Integrated National Electrification Programme: briefing by Department of Energy

NCOP Economic and Business Development

09 September 2013
Chairperson: Mr F Adams (ANC; Western Cape)
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Meeting Summary

The Department of Energy (DoE) informed the Committee that at the pace the electrification programme was going now, the goal of universal access to electricity in South Africa would not be reached.  If one wanted to increase access to electricity, this could be done only through an increase in funding or by tackling the problem with technology.  Hence a new approach to electrification was required, and a new “electrification roadmap” for South Africa had been developed.

In March 2012, the DoE had held an Electrification Indaba where all the relevant sector departments and stakeholders had been invited to participate. The Indaba had resulted in a consultative working group process through which the relevant stakeholders were involved in defining the new roadmap.  After the technology and funding options had been considered, taking into account future growth, and a mix of grid and non-grid connections, it was estimated that all formal households would have universal access by 2025.  The “least cost” benchmark for urban areas was R12 000 per household, and R17 000 for rural areas.   There had been a critical analysis of major infrastructure needs and costs, considering the role, and acceptance, of the independent power producers (IPPs).  Time frames to electrify outstanding households were linked to generation capacity and the available network capacity.  There had also been a focus on providing universal access per ward/municipality in the next two to three years.

Between 1994 and 2013/14, just under 5.7 million households had been electrified under the programme, while in the period from 2002 to 2013/14, 68 115 households  in the Eastern Cape, KwaZulu-Natal and Limpopo had been supplied with non-grid technology (solar panels and renewable energy).   A total of 181 004 connections had been made during the financial year, which was just ahead of INEP’s target of 180 000.  This could be attributed to improved efficiencies as a result of being more involved in the operational activities of implementers, and good co-operation from Eskom and municipalities.

There were still 3.3m households without electricity, with 75% of these in the Eskom supply area, and 25% in municipal supply areas. The INEP had been established in 2001/02 to address the backlog of households without electricity.  Newly built households were to be electrified by the restructured Electricity Distribution Industry (EDI), but due to serious inefficiencies in the EDI over the last ten years, INEP had had to address not only backlogs, but also newly built houses and informal households.  Not only connections had had to be funded, but also ‘back bone’ network infrastructure.  In addition to the above challenges, escalating electrification costs and limited funding, as well as the high growth rate of houses (formal and informal), had resulted in a serious threat to the goal of providing universal access in the country.  Despite its successes to date, the electrification programme would fall short of meeting its target of electrifying 92% of formal households by 2014.  It was expected that 84% of all formal households (and 78% of all households) in the country would be electrified by 2014.

The total the number of planned connections for 2013/14 was 276 703, which was quite a steep increase from the previous financial year. The Department was grateful for an increase of R400m in its funding allocation, which accounted for the higher number of connections projected.   The total allocation for the forthcoming year was R3.547bn.

The socio economic impact of the electrification programme was significant in the area of job creation, where one permanent job was created for every R800 000 to R1m spent.  There had also been training, with 700 interns having been trained at INEP and at local government level. There had been community upliftment, poverty alleviation and access to basic services.

Issues raised during discussion covered the need for stakeholder participation in the master plan development, particularly in rural areas, the role of independent power producers, problems with the solar geyser roll out programme, the training – and retaining – of electricians, illegal connections, and some traditional leaders hindering electrification projects in areas under their control. 

It was decided that a meeting with all key stakeholders would be held on October 8.

Meeting report

Briefing by Department of Energy
Dr Wolsey Barnard, Deputy Director General: Department of Energy (DoE), apologised for the late delivery of the presentation, and for the absence of the Director General, who was involved with urgent departmental business.

He said INEP contributed to five of the DoE and Government’s outcomes-based planning approach.  These were: decent employment through inclusive economic growth; an efficient, competitive and responsive economic infrastructure network; vibrant, equitable and sustainable rural communities with food security for all; sustainable human settlement and improved quality of household life; and a responsive, accountable, effective and efficient local government system.  It was also reporting into four special infrastructure structures (SIPs) of the Presidential Infrastructure Coordinating Commission (PICC).

