Free Basic Energy; Free Basic Alternative Energy; Integrated National Electricity Programme (INEP): update

Energy

17 June 2013
Chairperson: Mr S Njekelana (ANC)
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Meeting Summary

The Department of Energy briefing on its Integrated Electricity Programme (INEP) focused on the electrification process, allocations for 2013/14 and universal access challenges. The Department indicated that substantial progress had been made in electrification with 5.6 million households connected to the grid between 1994 and 2012/13. So far, about 65 174 households were supplied with non-grid technology solar panels (renewable energy). In 2012/13, Eskom had met and exceeded its set targets but the municipalities’ performance had been poor as the target was 73 847 households connected, however only 19 276 connections were achieved. The total allocation for 2013/14 was about R 3.5 billion. This amount was split between Eskom (R 2.1 billion), municipalities (R 1.3 billion) and ADAM (Approach to Distribution Assets Management) allocation (R 320 000). There were currently about 3.3 million households in South Africa without electricity; this included 1.2 million informal households and 2.1 million formal households. 75% of these unelectrified households were in areas waiting on Eskom’s supply, while 25% of these were in areas dependent on municipalities for electricity supply. The province with the largest backlog of households without electricity was KwaZulu Natal, followed by Gauteng and the Eastern Cape. INEP was faced with various challenges including infrastructure backlogs and the rapid growth in informal settlements. The Department had to wait on Eskom to provide network designs and infrastructure upgrades. The electrification programme would unfortunately as a result, fall short in meeting its 2014 target of electrifying 92% of all formal households. It was estimated that only 84% of all formal households would be electrified by 2014.

Members raised concerns about non grid and grid connections in rural areas and the attainability of the DOE’s targets for universal access. Members wanted to know what the Department’s rate of implementation was to achieve its 2014 electrification targets; how it spent its unspent funds or whether they were returned to National Treasury. It was noted that rural municipalities were very skeptical about non grid connections because of the perception that they would not be connected to the grid. As much as Eskom had exceeded its targets, there were still matters which needed to be addressed so that backlogs in network connections were addressed. However, Members commended the DoE on its New Master Plan and indicated that as soon as it was finalised, the DoE would be invited to brief the Committee on its progress. Members agreed that stakeholders such as the South African Local Government Association (SALGA), and the Department of Cooperative Governance and Traditional Affairs (COGTA) should meet with the Committee on the challenges faced by municipalities.

The DoE, National Treasury and the Fiscal and Financial Commission briefed the Committee on Free Basic Electricity (FBE) and Free Basic Alternative Energy (FBAE). Government’s Free Basic Services commitment was borne out of numerous debates on ways to address the needs of impoverished citizens. The provision of Free Basic Services played an important role in addressing asset and capability poverty, and improving the ability of the poor to participate in society and in the economy. Currently, Free Basic Services were covered by grant funding from either the equitable share or other national grants. Very little municipal funding got routed to Free Basic Services in the form of tariffs. Also due to the high levels of unemployment within municipal areas, there were households and citizens who were unable to access or pay for basic services, and this group was referred to as the indigent. Members indicated that they had previously requested that the DoE provide statistics on the exact number of indigents in all municipalities, and that had not been provided. This delay was worrying because the municipalities would then not be able to request adequate funds from National Treasury.  Members argued that there were some municipalities which were not financially viable, and a suggestion was made that these municipalities be grouped together for their sustainability and effectiveness. Education to rural communities, especially those which still preferred to use traditional sources of energy such as paraffin and coal was needed.

Meeting report

Chairperson’s opening remarks
The Chairperson said the Committee would be getting updates on the work that the Department of Energy, National Treasury, and Fiscal and Financial Commission had done in addressing crucial energy challenges. The DoE would brief the Committee on its revised strategic plan and annual performance plan. There were challenges with regard to Free Basic Electricity and Free Basic Alternative Energy and these challenges needed to be addressed by the DoE by highlighting its strategies within the newly revised Annual Performance Plan. 

The Department of Cooperative Governance and Traditional Affairs (COGTA) and the South African Local Government Association (SALGA) would also be given an opportunity to address them about the challenges identified at municipalities. Both had been unable to attend this meeting. He reminded the DoE that one of the resolutions agreed on was that the DoE would forward a list of municipalities which did not have an indigent register, within one month, that is, end of March. This did not take place. The Committee was waiting for the DoE’s explanation on the matter so that it could finalise its minutes. 

