The Committee received presentations from the Department of Cooperative Governance and Traditional Affairs (COGTA), the Municipal Infrastructure Support Agent (MISA) and South African Local Government Association (SALGA) on the electricity distribution industry and Infrastructure rehabilitation.
The Department of Cooperative Governance and Traditional Affairs (COGTA) reported that as early as February 2017, a structure was established to address the challenges facing the energy sector. After the discussions between COGTA, Eskom and other stakeholders, Eskom committed to the following:
-the rationalisation of municipal targets to reduce tariff options from 11 to three;
-decreasing the interest rate charged on overdue balances from prime +5% to prime +2.5%;
-changing Eskom payment allocation policy to allocate payments for capital debts first before allocating payments to interest charge; and
-to allow municipalities pay connection charges over 20-year period at relevant interest rate, instead of cash up front.
MISA reported that it provided support to municipalities in various ways, including preparation of business plans to secure funding; monitoring of illegal connections and provision of guidance on smart metering systems; establishment of linkages and partnerships with stakeholders in the sector; mentoring and transferring skills to municipal officials, and so on.
MISA highlighted that the key challenges facing the sector include; under-resourced electricity departments in most municipalities; a shortage of qualified officials in the electricity departments for MISA to support and carry out skills transfer- most of the ailing electricity departments do not have top and middle management in their electricity departments, as well as limited funding to refurbish the aged and collapsing infrastructure in most municipal networks. Other challenges include failure to attract and retain electrical engineers in municipalities, as well as fierce competition; demand for support exceeds the resources within MISA for master plans development and other support required; high electricity losses and billing inaccuracies or errors that adversely impact on revenue collection; and inadequate municipal budgets for network maintenance and refurbishment.
With regard to future plans, MISA said it seeks to improve and expand support to municipalities around energy supply by filling 15 positions of electrical engineers on the new structure. The process of setting up framework contracts that would enable municipalities to place orders for standard electrical equipment was underway. MISA continues to engage with municipalities to adopt functional organograms and fill approved and funded positions. Engagements have also continued to improve budgeting and funds availability to electrical departments. Qualified artisans and young graduates would be deployed in municipalities with capacity challenges.
SALGA said that the Electricity Distribution Industry (EDI) was currently experiencing rapid structural and behavioural changes, characterised by energy security threats and rising electricity prices; increasing unemployment leading to low revenue collection in municipalities; and unavoidable market dynamics linked to customers using less energy and becoming their own suppliers of electricity, leading to loss of revenue. There was also lack of capacity and skills for planning; project management and contracting; drafting of bylaws; setting and designing tariffs; revenue management and protection, and so on. These dynamics have radical implications for local municipalities that are compelled to redefine their role in the electricity value chain as well as adapt the funding and operating models. The dynamics also raise the need for government to review or develop support strategies for municipalities in respect to electricity reticulation. This was in accordance with Section 154 of the Constitution, which states that national and provincial departments or governments should support municipalities in all aspects, in order to enable municipalities to discharge their developmental mandate in terms of their service delivery function. These changes also called for the reviewing of local government funding models. Currently, local governments were still enjoying less than 10% of the fiscus. Although the new model was calling for municipalities to be self-sustainable since they have trading services, the current realities stood as an obstacle for municipalities.
The Department of Planning, Monitoring and Evaluation (DPME) also presented the outcome of a performance assessment on the Department of Energy (DoE) and its entities. The performance assessment covered two outcomes of the Department, namely Outcome 6 and 10. The overall performance however, showed that DOE was unable to achieve most of its targets within the specified timeframes. For Outcome 6, it is recommended that the DoE produce a recovery plan with clear time frames for those indicators where target dates have already passed. On areas where DoE has never reported on progress; or indicators where targets need to be reviewed, the Department will be required to refine and align their targets towards meeting the objectives of the MTSF 2014-2019. For Outcome 10, it is recommended that DoE should expedite their process of reporting percentage of new build that is renewable power generation in order to promote the transition to a lower carbon economy. Whilst DoE is working on their strategy review, projected target for energy efficiency improvement for the remainder of MTSF should be provided. Participation in the Outcome 10 Implementation Forums is crucial for the coordination and collaboration of the sector’s efforts and work towards achieving the vision of the NDP on ensuring environmental sustainability.
Discussion by Members on the three presentations raised issues around the need for a coordinated response, which could only be achieved through a joint meeting with relevant entities and departments. Members sought clarity and explanation on a number of issues including the SALGA’s proposed suggestions for the amendments to be made to the EDI; the rationale behind the existence of many entities performing the same function in the energy sector; the growth in municipalities’ debt to Eskom from R6 billion to R11 billion; whether or not the department had executed the mandate to review the entire electricity value chain, develop a holistic approach to revitalise energy infrastructure, energy security, as well as produce the financial implications of executing the mandate; the criteria used by MISA in selecting provinces for the Mini ADAM programme, as well as criteria for selecting learners to be trained in the electrical discipline programme; the reason behind Eskom’s refusal to sign the service delivery agreements; the extent to which the Mini ADAM programme was assisting in service delivery; details on the timeframes for completion of the training programmes organised by MISA; the reason behind the low record of graduates from these training programmes; whether or not plans have been put in place by DOE and SALGA to address the situation of massive debts owed by the municipalities to Eskom; whether DOE and NERSA had the willpower to embark on a massive restructuring exercise within the sector; whether DOE had made any progress in achieving the national development plan (NDP) priorities; and details on the status of coal and gas IPPs.
Members expressed disappointment in the general performance of the department in terms of achieving set targets within specified timeframes.
The Deputy Minister of Energy clarified some issues raised, and also noted that the Department was making progress contrary to the belief that it was seriously underperforming. She noted that the timeframes for the IEP and IRP have been indicated in the revised APP of the Department; and the process was still ongoing. She also mentioned that the Western Cape Province had a huge import capacity and would be the first beneficiary of lower prices of gas.
Briefing by Department of Cooperative Governance and Traditional Affairs (COGTA)
Dr Charles Nwaila, Director General (DG), COGTA, took the Committee through a progress report on departmental activities.
As early as February 2017, a structure was established to address the challenges confronting the energy sector. The said structure was an inter-ministerial task team that comprised of Ministries of COGTA, Energy, Public Enterprise, and Finance, as well as executives of Eskom and SALGA. It was to be convened by the Minister David van Rooyen. During the discussions between COGTA, Eskom and the other stakeholders, Eskom was able to commit to the following:
-the rationalisation of municipal targets to reduce tariff options from 11 to three;
-decreasing the interest rate charged on overdue balances from prime +5% to prime +2.5%;
-changing Eskom payment allocation policy to allocate payments for capital debts first before allocating payments to interest charge; and
-to allow municipalities pay connection charges over 20-year period at relevant interest rate, instead of cash up front.