Between 1994 and 2013/14, just under 5.7 million households had been electrified under the programme, while In the period from 2002 to 2013/14, 68 115 households  in the Eastern Cape, KwaZulu-Natal and Limpopo had been supplied with non-grid technology (solar panels and renewable energy).   A total of 181 004 connections had been made during the financial year, which was just ahead of INEP’s target of 180 000.  This could be attributed to improved efficiencies as a result of being more involved in the operational activities of implementers, and good co-operation from Eskom and municipalities

The total the number of planned connections for 2013/14 were 276 703, which was quite a steep increase from the previous financial year. The Department was grateful for an increase of R400m in its funding allocation, which accounted for the higher number of connections projected.   The total allocation for the forthcoming year was R3.547bn.

The socio economic impact of the electrification programme was significant in the area of job creation, where one permanent job was created for every R800 000 to R1m spent.  There had also been training, with 700 interns having been trained at INEP and at local government level. There had been community upliftment, poverty alleviation and access to basic services.

Universal access to electricity still presented a challenge.  There were still 3.3m households without electricity, with 75% of these in the Eskom supply area, and 25% in municipal supply areas. The INEP had been established in 2001/02 to address the backlog of households without electricity.  Newly built households were to be electrified by the restructured Electricity Distribution Industry (EDI), but due to serious inefficiencies in the EDI over the last 10 years, INEP had had to address not only backlogs, but also newly built houses and informal households.  Not only connections had had to be funded, but also ‘back bone’ network infrastructure.  In addition to the above challenges, escalating electrification costs and limited funding, as well as the high growth rate of houses (formal and informal), had resulted in a serious threat to the goal of providing universal access in the country.  Despite its successes to date, the electrification programme would fall short of meeting its target of electrifying 92% of formal households by 2014.  It was expected that 84% of all formal households and 78% of all households in the country would be electrified by 2014.

According to the 2011 census, about 12,24m households out of a total of 14,45m households were using electricity as a lighting source.  About 85% of households had access to electricity for lighting purposes.  Included in the total household figure were 1.26m structures such as backyard rooms, shacks and granny flats, built on the same stands as the formal households.  Of these, about 1.1m were not metered, and as the network designs had not been done to accommodate these additional households, they would have to be upgraded.

A new household electrification strategy had been approved by the Cabinet on 26 June 2013, based on the following focus areas:

• Defining universal access as reaching 97% of households, as full electrification was unlikely to be possible due to growth and delays in the process of formalising informal settlements;
• The electrification of about 90% of households through grid connection, and the rest with high-quality non-grid solar home systems or other possible technologies, based on cost effective options in order to address current and future backlogs;
• The development of a master plan to increase efficiency in planning and the delivery process to ensure more connections, including a workshop on the plan, to which all members of the Cabinet would be invited.

Dr Barnard said that at the pace the programme was going now, universal access would not be reached, and argued that if one wanted to increase access to electricity, this could be done only through an increase in funding or by tackling the problem with technology.  Hence a new approach to electrification was required, and a new “electrification roadmap” for South Africa had been developed. In March 2012, the DoE had held an Electrification Indaba where all the relevant sector departments and stakeholders had been invited to participate. The Indaba had resulted in a consultative working group process which the relevant stakeholders were involved in defining the new roadmap.  After the technology and funding options had been considered, taking into account future growth, and a mix of grid and non-grid connections, it was estimated that all formal households would have universal access by 2025.  The “least cost” benchmark for urban areas was R12 000 per household, and R17 000 for rural areas.   There had been a critical analysis of major infrastructure needs and costs, considering the role, and acceptance, of the independent power producers (IPPs).  Time frames to electrify outstanding households were linked to generation capacity and the available network capacity.  There had also been a focus on providing universal access per ward/municipality in the next two to three years.

Eskom had progressed very well with addressing the so-called “island electrification” in KZN.  Of the 14 959 households that had been identified as falling into this category in 2011/12,10 186 had been electrified, leaving 4 773 outstanding. The DoE and Eskom had collaborated to develop a “master plan.”   The Development Bank of South Africa (DBSA) had been “front loading” a process to fast track certain high backlog municipalities as part of INEP’s long term planning, although some challenges with this programme were being experienced.

The targets that had been set for 2030 by the United Nation’s "Sustainable Energy for All" (SE4All) initiative were: ensuring universal access to modern energy services; doubling the global rate of improvement in energy efficiency; and doubling the share of renewable energy in the global energy mix.  This UN initiative was fully in line with South Africa’s energy policies and goals, as outlined in policy and regulatory frameworks such as the Energy Policy (1998), the Energy Efficiency Strategy (2005), and the IRP-2 of 2011.