Department of Energy presentation: Integrated National Electrification Programme (INEP)
Mr Khwrommbi Bongwe, Senior Manager: INEP, introduced his team and relayed an apology from Dr Wolsey Barnard, the Deputy Director General for Programmes and Projects who was unable to attend. He took the Committee through the progress INEP had made to date, together with the challenges it faced and the way forward. Specific focus was paid to the following areas:

Electrification process
Mr Bongwe said DoE had made substantial progress on the electrification process; over 5.6 million households were connected to the grid between 1994 and 2012/13. In addition, during the period 2002 to 2012/13 about 65 174 households were supplied with non-grid technology solar panels (renewable energy), of these, 43 511 were from KwaZulu Natal, 12 282 were from the Eastern Cape, and 9 381 were from Limpopo. Eskom and municipalities had in total electrified over 5 million houses nationally; with the Eastern Cape having the highest number of electrified houses at just over 1 million households, while the province with the least number of electrified households was the Northern Cape, with about 130 000 households electrified. Municipalities had set a target to connect about 73 847 households in 2012/13, however only 19 276 connections were achieved. The municipalities’ performance was poor. On the other hand, Eskom set a target of connecting 114 224 households and they managed to connect 102 894, and so Eskom’s performance was applauded.

As for non-grid connections for 2012/13, there were 13 310 planned connections; of these, 9 343 households were connected. INEP’s performance for 2012/13 was said to have improved, as its target of connecting 180 000 households was exceeded. However, more connections still needed to be made. For the Medium Term Expenditure Framework (MTEF) allocation, Eskom was allocated R 1.8 billion, municipalities R 1.1 billion and Non-grid was given R 86 million. In total, MTEF allocations for INEP amounted to about R 3.1 billion.

● Allocation for connections in 2013/14 is about R 3.5 billion:
Municipalities                  R 1.3 billion
Planned Connections            R 103 million
Eskom (National)            R 2.1 billion
Planned Connections            R 157 million
Non-Grid                       R 91 million
Planned Connections             15 000

Allocations for connections for 2013/14 amounted to about R 3.5 billion. However, connection and bulk allocations in total for 2013/14 amounted to R 3.7 billion. This amount was split between Eskom (R 2.1 billion), municipalities (R 1.3 billion) and ADAM allocation (R 320 000). Mr Bongwe explained that ADAM allocations were to upgrade the ageing infrastructure of municipalities. However allocations were only awarded funds if they made their submissions to the DoE in time. The following municipalities received ADAM allocations: King Sebata Dalindyebo (Eastern Cape) R60 million, Nelson Mandela (Eastern Cape) R35 million, Ngwathe (Free State) R 20 million, Moqhaka (Free State) R 20 million, Nala (Free State) R20 million, Mangaung (Free State) R25 million, Msunduzi (KwaZulu Natal) R100 million, Sol Platjie (Northern Cape) R20 million, Tlokwe (North West) R20m.

● Universal access challenges
Mr Bongwe explained that there were about 3.3 million households in South Africa without electricity; this included 1.2 million informal households and 2.1 million formal households. 75% of these unelectrified households were in areas waiting on Eskom’s supply, while 25% of these were in areas dependent on municipalities for electricity supply. The province with the largest backlog of households without electricity was KwaZulu Natal, followed by Gauteng and the Eastern Cape. While the provinces with the least number of backlogs were North West, Northern Cape and the province with the lowest backlog of unelectrified households was the Western Cape.

Mr Bongwe explained that INEP was established in 2001/02 to address the backlogs of households with no electricity, this was in line with the recommendations made in the Energy White Paper of 1998. However, due to serious inefficiencies in the Electricity Distribution Industry (EDI) over the last 10 years, INEP had to address not only backlogs but it was also mandated to electrify newly built houses; both formal and informal. In addition to these challenges, escalating electrification costs and limited funding, as well as the high growth rate of houses (formal and informal), resulted in a serious threat to reach universal access in the country. The electrification programme would unfortunately as a result, fall short in meeting its 2014 target of electrifying 92% of all formal households. It was estimated that only 84% of all formal households would be electrified by 2014. Another stumbling block was that the majority of households which needed electricity connections were not metered, and the DoE still had to wait on Eskom for network designs and upgrades. According to the 2011 Census about 3.3 million households were not metered. The new Household Electrification Strategy was however a key aspect in addressing these challenges.