Eskom had considered the above and would assist COGTA in this regard.
There were however, six unresolved issues that SALGA would speak upon at length. The first issue was in relation to a constitutional challenge. An issue arose that prompted COGTA to approach the court for a declaratory order for the purpose of clarifying issues. The Constitution provided that municipalities should be in charge of reticulating and distributing electricity in the municipalities, but the presence of Eskom in the same space has led to challenges. This matter was presented at the Presidential Coordinating Council on 29 September 2017, where it rejected the suggestion to resolve the issue through the court. COGTA would then be meeting with the DPE, DOE, as well as with SALGA and Eskom, in order to discuss and come up with alternative methods of addressing the constitutional challenges.
The other unresolved issues were provision of public and street lighting; the role of municipalities in renewable energy; as well as the compound interest rate charged by Eskom and Eskom’s high connection charges to municipalities. Different stakeholders would be meeting in Pretoria on 04 October 2017, and the DGs would also be meeting to find a sustainable solution going forward.
Briefing by Municipal Infrastructure Support Agent (MISA)
Mr Ntandazo Vimba, Acting CEO, Municipal Infrastructure Support Agent (MISA), took the Committee through a presentation on MISA’s role in the electricity distribution industry and infrastructure rehabilitation.
On the background to the mini asset distribution management programme (Mini ADAM) that focused on electricity backlogs, it was pointed out that the programme emanated as a result of the 2011 census on electrification backlogs which indicated that an average of 3.3 million households were without electricity. This figure comprised of 1.2 million informal settlements and 2.1 million formal settlements. 75% of backlogs were in the Eskom supply areas while 25% were in municipalities supply area. The Department of Energy (DOE) therefore, resolved to respond to the challenges in electricity backlogs through an approach to asset distribution management (ADAM).
The ADAM programme was initiated in 2012/13. It was introduced after the disbandment of electricity distribution industry (EDI) restructuring process, with the aim of addressing poor infrastructure maintenance and weak management capacity in electricity distribution. The programme was driven by DOE in collaboration with other role players such as MISA, DBSA SALGA, and National Treasury (NT).
Due to a limited funding of R320 million against the required budget of R30 billion, a decision was taken to start with a pilot programme known as Mini ADAM.
The available budget for Mini ADAM was allocated to nine pilot municipalities across five provinces.
The main focus of Mini ADAM was to assist municipalities with technical identification of most critical challenges; develop business plans; engage with consultants/contractors on work to be done; as well as monitor progress on continuous basis.
A steering committee comprising of representatives of the National Energy Regulator of South Africa (NERSA), MISA, DOE, DBSA, NT, and Eskom was established as an institutional vehicle for the rollout of Mini ADAM. The committee was supported by specialists, consultants or advisors depending on the need. The key role of the Committee was to oversee the progress of the programme, while ensuring that it is carried out satisfactorily.
R320 million was allocated from the multi-year price determination 2 (MYPD2) for the implementation of Mini Adam in 2013. The programme was to be implemented in critical municipalities to test the ADAM model. However, it was envisaged that funding for later phases would be obtained from part of tariff allowance. The other option was to enforce ring-fencing of tariff allocation for intended purpose and explore co-funding by municipalities from soft loans. The programme was to be implemented in four phases. The first phase was the pilot phase which was funded with R320 million. Phase 2 would require an average amount of R23 to R30 billion. Phase 3 would focus on the continuation of implementation of priority projects, while phase 4 would deal with maintenance of backlogs based on available funding. The programme has not been able to proceed beyond the pilot phase due to lack of funding.
On the role of MISA, it was pointed out that MISA provided support to municipalities by focusing on the preparation of business plans to secure funding; pricing and tariff structuring; conducting meter auditing, monitoring of illegal connections and provision of guidance on smart metering systems; development of technical standards; establishing linkages and partnerships with stakeholders in the sector; mentoring and transferring skills to municipal officials; planning and implementing projects; operation and maintenance policies and procedures; as well as provision of guidance on best practices in electricity distribution.
MISA also assists municipalities in carrying out functions to improve energy service delivery. This support includes conducting status quo analysis on each municipality to identify key areas of
support. Two sets of municipalities were currently being assisted; namely electricity distributors and non-electricity distributors. Assistance to the latter was mainly around the DOE, INEP, funded projects, planning, implementation and reporting on projects.
MISA supports electricity distributing municipalities to carry out various functions of network planning and compliance; distribution in terms of operation and maintenance of network; projects such as municipal, INEP and other grant funded projects; electronics; and buildings, street lighting, high.
A breakdown of MISA’s support to municipalities on electricity distribution was also highlighted. Support provided to the Eastern Cape Province was for five municipalities including the KSD municipality. One of the setbacks recorded by MISA was the death of one of the young graduates undergoing mentorship and training in the Eastern Cape.
On the training of learners in electrical discipline, MISA is involved in the training of learners in electrical trades through its technical skills programme. 230 learners were currently laced in various municipalities for workplace training. This number comprised of learners receiving training through MISA’s three learning programmes, namely apprenticeship or artisan training under which there were 196 apprentices; graduates development programme comprising of 12 electrical graduates; and experiential learnership comprising of 22 experiential learners.
The key challenges facing the sector include; under-resourced electricity departments in most municipalities; a shortage of qualified officials in the electricity departments for MISA to support and carry out skills transfer- most of the ailing electricity departments do not have top and middle management in their electricity departments, as well as limited funding to refurbish the aged and collapsing infrastructure in most municipal networks. Other challenges include failure to attract and retain electrical engineers in municipalities, as well as fierce competition; demand for support exceeds the resources within MISA for master plans development and other support required; high electricity losses and billing inaccuracies or errors that adversely impact on revenue collection; and inadequate municipal budgets for network maintenance and refurbishment.
With regard to future plans, MISA seeks to improve and expand support to municipalities around energy supply by filling 15 positions of electrical engineers on the new structure. The process of setting up framework contracts that would enable municipalities to place orders for standard electrical equipment was underway. MISA continues to engage with municipalities to adopt functional organograms and fill approved and funded positions. Engagements have also continued to improve budgeting and funds availability to electrical departments. Qualified artisans and young graduates would be deployed in municipalities with capacity challenges.
Briefing by South African Local Government Association (SALGA)
Mr Bhekumuzi Stofile, National Executive Council Member, SALGA, said that SALGA resolved to seek a declaratory order after trying its best to resolve the issues around lack of leadership in terms of identifying those responsible for distributing electricity in municipalities. It was expected that the interpretation enshrined in the Constitution and Municipal Systems Act (MSA) should be adhered to by everyone.
