification. This could not be a technical requirement.

Mr Schmidt urged that nuclear energy had to be considered. While new conventional stations were being built, some of the existing stations would have to be phased out by 2020. There were major problems ahead. It was up to the DME to decide on nuclear policy, not Eskom or the DPE. He asked why there seemed to be indecision on the matter. The technical standard of the PBMR had been downscaled from Level 4 to Level 3. He asked why this decision should be left to Eskom. The Government was still committed to nuclear energy.

Mr Schmidt asked about IPPs. Since the episodes of load shedding a policy and regulatory framework had been developed. IPPs had to enter into an agreement with Eskom and had to sell energy to them at a set price. It was not the case that IPPs were not willing to step forward. The IPP contribution was needed and therefore a change of the regulatory framework was needed. International companies were also willing to invest in South Africa. He cited a Canadian power company who had been interested.

Mr S Huang (ANC) said that the policy on nuclear energy was not yet finalised. The target was to have 27% of the energy supply from nuclear sources by 2030. The international experience was that the lead time for a nuclear station was between six and seven years. He asked how radioactive waste would be removed and stored. Eskom was looking for a 34% tariff increase. The media had interpreted this as Eskom needing mountains of cash. The Congress of South African Trade Unions (COSATU) rejected this approach, saying that it would only support an increase of 12%. Such an increase would also affect municipalities, which were bound by provisions of the Municipal Finances Management Act (MFMA), and might be bankrupted.

Mr L Mkhize (ANC) said that the target for free basic energy had still not been achieved. He asked what the challenges were in achieving poverty relief and what interventions had been made. He noted the pilot projects for energy efficiency in the 2010 host cities but asked what was being done in other areas. Visitors for the tournament would be encouraged to see more of the country than the host cities.

Ms B Tinto (ANC) noted that she had visited the wind farm at Darling often. Nothing was happening there. She felt that the DME was not serious about renewable energy. She asked why it showed no vigour in pursuing this avenue. So many resources had been used on the development of the PBMR. She was not satisfied. There was a question of cleaner coal. This was a critical industry and provided employment for thousands of people. Sasol had been created by the government of the day to relieve the pressure on South Africa’s fuel supply. Now it was just another private company.

Mr Selau asked what the implications would be for NAAMSA members should there be a change to fuel specifications. These would impact on consumers and fuel suppliers as well. He asked how the DME would deal with the challenge. No timeframes had been put forward. He asked if there was work in progress in this regard.

Mr Selau asked for an explanation of the terms blackout and brownout.

Mr Selau noted that the price of fuel and electricity were increased against the background of the economic meltdown. This would have negative implications, including increased unemployment. He asked for the DME’s view on this.

Mr Selau commented that CFL bulbs contained hazardous material and asked what special handling measures were needed to ensure safety.

Mr P Dexter (COPE) needed clarity as there were many entities involved. There was a general key issue of the governance of SOEs and their performance. He asked if there was any cost or date known for the completion of the PBMR. This issue was vague.

Mr Aphane replied in general to a number of points raised. He said that he thought all South Africans had experienced power outages. A blackout was a total disruption to the electricity supply in an area. A brownout was a less severe outage, of shorter duration, in a smaller area. The policy of load shedding had been a response to avoid blackouts. The shortage of supply arose when the system could not satisfy the demand. Supply to certain areas was then stopped to prevent a total collapse of the network. Such an eventuality had been prevented. The implications of such a total collapse would be disastrous as it could take up to two months to restore the network. This had been experienced in New York. Load shedding was a means to avoid total failure. It was a way to match supply to demand.

He said that South Africa was a net importer of electricity. Much of this came from Cahora Bassa. There were some short-term export contracts in place. These were historical agreements. New tariffs would be applied when these contracts were due for renewal.

Mr Aphane commented that a Department of Science and Technology (DST) cost-benefit study had been conducted four years previously into the provision of peak-period generators. At that stage costs had exceeded benefits, while it was touch and go two years later.

Mr Aphane added that investigations into biofuels were in progress.

Co-Chairperson Ms Thabethe said the Committee would need guidelines in order to approve the DME budget.

Mr Aphane said that there was not a lack of decisiveness regarding old power stations. The regulatory framework for IPPs was problematic and would be addressed. The Department needed to prevent Eskom from abusing power. It was up to NERSA to determine Eskom’s financing model. The tariff increase was an interim application. The municipal financial year (FY) had already started and they could not adjust tariffs at that stage. Increases could only be implemented after April 2010. There were only two ways to finance Eskom’s capital expenditure programme, either from tariffs or fiscal assistance. Loans and donor funding could also be used.

He said that a complicating factor in the lead time for new power stations was not the construction itself but also in the transmission side, environmental considerations and equipment. The longest time was taken by upgrading the transmission network to accept power from that station. The lead time was approximately ten years. The complete value chain had to be considered.