Discussion
The Chairperson thanked the DoE for the comprehensiveness of the presentations, especially on the matter of bulk infrastructure. Metering also needed to monitored, especially when it came to consumption. This would also ensure the optimisation of electricity planning.

Mr J Selau (ANC) thanked the DoE for the presentation. He asked what happened to the money allocated which was not sufficiently spent. Was it returned to National Treasury? The Committee appreciated the improvement of INEP. The quality of the DoE’s presentations had shown significant improvement over the years. The needs of society were changing, as a result of urbanisation, and the increased influx of people from rural to urban areas. He made reference to the 2014 household electrification targets set by DoE and asked if 100% household electrification was a realistic target, and if the universal access target for 2025 could be achieved in such a rapidly developing society.

Ms N Mathibela (ANC) agreed with Mr Selau that it did not seem realistic that the DoE wanted to achieve universal access to electricity. On non grid solar systems, she asked whether the DoE would meet the target it had set for itself. 

Mr L Greyling (ID) said in the past, the target for universal access has been changed quite often. As it stood, the DoE set a 97% target for universal access. He welcomed the DoE’s New Master Plan. He raised a concern around the perception rural municipalities had about non-grid connections and that municipalities in rural areas seemed to have made a decision that they do not want non grid connections because they fear they would not get connected to grid electricity. In tackling this, he suggested that both non grid and grid connections be installed at the same time.  He noted there were a number of delays on Eskom’s side with regard to grid connections, especially at rural municipalities. Non grid should then be fed into the grid.  As for renewable energy and the Independent Power Producers, he asked if they could not be combined as mini grid connections in solar farms, a move that would lower the connection rates of non grid.

Prof S Mayathula (ANC) said for formal household electrification, the DoE had now set itself  84% by 2014. He asked what rate of connection the DoE was working at in order to meet such a target.

The Chairperson apologised for having combined the INEP presentation with the rest of the presentations and said in the future, INEP should be given a standalone briefing slot. However the matter of projections was a very important one, and the Committee would monitor the DoE’s quarterly reports. He agreed with Mr Selau and said the definition of ‘universal access’ needed to be looked at when there was adequate time to do so. When working on the definition, the DoE together with the Committee needed to take into account the challenges which came about as a result of development. He thanked DoE for a New Master Plan and congratulated Eskom for the high rate of targets achieved, which was not the case with municipalities.  He reiterated that it would have been ideal to have a representative from municipalities, SALGA to be exact, so that matters pertaining to municipalities could be addressed directly. He referred to the 5% backlog of unelectrified households in the Western Cape, and asked whether this percentage took into account farm workers. How much significance and attention did the DoE give to bulk infrastructure? Why were non grid connection targets so low? What strategy did the DoE have in place for electrification? Where were the exact locations of the island electrification programmes? As for rural development, he said there was a strong focus on electrification. How did the DoE propose to contribute to the enhancement of rural development, with a specific focus on non grid electrification?

Mr Bongwe responded to the question on growth and said it was a serious challenge faced by INEP; and this was why INEP was currently finalising the Master Plan document. The document would address challenges of urbanisation, growth and rural municipality electrification. Unfortunately the DoE had paid too much attention to growth and not on matters pertaining to electrification. He therefore urged the Committee to support the plan, so that the DoE could meet its 2025 targets. He agreed that a representative from SALGA would have been ideal. All municipalities which had received ADAM allocations had submitted their business plans in time, and they had motivated that they were viable for infrastructure upgrade.

Mr Matthews Bantsijang, DoE Director: Electricity Policy, replied to the question of universal access and said a 100% target was not possible because South Africa’s society was too diverse. The DoE however would always have set targets for this.

The Chairperson asked whether defining universal access was relative.

Mr Bantsijang said the New Master Plan would seek to define universal access in relative terms, because society was always changing in nature and diversity. On the question on low non grid targets, there was an issue on how to roll out non grid and the need for municipal education on non grid and grid connections. He agreed that some municipalities still saw non grid connections as an inferior type of connection, due to a lack of adequate education. Eastern Cape and KwaZulu-Natal were currently the provinces where non grid education had showed positive results. The roll out would extended to all municipalities. He agreed that Eskom was the cause of some delays, with regard to network connections. He responded that there would be an efficiency issue on the suggestion to fuse the connection of grid and non grid connections.

