Integrated National Electrification Programme: briefing by Department of Energy

Committee: NCOP Economic and Business Development

Chairperson: Mr F Adams (ANC; Western Cape)

Date of Meeting: 07 Mar 2011

Summary

The Committee was briefed by the Department of Energy on the progress of the Integrated National Electrification Programme (INEP) whose new drive was to increase access to electricity from 81% to 92% by 2014. The biggest chunks that had not been electrified were in Kwazulu-Natal, the Eastern Cape and Gauteng. In total the backlog of un-electrified households was 3,388,156. In the Eastern Cape the biggest backlog was in the formal settlement sector, however in Gauteng it was in the informal sector. The challenges that they were faced with included un-electrifiable informal settlements, electrifiable urban informal settlements and terrain that was characterized by scattered settlements typical of the Eastern Cape. For this year they had earmarked and allocation of R2.8 billion which would result in 190, 000 electrified households. The total number of jobs created due to INEP so far had been 5, 811, which had exceeded the 5, 000 target. The actual expenditure was R 363,901,989 - which was 36% below the budgeted amount of R 504,731,218. On the gender target for job creation, the Department said it had not performed adequately.

In terms of universal access, a 92
% target by 2014 was more realistic under the current conditions. Low backlog municipalities and provinces (Northern Cape, Free State and North West) would reach universal access by 2012/13 FY. A focused approach on bulk infrastructure, especially in rural areas would cause a slight decrease in current connection figures, but would have a very positive effect within the next two years. Political drive was required for the non-grid programme to continue existing.

On performance, municipalities needed guidance and the trend had been that municipalities, usually the rural ones, did not perform due to low skills and backlogs. The Department was in an uncomfortable position as they wanted to stretch the money as far as possible in providing electricity access,. However, by neglecting disadvantaged municipalities that could not deliver the same yield per rand as opposed to municipalities with better infrastructure, they would wind up disadvantaging disadvantaged areas even more. They needed to get a sense of what to do because it was a bigger fiscal problem.

Projects in the Eastern Cape municipalities that were behind included: Buffalo City, Inquza Hill, King Sabata Dalindyebo. These were only in the design phase. The Department had issued letters of non-compliance to Mothibeng and Ethekweni which were also behind. The Department said it would provide the Committee with a spread sheet of problematic municipalities. In Kwazulu-Natal problematic municipalities included Umshwathi, Hibiscus Coast, Newcastle, Hlabisa and Abaqulusi. In Limpopo they were Elias Motsaoledi, Baphalaborwa and Lephalele. In Mpumalanga the problematic municipalities were Emalahleni and especially Mbombela. In the Northern Cape, Dikgatlong was problematic. In the Western Cape, the majority of municipalities were not problematic and were performing.

Members wanted clarity on the definition of formal (having permanent walls) versus informal backlogs, how many jobs had been created, the misuse of funds, provision of electricity to un-proclaimed areas, bulk infrastructure and job creation gender bias. The Committee requested that a department official accompany the Committee as they would have to vigorously pursue oversight over Kwazulu-Natal, the Eastern Cape, Gauteng, Limpopo, Mpumalanga, North-West and the Free State. These areas needed to be prioritised


Minutes

Chairperson’s opening remarks
The Chairperson, Mr F Gona (ANC; Western Cape), said that in hindsight they should have also called in the South African Local Government Association (SALGA). There was a worrying trend, for example, in the Eastern Cape at King Sabata Dalindyebo Municipality, where R34 million was received for Integrated National Electrification Programme (INEP) of which not a cent was spent. He had heard all sorts of excuses from the municipality until the Department of Energy (DoE) stood up and said that they had tried to provide the municipality with advice all the time, which was not followed. It was only then that the truth emerged. The Department had advised the municipality, but two years down the line the money was still just sitting there. This was very disturbing as the funds were supposed to be used for service delivery. It was cases like this which had prompted the Committee to ask the Department to come and update them on the roll-out of INEP.

Integrated National Electrification Programme (INEP): Department of Energy (DoE) presentation
Ms Nelisiwe Magubane, Director-General: DoE, said that they had filled the vacancy for the executive manager for INEP and that the new manager was Dr Wolsey Barnard. The presentation would deal with how far the roll-out had proceeded, job creation and which municipalities were problematic.