The practice of having service providers determine the course of action an authority should take instead of entering into a service level agreement in terms of providing and rendering services in the municipalities, was a serious concern for SALGA.
Mr Nhlanhla Ngidi, Head of Electricity and Energy, SALGA began by noting SALGA’s disclaimer in terms of macro issues, the first being that Eskom was an important national strategic asset and its financial viability was of paramount importance. It was equally important for municipalities to be able to provide sustainable and affordable services and to collect revenue so that they can pay creditors such as Eskom and also become financially viable. The constitutional, legislative and fiscal frameworks were carefully designed to ensure that local government delivers sustainable services, both in terms of actual provision of services and financially. The current dispensation in the electricity distribution industry (EDI) was subversive of the existing legal frameworks which directly undermines the ability of municipalities to fulfil their constitutional mandate in the provision of services. However, the energy sector was changing at a pace that has never been seen before, while municipalities were faced with the responsibility of catering for the said change.
Some of the current realities alluded to include the fact that the EDI was currently experiencing rapid structural and behavioural changes, characterised by energy security threats and rising electricity prices; increasing unemployment leading to low revenue collection in municipalities; and unavoidable market dynamics linked to customers using less energy and becoming their own suppliers of electricity, leading to loss of revenue. There was also lack of capacity and skills for planning; project management and contracting; drafting of bylaws; setting and designing tariffs; revenue management and protection, and so on. MISA highlighted a few areas where support was being offered to municipalities on some of these issues. However, some of the support being offered were not at the stage they should be. For instance, half of the 117 license distributors were going through financial challenges and lacked critical skills.
The above mentioned intertwined dynamics have radical implications for local municipalities that are compelled to redefine their role in the electricity value chain as well as adapt the funding and operating models. The dynamics also raise the need for government to review or develop support strategies for municipalities in respect to electricity reticulation. This was in accordance with Section 154 of the Constitution, which states that national and provincial departments or governments should support municipalities in all aspects, in order to enable municipalities to discharge their developmental mandate in terms of their service delivery function.
The above mentioned changes also called for the reviewing of local government funding models. Currently, local governments were still enjoying less than 10% of the fiscus. Although the new model was calling for municipalities to be self-sustainable since they have trading services, the current realities stood as an obstacle for municipalities.
The key drivers for EDI restructuring were highlighted. On the key driver of non-rationalised regulatory frameworks in the EDI, it was pointed out that Eskom enjoyed regulatory frameworks of multiyear price designations, and in effect, enjoyed the regulatory clearing account where some of the money can be removed. On the other hand, NERSA uses a benchmark for municipalities, which sometimes, has a lot of problems. Although some benchmarked municipalities were performing well, some of those in the Northern Cape were in need of an increase in tariffs.
On the loss of revenue in municipalities, it was pointed out that municipalities were at a record low than what obtained seven years ago.
On whether municipalities had an alternative or plan to rehabilitate infrastructure and strengthen municipal distributors, R300 million was spent to rehabilitate infrastructures but no follow-up was carried -out.
Contributing factors to the crippled EDI were also highlighted. The main examples of contributing factors to the crippled EDI could be linked to the municipal constitutional powers between Eskom and municipalities.
The constitutional framework for municipal powers was also highlighted and the problems facing municipalities were outlined. Several structural and systemic issues have arisen from the current dispensation.
An invisible line ran across municipalities where constitutional powers of such municipalities were subverted; the developmental role of local government was undermined; some communities were prejudiced relative to others; and municipal revenue collection was also undermined. To buttress this position, an example was cited of Johannesburg’s Alexandria township on one hand and Sandton on the other side. Electricity was supplied by Eskom to Sandton while that of Alexandria was supplied by the municipality. People living in Alexandria pay a surcharge that contributes to the basket of non-trading services such as parks, libraries, and pavements; they subsidise services for people living on the other side; their electricity is used as credit control mechanism in the event of non-payment of rates and taxes; and their electricity tariff is probably higher than those living in Sandton. The opposite of what obtains in Alexandria takes place in Sandton. Overall, Alexandria township subsidises Sandton.
Examples of collection rates by municipalities and Eskom were highlighted. The inability of municipalities to exercise control in Eskom supplied areas had led to lower collection rates. Therefore, in Eskom supply areas, municipalities are deprived of their constitutional and legislative powers in terms of electricity reticulation. Customers are also deprived of executive accountability.
The negative impact on municipal revenue collection was also highlighted. An example of what happens in the Western Cape was cited, showing a comparable average of 41% revenue collection in Eskom supply areas and 74.7% revenue collection in municipal supply areas.
On Eskom debt, it was pointed out that municipalities’ debt to Eskom has escalated to over R2 billion in the past four or five months. It was also pointed out that Eskom have not resolved most of the challenges facing municipalities.
The current trends in the energy sector were outlined and it was noted that municipalities were trying to adapt to the current realities. However, some of the policies have not been helpful in hastening the adaptation process.
Mr G Mackay (DA) said that there was a significant concern around the need for a coordinated response on the issues that had been raised by the entities, especially because the DOE had limited direct impact on same. It was therefore, recommended that the Committee should meet with the three other Portfolio Committees: DPE, DOE and COGTA so that all Members could take a look into the identified challenges. His Democratic Alliance colleagues from the two other committees had already written to their respective chairs requesting a joint meeting. Members of the PC on Energy were enjoined to attend the said meeting, as it was important for the Committee to support SALGA in making the necessary changes.
He appreciated SALGA’s disposition to criticisms. However, the core problem faced by the energy sector was the failure to understand what the in-state energy sector should look like in South Africa; government’s overwhelming protection of Eskom at the heart of the EDI; and a lack of reform of Eskom’s environment, as Eskom is seen to be unable to manage its costs effectively. Will the aforementioned problems not affect the sector of the economy and municipalities? Also, Eskom has requested a tariff increase for municipalities to the tune of 27.5%. This would mean that the poorest individuals in the country would face the highest tariff increases.
He said that the tariff increase was not sustainable and new models should be considered. Examples of new models that could be adopted would be for municipalities to contract directly with other energy providers. This would mean that municipalities would be allowed to purchase cheaper energy for electricity from renewable energy providers, and in effect lowering the cost of energy into areas. This would have a positive effect on the poor, as well as provide support for growth, industries, and jobs. Municipalities should not be allowed to be held at ransom by Eskom, especially because of the current realities of state capture and rumours of corruption. New models that allow municipalities to either be owners of their own renewable power or contracting with other energy providers should be considered.
He asked for information on SALGA’s proposals around the suggestions for the amendments to be made to the EDI, as well as the funding models of municipalities. It was a known fact that SALGA was critical of DOE, especially since it was indicated in the performance of the EDI sector in 2010 that the department failed to make any real changes in the system.
