In a virtual meeting the Committee was briefed by the Kannaland Local Municipality and InovaSure on the potential solar power project for Kannaland. The Department was included in this briefing where an Executive Summary on the Innovative Energy Vault Program for Kannaland, as well as the Specific Public Private Partnership (PPP) Management Plan were presented and discussed.
It was reported to the Committee that Kannaland started a process in 2012 to source partners from the private sector willing to assist with first world technological and funding solutions that would offer feasible implementation models to secure the economic future of Kannaland and the whole District of the Garden Route Municipality. InovaSure was identified in 2012 as a suitable partner and to date has interacted with the municipality in a Public Private Partnership (PPP) process aimed at securing a suitable model for the feasible implementation of technologies.
Members first needed to be located in the milieu by asking ‘Who are the owners of InovaSure’?; ‘Why was Kannaland chosen’?; ‘What are the current regulatory obstacles being experienced by Kannaland’?; ‘Why did Kannaland choose to cover the whole range of electricity supply’; ‘Would Kannaland be taking over the existing electrical infrastructure of the municipality’?; ‘If so, at what stage and to what extent’? ; ‘In terms of Kannaland’s discussions with Eskom, has Eskom committed to any transfers of the infrastructure in Zoar and other environments’; the ownership status of InovaSure and ‘Who owned the company’?
Members heard that there was no land of the municipality that would be utilised for the purpose of the project. Private land would be accessed by the investor; and that it had been tough in the municipality in terms of what they had gone through over the years. The governance in the municipality had certainly improved. In 2016 the municipality was able to skip the adverse opinion and move into the qualified status opinion. Last year June the municipality was very fortunate to maintain an Unqualified audit status with fewer findings. InovaSure as a company was a conglomeration of a lot of different companies, groupings and people. All together there were about 70 engineers that were involved with the way in which the project had unfolded in South Africa.
In terms of tariffs, the tariffs being paid by Kannaland were called night tariffs, which was a Time of Use tariff structure by Eskom. The agreement was signed by Kannaland to distribute energy into their distribution network based on their Time of Use tariff which was night tariffs. The country was and had always been trying to correlate the Time of Use tariffs being paid by municipalities and then offsetting that against Time of Use tariffs on end users. In terms of whether Eskom’s role was being taken over or not, the project was actually to enhance Eskom’s capacity and not take over their role. On electricity Members heard that electricity infrastructure was owned by the municipality which provided the service to the community. This was with the exception of Zoar, which was the Eskom infrastructure.
The Committee was concerned about issues of Broad-Based Black Economic Empowerment (BBBEE) compliance status; BEE fronting and a Minority BEE shareholder Mr Mathews Phosa, and his local relations with Kannaland. Members heard that the municipality did not support any fronting when doing business with anyone. There was no links of any kind between partners that were presently in the BEE component in InovaSure. When Members heard that the BEE partner was Mr Phosa, they asked if this was the previous Treasurer General of the ANC and previous Premier of Mpumalanga. Members said that they did not want to make assumptions but wanted clarity in this regard as well as how Mr Phosa became interested in Kannaland specifically. It was explained that with regard to BEE and Mr Phosa, he was indeed the individual mentioned and his company had dealt with InovaSure for many years in terms of their interaction with Mozambique and Maputo specifically. Members were pleased to hear although a lot of technology had been used from Russian and China, the thought processes and integration of the software requirements in this specific deployment was owned by South Africans.
Further discussion included: Independent Power Producer (IPP); InovaSure Energy Vault Program; Eskom’s service delivery; Past administration of Kannaland; Current financial position and liquidity situation of the municipality; Ability of municipality to meet its commitments and obligations; PPP model; Procedure of PPPs versus IPPs; Role of the province and National Treasury; Community involvement; Local content and local empowerment; Electricity generation and storage; Smart distribution metres; Photo Voltaic (PV) system; Assuring Kannaland is in a better position after 25 years; Municipality contribution; Municipal Manager’s work and impact in Soweto; Governance and accountability of the municipality; Sovereignty of the municipality; the roles of the Minister of Finance, Minister of Energy, and Development Bank of Southern Africa (DBSA) ; the spread of the Kannaland piloted project to the rest of South Africa; and a follow up presentation by the Kannaland Local Municipality and relevant departments.
It would not be the last time that the Committee engaged with the municipality. Further questions were to be put in writing to the Kannaland Local Municipality as time had run out. Members were also to put their resolutions in writing to the Procedural Officer to be combined for discussion and approval at the next meeting.
The Chairperson tabled apologies from Mr David Maynier, MEC: Finance and Economic Opportunities (WCPP), Mr Solly Fourie, Head of Department: Department of Economic Development and Tourism, and Ms N Makamba-Botya (EFF).
Mr M Xego (EFF) would be standing in for Ms Makamba-Botya for the day.
Briefing by Kannaland Local Municipality and the Department of Economic Development and Tourism on the potential solar power project for the Kannaland area
Mr Reynold Stevens, Municipal Manager: Kannaland, briefed the Committee and Department on the potential solar power project for Kannaland. This included presenting and an executive summary on the Innovative Energy Vault Program for Kannaland, as well as the Specific Public Private Partnership (PPP) Management Plan.
