Grand Inga Hydropower Project Treaty with DRC: Deputy Minister of Energy briefing

Energy

04 November 2014
Chairperson: Mr F Majola (ANC) Co-Chairperson: Mr L Suka (ANC; Eastern Cape)
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Meeting Summary

The Department of Energy met with the Portfolio Committee on Energy and the Select Committee on Economic and Business Development in a joint meeting to discuss the Treaty on the Grand Inga Hydropower Project between the Republic of South Africa and the Democratic Republic of Congo. The two Committees approved the treaty.

Members were provided with some background on the Grand Inga Project, its strategic importance to the Department of Energy, to Africa and its sub-regions. The tenets of the draft Grand Inga Treaty were noted. The Grand Inga Memorandum of Understanding signed on 11 November 2011 which paved the way for the development of the Grand Inga Treaty. The Grand Inga Project has seven phases and is a hydro power station to be built on the Congo River on the Inga site, with potential to generate approximately 40 000MW. The Inga dams were located in the western DRC 50km upstream of the mouth of the Congo River and about 225km south west of Kinshasa.

The strategic importance of the Grand Inga Project was that the project had the potential to generate 40 000 mega watts (MW) of relatively cheap, clean energy of which South Africa has potentially secured rights to import 12 000 MW. The project would contribute to the universal energy access agenda and the alleviation of poverty within the African continent. Regional economic development and integration within the Southern African Development Community (SADC) was also a high priority, and this had a potential to stabilize the DRC; a country strategic for African development. The Project’s strategic importance for South Africa was that of the reduction of its carbon footprint, the diversification of energy risk, energy security, positive impact on the tariff, and it was in line with the Integrated Resource Plan (IRP).

Members asked for timeframes for the implementation of the different phases? How long would it take for the project to be completed? How much would this cost? Who else would benefit from this hydropower - which other countries have shown interest? What was the rough estimation of the value of the project and how much would South Africa be contributing to this? What measures were put in place to deal with the ageing infrastructure of Phase 1 and Phase 2 of the project? What timeframes were in place to engage surrounding countries such as Zambia and Zimbabwe? What about DRC's appalling record on human rights? Over 3 million people had died since the war began in the DRC, how would this affect the project? How would the political and security risks within the DRC be managed? In terms of the index of failed states, the DRC was ranked number two after Somalia so how would the Grand Inga Project be protected?

Both the Select Committee and the Portfolio Committee recommended that the Treaty should be approved by both Houses of Parliament. The Democratic Party and Economic Freedom Fighters abstained until the National Assembly vote on it as their parties had not had an opportunity to caucus the matter.

Meeting report

Deputy Minister of Energy and Department briefing on Grand Inga Hydropower Project Treaty
Deputy Minister of Energy, Ms Thembisile Majola, thanked both Committees for organizing the joint meeting. She welcomed members of the media and those from civil society. She said the meeting would be a wonderful opportunity for all Members to clarify any outstanding issues they had with the treaty. Based on the assumption that Members had a good idea about what the treaty was about, the meeting would not go into too much detail. The treaty has already been signed by the two Presidents. She indicated that South Africa’s Ambassador to the Democratic Republic of Congo (DRC) was also present at the meeting and if necessary, he would also respond to any questions and concerns Members might have.

Mr Ompi Aphane, Deputy Director-General: Policy, Planning and Clean Energy, DoE thanked the committee for the invitation and the Deputy Minister for the opening remarks. He indicated that the purpose of the presentation would be to provide Members with some background on the Grand Inga Project, the strategic importance of the project to DoE, to Africa and its sub-regions. The tenets of the draft Grand Inga Treaty would also be discussed.

The Grand Inga Memorandum of Understanding (MOU) signed on 11 November 2011 paved the way for the development of the Grand Inga draft treaty. The Grand Inga Project has seven phases. Phase 1 is associated with the following: costs due to the development of the Common Works; costs due to the transmission line to Kolwezi (the Delivery Point); investment by South Africa in the construction of the transmission infrastructure from the Delivery Point to South Africa, the commitment to off-take 2500 MW by RSA and 2300 MW by DRC and assistance in the mobilisation of funding. He explained that the Grand Inga Project was a multi-phased hydro power station to be built on the Congo River on the Inga site, with potential to generate approximately 40 000MW. The Inga dams were located in the western DRC 50km upstream of the mouth of the Congo River and about 225km south west of Kinshasa. Associated with the Grand Inga are transmission lines to evacuate power from the generators to the markets in the DRC and to export markets. It is foreseen that a new transmission line to South Africa will be associated with the first phase of the Grand Inga project. The transmission line will probably go through Zambia and Zimbabwe and Botswana.