He referred to the graph showing the provincial overview of municipalities with indicators of financial health risks (see slide 9 of the attached document), and noted that apart from Western Cape Province, most of the municipalities in other provinces were in red, which signified the need for intervention. He opined that the overview reflected a governance issue, regardless of SALGA’s position that it was not entirely a governance issue. Municipalities should be administered in terms of the Municipal Systems Act (MSA) and be held accountable for a lack of performance.
He reiterating the need for coordination among the three departments to be led by COGTA, as well as emphasize the introduction of new models for municipalities.
Mr J Esterhuizen (IFP) asked for the justification behind having so many entities (such as MISA, SALGA, COGTA, EDI which replaced REDs) carrying out the same functions with taxpayers’ money. He noted that most of the problems facing municipalities can be linked to credit control from Eskom.
He also wanted to know how debt of municipalities grew from R6 billion in 2016 to over R11 billion at the moment. Defaulting municipalities that fall under the umbrella of SALGA should also be blamed for owing such huge sums of money.
Most municipalities were grossly under-skilled. He sought explanation on the reasons behind this.
He disagreed with SALGA’s submission that electricity of people living in Sandton would not be cut off if they do not pay rates and taxes.
On the submission that fiscal injections were needed in municipalities that were defaulting in payments to Eskom, he sought clarity and confirmation on whether consumers were already paying for this debt.
He opined that despite the fact that slow economic growth affected consumers more, Eskom and SALGA still got paid. Also, consumers should pay connection charges upfront. Eskom cannot provide growth access and the integrated resource plans (IRPs) of 2010-2013 did not address the growth.
Lack of planning in the industry has affected the energy sector.
Ms G Nobanda (ANC) disagreed with most of the submissions made by SALGA regarding Eskom. She noted that a representative of Eskom should have been invited to respond to the issues raised by SALGA. She asked the Department whether it had executed the mandate to review the entire electricity value chain and develop a holistic approach to revitalise energy infrastructure, energy security, as well as produce the financial implications of executing the mandate.
She wondered about SALGA’s uncertainty around its game plan and sought explanation on SALGA’s response in this regard. She disagreed with SALGA’s submission that the state of most municipalities requiring interventions as depicted by the red colour code was due to the debts owed by municipalities to Eskom. The reasons behind the result of the Auditor-General’s report was because most of the municipalities were incapacitated. Officials in the municipalities lacked capacity to collect revenues. Also, the illustration of Alexandria township subsidising electricity of Sandton was an exaggeration by SALGA. She requested further clarification on this.
She asked MISA to explain the criteria for selecting the provinces to which support was provided to municipalities for electricity distribution. MISA was also asked to provide details on the criteria and method used in selecting learners to be trained in the electrical discipline programme organised by the entity.
Mr R Mavunda (ANC) referred to slide 30 of SALGA’s presentation and asked for the reason behind Eskom’s refusal to sign the service delivery agreements, especially since signing the agreement seemed to be mandatory according to the Constitution.
On the Mini ADAM programme that was basically developed by the COGTA Department, he wanted to know how much the programme was assisting in service delivery, especially in terms of infrastructure, and maintenance of such infrastructure. Also,
entities should stop pointing fingers at each other. The realities facing the Department and entities should be presented instead of sugar-coating existing problems and challenges.
He asked if SALGA invites Eskom to its strategic meetings in order to discuss, address conflicting issues, and clarify differences between the two entities.
Understanding the constitutional mandate in relation to the compliance of the department to the constitutional mandate without provision of an alternative posed another challenge. It was also important to consider the adaptability of policies that have been drawn up for a long time and were probably yet to be reviewed. Consideration of such policies would help to determine their relevance to the current situations.
Ms Z Faku (ANC) sympathised with SALGA, noting that she understood the complexity surrounding the challenges being faced by the entity. She agreed with Mr Mavunda that entities and departments should refrain from pointing fingers at each other, since the common agenda was to provide services to the people of South Africa. Instead, entities and departments should assist each other in addressing the challenges facing the sector. Policy makers had a role to play in developing policies that would fill the gaps in the energy sector. The challenges facing the entities were huge and there were only a few solutions to these challenges. She expressed interest in the programme organised by MISA in relation to training learners. She however, requested for details of completion of these training programmes and the reason behind the record of few graduates from the programme.
She also asked if SALGA had a solid proposal on alternatives to the funding model for municipalities.
Ms T Gqada (DA) sought clarity on the growth in the debts owed by municipalities to Eskom that escalated to over R11 billion within a period of five months. She also wanted to know what plans have been in place by the DOE and SALGA to correct the situation, especially since the debts would have an overall effect on the consumers.
Having considered Eskom’s proposed revenue management initiative, it was evident that Eskom and SALGA held different views on this matter. She agreed with and supported the proposals made by other MPs on the need for collaboration between Eskom, NERSA and SALGA in order to come up with a long term strategy on how to deal with the issue. A proposal was made by the department on the ADAM project, to which Eskom expressed its lack of support for the budget model. It was therefore important for representatives of Eskom to be present whenever issues affecting the entity would be discussed.
On SALGA’s proposed possible way forward, she expected SALGA to address the issue of working relationship between SALGA and Eskom. It was important to have a strategy from both SALGA and Eskom on how the relationship between them would be improved.
She asked for details on the amount that has been set aside for the training of learners. The problem of retention of engineers should be addressed as a matter of urgency, as the lack of engineers was affecting service delivery. The department and MISA should develop a clear strategy or a long term plan for the retention of engineers.
The Chairperson asked MISA to clarify its submission on 75% of backlogs recorded in Eskom supply areas. What was the percentage of Eskom supply areas versus municipalities?
He also asked for the results of the pilot Mini ADAM programme in municipalities and agreed with Members on the need to have a coordinated meeting with relevant entities at the same time in order to address some issues.
He suggested that a different approach should be adopted for summits organised by SALGA and other entities, to allow for better coordination.
On the provincial overview of municipalities with indicators to financial health risks, although the performance of municipalities was a problem, some legacy issues also contributed to the performance of municipalities. He compared the performance of Gauteng Province with that of Western Cape and sought clarity on the cause of the problem resulting in Gauteng’s performance.
He disagreed with the possibility of NERSA issuing licenses to Eskom to reticulate electricity.
On the issues raised by the Committee and SALGA on the need for coordination of efforts, Mr Vimba said that a structure had been established by Cabinet. The structure was established for the sole purpose of dealing with the issues raised by MPs and SALGA. The issues raised were part of the agenda of the inter-ministerial task team. In the opening remarks of the DG, mention was made of the issues around Eskom and SALGA, including the debts owed by municipalities to Eskom, increase in tariffs and so on. Agreements have been reached on these issues.