As investors in the Kannaland Energy Vault Program, Mr Max Lourens, CEO: LiveSure and InovaSure, and Mr Jaco de la Rouviere, Chairman: LiveSure and InovaSure, contributed to those aspects of the presentation pertaining to the technical nature of the Inovasure Energy Vault Program.
Kannaland started a process in 2012 to source partners from the private sector willing to assist with first world technological and funding solutions that would offer feasible implementation models to secure the economic future of Kannaland and the whole District of the Garden Route Municipality. InovaSure was identified in 2012 as a suitable partner and to date has interacted with the municipality in a PPP process aimed at securing a suitable model for the feasible implementation of technologies.
This PPP process has reached its conclusion with a Draft PPP Agreement which has been advertised in June 2020 as an unsolicited bid, and approval for the PPP arrangement has also been received from the National Treasury including the registration thereof on 26 April, as well as the required views and recommendations from Provincial Treasury. A procurement specialist, Advocate Helen Venter, was procured to go through the documentation and provide the exact legal position of Kannaland and further clarifications. All documents were provided to the National Treasury and assurance was given that timeous due diligence would be given and comments would be issued. The documents were also sent to all other interested government departments and the Committee would also be provided with the information to assist in serving their oversight role.
Kannaland’s goal to achieve economic success can be best implemented in the form of a COMPACT between the public elements of the PPP partnership with InovaSure. This will include global institutions and funding sources , the organs of State-Owned Entities, Development Finance Institutions and other banks, the donor community and society at large , as well as private sector funding and specialised products and services. Within the “Living Security” framework, InovaSure focuses on Energy Security and some of its ‘derivative’ applications such as Water Security (capping energy costs) and Telecommunications Security (supplying sustainable telecommunications and ICT).
InovaSure will provide an Energy Vault which is an integrated management system for power. If Kannaland (or any other Municipality) is able to store grid energy at very low off-peak rates during the night and discharge during morning peak and then again charge the storage device during the day with an affordable off- peak renewable or other energy source for the evening peak, then a viable Municipal Electricity Department that save up to 60% of current energy costs can be had. This will stabilise the distribution networks and optimize the power supply services offered by Municipalities. The InovaSure Energy Vault ensures cost effective and in-time delivery of electrical energy to users in a profitable manner. As a result of this, the cost of delivering potable water is concomitantly also reduced. The Energy Vault comprises of a 20MW/53MWh battery, Balance of Systems component, 25MWp PV Power Plant, 30000 “smart” network distribution and telecommunications devices.
Kannaland currently uses approximately 6MW of power. The InovaSure Energy Vault implementation will therefore begin in its first phase in Kannaland with a 4MW Solar PV installation. In Phase 2, the size of the Energy Vault’s will be increased in order to provide the benefits to the whole district with numerous installations. The above system comprises a single unit Inovasure Energy Vault which costs approximately $50 million. Part of the current process was that Kannaland Municipality did not share in on any of the risks or have to contribute capital. The benefits of the Energy Vault include that after the 25-year contract the assets will be transferred to the municipality who will make the business decisions. This provides access to stored capacity and distribution mechanisms needed to prevent load-shedding without the loss of income to Eskom. The estimated energy savings for Eskom in South Africa, for instance - on the advice of InovaSure - will be between 5% and 8%. The estimated jobs created in construction in South Africa will be approximately 20 000 over an initial 5-year period.
Under the auspices of the DBSA as the Mandated Lead Arranger and co-founder, InovaSure will effectively arrange to fund the project/s. In each instance of the InovaSure Energy Vault installation at a Municipality, Transaction Advisors carry out a Technical, Financial and Legal due diligence process. Agreements governing the basis of the InovaSure delivery of the Energy Vault installations have been entered into between InovaSure and various organizations, underpinned by agreements with various companies and countries, amongst others, from the Russian Federation and the Peoples Republic of China.
In terms of the power factor, the proposed PPP Agreement between InovaSure and the relevant local municipality will set the specific terms out as to how InovaSure will install specialised equipment to correct the power factor in real time and guarantee it in the specific municipal distribution network at 0.97. Regarding dynamic tariff shifting, InovaSure will deal with this issue in four ways: 1) Dynamic Tariff Shifting, 2) Intelligent Distribution Devices, 3) Incidental Savings to Eskom and 4) Incidental Savings in Distribution Capacity. The first step will be to install equipment to manipulate the demand in many respects. The proposed PPP Agreement between the relevant Local Municipality and InovaSure will set out the specific terms of how InovaSure will store energy on behalf of the municipality during off-peak times and at low tariffs from 11pm up to about 5 am and release the power intelligently during on-peak tariff from 6am to 8am into the Distribution Network.