South Africa negotiated for interconnection on two fronts; the East and West. He said it was important to diversify the risk for South Africa to depend on cross-border sources. The strategic importance of the Grand Inga Project was that the project had the potential to generate 40 000 mega watts (MW) of relatively cheap, clean energy of which South Africa has potentially secured rights to import 12 000 MW. The project would contribute to the universal energy access agenda and the alleviation of poverty within the African continent. Regional economic development and integration within the Southern African Development Community (SADC) was also a high priority, and this had a potential to stabilise the DRC; a country strategic for African development. The Project’s strategic importance for South Africa was that of the reduction of its carbon footprint, the diversification of energy risk, energy security, and a positive impact on the tariff, in line with the Integrated Resource Plan (IRP).

Mr Aphane said the purpose of the treaty was to develop an enabling framework, linking the DRC and South Africa into a project which would allow for the two countries to jointly explore economically feasible options for the development of the project. The treaty also provided for the establishment of certain institutional arrangements such as the Joint Ministerial Committee (JMC) and the Joint Permanent Technical Committee (JPTC), to facilitate the development and management of the project within the DRC. With regard to the governance of the project, he said the JPTC, comprised of representatives from South Africa and the DRC, would prepare project documentation, structuring issues and it would also conduct feasibility studies for finance arrangements, generation and the transportation of power. The JMC would ensure that the implementation of the project was in accordance with the treaty provisions. The JMC would consist of the ministers responsible for electricity from both countries; they would meet at least twice a year.  

It was anticipated that the economics of the project would be more favourable (due to common works completed and project significantly de-risked) as more phases were added and generation cost per megawatt would decline. South Africa would be guaranteed access to cheaper and cleaner power if future project phases went ahead. Tariff setting would be subjected to negotiation and would be based on the following principles: covering the costs, the return and the fees imposed by the DRC, and taking into account the price of energy that would be supplied by alternative projects. In the case of South Africa, the alternative price would be the cost of generation from coal. A tariff setting protocol would be negotiated. With regard to challenges, he said the treaty could take long to be ratified by respective parliaments; there was also an urgent need for engagement with Zambia and Zimbabwe to initiate the negotiation on transmission lines. Other challenges were the political and security risk.

He concluded that the treaty would be introduced to Parliament for ratification and negotiations on the outstanding protocols on tariff setting also needed to be finalised. The negotiations with potential transit countries and the commissioning of a feasibility study on transmission lines were also on critical path. 

Discussion
The Co-Chairperson thanked the DoE for the presentation.

Mr W Faber (DA; Eastern Cape) thanked the DoE for the presentation. He said the presentation indicated that in 2013, 12 000 mega watts (MW) of electricity would be pumped into South Africa; how much did the country actually need in order for it to function at 100%? He said Phase 1 of the project stated that 4 800  mega watts would be generated, of this 2 500 MW would be for South Africa. How long would it take for this 2 500 MW to reach South Africa?

Mr L Greyling (DA) said he was excited about the project. The first phase of the project would generate 4 800 MW, of this 2 300 would be for the DRC. However, most African countries used less energy than this; would there be enough demand for this energy in the DRC? South Africa needed a plan to prevent over capacity; what were some of the timeframes for the implementation of the different phases? How long would it take for the project to be completed? He said it was expected to cost R80 billion dollars to complete the project, which would generate about 40 000 MW, and this was substantially cheaper than the nuclear programme. Therefore South Africans should be expected to pay a lower tariff from the Grand Inga Project. He asked if these were some of the discussions taking place within the DoE. He asked if transmission lines to pull power from Zambia would be upgraded. He argued that South Africa needed a regional grid within Southern Africa; how much would this cost? He asked if South Africa’s obligations ended with an off-take of the agreement or whether more capital investment would be made into the construction of the project.

Ms L Makhubele-Mashele (ANC) said the treaty has already been signed by the DRC and South Africa. Which other countries would also take part in these agreements? Who else would benefit from this hydropower; which other countries have shown interest? Looking at the model of the hydropower which the country was currently taking from Mozambique, South Africa only owns about 22% of the transmission lines. South Africa was therefore a minority shareholder in this arrangement. With the Inga Project, what kind of arrangement would be followed with regard to the ownership of these transmission lines?