Dr Wolsey Barnard, Chief Director, INEP: DoE, said INEP was established in 2001 following the Energy White Paper. The Department had extended funding further up the electricity distribution line due to the fact that most rural municipalities did not possess the funds to build infrastructural capacity. INEP funding came from National Treasury and the Department then disbursed it to Eskom and municipalities to implement grid electrification. Non-grid electrification was implemented by service providers. In terms of the national backlog there were three big chunks that had not been electrified in Kwazulu-Natal, the Eastern Cape and Gauteng. In total the backlog of un-electrified households was
3,388,156. In the Eastern Cape the biggest backlog was in the formal settlement sector, however in Gauteng it was in the informal sector.

The challenges that they were faced with included un-electrifiable informal settlements, electrifiable urban informal settlements and terrain that was characterized by scattered settlements typical of the Eastern Cape. For this year they had earmarked an allocation of R2.8 million which would result in 190, 000 electrified households. The reasons for budget escalations from this figure over the following two years was due to the fact that the homes targeted in the future would be further away from the grid.

The total number of jobs created due to INEP so far had been 5, 811 which had exceeded the 5, 000 target. The actual expenditure was R 363,901,989 which was 36% below the budgeted amount of R 504,731,218. On the gender target side of things the Department had not performed adequately. In terms of universal access, the challenges included
insufficient programme funding; building of new bulk infrastructure in rural areas; refurbishment and rehabilitation of electrical infrastructure; building municipal capacity without negative impact on service delivery; structured planning approach (COGTA, Human Settlements etc.); project management; resources management (contractors, consultants, etc.); technology innovations (integration of other sources of energy) and the unacceptability and misconceptions about off-grid technology used on Solar Home Systems which lead to vandalism of systems.

In conclusion, the 92
% target by 2014 was more realistic under the current conditions. Low backlog municipalities and provinces (Northern Cape, Free State and North West) would reach universal access by the 2012/13 FY. A focused approach on bulk infrastructure, especially in rural areas, would cause a slight decrease in current connection figures, but this would have a very positive effect within the next two years. Political drive was required for the non-grid programme to continue existing.

Ms Magubane said that in terms the performance, municipalities needed guidance. The trend had been that municipalities, usually the rural ones, did not perform due to low skills and backlogs. The Department was in an uncomfortable position as they wanted to stretch the money as far as possible in providing electricity access, but by neglecting disadvantaged municipalities that could not deliver the same yield per rand as opposed to municipalities with better infrastructure, they would wind up disadvantaging disadvantaged areas even more. They needed to get a sense of what to do because it was a bigger fiscal problem.

The Chairperson said that some municipalities were not even using the allocated funds to pay salaries; they just did not touch the funds. This was a serious problem.

Mr Mohau Nketsi, INEP Senior Manager, said that projects in the Eastern Cape municipalities that were behind included Buffalo City, Inquza Hill, King Sabata Dalindyebo. These were only in the design phase. They had issued letters of non-compliance to Mothibeng and Ethekweni which were also behind. He added that he would provide the Committee with a spread sheet of problematic municipalities. In Kwazulu-Natal problematic municipalities included Umshwathi, Hibiscus Coast, Newcastle, Hlabisa and Abaqulusi. In Limpopo, they were Elias Motsaoledi, Baphalaborwa and Lephalele. In Mpumalanga the problematic municipalities were Emalahleni and Mbombela, which was very problematic. In the Northern Cape, Dikgatlong was problematic. In the Western Cape, the City of Cape Town was facing problems due to the fact that they did not have areas to provide electricity to because the areas were Eskom areas. The problem was that the Department could not not allocate money to the City. The majority of Western Cape municipalities were not problematic and were performing.

Ms Magubane said that her experience had shown that if a municipality had its own internal problems, then INEP performance would also be affected.

Discussion
The Chairperson said that they would then be receiving a hand-out on municipality performance from the Department. He added that municipality hold-ups were hampering delivery.

