Meeting with German Committee on Economic Affairs and Energy

Economic Development

20 April 2016
Chairperson: Ms E Coleman (ANC), Mr F Majola (ANC), Dr J Pfeiffer (German Committee)
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Meeting Summary

The Portfolio Committee on Economic Development and the Portfolio Committee on Energy had a joint meeting with the German Committee on Economic Affairs to discuss matters such as the introduction of nuclear power stations and renewable energy, as well as to receive advice on how to improve existing power stations and increase job opportunities.

Among the major issues raised were the cost of nuclear waste disposal, the challenges presented by outdated coal mines and the shortage of electricity supply, which was impacting on the growth of the South African economy. The Chairperson for the Portfolio Committee on Energy said the government had been looking for the optimum energy mix that would be suitable for the country, and had agreed that it needed to focus more on renewable energy. The challenge that the Committee faced was that the construction of nuclear plants that the country planned to build would be expensive and it was important to take affordability into account.

A member of the German delegation asked if there any programmes in place to reduce emissions from the fairly outdated coal-fired power plants, or whether they might need support from German companies which had a certain amount of experience in this regard. Germany also had coal-fired power plants that still operated, but had stringent programmes that tried to reduce their emissions. Another delegate suggested the cheapest solution for South Africa with regard to the energy issue would be a combination of energy from gas and other natural energies.

Meeting report

Co-chairperson Coleman, of the Economic Development Committee, said that South Africa was one of Germany’s most important partners within the SADC region and there have been cordial relations between both countries. This relationship had been established in 1996 when former President Nelson Mandela had visited Germany.

Germany was one of South Africa’s major trading and strategic partners and was the country’s second largest tourist supplier after the United Kingdom. It was one of South Africa’s top export destinations and one of the country’s largest sources of imports. The international relations statistics showed that there were about 100 000 Germans living in South Africa and over 600 German companies in the country. These included multinational companies such as Siemans, VW and BMW, which were beneficiaries of South Africa’s Automotive Production and Development Programme. The companies contributed to the country’s industrial growth and in increasing employment opportunities. South Africa also had a presence in Germany because of companies such as Sasol, Sappi, Altech Multimedia and Imperial Holdings.

The South African government was strongly committed to unleashing the potential of a green economy which was outlined in the country’s socioeconomic frameworks, such as the National Development Plan (NDP) and the New Growth Path (NGP), which prioitised the green economy as one of the sectors with the potential to creating jobs in the country. The government continued to encourage private sector participation in infrastructure projects such as renewable energy, given that renewable energy was capital intensive.

She explained the role of the Portfolio Committee on Economic Development Committee and its history. It had been established in 2009 by President Jacob Zuma to ensure that the Department and its other entities such as industrial development reported effectively to the Committee around the key government policies, such as Industrial Policy Action Plan (IPAP, the NDP, the NGP and the National Infrastructure Plan, which guided the Committee’s oversight role with the Department. It also had a responsibility to ensure that the Department and its public entities contributed to the requirements to reduce income inequalities, eradicate poverty and create jobs. The Department was not an implementing department, but rather a coordinating one which ensured service delivery was fast-tracked, as it concerned itself with the economic development of the country. The Committee was also responsible in the field of promoting renewable energy initiatives and conducting oversight visits to companies to make sure that projects undertaken by the companies which benefited from incentives remained competitive and also made sure that they reciprocated by empowering people.

Unlike the German Committee on Economic Affairs, the local Economic Development Committee and Energy Committee were separate.

Co-chairperson Majola, of the Portfolio Committee on Energy, greeted the German delegation and said that he had been given instructions by Ms Coleman, and would not say much until they got to the section where members would be discussing matters of energy.  

Dr Pfeiffer thanked the members for the warm welcome on behalf of his delegation and said it was a pleasure to be part of the meeting. They had visited some German companies in Pretoria and Johannesburg such as the BMW plant and also visited the Council for Scientific and Industrial Research (CSIR). The delegation represented the German Committee on Economy and Energy Affairs and was the largest committee in their Parliament, with 47 members. There were seven delegates from the Committee, who represented all parties. The Committee’s portfolio was wide-ranging and included sectors from air and space technologies responsible for increasing efficiency from the raw material and energy sectors.

Mr Majola said the Energy Portfolio Committee currently had 11 members, of whom five were present in the meeting. This was not the first discussion on energy that the Committee was having with the German Ministry of Economic Affairs and Energy, as they had held one in Germany in 2014 and the Committee had learnt a lot during that visit the country. The South African economy was one of the most integrated economies on the continent and was affected by what happened to the global economy, which was now going through a period of very slow growth. One of the major constraints to growth in South Africa was the shortage of electricity supply. At the moment, most of the country’s electricity was generated from coal, and the usage of coal had now become a major challenge because of the energy transitions in the world from using coal to cleaner energy.