Mr Aphane said that the DME was responsible for policy. Different approaches were followed. All metros in the country took responsibility for electricity distribution. The DME was particularly concerned with the energy efficiency within the 2010 host cities. There would be a big uptake in renewable energy in the near future. The DME had never had a policy on pricing.

Mr Aphane acknowledged that CFLs contained mercury, but there were many other devices with this material in them. However, with so many of the CFL bulbs in use, a safe disposal method was needed. He thought that it might be an option to charge a deposit. The NERT had reached an agreement with the Department of Basic Education that energy efficiency should be an integral part of the school curriculum.

Mr Maqubela said that the DME could not focus on the first generation of biofuels. They had been introduced prior to the food crisis. The Department had to look now at the second generation. An inter-government task team had been established. There were a number of issues limiting the country’s capacity to produce biofuels. These included the scarcity of water and the shortage of arable land. The experience of Brazil showed that the size of sugar cane plantations would have to double to meet the need. There would be collaboration with the states of the Southern African Development Community.

Co-Chairperson Gona asked how the feedstock for biofuels could impact on food security.

Mr Makuke, Deputy Director General: Hydrocarbons, DME, said that Cabinet had excluded certain products from the biofuel programme. The first generation were crops such as maize, which were edible crops. The second generation would be derived from waste material, and the third generation would be crops planted specifically to produce fuel.

Mr Maqubela said that the business case for SANEDI had still to be established. Approval for the formation of the body had been given after the approval of the budget. The business case would be completed by the end of September 2009 and an allocation of funds would be requested in October.

Mr Maqubela said that with regard to the suggestion that cleaner fuels be found, there were environmental and health considerations. Since lead had been phased out of petrol in South Africa, research had shown that the level of lead in the blood of children had decreased. The next target was the benzine component. This was now known to be carcinogenic, and the content in South Africa was higher than that in Europe. The same was the case with sulphur in diesel. In South Africa the level was 500 parts per million compared to 50 parts per million in Europe. Diesel engines were affected by high sulphur content. New vehicles needed the latest specification of fuel in order to be efficient. New vehicle specifications would be applicable in 2012. He said that Sasol was using coal to produce petrol. This saved on imports and improved the balance of payments. This benefited the country, although it was not evident at the fuel pump.

He said that it was time for tough decision on the nuclear issue. He could not rule out a change of policy. A task team was needed. The DST, DME, National Treasury and DPE would present to the Inter-Ministerial Committee. Construction of a nuclear power station could take anything between 48 and 72 months. Servitude issues should be dealt with now. The PBMR was a difficult question. Eskom reported to the DPE for accountability purposes. The DME did not have the latest figures. Parliament had approved the establishment of a waste disposal institution. The export of radioactive materials was prohibited.

Mr Gazi said that all the SOEs had Boards and reported to government.

Mr S Motau (DA) asked about the question of the cost of CFLs. There were huge cost implications of solar energy. It was a pity that Eskom was not present at this meeting as the Committee needed to discuss areas of concern. Regarding Transnet, there was the conundrum of the merits of road and rail transport. It was important to improve the efficiency of rail transport.

Co-Chairperson Gona had not seen the estimates of energy needs. There were only assumptions. He asked if any agreements had been secured with IPPs.

Co-Chairperson Gona commented that in regard to nuclear energy, the security of uranium mining had to be linked to beneficiation. The comparison of costs of nuclear and electricity generation was important as well as the number of jobs being created.

Mr Maqubela said that the nuclear security plan involved all authorised entities. A comprehensive plan was needed. All uranium ore went to NAFCO. The ore was not useful at the stage and had to be concentrated for use in generating energy. The DME would revert to the Committee on the question of job creation. The numbers would depend on the technology used. The efficiency of rail transport was recommended in the ESMP. These recommendations would be sent to the Committee.

Mr Aphane said that transparent demand projections would be made in the next few weeks. Negotiations on the status of IPPs were 90% completed. The solar water-heating programme could be seen as a virtual power station. These would be funded through tariffs, but the cost would be lower than if diesel or gas turbine generators had to be used to satisfy peak demands. Initiatives were underway to reduce the cost of CFL.

Mr E Ragimana, Chief Financial Officer, DME, said that the nuclear budget was R17 million in 2009/10 and would increase to R19 million in 2010. Government had allocated a substantial  amount to NECSA. There was a 50% increase from R277 million to R438 million.

Co-Chairperson Ms Thabethe said that communication was a big problem. So much was being done which was not known about. The budget should be used as a tool to create a better life for all. The DME would be called back to present to the Committee after the budget speech. Although some entities were not obliged to report to this Committee they could still be called if required.

The meeting was adjourned.


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