Mr A Lees (ANC - Kwazulu-Natal) wanted to know the definition of formal versus informal backlogs, especially in Kwazulu-Natal. He thought that the informal backlog would be larger. He asked whether the Department was able to say how much of the R2.8 million budget would be spent. With regards to non-grid electrification, he agreed that there needed to be a political emphasis. He said that a municipality in his constituency was handing out solar panels and he assumed it was from their own budget. He hoped that it was the Department’s money that was being used because he had problems with the manner in which recipients were being selected. The municipality in question was the Amajuba Municipality. He asked how they calculated how many jobs had been created. The plea from the Department was heard, regarding the misuse of funds, this was a structural problem. The question of viable municipalities was not fiscal but structural.

Ms Magubane replied that formal households were defined as houses, be they in rural or urban areas. The reason why Johannesburg had such a large backlog was because the houses were not just informal, defined as not having permanent walls, but also in an un-proclaimed area.

Mr Nketsi replied that the R2.8 billion was split between Eskom and municipalities, with R1.1 billion going to municipalities. If one talked about under-performance in Eskom’s case, they would most likely only under-spend by 5%. By the end of March the Department tried to disburse all it money and usually were at 80-90% of the allocated budget for municipalities.

Dr Barnard said that the Department was not in the habit of simply dishing out solar panels and that he was surprised at the situation Mr Lees noted. There was a specific process that the department followed when distributing solar panels where they earmarked specific areas.

Mr Lees said that houses in rural areas were not in proclaimed areas.

Ms Magubane replied that the municipality usually proclaimed an area as safe for accommodating humans.

Mr A Nyambi (ANC; Mpumalanga) said that he failed to understand slide 20 about bulk infrastructure. He noticed towards the end of the presentation, Mbombela and Komba were talked about despite their being two different areas that were 200 kilometres apart. He did not see why they were discussed as being the same area. He noted that in the Western Cape not a single female job had been created and that only in the Eastern Cape had a sizable amount of female jobs been created. This was a serious issue.

The Department had indicated that by 2014 there would be 92% coverage. He asked what the target for 2012 was and how they would monitor progress.

Ms Magubane said that in rural areas bulk infrastructure was needed for household uptakes of electricity and they found that as a result in one year they would have to spend large amounts on bulk infrastructure, which reduced the total number of households electrified but allowed for capacity potential to do so in the future. She was not proud of their job creation gender bias and expressed her embarrassment at the state of things. She admitted that this was an area that needed serious work. The jobs created were gauged when they transferred money to Eskom or municipalities under INEP. The transfer stipulated that either Eskom or the municipality needed to report to the DoE on employment equity and other demographics of the people employed. Once they received the reports, they did an audit to verify the information.

Mr Nketsi replied that in terms of the Mbombela project, it could be a bit misleading as they went by municipal information and in some cases the project name might be different from the actual municipal area in which the project was. Thus, the reference to Mbombela may just be a project name; however the details would be in the spreadsheet that he would furnish members with.

Dr Barnard said that in terms of the Department improving, they already used a phased approach to electrification goals and were currently at 81%. They knew exactly how they would step it up to 92%. They were busy working on turn-key projects where they helped municipalities with projects. They did not take way the projects, but rather assisted and negated the need to hire contractors.

Ms E Van Lingen (DA; Eastern Cape) asked where in the Eastern Cape the problematic sites were. She asked how they were progressing this year and what measures they would take to see action in problematic municipalities. She was worried about the problems with maintenance. It looked like service providers were liable for maintenance of non-grid utilities. She asked what maintenance costs should be as a percentage of the projects cost for the first five years.

Ms Magubane replied that they tried to look at the service provider that was going to service the area. The municipality also usually provided free access to basic alternative energy. The service provider usually requested R62 per month for maintenance; municipalities paid this on behalf of each resident, which covered the maintenance fees. This made the system viable.

Mr Nyambi asked whether it was possible for un-proclaimed areas to be electrified.

Mr Nkalipi replied that the municipality proclaimed areas and the Department followed them through the process of proclamation. His belief was that if people were living in an area, then services needed to be provided. Ultimately the municipalities were responsible as the Department provided services to them.