The incidental savings included that the InovaSure Energy Vault protects the substation against peak utilisation and will increase the total net capacity by 30% and ensure additional use in off- peak energy distribution and on-peak protection and energy injection. In terms of the eThin technologies, InovaSure will install broadband connections to each Distribution Device in each house in each Energy Vault deployment area. This broadband connection will be used to access the server and cloud technologies developed by InovaSure, which includes the ability to connect to a cluster of servers from remote devices. The secure connection will be maintained to uniquely identify the user as well as to ensure privacy of the end user data and to protect the cluster of computers. InovaSure has entered into a Joint Venture with various companies to obtain unique content inclusive of Movies, Books and Music - inclusive of customised and curated educational content which includes the CAPS curriculum. The InovaSure devices will be used to access the content via the distribution devices and the custom devices. With reference to collection services, changing the current infrastructure with pre-paid distribution devices as well as sophisticated software, eliminates many inherent risks with the retail of energy and results in a 100% collection rate. As costs paid to income will be reduced and energy would be cheaper, this would enable Kannaland to secure a better income. This links to the long-term sustainability of Kannaland as a stand-alone municipality.
With particular reference to the PPP plan, this was separated into three parts being the public authority, project company, and ownership structure. In terms of the ownership structure, the shareholder percentage was given and mentioned as contractor, operator and financial investor. The public authority and project company were linked. The project company was formed of the construction and operating contractors. The contract management plan would be further elaborated once the funding has been finalised by the Transaction Advisor and InovaSure in conjunction with the DBSA. The composition and responsibilities of the contact management unit would be within Kannaland and comprised of employees. In terms of the procedures dealing with contractual events in the various stages of the implementation of the PPP project, the contract management committee would deal with supervising and monitoring the procedures. The performance criteria, monitoring systems and other deliverables under the PPP proposed agreement and procedures for reporting and disclosure of PPP performance to Kannaland municipality, government and stakeholder structure was important and was a unit within the municipality to protect the responsibility and accountability required by council to exercise over the project. In terms of the performance monitoring structure, the Kannaland PPP management unit committee would carry out performance monitoring as its most important monthly task. Concerning changes, variations and amendments, due to the long nature of the PPP agreement changes may be needed to address a change in circumstances and technology. The PPP agreement provides for mechanisms to address changes through a variations or change procedure for minor changes to made and agreed upon by Kannaland and InovaSure. Fundamental changes requiring renegotiation have a specified regime in the PPP agreement.
The fundamental basis of the deployment is trying to reduce the end user cost. The real expenditure in South Africa, as tested in Soweto, is people’s demand for technology, data, telecommunications and communicating for education which is centred around technology that is very expensive. This has been over-expensive for a long period of time. InovaSure levelled the playing fields of all levels of society. InovaSure did not charge different structures and higher income groups different tariffs, and also made the technology available to the poorest communities. InovaSure had this capability within its submissions and is not subsidised. The company has made it an inherently cheap way of accessing a high-end technology base, reducing costs, and creating connectivity between people on an intelligent basis. Energy and water were the basis of the submissions to the municipalities. The submissions were focused on water and energy security which InovaSure is knowledgeable about and has expertise in.
In terms of how one funds such a large capital investment without encumbering the municipality, the only way that this can be done is through reducing the costs of end users and to bring a lot of other attractive technologies to the distribution – which InovaSure achieved cumulatively back to the utility provider. Shifting energy during off-peak periods on to on-peak demands increases the capital efficiency of Eskom by 30% given that 120 sites are implemented. The incidental savings started making a lot of sense when discussions were had with Eskom, as capital is spent exactly where it is supposed to be spent and not on trying to address one issue within the value chain. The submission were made directly to the Minister of Finance and Deputy Minister of Finance last year December. The proposals were accepted and would be rolled out in the future if the projects could be done over a larger base. Eskom was funded through corporate debt, which was not a good idea but if refunded through the sale of future earnings on Power Purchase Agreements through municipalities, this is the way that most utility providers in the world are funding their new capital projects.
The biggest incidental value is looking at the efficiency of using energy, which is the greenest way of looking at energy. Further energy is not generated, it is just used efficiently. The tariff parity difference between on-peak and off-peak energy is where the real benefit lies. If co-generation can occur and be focused on the evening peak, energy generated by diesel is attacked. From a financial perspective this means injecting 26 cents of energy against R5.80 and profoundly impacts the country.
The Chairperson noted that the Committee did not have the full presentation which dealt with intricate details of the PPP agreement.
Mr A Van der Westhuizen (DA) said that it was nice to hear the excitement and the embracement of new technology and that Kannaland was willing to act as the pilot for what seemed to be an ambitious project. ‘Who are the owners of InovaSure’? ‘Why was Kannaland chosen’? He could imagine that Kannaland had good solar potential but, on the other hand, Kannaland was also an area with vast distances where the distribution of electricity could be quite costly. ‘What are the current regulatory obstacles being experienced by Kannaland’? ‘Why did Kannaland choose to cover the whole range of electricity supply’? If Kannaland had first concentrated on generation and storage, he would have felt a little bit more comfortable. However, it seemed to him that Kannaland wanted to cover generation, storage, distribution, and sales – which was the whole infrastructure. He presumed that a project of this nature and size would be a phased project. ‘Would Kannaland be taking over the existing electrical infrastructure of the municipality’? ‘If so, at what stage and to what extent’? ‘In terms of Kannaland’s discussions with Eskom, has Eskom committed to any transfers of the infrastructure in Zoar and other environments’?