The country was in a difficult situation as the power utility, Eskom, had an installed capacity of about 45 000 Megawatts (MW) at the moment and 38 000 MW was from coal. The utility was struggling to supply because of the aging infrastructure. The country needed to focus more on renewable energy and to expand in the space, and this would happen after the power stations that were currently being constructed were complete.  The government had been looking for the optimum energy mix that would be suitable for the country, and had agreed that it needed to focus more on renewable energy. The challenge that the Committee faced was that the construction of nuclear plants that the country planned to build would be expensive and it was important to take affordability into account.

On the side of renewable energy supporters, political parties and investors were agreed on the necessity of rapidly expanding renewable energy sectors and would ensure that this happened. The challenge was that the Department had not yet found reliable gas deposits and a result would have to rely on imports. It was currently in discussions on how to achieve that. The electricity supply situation was a major constraint in the country and was also hindering the rapid growth of the country’s economy.

Ms Coleman said that the countries came from two different worlds -- one that was developed and one that was developing -- but the challenges faced by the countries were the same and the difference might be the degree of the challenges.

Discussion

Dr Julia Verlinden, a member of the German delegation, said she was impressed by the beauty of the country. The CSIR was doing an impressive job and conducting great research, and she was interested in the New Integrated Resource Plan, and whether renewables would have a higher share in the Plan that was currently being revised, compared to the one designed in 2010.  

Dr Hans-Joachim Schabedoth said that he was aware that a country with coal reserves that were sufficient for the next 200 years was not in dire need to give up coal-fired power plants with any sense of urgency. He knew that South Africa did not have a lot of modern coal-fired power plants and asked if there any programmes in place to reduce emissions from the fairly outdated coal-fired power plants, or whether they might need support from German companies which had a certain amount of experience in this regard. He said that Germany also had coal-fired power plants that still operated, but had stringent programmes that tried to reduce their emissions.

A member of the German delegation referred to Co-chairperson Coleman’s statement about the countries coming from two different worlds, and said there were no two worlds in globalisation -- from an economic perspective, there was just one world. In terms of economic performance, he asked how South Africa saw itself, and if it viewed itself as an African economy, does it compare itself to other African countries with developing economies like Nigeria, or did it view itself as a global competitor.

Another German delegate said that they were informed that the cheapest solution for South Africa with regard to the energy issue would be a combination of energy from gas and other natural energies, and asked what role the CSIR played in creating practical political decisions. He highlighted that they had learnt that the bottom line of policies implemented was to include the economically marginalised people of the country, and they had imposed certain measures to ensure that this happened. The question was, how did the government ensure that this happened? Were there measures to ensure that the policies were not applied in the hands of just a very few privileged people.

Mr P Atkinson (DA) said it would have been nice if the delegation had had the opportunity to visit some of the solar power stations, as South Africa was one of the best places in the world for solar energy because of the atmosphere, especially in the Northern Cape. The local Committee had a lot to learn about Germany’s apprenticeship system, because one of the great paradoxes of the country was that there was a skills shortage as well as massive unemployment. The only way the Department of Social Development would solve the problem for the majority of South Africans was through education and skills.

Dr Pfeiffer said that the delegation had actually visited a solar power station and would be visiting the South African Renewable Energy and Technology Centre before their departure.

Mr S Tleane (ANC) said that for a developed country like Germany, it was easy for their delegation to view matters from a broader perspective, but it was hard for South Africa because the country did not have that many options. South Africa had an integral role to play in the economic development of other countries in the Southern African Development Community (SADC) region, and this required the use of an abundance of energy.  He acknowledged the disadvantages of using nuclear energy outlined by the German Committee, such as the issue of emissions and the high costs involved in getting rid of nuclear waste. He went on to ask if they could indicate what the advantages of introducing nuclear energy were, since they had experience and were even considering closing some of their nuclear power stations.

Mr M Mackay (DA) made a point that the cost of renewable energies were not transparent, and if the country did adopt renewables in the way that South Africa believed it would in the next 20 years, the country would have to rely on some kind of battery storage, and batteries were toxic. He addressed the question of the fairly old coal-fired power stations and mentioned that the stations would go offline by 2020-2022 as they were old and would be decommissioned, and there were currently no plans to convert them into cleaner forms of coal energy. He added that the introduction of nuclear power would probably happen.

The Chairperson said they would not be able to respond to a lot of questions, as they were pressed for time. She assured German Committee that the issue related to the safeguarding of people, especially the marginalized, was high on the Department’s agenda.

Co-chairperson Majola said South Africa was a young democracy and had a long history of international solidarity. The Department of Energy would be drawing from research results from the CSIR and other research institutions for policy considerations. The local portfolio committee was as much concerned about the costs of nuclear waste disposal as the German Committee was, and would be looking further into those issues. There had to be certainty of policy to ensure that the investors had an idea of what would be done with regard to nuclear energy.

Dr Pfeiffer thanked all members for the interesting discussions, and said there were still issues that were open for debate. He noted that every country had the right to decide what kind of energy to use and it was very important to diversify. The introduction of different technologies was always the best answer to the constantly changing environment.

He presented gifts to the Co-chairpersons of the Portfolio Committees and thanked them and the Members.

The Co-chairperson expressed the appreciation of the Members.

The meeting was adjourned. 

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