He continued that the National Electrification Plan would also need to be relooked at. Electricity demand was not only important at rural municipalities, but also at urban municipalities. On the 84% target for 2014, the target was a realistic one, in comparison to previous targets. He agreed that the performance of municipalities was a concern and the reasons for this varied, from inefficient supply chain processes to delays caused by Eskom. Eskom did not reserve capacity; it was on a first come, first served basis. Municipalities were also not capacitated, especially in the civil engineering field. He said farm dweller homes were also part of the problem and they were taken into account, however some farmers caused a lot of problems with connection and electrification. On bulk infrastructure, licences were an issue, but most were still supplied by Eskom. On the question on Western Cape, the reality was that people had access to two forms of energy.

Mr Bongwe replied that the unspent funds for non grid were used for rollovers.

Mr Bantsijang replied that energy mix was one of the DoE’s main strategies, but policy and environmental approaches and full implementation of various forms of energy were hindered by cultural stagnation. Certain people, especially in rural communities, did not want to adopt certain forms of alternative energies and this contributed to bottlenecks in connections.

In reply to the Chairperson asking when the New Master Plan would be out, Mr Bongwe said that the DoE hoped that a draft would be ready by the end of June 2013, however there were some challenges. Revision to the draft would be made in August 2013. The Chairperson said a slot in the fourth quarter would be put on the Committee’s agenda for the DoE to come present its Master Plan.

Mr Greyling asked whether Members could submit formal comments on the Master Plan as well. On the energy mix, he said the different types of households nationally needed to be taken into account when addressing electrification. The reality was that there were some households in rural areas which would never be able to get connection to the grid because they were too far apart geographically. Therefore enough solar energy needed to be made available to reach such households. Some households could be connected with wires, but the DoE still needed to wait on Eskom to provide the networks. He suggested that solar farms service these isolated households while the DoE was waiting for Eskom. This would be one effective way of addressing backlogs in rural areas. On monitoring household energy use, the DoE needed to be aware of what most households used energy for. For example some used electricity just for lighting and used alternative energy for cooking and heating; and proper energy carriers needed to be provided.

Mr Bongwe replied that the DoE was in talks with one service provider about mini grids. The DoE however needed some direction from the Committee on this.

Prof Mayathula asked what the latest forecast was for 2014 household electrification.

Mr Bongwe replied that in 2001/2, the DoE had a target of electrifying 92% of all households, formal and non formal. But for formal houses alone, the DoE set a target of 84% in 2014, and the target was reduced when informal households were included, to 74%.

Prof Mayathula noted that the expectation was 84% of all formal households, 2.1 million formal households to be exact, but at what rate was the DoE was planning to work to reach this target.

The Chairperson said the question by Prof Mayathula was a relevant one, because the DoE needed to scrutinise the forecasts when assessing the DoE’s quarterly performance.

Mr Bantsijang replied that when the government of 1993 took over access to electricity it was at a dismal low. In 2001, the INEP strategy was developed, indicating that by 2014 92% of the backlog would be electrified. Now the country was sitting at 84% of households with electricity, so 12.2 million households were electrified.

Mr Bongwe said a study undertaken by the IFC indicated that about  3000 000 connections needed to be made per year, to achieve the 2014 target.

Mr Selau agreed with Prof Mayathula that something was not working well with the presentations.  The backlog from now to 2014 was at 16% (2.1 million). He asked whether this target for 2014 was realistic and attainable. The calculations by the DoE were not correct.

Prof Mayathula said the calculations were very confusing.

The Chairperson suggested that the DoE compile a 2-3 page written report on its projections for household connections and present it to the Committee.

Mr Selau asked what criteria was used for the municipal Development Bank of Southern Africa (DBSA) allocations, and why the Eastern Cape received the most allocation. What was INEP’s relationship to the Electricity Build Programme? How did the Master Plan relate to the Electricity Build Plan?

Mr Bongani Khumalo, FFC Chairperson, thanked the Members for their questions. He responded to the question on municipalities and how they qualified for funding and said all municipalities were invited to apply for funding. Funding was to accelerate the electrification programme. DBSA had put aside R 2.2 billion for the programme to assist municipalities.

Mr Bongwe replied and agreed that there were different policies to address electricity challenges. The relationship between INEP and the Electricity Build Programme was of generation, transmission and distribution. The main policy guide was the Integrated Resource Plan. The DoE therefore needed to make sure that all plans talked to each other, through the Integrated Electricity Plan.