Mr M Xego (EFF) also wanted to understand the ownership status of InovaSure. ‘Who owned the company’? It was known that, by fault or default, Black Economic Empowerment (BEE) was predominantly not complied with. ‘In terms of the BEE status, how was InovaSure able to benefit the people of Kannaland’? ‘What other major projects would InovaSure possibly pursue to ensure that Kannaland was not only on the map to sell power, but also generate the grossly disadvantaged community and bring them to par’? The Kannaland Municipality was pursuing the juncture of ensuring the promotion of IPP for their whole region and would ultimately assist the province. This was a very good initiative under the circumstances around Eskom. The challenge was that, when going to Kannaland, one would find that the cabling was still in the air. Kannaland did not have the underground system of ensuring that there was proper cabling and networking of power that would not be disturbed by weather. The Municipal Manager was not a representative of the company presenting the new power project. The Municipal Manager was a representative of the municipality that was supposed to be talking on behalf of their challenges together with Eskom. ‘What is the municipality doing to ensure that Eskom delivered proper services’? This did not entail just replacing Eskom with an Independent Power Producer (IPP). It was known that the challenges might be politically themed. When checking the involvement of independent people and politicians, there was a high possibility of setbacks. However, he did not want to unnecessarily cast aspersions. ‘Why is the municipality prepared to give the opportunity to an IPP over empowering the national entity called Eskom’? He understood that there was a serious shortage of water that might be assisted by the provision of power, as the cutting of power was a serious challenge. There was an aquifer in Kannaland that would be able to provide water for generations to come, but water could not be produced because of energy challenges. ‘What is Kannaland doing to strengthen both Eskom and the IPP’?
Ms N Nkondlo (ANC) wanted to get an understanding of the current liquidity situation of the municipality. When talking about this type of project and the type of investment that it required, what became important was the financial position of the municipality. She was sure that the financial position was compounded by the Covid-19 impact on the Kannaland – as was the case for many other municipalities and government in general. ‘What is the current liquidity ratio and position of the municipality’? ‘How is the municipality viewing its ability to carry this particular project from a financial point of view’? In terms of the PPP model, she was aware that there was currently a process with National Treasury to review the current PPP framework. This was given that the traditional PPP framework was more about setting the parameters of the government entity versus the private sector participation, which was always about what became the value addition of the private partner. ‘What was the role of both the province and The National Treasury in putting together the PPP framework that would be carrying this type of project’? This was especially linked to the question of community involvement. ‘What is the period or phase of the PPP project that Kannaland was going to be indulging in through the initiative of electricity generation’?
Mr Stevens explained how the questions would be answered between himself, Mr Lourens and Mr de la Rouviere.
Mr de la Rouviere said that that the string of questions were pertinent and indicated that he would speak to the questions relating to infrastructure, deployment, the multitude of levels of technology, why it was all being done at the same time, and the IPPs and the regulations running it. In terms of IPPs, this was incredibly important and was where InovaSure had spent most of their time engaging with all of the relevant government departments. InovaSure made a conscious decision to rely on the constitutional rights of municipalities to generate, distribute, sell and transmit energy. InovaSure had never intended, and still did not intend, to become an independent entity. InovaSure would not be an IPP. They invested on the balance sheet of the municipality and assisted the municipality to achieve certain things. InovaSure was not an IPP selling energy to the municipality. They supplied technology in such a way that they did not encumber or take over assets from the municipality. In fact, InovaSure supplied assets to the municipality and were there to assist from a financial and technological perspective. They put all of these assets into the balance sheet of the municipality as a de facto result. InovaSure would not take over distribution networks but would invest in distribution networks to create a stable distribution network. Taking over assets was never the intent of the PPP as an intent like that would be frowned upon. He thought that the intent to create an IPP’s perspective on supplying energy to a municipality was completely flawed and could not be executed. There were a lot of recent attempts in the newspapers which spoke about the rights of a municipality to buy from an IPP. He could not see this being funded or executed and it was never InovaSure’s attempt to even promote it. InovaSure directly invested, in collaboration with the municipality, in creating capacity for generation, management, intelligent distribution and for the municipality – not for an independent perspective. This would answer most of the questions related to taking over assets and what InovaSure’s intent was with technology distribution.
The reason why InovaSure distributed such a large technology base was to make it viable. There was no way to try and invest in these technologies if you did not make sure that you could get 100% maximum efficiency and benefit back to the end user. There was not enough money in the process to make it work. InovaSure therefore had to add very fancy technologies. Most of the technologies that were added for the end user’s benefit was to bring something to the municipal domain to try and break the animosity between end users and municipalities for non-payment. This specific case was proven in Soweto where InovaSure had made presentation to Sowetans to say that they knew that Soweto wanted a limit on the expenditure on energy, which was not viable and could not be executed. InovaSure then suggested that if they reduce Sowetans living costs by adding much cheaper communication and education, that this would save a significant amount of money and the event of paying for energy would become secondary.
Mr Xego raised a point of order. He mentioned that in terms of the Covid-19 South Africans were to observe social distancing. He noted that the Mr Stevens and Ms Magdalena Barry, Executive Mayor: Kannaland, were sitting next to each other and not observing social distancing. What was going on there? This was a serious violation of the lockdown regulations.