Nonetheless, there were some issues that required legislative relooking and which have been raised by SALGA. It had been agreed that there was a need for clarity around constitutional powers in relation to electricity distribution. However, Cabinet said that the issue of clarity could not be addressed through courts. It then referred the issue back to the Committee to find an amicable solution. The reality was that there might be no solution without tampering with the current legislative framework in relation to Eskom, and in relation to SALGA’s interpretation of Section 156. In essence, there would be a need for legislative relook into the matter.
Overall, the aforementioned issues were being addressed. The technical task team of the inter-ministerial task team would be sitting on Wednesday, 04 October 2017. All DGs and executives of Eskom and NERSA would sit in Parliament to address the aforementioned issues.
MISA agreed that Eskom should have been part of the current meeting. However, during a previous entity meeting, the issues raised were thoroughly addressed. There were disagreements from Eskom due to the strong views it held on the causes of the challenges facing municipalities, as well as its contribution to those challenges.
In response to the questions asked by Members, it was pointed out that the R220 million was allocated to projects that have been identified to pilot the Mini ADAM programme only, and not for entities to provide support with it.
On the results of the pilot project, MISA suggested another meeting where a presentation could be made in this regard. However, the projects were implemented in different participating municipalities. The main challenge that impeded the progress of the rollout of the Mini ADAM programme. One of such challenges was the issue of funding, which was still a current challenge.
The criteria for selection of municipalities and budget allocation was not developed by MISA. The DOE in collaboration with other stakeholders came up with the criteria.
On the criteria used for identifying learners, MISA said that advertisements were placed in different municipalities. Municipalities would then respond to such advertisements by giving MISA learners interested in the advertised fields.
With regard to the few number of graduates recorded, it was pointed out that the biggest challenge faced by MISA, especially on the apprentices and artisans programme, was the issue of trade testing. Employers were not available to assist in trade testing for the learners. This has led to the extension of programme for most of the artisans until MISA was able to place such learners for trade testing. MISA has however, been able to enter into agreements with various municipalities and other private sector entities to assist with placement of learners for trade testing. Nevertheless, the issue of exiting the programme was a real challenge for MISA.
The young graduate programme was designed for young graduates who already have engineering degrees and for which assistance is provided by MISA for them to attain professional registration. Exposure was needed in a number of areas before a person can be registered as a professional engineer. These young graduates needed mentors to work with them until they are able to become professionally registered. The availability of mentors in the country was a challenge faced by MISA and other stakeholders, as the available mentors were few and expensive.
MISA has gone out to look for mentors for the young graduates. It was hoped that the process which MISA had embarked upon would yield more mentors to be allocated to learners in different municipalities, and would assist graduates to become professionally registered engineers.
The issue of exposure was yet another challenge facing municipalities that MISA was beginning to address. One of MISA’s future plan was to improve support to municipalities by filling 15 positions of electrical engineers that would be used for mentoring the young graduates deployed to different municipalities. Assistance would also be provided on the organogram of municipalities in order to ensure that municipalities received the needed support to improve their capacity.
On the budget that had been set aside for the training of learners, Mr Vimba said he did not have a breakdown of the budget per area. However, within MISA’s capacity building programme, an average of R61 million had been allocated for training in the current year. The training would cover electrical and civil engineering, learners and the young graduates programme. The breakdown of the allocation for electrical engineers would be submitted to the Committee at a later date.
The issue of retention of engineers in municipalities could be linked to the issues raised by SALGA on the revenue in municipalities. Municipalities are unable to afford these skills due to the shrinking state of revenue generation capacity of most municipalities. This issue needed to be addressed as a matter of urgency in order to prevent municipalities from becoming a going concern. Most of the issues raised in this regard were general issues around credit control mechanisms. Municipalities with licenses to distribute electricity were performing relatively well but they could not switch off electricity whenever consumers defaulted in making payments. It was a known fact that systemic issues abound in municipalities. SALGA had no intentions of downplaying such issues. Instead, it called for a need to address such issues especially since the goal was for municipalities to be viable enough to provide quality service to the people, as well as ensure that infrastructure was maintained. The biggest challenge asides lack of revenue was securing needed skills to for various purposes including maintenance of infrastructure.
The 75% of backlogs in Eskom supply areas was culled from a 2011 report. Mr Vimba did not however, have the overall percentage of Eskom supply areas.
Mr Timothy Seroka, Acting Head of Technical Support, MISA, reiterated that the 75% of backlogs in Eskom supply areas was an historic figure that led to the development of an approach through ADAM. The reason for this was that Eskom was focusing more on the rural areas and was having higher backlogs. However, the current situation was such that of all the basic services set in terms of the MTSF, both grid and non-grid electricity was performing fairly well. MISA was now looking into the reliability of services, instead of dealing with backlogs. The areas still lagging behind were in KwaZulu-Natal (KZN).
On the effectiveness of B2B in dealing with service delivery in relation to infrastructure, MISA played a more active role around the infrastructure aspect of it. There were areas in the B2B programme that had improved in terms of the contribution that was made to B2B. However, the challenges facing the programme could not be resolved by B2B alone, as it was necessary for municipalities to be capacitated to have skilled, technical professionals for the purpose of providing assistance to municipalities. MISA was dealing with some of these issues through a recently launched programme. Assessments have been carried out to identify the current challenges, including backlogs, viability of infrastructure, and funding. Plans were underway to address these issues. MISA requested for an opportunity to come back to the Committee to present the impact made by the B2B programme in addressing the issues confronting the energy sector.
The Chairperson clarified his question on the 75% backlogs in Eskom supply areas. He wanted to know what the percentage of Eskom supply areas was in municipalities.
Mr Stofile said the illustration of Alexandria township subsidising Sandton was speaking to lawmakers. The message was that despite the 20 years of democracy and freedom in South Africa, some poor areas were still subsidising the well-off. The question to be asked was what had been done with the entities since the beginning of the democratic era. Have the entities been transformed to support the developmental programmes?
The illustration reflected the state of affairs not only in Alexandria, but in other areas where Eskom took over where the light load was 100%. On the other hand, municipalities were in charge of areas where the light load was lesser than 100% payment rate. Such municipalities had the responsibility to bill the street lights in the richer areas. In other words, consumers in municipalities paid for those people to whom Eskom was providing electricity but were not charged for things like street lights. Another example was seen in the dispute between Eskom and the Soweto community. The question to be asked was what the offer Eskom has given would mean to the municipalities. It was unfortunate to see the poor subsidise the rich on a continuous basis.