Mr S Mthimunye (ANC; Mpumalanga) said innovation was well encouraged; was there any arrangement which the country was drawing inspiration from with regard to the Grand Inga Project? What was the rough estimation of the value of the project and how much would South Africa be contributing to this?

Ms T Mahambehlala (ANC) asked that the DoE provide Members with information on the risks and negative impacts of the project, especially those the project would have on the environment. The Congo River’s ecosystem also needed to be considered. The Grand Inga project was not new; phase one and phase two of the project were started in 1972 and 1982. However research indicated that the output from these projects has significantly reduced, primarily due to ageing infrastructure and a lack of maintenance. What measures were put in place to rectify these? Would Inga Phase 3 use the same canal as the existing phase one and phase two projects?

Ms N Louw (EFF) thanked the DoE for the exciting presentation. However she argued that Members should not be pressed for time during Committee meetings. Sufficient time was needed to interrogate the reports. What timeframes were put in place to engage other surrounding countries such as Zambia and Zimbabwe? How would the political and security risks within the DRC be managed?

The Chairperson responded to the question about there not being enough time for Members to engage the presentation and explained that the timeslot allocated was for the Select Committee on Economic and Business Development, however it was decided that the Committee would have a joint meeting with the Portfolio Committee on Energy during the first half of the meeting. After the joint meeting, the Select Committee would continue with its Committee meeting, without the Portfolio Committee.

Mr J Esterhuizen (IFP) thanked the DoE for the presentation and said he was excited about the prospects of clean air and clean energy. The Grand Inga Project was expected to cost about R140 billion, this was fair compared to Medupi which cost the country R145 billion, however these costs could escalate. The estimated costs of the project were expected to exceed those of the Three Gorges Dam in China. However the DoE needed to be realistic and admit that the project would not be completed in less than a decade. He also raised a concern about the maintenance of the existing dams; he argued that these dams were being neglected. Over 3 million people had died since the war began in the DRC, how would this affect the project? He argued that the project would increase South Africa’s vulnerability to climate change and this was a factor which the DoE needed to take into consideration.

Mr B Nthebe (ANC; North West) asked if there were any plans in place to increase the 2 500 MW allocation to South Africa.

Ms E van Lingen (DA; Eastern Cape) said she was concerned about whether there was sufficient capacity of transmission lines to transport power from the DRC into South Africa. With regard to the lack of maintenance, she asked what the potential was possible transmission losses.

Mr M Mackay (DA) also raised a concern about political instability within the DRC. In terms of the index of failed states, the DRC was ranked number two after Somalia. How would the Grand Inga Project be protected? In addition, the DRC had an appalling record on human rights. How would South Africa contribute to the improvement of people’s lives within that country, especially the lives of women and children? He asked if South Africa would use its balance sheet to contribute towards funding the project. He asked for clarity on the associated costs of building distribution lines. Would this not further destabilise South Africa’s national grid? South Africa had its own backlog on its distribution network currently. He argued that a far more critical assessment of the challenges around the project was needed.

Mr M Matlala (ANC) asked if any South African companies were involved in the construction of the project. How far was the project from its completion?

Dr Y Vawda (EFF; Mpumalanga) asked how many mega watts of power were needed to make South Africa more stable. He asked for a breakdown of the amounts of power currently being produced by the power stations in Mpumalanga. Would these power stations be phased out? Did South Africa have the capacity to capitalize on these increases of energy which would be coming through? On the z-countries, he said the surrounding countries also needed to be brought into the project, not only to buy in on the transmission lines but the Grand Inga idea needed to be sold to these countries, with an emphasis on how these other countries would be benefitting. Both the eastern and western corridors needed to be made use of. With regard to carbon credits from the project, how would South Africa be benefitting from this? On the human rights violations within the DRC, he said multinational companies who invested in African countries were the primary cause for human rights violations. He argued that South Africa needed to play a more active role in fostering socioeconomic justice within the DRC.

The Co- Chairperson thanked Members for their interactive questions. He said due to time constraints the DoE would only get a few minutes to respond to some of the questions. All other remaining questions would be responded to in writing. Select Committee Members had another meeting to attend.

Deputy Minister Majola thanked Members for the engagements with the presentation.