The Chairperson said that Mr Xego was correct. One of the reasons why Mr Stevens and Ms Barry were sitting so close was partly due to the Committee because of the technological challenges that they had faced earlier. However, the Committee also needed to be an example. She noted that Mr Stevens and Ms Barry had already moved and were wearing masks as well. She asked that they make sure that enough space was kept between them so that the Committee could be role models to the public who were watching them on video. Depending on who needed to speak, she suggested that Mr Stevens and Ms Barry move the laptop between themselves. She asked if Mr Xego was happy with this arrangement and whether he had any suggestions.
Mr Xego responded that he was not happy at all but said that it was fine. The challenge was that the meeting was being streamed on YouTube and the whole of South Africa was watching how the Western Cape easily contracted Covid-19 because of recklessness. If public representatives were not observing social distancing then there was serious trouble. For progress’ sake he asked that the Committee continue and observe social distancing going forward.
Mr D Mitchell (DA) thought that the Mr Stevens and Ms Barry had addressed the issue and asked that the meeting continue.
Mr de la Rouviere continued, saying that the structure of the investments directly in the municipality was the object of most of the thoughts during the 10-year process. Initially, during the feasibility studies, it was very difficult to make ends meet with the tariffs at the time. As the tariffs increased by 400% over the past five or six years, it became more viable. InovaSure also had to look carefully at what they could bring to the people of the country that would reduce their living costs. This was the major plus factor of the roll out and was something that happened by default because of the structure of the technology distributed. The structure of the technology made it possible to create a financial model which was viable. The point was not to try and confuse the issue by doing a multitude of technology distributions throughout the municipality and seemingly confusing people. The point was to do a technology distribution in such a manner that it would be financially viable. A lot of thought and investigation had gone through the Transaction Advisor throughout the years to make sure that this was what InovaSure had achieved. From a municipal perspective this was one of the most important portions of the original submissions, not to induce a long-term liability in the hands of the municipality.
Mr Lourens noted that the questions which were missed were around InovaSure and its structure – specifically with regard to its BEE commitments. From a shareholding point of view, InovaSure had a BEE shareholder, by the name of Mr Mathews Phosa, who had a significant percentage in the company. There were other diverse shareholders in the company as well. InovaSure was registered in South Africa and was in existence for approximately five years. It came into existence as a result of many other companies and operations that merged to provide the project to South Africa through one entity, and to give it one name it was called InovaSure. This structure was available and InovaSure was in the process of further structuring in terms of other companies involved in the process and joint venture arrangements with them.
With regard to the question as to why Kannaland, Mr Lourens took the Committee back six or seven years. At the time, the process was instituted at many municipalities throughout South Africa and not just Kannaland. This process was specifically to interact with various divisions of government and municipalities to further investigate the way in which the energy security and problems were being experienced at the time with regard to loadshedding. In most provinces and a number of municipalities, InovaSure instituted and entered into similar arrangements as was done with Kannaland. InovaSure followed parallel processes in a lot of the municipalities, with the input of the National Treasury, other departments, and Eskom etcetera. It was just that Kannaland had gotten to the end point of reaching the stage where InovaSure had received a non-objection and approval by the National Treasury for the process they had followed in the municipality of Kannaland during November of the previous year. There were still processes on the go in many other municipalities, where InovaSure regularly visited and had interactions with them. These processes were also aimed at the way in which the program would be instituted in the best way possible and InovaSure had received advice a few years ago that this would be on the PPP basis. InovaSure’s intention was to utilise the Kannaland process as the one in which they had gone through the full program, which had been seven years they first engaged. From there InovaSure would go outwards into the Garden Route and was of the inclination to do similar projects, which they had designed for the whole of the Garden Route district. They would thereafter have interactions with various other district and metro municipalities, with whom they had also spent between three and six years of interactions in doing the exact same thing. Kannaland was thus chosen because during the process of going into a program which they needed to serve the whole the country, the program would only work in tandem with other municipalities. This was because the requirement from Eskom was not just the 6MW that InovaSure would be able to store in Kannaland. It was actually closer to 5000MW as currently advised by the Department of Energy – starting with 2000MW immediately and building up to a need which was a lot more than that. Mr de la Rouviere was the Chief Engineer on the program and has worked with most of the BRICS (Brazil, Russia, India, China and South Africa) countries’ engineers. Mr de la Rouviere would better explain exactly how the engineers and actuaries arrived at the number of energy volts required. Unless InovaSure was able to start with the pilot implementation project in Kannaland, expand it into the Garden Route, and make it available to other municipalities who had similar problems and required similar answers, they would only be addressing a very small part of the current problem that was being experienced on a shortage of generation capacity during peak hours.
Besides the minority shareholder in InovaSure, Mr Phosa, they were also moving to a 51% black-owned structure within the company. This was part of the process that would be implemented with the Kannaland PPP. Each PPP was implemented as a special purpose vehicle. The structure that Mr Stevens put up earlier was just explaining how the special purpose vehicle to produce the result required in Kannaland would be dealt with, and how all of the parties would be included with representatives from the National Treasury, Eskom, Kannaland and InovaSure. This was so that InovaSure as the private entity and Kannaland as the public entity could share in the way in which they purchased off-peak energy from Eskom during the night, save it in a battery at a really low amount, and then make it available in the distribution network of the municipality during peak hours instead of paying the amount required on the Megaflex tariffs.