On the municipal debts, the question to be asked was what the contribution of the penalty and accrued interest was in the overall R11 billion debt. Historically, municipalities were expected to pay to Eskom up to the 15th of each month, in order to avoid interests that would accrue afterwards. However, municipal finance managers required municipalities to embark on collections after 30 days. The implication of this was that Eskom would benefit from such an arrangement.
SALGA also agreed with the suggestion to include other entities and stakeholders in the forthcoming energy summit, for the purpose of considering options relating to alternative energy.
SALGA also agreed to participate in the forum that sought to address the challenges at hand. Approaching the court to resolve the issues was an historical issue and not the idea of SALGA. A task team comprising of different role players including Ministry of COGTA, DPE, and DOE was established. However, the issues remained unresolved. SALGA was however, mindful of its engagement and participation in the presidential coordinating committee (PCC). It was also mindful of the fact that a solution should be found for the issues at hand.
Mr Lance Joel, Executive Manager: Office of the CEO, SALGA, said the current situation between municipalities and Eskom was a matter that has lingered for three to five years. He confirmed that SALGA had engaged with no less than three Eskom CEOs, and the reasons behind the current situation leading to engagements at the highest inter-governmental structure (i.e. the PCC) was because all other options had failed. This led to the kick starting of conversations between SALGA and Eskom, after which the matter was elevated to include the Department of COGTA. This was followed by the inclusion of other relevant departments such as DOE, DPE, and NT, up until the establishment of the inter-ministerial committee in February. However, no solution has been found after eight months of establishment. A reason for this could be that the same structure that was unable to provide a solution in the past has been saddled with the responsibility of providing a solution now. SALGA hoped that by the date of completion of the structure’s mandate (which was 13 October 2017), the structure would have been able to develop a solution and would have agreed on the appropriate steps to be presented to the PCC, which would convene on 14 November 2017.
The presentation made by SALGA had been presented to Eskom and other relevant entities. Although SALGA agreed that Eskom should have been present at the current meeting, the stance of SALGA would only have been reiterated to Eskom. There have been and would continue to be conversations between SALGA and Eskom in a bid to resolve issues and overall, address matters in the best interest of the people to which service would be delivered.
Mr Joel also noted that some consideration of the national pie should raise the question of why municipalities or local governments received only 9%. The answer to that question would be that municipalities have their own revenue streams, which was basically the surcharges on water, electricity, refuse removal, sanitation, and property rates. National Treasury therefore refuses to give municipalities more funds because the claimed access to additional revenue through the surcharge. It was important to consider the impact of the inability to collect surcharges on electricity in areas not serviced by the municipalities, as this would mean a shortage in the revenue of municipalities. The impact of residences going off the grid and not buying electricity was that municipalities would not benefit from the surcharges that should have accrued if the opposite situation obtained. All of these impacts on the ability of municipalities to collect revenue in terms of the expectations that Treasury and the government has placed on them to survive on funds collected outside of the 9% accruable to municipalities. There were broader implications for municipalities based on the challenges currently facing the energy sector.
On the illustration of Alexandria subsidising Sandton, the aforementioned five services on which municipalities charge, were not the only services provided by municipalities. Municipalities also pay the bills for parks, libraries, and street lighting through the surcharges paid by consumers for the five services. The same surcharges for the five services were used to subsidise other non-paying services that municipalities deliver. The implication of the Alexandria-Sandton illustration was that the money made by municipalities on the services had to be spread across to provide services for areas where the benefit of surcharges were not collected. This was referred to as cross-subsidisation and it occurred across all municipalities. Another example was the derivation of 40% of City of Johannesburg’s revenue from City Power for the purpose of cross-subsidising other services provided by the municipalities in the City of Johannesburg.
SALGA committed to presenting its proposed funding models for local governments to the Committee at the next opportunity given to appear from the Committee. Representations had been made to the Portfolio Committee on Finance.
The spread of electricity distribution between Eskom and municipalities was 40% and 60% respectively.
SALGA had no intention of making the energy summit a conversation strictly for local government. The summit would be organised in partnership with key relevant departments and stakeholders in order to have a robust conversation on the broader implications of local government. The event has been moved to two days preceding the state of the nation address (SONA) 2018, due to other events.
On the 60:40 split, Mr Ngidi added that the 60% was geographic and not the amount of electricity that has been distributed. The electricity in the Eskom supply areas was more than double the amount of the 60% for municipalities because Eskom enjoyed the benefits from bigger paying customers.
Ms Thembisile Majola, Deputy Minister of Energy, said she had been requesting for the conversation that ensued at the current meeting for three years, especially because conversations had taken place around all other areas. The result of not focusing on this key aspect of the energy sector has made it impossible to engage with SALGA on the issues raised. It was difficult to have high level conversations around electricity without having an understanding of what obtains in municipalities. It was also important for entities and departments to understand their different mandates. DOE was a policy department that had a mandate for electrification but it had no mandate to maintain electrification. It was for this reason that getting an understanding of the mandate of different entities was necessary. The gaps within the sector should be identified and addressed.
The issue of skills acquisition and retention was also critical. Although the Department was trying to assist municipalities in this regard, it was not within its mandate to do so. The needed skills was not only around electrification. Skills were also needed for the management of the finances of municipalities.
She noted that various relevant entities had separate views on the issue of cost reflective tariffs. Conversations should be held on finding solutions in this regard. Although Alexandria township was subsidising Sandton, the fact that other areas were subsidising Soweto could not be overlooked. It was therefore, necessary to balance all these issues.
She requested that more information should be given on the outcome of the Mini ADAM project.
On the efforts to pull energies to acquire needed skills, she noted that DOE had a programme for school kids to encourage them to take certain subjects, go up the value chain and secure scholarships from oil companies and so on. The Department was also looking into the general transformation of the industry. She was particularly concerned about the IPPs that were yet to meet their license conditions in terms of transformation.
more conversations should be held in preparation of the energy summit in order to achieve results during the summit.
The Chairperson said that the issues raised by the Deputy Minister would be addressed at a later time. The next engagement of the Committee would be with all relevant entities in order to have a robust engagement.
Briefing by Department of Planning, Monitoring and Evaluation (DPME)
Mr Rudi Dicks, Outcome Facilitator, DPME, noted that the presentation would focus on DOE’s performance review for Outcome 6 and 10.
DOE’s contribution to outcome 6 reflected through two specific outcomes namely, improvement of regulation, funding and investment; as well as ensuring reliable generation, transmission and distribution of energy. Outcome 10 focused on protection and enhancement of environmental assets and natural resources. Three sub-outcomes were reported under this, namely effective climate change mitigation and adaptation response; enhanced governance systems and capacity; and sustainable environment.