The Chairperson said the DoE needed to focus on the integrated nature of INEP. The Committee applauded the work done by the DoE in ensuring that implementation agencies worked in an enabling environment; guided by enabling policies. He suggested that INEP be given sole focus in the next term, so that non grid could be looked at in even more detail. Non grid had a significant impact on rural development and the economic wellbeing of rural communities, without dismissing the social factors which also played a role. Various players, such as DBSA, needed to be taken into consideration because they played a vital role. The matter of household energy strategy was one which had come up a number of times, and so DoE needed to finely define what it means by ‘access’. On the New Master Plan, the issues which were raised needed to be taken into consideration at a later stage. Electricity provided about 85% of all energy in the country and it was therefore vital.

Free Basic Electricity and Free Basic Alternative Energy
The Chairperson said the Committee had not been fully satisfied with the DoE’s briefing on Free Basic Electricity (FBE) and Free Basic Alternative Energy (FBAE) in January 2013 and that was why the DoE had been invited again to make a thorough presentation to the Committee, providing more clarity on a number of matters. The Committee needed to know what plans had been put in place, specifically those pertaining to the Medium Term Fiscal Framework.

Mr Matthews Bantsijang, Director: Electricity Policy, gave a brief background to those areas which were discussed in January’s briefing to the Committee. He responded to the Chairperson’s question about the list of indigents in municipalities and said the DoE had included the list in its presentation, however there was still a challenge with monitoring, which needed to be addressed. One other challenge was that the Minister had not signed the indigent register; however about 99% of municipalities had registered indigents. It was a challenge that it took a long time to get information from municipalities.

He explained that free basic electricity accrued to a designated Point of Purchase on a monthly basis, and it was streamed at provincial, district and municipal capacity. FBAE however would only be implemented where there was no FBE roll out due to a lack of infrastructure at municipalities. The rising costs of electricity were also a challenge to roll out, and the DoE was therefore thinking beyond FBE, and the Inclining Block Tariffs (IBT) implemented by Eskom was there to cushion the poor. Other challenges included: the availability of low electricity cost appliances; moving people away from the consumption of paraffin, coal and candles; geographic accessibility of FBAE Liquified Petroleum Gas (LPG); lack of information at municipal level on the roll out of FBAE; lack of indigent policies; registration, verification and management of indigents; contravention; lack of human capacity at municipal level; the lack of proper reporting, monitoring and evaluation systems; and token collection (though some municipalities had however been provided with workshops on token collection).

In conclusion, Mr Bantsijang said due to a lack of a monitoring on the ground it became difficult to establish accurate figures and COGTA’s coordination was needed. The National Treasury was also urged to intervene about the lack of implementation, as a result of inadequate funding. Poverty alleviation was an important challenge in the country, and the link between poverty and energy was clear. Policies such as FBE and FBAE were therefore important in the upliftment of poor communities. Illegal connections were also one of the biggest challenges to efficient roll out.

New Local Government Equitable Share Formula and Free Basic Electricity - National Treasury
Ms Wendy Fanoe, Intergovernmental Relations: National Treasury, spoke about the New Local Government Equitable Share Formula and Free Basic Energy, after introducing her team. She said National Treasury was seeking to increase access to both Free Basic Electricity and Free Basic Alternative Energy, and also to fund these. 

● Access to electricity
Ms Fanoe explained that the 2011 Census indicated that about 15% of households nationally were without electricity. Municipalities were divided into these types: metros, secondary cities, large towns, small towns and rural municipalities. Rural municipalities had the highest percentage of households without electricity, with a backlog of about 25% of the national total. While in contrast, metros had the lowest percentage of non-electrified households, at about 11% of the national percentage. However, there had been significant improvements in backlog reduction between the periods 2001 – 2011, especially in rural areas. In addition, R 2.6 billion had been added to the Integrated National Electrification Programme Grants over the 2013 MTEF to accelerate growth.

● Funding Free Basic Energy
The Local Government Fiscal Framework was made up of own revenues, which included property rates, service charges and transfers. Municipalities should however charge cost-reflective tariffs for the supply of electricity for all users that can afford to pay. However the high levels of poverty meant that funds from national revenues were needed to fund the delivery of services to poor households. Historically, municipalities generated surpluses form the sale of electricity that had been used to fund other services. Now the rapid rise in bulk costs and a desire by municipalities and NERSA to keep electricity affordable to consumers had resulted in reduced surpluses. In some cases, municipalities were generating losses from sales. Reduction in surplus limited the ability of municipalities to cross-subsidise.