The Chairperson said that some areas in the Western Cape were not proclaimed, but the municipality had provided sanitation and electricity in parts.

Ms Magubane said that in Cape Town it was urgent to provide temporary services in un-proclaimed areas. However, the Department tried not to put services in un-proclaimed areas due to the fact that these people would need to be moved to proclaimed areas. In cases such as, this it would be a waste as they could not afford to provide services twice.

Ms B Abrahams (DA; Gauteng) said that in Kliptown they were told that the area was un-proclaimed, yet 10% of the area was electrified and 90% was neglected. There were formal and informal dwellings there. She asked what the hold-up was.

Mr Nketsi said that he would look at this issue and get back to Ms Abrahams on it.

Ms Van Lingen asked how they calculated backlog figures in the Eastern Cape, because when she looked at the figures she had her doubts about them. In the RDP (
Reconstruction and Development Programme) houses there was always an argument about who was responsible for electrification. She asked what the department could do about the Coega problem where they wanted to build 250, 000 houses, but the Department of Environmental Affairs (DEA) wanted a secure plan of service provision to the houses. She had a feeling that they would just go ahead and build the houses without securing a service provision guarantee in line with DEA’s demand.

Dr Barnard replied that in the Coega area 391 houses were proclaimed. There was solely a process problem there as the Environmental Impact Assessment (EIA) process had started late.

Mr Nketsi relied that there was a 67, 000 household backlog in the Eastern Cape and that 50% of this was in metro areas and the rest were in small scattered locations across the province. Informal dwelling was linked to job migration across the provinces. In terms of accuracy, the figures provided had a 10 -20% margin of error.

Ms Van Lingen said that the EIA approval had been given with the condition that they could provide proof that they would be able to provide electricity to the houses. She asked what the Department was doing to ensure this.

Mr Nketsi replied that if the party concerned was a municipality, then all they needed to do was provide the Department with a business plan which they would look at and then guarantee.

Mr Lees asked how much money was just sitting untouched in the bank accounts of municipalities. In Kwazulu-Natal the Department was referring to rural dwellings as formal even though they were not in proclaimed areas. He understood this now, as the term formal only applied to the actual structure.

Mr Nketsi replied that a lot of the time money wound up being unused because projects were delayed.

Mr D Gamede (ANC; Kwazulu- Natal) said that the Department should not use the term ‘disabled’ as they were referring to people who could function and were rather “people with disabilities”. He said that it seemed that they were moving away from the Millennium Development Goals (MDG) and asked if this was the policy of government. They could not stop at 92% and needed to focus on 100% service provision. They should not admit defeat and settle for 92%. They should aim for 100% delivery and see how far they could get. He asked if it would be possible to get a Department official to go with the Committee in order to visit areas on the ground. He was happy that the Department had acknowledged their shortcoming around gender and people with disabilities in terms of job creation, but the figures were really not acceptable.

Dr Barnard took note of Mr Gamede’s comments around the term ‘disabled’ and said that they would facilitate the visit spoken about. He added that they had regional offices and people on the ground everywhere. They were very aware that they were not achieving job creation targets for people with disabilities and women. They acknowledged the problem and were committed to solving it.

Ms Magubane said that in terms of the MDG, it was not their intention to abandon them. They were looking at the current Medium Term Expenditure Framework (MTEF) and looked at what the implications were for their ability to deliver their targets according to the funding. They had not given up on the MDG, but would need to motivate for more funds to achieve it. She added that she would get Dr Barnard to provide Mr Gamede with his contact details.

Ms Van Lingen said that it seemed to her that the alternative energy systems installed in various areas were being installed by some sort of choice and not on a house to house or street by street basis. She was concerned that municipalities were doing this. For some townships in the Eastern Cape, Eskom were the direct supplier of electricity. She asked whether this would stay like this.

Dr Barnard replied that the Eskom serviced areas would stay as they were.

The Chairperson said that the Department had made a good impression and it seemed that everyone was satisfied. They would have to vigorously pursue oversight over Kwazulu-Natal, the Eastern Cape, Gauteng, Limpopo, Mpumalanga, North-West and the Free State. These areas needed to be prioritised.

The meeting was adjourned.