The Performance Assessment for Outcome 6 was outlined as follows:
-Progress has been very slow between 2014 and early 2016 but has improved from 3 rd quarter of 2016 /17.
-The MTSF targets in most indicators where progress has been shown was expected to be delivered between 2014 and 2016. It has however been noted in some indicators that the MTSF target will be achieved.
-No progress report has been provided on the following MTSF indicators. These include Taking a decision on expanding oil refining capacity; Developing a funding mechanism for upgrading of existing refineries to ensure they meet new fuel-quality standards and improving governmental support for combating illegal use of electricity.
- Progress should however be noted on energy generation: Eskom continues to implement a maintenance strategy to improve plant availability and accelerate delivery of additional generating capacity; - Eskom has on the 31 March 2017, raised R57.4 billion, and R32.0 billion for 2016/17 and 2017/18 financial years respectively and the Renewable Independent Power Producer Programme (REIPP) has unlocked R201 bn with 6 244 MW Renewable Energy procured and now supplying 3 175MW to the Grid.
For Outcome 6, it is recommended that the DoE produce a recovery plan with clear time frames for those indicators where target dates have already passed. On areas where DoE has never reported on progress; or indicators where targets need to be reviewed, the Department will be required to refine and align their targets towards meeting the objectives of the MTSF 2014-2019
The Performance Assessment for Outcome 10 was outlined as follows:
-Although DoE had made commitments on the percentage of new build that is renewable power generation (42% by 2030) in the Outcome 10 delivery agreements, progress reports are still lacking at outcome level
- However, progress on the number of megawatts transmitted to the grid (100 MW per year) as committed in the DoE Strategic plan is reported at Working Group 10 level (IGCCC Climate Change)
-DOE has exceeded its target of 12% by 11.7% on percentage of energy efficiency improvement in 2015/16 FY, new commitments/ upscaling of targets for the remainder of the MTSF is required
-Significant progress has been made by DoE in the installation of solar home systems (PVC). To date the department is sitting at 59 922 (57%) against a target of 105 000 by 2019 Ø Progress on publishing energy balances is lagging behind, the department has so far published 2014 energy balances tables. This has impacted on the timeous publications of subsequent energy balances as the backlog has been created.
For Outcome 10, it is recommended that DoE should expedite their process of reporting percentage of new build that is renewable power generation in order to promote the transition to a lower carbon economy. Whilst DoE is working on their strategy review, projected target for energy efficiency improvement for the remainder of MTSF should be provided. Participation in the Outcome 10 Implementation Forums is crucial for the coordination and collaboration of the sector’s efforts and work towards achieving the vision of the NDP on ensuring environmental sustainability.
DPME noted that the Department’s plan includes performance indicators that are not well formulated. Some of the indicators are crafted as statements and are not measurable, for example: “Contracts for coal, cogeneration and gas IPPs for additional power capacity as per IRP”. Some are measuring multiple variables, for example: “Number of energy savings realised and verified from EEDSM projects” This will result in distorted reporting. Performance indicators should be well formulated to reflect the contribution to the intended outcomes and outputs to be achieved. Indicators that are not well formulated may result in a disjuncture between the strategic intent reflected in the Strategic Plan and the indicators reflected in the APP.
Mr Mackay said that the performance assessment by DPME showed that DOE’s performance was unsatisfactory. Why was DOE struggling to align itself to the key strategic outcomes that it had committed itself to. He was alarmed by DOE’s absolute failure to take the annual performance plan (APP) seriously, especially since it was not the first time of drafting the APP with performance indicators that were not well formulated. This reflected an outright disrespect on the part of the department. The planning and monitoring mechanism was supposed to assist in ensuring efficient and effective governance.
The Department had also failed to achieve any of the outcomes for the MSTF period.
He noted that Mr Dicks did not mention the fact that the target for the renewable energy programme in relation to the installation of water geysers by the Department was reduced from over R400 000 to R100 000 and currently the DDG responsible for that particular programme was on suspension because of illegal contract issues.
The assessment reflected the fact that DOE was faced with the problem of mismanagement. It also showed that DOE was in chaos, and there were cases of corruption within the department that needed to be dealt with.
He was particularly concerned about the general performance of the department, and sought clarity on the actual work that the department was doing. The outcome of the performance assessment on the department was disappointing, and the Committee should ask serious questions.
The three year performance comparisons had worsened. It seemed the department was not doing its job, neither was the Committee doing its job in terms of holding the department to account.
It was expected that the Minister and Deputy Minister would present a comprehensive plan on addressing these issues, during their presentation of the annual report next week.
The current performance of the department was having a negative impact on the economy; it was sending a wrong signal to the industry and the sector. Also, there was a huge confusion about the future of the renewable energies programme.
Mr M Matlala (ANC) wanted to know how often DPME engaged with DOE to address and prevent some of the outcomes of assessment presented to the Committee. He opined that the primary role of DPME was to assist DOE in remaining on the right track, instead of waiting till the next financial year to report the underperformance of the department. Most of the assessment reports would have been avoided if DPME met with DOE often to offer assistance where necessary.
He also asked DPME whether any progress had been made by DOE in achieving the national development plan (NDP) priorities of 2030. DPME was further asked to mention some of the goals that the DOE had achieved through the NDP 2030.
Mr Esterhuizen wanted to know whether DOE and NERSA had the willpower to embark on a massive restructuring exercise, starting with their executives who were among the highest paid people in the industry and public sector at large.
He noted that there was more potential in renewable energy methods, such as solar energy. However, the lack of clear policies and regulations in South Africa has resulted in a diversion of focus in this regard.
Mr Dicks opined that the department’s performance did not amount to a dismal failure. He noted that the mandate of DPME was to provide planning, monitoring and evaluation across government. This mandate is to be carried out without fear or favour. The reality was that some departments did not perform well while some others performed relatively well. DPME had an obligation to report on the performances of department, regardless of whether the performance of any such department was poor or not.
DPME engaged with DOE on a quarterly basis to monitor and evaluate the department’s performance, as well as raise concerns. Concerns were also raised at the Cabinet Committee level, directly with the Minister and Deputy Minister in relation to the targets that the department has achieved.
Mr Dicks agreed with Mr Mackay on the need for a more consolidated approach in addressing the performance of the department. He reiterated that the department had performed relatively well in the space it had found itself. It was certain that difficult challenges would emerge from time to time. The space that the department had found itself highlighted the need for developing new models for generating, distributing and transmitting energy, which would be different from what obtained in the past. It was however, necessary for the department to manage the difficult space by opening it up to the private sector, in order to increase the energy generation capacity. The latter was the significant goal of DOE.