Dr Barnard said that if universal access to electricity was to be reached by 2025, the following was needed:

• Adequate funding for capital projects;
• Implementation in line with the Master Plan;
• A solution to the serious challenges in the EDI, as it was difficult to run an electrificationprogramme where network upgrading of billions of rands were required;
• To solve some serious network constraints, as one could not roll out connections in large parts of KZN and the Eastern Cape;
• Improvement in the turn around time for International Energy Agency (IEA) approvals;
• Good co-operation between National Government and other spheres of government;
• Resources to municipalities needed to be improved;
• Clean and good administration for delivering the infrastructure projects required about 40% more staff.   While additional staff allocations of this scale in the public sector was not allowed, this function would have to be fulfilled by operational staff, so productive time for delivering the service would be lost;
• INEP needed to be resourced effectively.

Dr Barnard said that a connection was made every 85 seconds, and by 2025 every household would have access to modern energy.

Discussion
Mr K Sinclair (COPE, Northern Cape) asked who determined the master plans.  There were a number of role players, so he wondered who orchestrated the plan.

Dr Barnard answered that what was important about the Master Plan was that it was the recipe for implementation.  Matters needed to be approved and discussed at the local level, so the master plan had to be constructed with interaction “on the ground.”  At the moment there was no handbook available as to how to go forward, and this was what the master plan sought to do. There was a need to determine how to allocate funds.

Mr Sinclair asked about non-grid solar geysers. He identified two challenges -- the relative slowness of the roll out and the quality of the product.  Many of the tubes installed soon showed a problem after installation. What was the situation in terms of solar products being produced in South Africa?

Dr Barnard replied that solar geysers were not the same as solar panels, as had been outlined in the presentation.  It was correct there had been a roll out of solar geysers, but the change over to a local producer had caused the delay. There was also the problem that the products were manufactured in places outside of Africa, where the water quality was different to that of South Africa.  This was why there had been a move to local production, with 70% of the tank needing to be local. This had also caused a delay, as many companies could not reach the 70% level, and there was a move to possibly lower this figure.

Mr Sinclair argued that there was a need to go back to the Regional Electricity Distributors (REDs) concept in order to address challenges faced in the field.

Ms B Abrahams (DA, Gauteng) asked how many jobs were sustainable and how many had been created?

Dr Barnard replied that the analysis that had been done showed that R1m spent created one sustainable job.

Ms Abrahams commended the Department for the fact that internships had led to employment.

Ms E van Lingen (DA, Eastern Cape) asked if the interns were being taken up by the private sector and if there was some sort of arrangement to ensure that engineers went to the municipalities where shortages existed.

Mr Korombi Mbongwe, project manager for training within the DoE, replied there had been approximately 500 students trained who were qualified to become electrical engineers.

Dr Barnard added that some had been brought into the Department, as well as into municipalities, but some had been taken up by other entities.

Ms Abrahams asked what could be done to assist people who had to steal electricity, or use illegal electricity, and those who had to use alternative sources of energy.

Ms Van Lingen said there were many issues around the responses to illegal connections, such as being cut off.  Within the townships there was an imbalanced system and there was a need to find a solution for that. The cost of electricity was high.

The Chairperson said that it seemed as if the use of paraffin was a policy issue, as the Department of Environmental Affairs had advocated the use of paraffin at some point.  However the DoE had called for newer and more renewable forms of energy. He had also heard at a strategic meeting that alternative energy should be supplied to rural areas.

Dr Barnard replied that the only issue he wanted to reflect in the report was that although customers had access to electricity, they still sought to use alternative forms of energy such as paraffin and candles, which was problematic. He did not mean to mislead the Committee by referring to the number of people using electricity. The issue was not easy to solve and this was why there were attempts to give people legal access to electricity so that more people could be brought into the realms of legal supply, and the issues of illegal connections could be tackled.

Ms Van Lingen stated that she did not think people used paraffin and gas, or other means, for any other reason than that electricity was very expensive.

Dr Barnard replied that South Africa had the sixth of seventh cheapest electricity in the world, no matter what currency one converted it into. If one looked at the cost of telecommunication, then the story was on the opposite side of the scale. However, one needed to be cognisant of what was cheap in this case.