National Treasury was therefore working with municipalities to improve tariff setting practices to ensure tariffs were cost reflective so municipalities did not lose money on services to non-poor households. Progress to date included:
- Pilot study at uMhlathuze on costing;
- Compilation of costing guidelines;
- Assisted various municipalities with costing and tariff setting;
- Various training sessions to CFO Forums and Provincial Treasuries; and
- Inclusion of an additional segment (Management Accounting) in the Standard Chart of Accounts (SCOA).

Section 227 of the Constitution states, “Local government and each province is entitled to an equitable share of revenue raised nationally to enable it to provide basic services and perform the functions allocated to it.” Hence the equitable share funded the operating and maintenance costs municipalities need to provide basic services to poor households; services such as infrastructure, which was funded through conditional grants. The new Local Government Equitable Share (LGES) formula was in place to ensure that local government could raise revenue in terms of Section 227 of the Constitution.

The formula funded free basic services for every household below an affordability threshold of R2 300 household income per month. Cost of services and the number of households would be updated annually. A subsidy of R275.17 was allocated per household for a package of free basic services. To date, a total of R5.7 billion has been allocated for energy through the LGES. This amount included an allocation of R56.29 per household per month for free basic energy (including 10% allocation for maintenance). Unlike the old formula, the new formula allowed for a more redistributive structure at municipalities and among households. Some of the advantages of the new formula were that its structure was more transparent, it had a higher affordability threshold and it allowed for more realistic cost estimates for basic services.

With regard to access to FBE, municipalities reported on their provision of FBE in the Non-Financial Census of Municipalities, which was collected by StatsSA, among other things. Households without electrical connections should receive Free Basic Alternative Energy (FBAE). In conclusion, the effectiveness of the FBE rested on three pillars: providing access, maintaining access and subsidising consumption. 

Financial and Fiscal Commission (FFC) presentation
Mr Bongani Khumalo, FFC Chairperson, introduced the team from the Commission. He said quite a number of issues had already been raised by the previous presentations, and the Commission would therefore try to not repeat information and highlight only the key issues. He said one of the main matters the FFC was trying to address was the foundations of where the system was going, and how it would align itself with the National Development Plan (NDP). The FFC 2014/15 submission on the Division of Revenue raised concerns around maintenance and the refurbishment of infrastructure, for water and electricity as services needed to be reliable. It was important to look at issues of access to make free basic services a reality for all beneficiaries. Sustainability was also another factor which needed to be considered, especially when it came to pricing and to promote environmentally responsible energy.

Access to Free Basic Electricity and Free Basic Alternative Energy
Dr Mkhululi Ncube, FFC Programme Manager: Local Government, said the biggest improvement in access to electricity was in rural municipalities. Between 2001 and 2011, households with access to municipalities rose from 47% to 74%. There was also a steady increase in consumer units receiving electricity. But consumers receiving Free Basic Electricity, there had been a decline. This decline was as a result of the proper targeting measures by municipalities. There were also policies in place for Free Basic Electricity and Free Basic Alternative Energy; however the challenge was that not all municipalities were implementing these policies well. There were also a number of municipalities which provided alternative energy in 2010 and 2011; they provided coal, liquefied petroleum gas, paraffin, solar home systems etc. With regards to funding, the DoE worked with National Treasury, municipalities and SALGA. Both FBA and FBAE were funded by the Local Equitable Share index, which was implemented in 2013. It improved accurate and targeted funding for FBE and FBAE and provided for better support for rural municipalities. As previously indicated by National Treasury, R 56.29 was provided for every poor household for FBE and FBAE.

Ms Sasha Peters, FFC Researcher, said that some of the constraints to the adequate provision of electricity were capital renewal backlogs and infrastructure backlogs in the electricity sector, illegal connections and the incorrect use of indigents.

Discussion
Mr Ncube emphasised that the Revised Equitable Share Formula shifted more funds towards rural municipalities, which needed to address capacity constraints. Parliament therefore needed to follow quite closely the money which had been allocated to municipalities, so that the extra money allocated addressed the matter of free basic services. From the FFC’s perspective, underspending and misallocation of funds needed to be looked at and monitored. The FFC was engaged with a process with National Treasury to review the conditional grants provided to municipalities. The role of the DoE was to prioritise oversight, according to Section 114 of the Constitution.