Emphasis was placed on the relatively good performance of the department, particularly with regard to the level of significance of the strategic goals of the department. Securing the market for participation with the private sector was worth thinking about.
On the question around the APP, it was pointed out that DOE’s APP was the first draft. However, DPME had identified some issues in the draft and had drawn the attention of DOE to those issues. The issues identified were not only peculiar to DOE. DPME has not really had performance dialogues with the DOE. Instead, it had a system for performance dialogues. DPME however, committed to raising these concerns to DOE on a continuous basis. DPME proposed that the senior management of DOE should set in motion a process of having the for the first performance dialogue with NT, convened by DOE and utility support.
It was pointed out the restructuring going on within DOE was yet to be fully understood, from the political point of view to a regulatory point of view. The main issue was that an appropriate funding model for Eskom was yet to be developed. It seemed that sufficient research has not been carried out in this regard.
Mr Mackay said that DPME’s presentation reflected the fact that two pieces of legislation (namely Integrated Resource Plan (IRP) and Integrated Energy Plan (IEP) that determined the shape of the energy sector were four years late. A lot more success would have been recorded if these documents had been finalised. Eskom was yet to sign the outstanding IPPs and it had no intention of signing additional ones. It was clear that the IPP programme was currently dead till the next four to six years, depending on what the changed IRP may stipulate. The consequence of not finalising documents timeously had a significant impact on the economy, as it affected the ability of the economy to function properly and to track investments. The economy has witnessed a withdrawal of FDI in the last quarter, and 34 000 jobs have been lost. The inability of DOE to deliver critical policy within four years was a huge problem, and was inexcusable. The job of DPME was to report on the performance of DOE, rather than excuse the underperformance of the DOE. He urged the Department to focus on improving its performance. He also noted that it was not the first that the department was drafting its APP. The fact that the department had no clear targets reflected a disrespect to the MTSF process and DPME. The department was not aligned with the NDP, neither were its priorities aligned with the NDP. He sought clarity on the Department’s incapacity to set targets, and asked if this was due to the mass exit of staff in the last six months. He attributed the state of underperformance in the
Department to the failure of the Minister and Deputy Minister to hold the DG and the department generally, accountable. This meant that the political oversight was non-functional. The Committee should be more critical of the department.
Mr Esterhuizen said the commitments made by the department in respect of hydro scheme was important. He also sought clarity on whether DPME engaged with DOE and other relevant entities. This was because DPME expressed optimism on the department’s performance, while SALGA alluded to the worsening of things within the energy sector.
The Chairperson said another discussion would be held on electricity distribution at another meeting.
He sought confirmation on the department’s commitment to submit the two outstanding pieces of legislation to Cabinet by the end of the current financial year. He also noted that the same deadline had been set for inter-departmental consultation on the IEP and IRP. He then asked for clarification of what the process of inter-departmental consultation entailed; and also when both IEP and IRP would be submitted to Cabinet for consideration. He asked for details on the status of coal and gas IPPs; clarification of targets highly likely to be met; and clarification on what it means for the renewable energy IPP (REIPP) programme to be at window 5 stage.
Mr Dicks confirmed that the commitment of the department was to submit a revised memo to Cabinet for consideration of the National Energy Regulator Act (NERA) in the 2017/18 financial year.
DPME, as the department responsible for the socio-economic impact assessment systems understood its role assisting DOE in its efforts to improve the Bill.
The IRP has gone out for public consultation. Substantial progress has been recorded in respect of IEP and IRP. Discussions have also been held among government on this. However, the third quarter report would be submitted in December. DPME would have to consult with DOE on the progress of the IEP and IRP process.
On the issue of inter-governmental consultation, DPME noted that a socio-economic impact assessment was introduced 18 months ago. DPME has also engaged with the sector and DOE has committed to having inter-governmental consultations (which comprise of discussions across the sector) before the end of Quarter 2.
On the issues around coal and gas, the uncertainty in the space has caused the department to have a relook and make difficult decisions. There were plans underway to ensure private sector participation.
DPME clarified that the target for the hydro scheme referred to the approval (paperwork) of a target to have a major hydro scheme approved over the MTSF, rather than having the hydro scheme itself.
The Deputy Minister appreciated the oversight work of the DPME. The DOE had requested that DPME should not come to around to critique whenever the department had a Cabinet memo. Instead, DPME was expected to participate in the development process of achieving the NDPs. Some of the highlighted outcomes of the Department were high-level outcomes. Other outcomes of the Department such as electrification that took 95% of the Department’s budget, were not reflected in the presentation. Those outcomes were proof that the department was making progress. She clarified that the 2.5 million homes yet to be electrified were not backlogs; instead, they reflected growth. It was important to differentiate between backlogs and growth, as the aforementioned growth reflected progress in the sense that people were migrating from repressed areas and informal settlement to urban areas.
The timeframes for the IEP and IRP have been indicated in the revised APP of the department. The process was still ongoing, as it was a consultative process. In other words, the department had to continually take comments and concerns raised on these policies into consideration. The Minister had indicated that the Minister of Finance requested a finalisation of the process in February, rather than March 2018.
The issue raised around grids was not only a DOE discussion, because it had wider implications. Eskom had a department to which it was accountable, and with which it carried out planning in this regard.
She corrected the notion that R150 million had been spent by the Department. Part of the plan was for an escrow account to be opened during the development process, to which USD10 million would be put as part of the guarantee. At the time this was stipulated, the exchange rate was USD1 to R15, hence the R150 million. However, no money has been put in the account, neither has any such money been spent by the Department.
Although Mr Esterhuizen argued that the said amount had been spent, the Deputy Minister noted that she was unaware of any such spending.
The Deputy Minister said that the importation of gas like other imported products was affected by market factors, such as fluctuation in prices. However, a positive note was that NERSA had granted licenses to utilities in Saldhana. There was huge import capacity in Western Cape and the Department was hoping that this would help in price reduction. The Western Cape would be the first beneficiary of lower prices of gas. Apart from importation, it was also necessary to have necessary infrastructure for storage across the country to avoid having to spend so much as cost for transportation.
On the issue of excess energy, it was pointed out that some people held the view that such excess energy was artificial in nature, particularly because South Africa was unable to trade this energy with neighbouring countries. The Department was focusing its efforts on having transmission lines and interconnectors, in order to sell energy to other countries, such as Zambia, Angola, and so on.
The meeting was adjourned.
- Electricity Distribution Industry & Infrastructure Rehabilitation: COGTA, MISA, SALGA briefing; Department of Energy performance: DPME briefing, with Deputy Minister 1
- Electricity Distribution Industry & Infrastructure Rehabilitation: COGTA, MISA, SALGA briefing; Department of Energy performance: DPME briefing, with Deputy Minister 2