Ms van Lingen asked how far the Department was in providing serviced stands.  She also asked if there were reports on Eastern Cape municipalities.

Dr Barnard replied there had been a master plan for all provinces.   However there had not been a great deal of report back from the Eastern Cape.

Ms Van Lingen said she did not understand land claim issues or the issue of tribal land, as she did not see how traditional leaders could deny their people electricity.

Dr Barnard replied there had been times when tribal leaders had hindered the building of lines by asking for payment, or merely refusing access.  It was unfortunate that this sometimes happened. There had even been cases of leaders burning lines down once they had been built. This had led to various delays, including the redirecting of lines for very many miles.

Ms M Dikgale (ANC, Limpopo) argued that in these areas, many of the traditional leaders were poor and this was often why they talked about money. It was not right to not put in lines just because they had asked for money, and there were various institutions that dealt with traditional leaders.

Dr Barnard replied that providing services at grass roots level in this country was extremely difficult, and if one stated that one could not do something without ‘putting money to my name’, then the process was extended. The department did use these institutions and processes, but this took time.

Ms Dikgale stated that traditional leaders deserved respect, and working with them would make work go more smoothly

Ms Van Lingen said it would be difficult to explain on the ground why targets were not being met. Her concern was that urbanisation was growing too fast and she did not feel that INEP could catch up with the demand. She asked if areas still had to be proclaimed.  How were people to know which areas were proclaimed and which were not?

Dr Barnard replied that this notion was correct. With the new household electrification strategy there was a move from the idea that there was a need to formalise and proclaim. There were various areas where it was not possible to place a grid.  There was a move away from strict principles for electrification.

Ms Dikgale asked how the Adam allocation was distributed, as some areas did not seem to qualify to receive an allocation.

Dr Barnard stated that there had only been a R320m once-off payment against a backlog of billions of rand, which meant that someone would be disappointed.  In terms of allocations, municipalities had to submit business plans. Sometimes plans were submitted which did not state what the problems were (which was meant to be part of the business plan), but requested nearly a billion rand.  If the problems could not be identified, then the Department could not help by providing an allocation. The Adam fund was to assist and upgrade existing networks.

Ms Dikgale responded that people who had nothing would say everything was wrong, but leaving them did not help.

Mr D Gamede (ANC, Kwa-Zulu Natal) highlighted the fact that there were many backlogs that needed to be a dealt with, and this made one question the figures.

Dr Barnard replied that he understood that there were many backlogs and the amount that was allocated to the Department was far less than was needed.

Ms K Kekesi (ANC, North West) replied that she did not think municipalities understood that the Adam allocation was for upgrades.   She asked about the blank spaces in terms of allocations -- did it mean that these places did not get an allocation.  She also asked why there was only one municipality under North West, as this was an extremely remote province.  She wanted clarity as to why some were given so much, while others received none?

Dr Barnard replied that the small amount of allocation meant that some would always be disappointed. The allocation had been done according to municipalities, and was not so much a provincial consideration.

Mr Sinclair said that the important issue was to get all the role players around the table, as they were dealing with a twentieth of the budget that they needed.

Mr Gamede said that the reasons for not reaching the Millennium Development Goals was not convincing.  There was a need to achieve mandated targets.

Dr Barnard replied that it was part of policy to make sure all the current households had been connected.  However there were always new houses being built and these also needed to be connected. There was thus a need to engage in a balancing act.

Mr Gamade said not much had been said about Broad-Based Black Economic Empowerment (BBBEE) and small, medium and micro enterprise (SMME) support.  He did not understand the problems in getting cohesion between DPSA and other stakeholders, as it seemed there was a constant delay waiting on the various stakeholders within government, which did not make sense.

Dr Barnard replied that a facilitated meeting would be much appreciated, and the Department would participate in that.

The Chairperson said that sometimes money was transferred to municipalities and was then used for other means and purposes. Electricity had been used as a credit control measure in some areas. He suggested that a meeting be held on 8 October with various stakeholders including DPSA, Treasury and the IFP.

Dr Barnard replied that it was true that municipalities were using electricity as a credit control measure, and there were court cases out on that to make sure they continued to supply the services.

Mr Gamade said that he was not sure about the figures given, as what was reported was often different to the actual situation. He asked how the equitable share could be used to aid in infrastructure.

The Chairperson asked that the outstanding answers be brought to the meeting on 8 October.

The meeting was adjourned. 

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