Mr Stevens added that Kannaland was so fortunate to have ended up with InovaSure for the Memorandum of Understanding, the process that they undertook at present, and that they could benefit from the process as envisaged. Concerning the question which dealt with the electricity infrastructure and whether InovaSure would take it over, the electricity infrastructure was owned by the municipality which provided the service to the community. This was with the exception of Zoar, which was the Eskom infrastructure. He believed that part of the process would inevitably be the negotiations with Eskom, who would also be provided the opportunity to peruse all the documentation that he had alluded to and that was currently available on the Kannaland website. Time wold need to be spent on this in terms of the Zoar community because, in his view, this was Eskom’s infrastructure. Kannaland would need to take this valuable point into the process in making sure that they got the best situation for the municipality within the present proposal of the project.
Regarding the other major projects, there were numerous benefits for all members of the community indirectly in terms of the multiplier effect of the investment and directly through the number of permanent job opportunities that would be created. Direct opportunities would also be given to local entrepreneurs to benefit from the construction insofar as they had the capacity and expertise to do so. InovaSure already had a meeting with the local emerging business groupings and would not be excluding mainstream business. When the project was made public, which was in December a year ago, the role players were all present at the meeting. This was in reference to the local industry leaders, people in the wine industry, and people from the farming community etcetera. All of these people were in love with the project because they saw a benefit for their own industries and the people. In particular reference to meeting with the emerging entrepreneurs, this was a meeting that had happened. Assurance was given to the representatives that were present in that they would benefit from the process in a direct manner. He then spoke to the benefit to the community and impact on the lives of disadvantaged people. Throughout the process that they hoped would be successfully concluded at the end of the day, the Kannaland municipality would make sure that the commitments made to the community were honoured. These commitments were part and parcel of the eventual agreements that would be concluded, as well as part of the performance monitoring of the project that he had attempted to explain. There was a firm commitment from Kannaland to change the lives of as many people as possible – which is what this project envisaged and would enable the municipality.
In response to the liquidity and financial situation of the municipality, this was indicated at the start of the presentation. If one looked at the limited income base of municipality and their reports, this also indicated that Kannaland had low population growth. At the moment this was a benefit for Kannaland. If one looked at the amount of investment in a project like this and worked it out per capita figures per person in the municipality, this would obviously make a huge impact on every resident in the community. As Kannaland did not have a large population, it was to their benefit – including reducing the unemployment to almost 0% if possible. In terms of the liquidity ratio, he emphasised the municipality’s limited income base, the projections for the future, the impact of Covid-19, unemployment, the current economy, and international agency gradings. This showed that there was still a long way for South Africa to go to get to a point where there was enough economic growth in the country. Kannaland thus experienced a very negative scenario in terms of their own income base, projections for the future, and sustainability of the municipality. He could not disclose the exact figure of the liquidity ratio at present, but it was not a positive ratio. This explained why the municipality was currently under financial administration, and confirmed why there have been previous administrations and why it was so difficult for the municipality to move out of the situation they were currently in. All in all, this investment provided an opportunity of advancement for the residents in Kannaland to move out of the dark hole that they found themselves in and take them to the next level. Through his own engagements through the public participation process with the community, this was raised and the community was informed. The project of InovaSure skipped time and enabled Kannaland to fast forward. This was a big challenge for Kannaland, as time was against them. The only aspect that could change this was technology that could catapult them to the next level. Kannaland was confident that InovaSure would enable this for them so that they would be able to have the investment in new business and change the ratios from negative to positive. This was why council supported the project, because the project gave Kannaland the indicator that it would be possible to turn themselves around and expand local businesses.
In terms of community involvement, this spoke to the review of the current PPP framework. This was a process that was under review. The Kannaland municipality had to comply with the existing PPP framework as this was currently valid. Regarding the inputs that local government, provincial treasury and The National Treasury had to give with regards to the review process, this was a challenge that they all had to take up and make sure that there was a framework that worked for everyone at the end of the day. Why the services of Advocate Venter, the specialist advocate on supply chains, was procured by the municipality was for her to make sure that Kannaland complied with the necessary regulations, legislation, and processes exactly. Since the arrival of the project proposal in Kannaland, communities were informed through their own public participation processes. No stone was left unturned in informing communities of those processes dealt with. Reference to it was even included in Kannaland’s Integrated Development Plan because they also needed to make provision for renewable energy, sustainable energy, and climate change etcetera. This project fit into that strategic environment. In the document, reference was also to the reduction of the carbon footprint and Kyoto Protocol on climate change and global discussions.
Mr Van der Westhuizen was afraid that his list of questions increased. The agenda for the meeting created the impression that there would be a huge solar plant being constructed within the Kannaland municipal area. He had heard very little about the solar part today but heard about energy vaults, which he presumed referred to energy storage capacity. With his limited exposure to the project, to him it seemed as though they were playing musical chairs – one moment the discussion concerned solar power plants, the next moment it concerned storage, and the next it was lowering the cost of living to electricity consumers. Somewhere between all of this he was losing what the project was about. He took the technology to use and buy power at cheap periods during the night and then to store it was fast developing. In an environment that was as technical as electricity, to say that Kannaland was where the first approvals were received and then to go there required technical reasons as to why Kannaland should be piloting the project as well. He did not hear many technical reasons as to why Kannaland should pilot the project.