Mr Aphane responded to the questions on environmental issues, saying carbon credit has been taken into consideration. Article No 14 raised issues around how the DoE would treat the environment, and the social aspects of the project. The Grand Inga Project has been recognized as being a great risk, and the treaty did make provisions for environmental issues. On the technical questions on how power would be moved from the DRC into the country, he said it would be incorrect to assume that the transmission lines in place would be disrupted. On the questions around finance, South Africa was not handling any debt at the moment. South Africa would be paying per kilowatt hour as it flowed. Funding of the building project would not be part of South Africa’s responsibility. On the tariff, he said as much as there were no operating costs in relation to the project, transmission was a massive cost, particularly in the initial stages. On the 2 300 MW allocated to the DRC, he said much power was needed in Kinshasa, especially in the mining areas. The question on the model of ownership would be responded to in more detail in writing.

Mr Ntsiki Mashimbye, Ambassador to the DRC, Department of International Relations and Cooperation (DIRCO), thanked the Chairpersons for the opportunity to respond to the questions. He invited Members of both Committees to the DRC. He said the Grand Inga project moved the entire African continent to a new level. The Inga project was not a project in isolation; it was a project bigger than electricity, it was about industrializing Africa as a whole.

The Co-Chairperson thanked the Ambassador for the invitation, and said taking costs into consideration, Members would look into the invitation.

Deputy Minister Majola said one of the things which the country should not lose sight of is how the project came to be and why the DoE opted to look at a treaty and not the usual agreements. She said there was a significant history behind all that. She acknowledged that the BHP Billiton project failed dismally because the project generated electricity mainly for itself without taking into account the needs of the people within the DRC. Therefore the questions which have been raised in the meeting should also be seen in the context of the role of South Africa within the DRC. South Africa was well aware that the day the Grand Inga “giant” rose would be the day that Africa also rises; the potential within the DRC was massive. The Grand Inga Project was an important project in the integration of the African continent. Different contracts would be negotiated with the transiting companies, and the DoE would not make the same mistakes as it did with the BHP Billiton project.

The Co-Chairperson reiterated that whatever questions were not responded to during the meeting should be responded to in writing.

Deputy Minister Majola responded to the question on the participation of South African companies and said the Grand Inga Project was not only about turbines and generators, but it included all related development around the project. The opportunities and space for South African businesses to participate would be created. The actual building of the power stations was massive. She indicated that the Three Gorges Dam was only a third of the Grand Inga Project in size. She hoped that South African companies will actively participate in these initiatives.

The Co-Chairperson thanked the DoE for the presentation.

Portfolio Committee on Energy Report: Grand Inga Hydropower Project 
The Chairperson read out the Committee Report and asked Members of the Portfolio Committee on Energy to consider the adoption of the report so that it could be referred to the House.

Mr Greyling asked when the report needed to go before the House. Members had caucus on Thursday, 6 November 2014.

The Chairperson replied that the report would be going to the House long after the caucus.

Mr Greyling asked if the Democratic Alliance could accept its right not to reject or accept the report.

Ms Louw shared the same sentiments as Mr Greyling; the Economic Freedom Fighters (EFF) would not accept or reject the report until it met with caucus.

Ms Z Faku (ANC) said since the DA and EFF would did not object to the adoption of the report, the African National Congress moved for the adoption of the report. Mr R Mavunda (ANC) seconded the adoption.

The report was adopted.

Select Committee on Economic and Business Development Report: Grand Inga Hydropower Project 
The Co-Chairperson read out the Select Committee Report and asked for the adoption of the report.

Mr E Makue (Gauteng) moved for the adoption of the report. Mr Nthebe seconded the adoption.

The Report was adopted.

The Co-Chairperson thanked the DoE and the Portfolio Committee on Energy for the interactive meeting.

The meeting was adjourned.


Appendix
Report of Portfolio Committee on Energy on Treaty on Grand Inga Hydropower Project between Republic of South Africa and Democratic Republic of Congo, dated 04 November 2014


The Portfolio Committee on Energy, having considered the Treaty on the Grand Inga Hydropower Project between the Republic of South Africa and the Democratic Republic of Congo and the accompanying Explanatory Memorandum, tabled in terms of section 231 (2) of the Constitution, 1996, recommends that the House ratify the Treaty.

 

Report to be considered.

Report of Select Committee on Economic and Business Development on Treaty on Grand Inga Hydropower Project between RSA and Democratic Republic of Congo, dated 04 November 2014

 

The Select Committee on Economic and Business Development, having considered the Treaty on the Grand Inga Hydropower Project between the Republic of South Africa and the Democratic Republic of Congo and the accompanying Explanatory Memorandum, tabled in terms of section 231 (2) of the Constitution, 1996, recommends that the House ratify the Treaty.

Report to be considered.

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