The Chairperson said it was a pity that local government representatives were not available for the meeting. However they would be called in and the DoE would be invited for an official briefing. Members needed to understand how crucial all the information presented was, and the Committee had an important role to play, especially with oversight, monitoring and evaluation. Part of the responsibility of the DoE was to ensure that municipalities were adequately empowered.

Ms Mathibela thanked the DoE for the presentations. She was not happy with the concerns raised against management within the DoE. Policies were there to provide guidance to management. As for municipal non-compliance, she asked who was responsible to act, was it SALGA, the DoE or the responsibility of the Committee? In rural communities, as outlined by the presentations, some people preferred to use coal and paraffin, however the DoE needed to drive electricity initiatives for lighting. These alternative sources of energy could not be used for lighting. She raised a question on the collection of coupons, saying as it stood, people in poor communities housing backyard dwellers forfeited free services. What happened to the forfeited money which was supposed to go to these people?

Mr Greyling said reference was made in one presentation that there was in fact a deficit in municipalities from revenue sales. That was frightening, seeing that South Africa was falling behind in reducing electrification backlogs. There were a number of municipalities which were not financially, or structurally viable to provide adequate services. These municipalities therefore needed to be grouped together for sustainability. As for FBE, he asked how municipalities gave out coupons and whether they were regulated. Was there a way to enforce safety compliance measures for paraffin? He asked whether people could not get their coupons on their BRT cards. FBE provision therefore needed to be provided on a household basis, not on an individual basis.

Mr Selau said a turnaround in the electrification process was needed. DoE did not seem to have a clear roadmap or implementation plan for the electrification of all households. How many indigent people were registered? How could the DoE request adequate funding from National Treasury if they did have exact figures? He asked that the DoE define what an indigent person was, and how that was different from human capacity. According to the DoE presentation, there were skills shortages in some areas; what were these skills shortages?

Prof Mayathula referred to the presentation by National Treasury and thanked them for the increase in allocations for municipal households.

Mr Bantsijang responded to the question of management and said it was out of context. On the question on non compliance to policies at municipal levels, the issue was a bigger issue, which was bound by constitutional responsibility. He appreciated the question as it was one which needed to be addressed. On the question on coal, he mentioned South Africa’s energy mix. Certain amounts were budgeted for, so people needed to change their cultural traditions and they needed to be educated about various and more sustainable sources of alternative energy. The collections of tokens was mainly in rural areas which were mainly too far from towns, and this was still a huge concern. However, vending stations were the main place for token collections, but certain vendors needed there to be a minimum of people who collected tokens for them to remain operational and sustainable. In rural areas, where people are scattered, providing the service became a huge challenge. It was therefore the responsibility of the municipalities to extend the service to as many people as possible. He was not sure whether the BRT cards would work in rural areas. The issue of backyard dwellers did not only affect the provision of free services, but it also affected the installation of meters. The same concerns applied to farm workers. He agreed that the DoE needed to intervene with regard to the maintenance of infrastructure and the provision of free basic services. Indigents were identified according to the definition of what a ‘poor’ person was; and this was dependant on the municipality’s own policies.

Ms Fanoe responded to the question on backyard dwellers and said urbanisation was a reality. What needed to be done was that sector municipalities needed to work together with DoE to draft solutions to address these issues. On the question on electricity deficit from sales, this was a matter which the DoE was already addressing through various strategies. On the question on indigents, reference had been made to the 2011 Census and each municipality had its own database on the matter. Municipalities were encouraged to work collaboratively in addressing some of the service provision challenges. 

The Chairperson said he had a stream of question, but because of time, he would put them through in writing. He concluded there was a lack of satisfaction from the Committee, even though the presentations were great. He suggested that a more comprehensive platform needed to be extended, where SALGA and COGTA would also be present. He asked that Eskom give an update on their ‘regional forum base set’, because the briefing on it was not satisfactory. He acknowledged that the electricity sector was a very broad one, and it needed to be adequately supplied. The Committee became ultra sensitive when it came to addressing electrification backlogs among poor municipalities. Free Basic Electricity and Free Basic Alternative Energy were areas which would be looked at on a continual basis because they were important areas. He thanked all the presenters.

The meeting was adjourned.
Apologies: Ms B Tinto (ANC), Mr K Moloto (ANC)
 

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