When speaking about smart distribution metres, this did not seem to be smart consumption metres. In terms of Time of Use tariffs, some farmers could make use of this by recharging forklifts at night or people could pump water and irrigate at night when electricity prices were lower. How would this impact the consumers in Kannaland? ‘What would the contribution be from the municipality’? ‘Would Kannaland be contributing land in the form of rental free land for the vaults’? He asked Mr Stevens to tell the Committee more about his work in Soweto. The Western Cape was quite a distance from Soweto, but Members knew that Eskom had particular challenges that Mr Stevens had also referred to. ‘Have you been making a difference in Soweto’? ‘Have you been able to sway some part of Soweto’? ‘Have the devices been able to make an impact’?
His understanding was that this was a build-operate-transfer. InovaSure would be investing and getting something out of it. He added that he would appreciate hearing more about what commitments Kannaland would enter into to make the proposition viable for InovaSure. If such a highly technical field was being entered into, surely after 25 years the technology would be outdated, the chemical storage facilities would be aged, and the infrastructure would show some wear and tear. How would it be assured that after 25 years Kannaland is in a better position than it would have been?
Mr Xego wanted to understand the BEE status. He heard that the shareholder had a minority shareholding. Does this necessarily qualify as a BBBEE arrangement if Phosa is a minority shareholder? This situation of fronting and utilising people by giving them a certain percentage to qualify for a project in having a black person should be avoided. Here, the person happened to be a male. There were a number of females who wanted to do business in the Western Cape but do not get chances. When checking Mr Phosa’s background, he was not even from the Western Cape – he was an ANC guru from Mpumalanga. This was a Western Cape project aimed at benefiting the people of the Western Cape. He did not have a problem with it being said that people would be empowered internally, locally, provincially, or otherwise. However, he had a serious problem with entertaining people who had certain credentials because they came from a head office somewhere else. This could not be the case whilst there were internally people who would be able to benefit. The project came from a rural municipality that it wanted to empower, whose motives are to empower the entire province. He was challenged by Mr Phosa being regarded as a BEE arrangement, when it was not. This was called fronting, but it was fine. He wanted to understand exactly what was being done and what was happening here. ‘Was InovaSure in interaction with people who knew people’? ‘Was it a way of putting their hands into the cookie jar’? ‘Why would InovaSure be able to choose someone from outside instead of being able to boost business locally’? At the end of the day, he was not sure who gave the directives and instructions but he sensed that the arrangement would be compromising.
Ms Nkondlo checked whether the BEE partner spoken about had any local relation with Kannaland, as the immediate radius of the project, or the Western Cape in general. Perhaps this could be explained. She was not sure whether InovaSure was referring to Mr Phosa from the ANC. In this context, she had not heard and was interested in what the local content aspects of the project were. She was in no way expecting an answer to how many jobs would be created, but rather the structure of the project. ‘Where was the local content and local participation’? She asked that Mr Stevens be explicit in directing the Committee to where the particular element was in this particular project.
She fully appreciated that the partner to the municipality in this context, which was the private sector partner, could be able to explain on technical matters. However, this was a project of the municipality and she wished to see the municipality speaking to the Committee. When it came to governance, one had to be very careful. If something happened the next day, she was not sure whether the Committee would be calling the private partner to come and account on behalf of the municipality. She wanted the Committee to ensure balance because this was a project of the municipality, who had to confidently present to the Committee on the project. Nationally, provincially and in municipalities across the country, she had seen that when something hit the fan it then became a challenge to get the private sector to come and account to the public on its role. While it was easy for the private sector to come and speak and eloquently explain the nature of the project now, she hoped that this would be the case when anything happened in the implementation of the project and that it would not just be the municipality on the firing line while the private sector did not see its particular role. These were the dynamics of the PPPs that government has seen over the past couple of years. From an oversight point of view, this was something important that needed to be recorded.
She fully understood the tricky or precarious financial situation of the municipality and opportunity of the particular project. All she was interested in was understanding in the now, how then would the municipality be able to meet its own contribution and enable the project given their current financial position. Unlocking this particular future investment that was correctly seen as a benefit of resolving the current financial situation of the municipality that approved that the project continue was understandable. As this was done, the municipality needed to be able to fulfil particular obligations in the current space. Given its current situation, how then would the municipality be able to fulfil whatever obligations that they had? Who would offset or be able to fund those obligations of the municipality to enable the project? This was so that there would not be the same situation once again. The sovereignty of the municipality was being protected as government, so that the municipality did not get itself into a precarious relationship with the private sector. This has been seen in many of these kinds of projects, where the municipality is then funded by a private sector and therefore its voice in the project is limited. She wanted comfort in knowing that, in implementing the project, the municipality would be able to meet its own financial obligations.
The Chairperson addressed the municipality, saying that she found it very difficult to understand all the information regarding this particular project that they had by chance found out about in a presentation during the local government week economic visit to Kannaland. The reason it was so difficult was because, previously, “no” was being said to municipalities for IPPs. However, the Committee then went to Kannaland and all of a sudden found out about the PPP that was being allowed. This was interesting because it seemed as though the PPP could allow for energy and include energy in projects. The other flip side to it was that PPPs did not follow the same procedure as IPPs. For example, an IPP required asking the Minister of Energy for permission in terms of procuring the energy. However, in terms of PPP it was indicated that the municipality was working with the Minister of Finance, the DBSA etcetera. It seemed as though this particular project fell with the Minister of Finance but nowhere was the Minister of Energy or his Department mentioned. What is the role of the Minister of Energy and his Department in this project? It did not seem as though the Minister of Finance, Minister of Energy and municipality were in the same WhatsApp group. At the beginning of the year, the Minister of Finance said that the municipalities with good standing would be able to procure energy. She did not want to insult Kannaland but given that they were under administration, in her mind she did not expect Kannaland to qualify as a municipality in good standing.
‘Was this a solar project or battery storage project’? The way that it was marketed was as a solar project but based on the detail in the proposal it seemed to be more of a battery storage project. ‘In terms of tariffs, how much were residents currently paying for electricity in Kannaland as well as for the Eskom region’? ‘How much would residents pay once this project is implemented’? This would allow the Committee to understand what the benefit was there. In terms of the music project in schools that was mentioned in the project, music was very important indeed. However, she suggested that the municipality look into coding and technology for children in schools as well. Given that a lot has been said about how amazing the technology was, one could then use the potential of that amazingness to teach the children on the ground how to move into and participate in the digital economy.’ InovaSure said that the BEE partner was Mr Phosa. Was this referring to the previous Treasurer General of the ANC and previous Premier of Mpumalanga’? She did not want to make assumptions but wanted clarity in this regard as well as how Mr Phosa became interested in Kannaland specifically. In finance terms, the document mentioned that Russia and China was involved. ‘Was this with the DBSA, InovaSure or the municipality’? ‘How did they get involved’? She thanked Mr Stevens for committing to send the documentation to the Committee and appreciated the municipality working with the Committee in this regard. ‘Ideally, if all of the processes and tender procedures went well and the due diligence came back as perfect, then when exactly would construction commence’?
Mr Xego mentioned a matter of reference. As a Committee, they wanted things to be recorded in terms of the information which they received from the platform. With regard to the partners involved in the whole assignment, to avoid the Committee finding themselves in a situation where they became extraordinarily compromised with the whole agenda, the idea itself was initially correct. The idea was aimed at empowering the area with acquiring water and independent energy, which was fine. When talking of energy, the Committee needed the Department of Energy to be able to give them some form of confidence that the Department of Energy was fine with the arrangement. This was so to that the Committee did not agree on things that would come back and haunt them, saying that they did not consult a certain department who was a very critical stakeholder of the whole arrangement. The Department of Energy was paramount in terms of getting clarity about the arrangement and what was going on. The Committee understood what the municipality was saying and as a province this arrangement might be supported. ‘Is the Department of Energy itself in the very same line as the Committee in terms of the arrangement’? The Committee was to be told why the initiative was supported. There was nothing wrong with the initiative as it was paramount and, if possible, should be spread around the province for everyone else to follow what Kannaland had done in order to be sustainable. ‘Has the Department concerned been engaged and what was the possibility of them coming to the Committee and presenting this’?
Mr Stevens alluded to how the project was structured on the ground in terms of the physical environment. He confirmed that there was no land of the municipality that would be utilised for the purpose of the project. Private land would be accessed by the investor. Concerning the technologies that might change or vary overtime and whether the asset that would be transferred at the end of the 25th year would not be in a dilapidated state and of no value, this was the worst-case scenario. He had spoken to the adjustments, deviations and exceptions but the investor would be in the best place to answer this. In terms of the BEE rating, Mr Lourens had indicated that there was an envisaged 51% BEE component in the eventual structure. As the Accounting Officer of the municipality, he would make it his point to make sure that those issues raised in terms of the local content and local empowerment gets included. Most of the things relating to the business model and agreement were drafts. This was the document that had to be submitted when applying for conditional registration as a PPP. He committed to the Committee that he would make sure that the BEE rating, local content and empowerment feature din the final document that would be presented to council.
With regard to whether any person in the municipality, administration or council had any relations or links with the BEE partner, he knew the person that was mentioned by name. However, he had never spoken to or met Mr Phosa. There was no links of any kind between partners that were presently in the BEE component in InovaSure. He also thought that he would not have any link with any other BEE partners that might join at a later stage when realising the envisaged 51%. In terms of the current funds, the municipality’s present situation was understood. This was why not a single cent of the municipality was spent on any studies, processes, or travelling. There was perhaps a telephone call here or there to discuss progress or to have a video conference on the matter. This was where municipality’s obligation or commitment in terms of finances were at the moment. As was rightfully pointed out, this was a project of the municipality who would have to take responsibility and accountability at the end of the day. His head was on the plot, so if he did not act according to the prescripts he faced ending up where he, and the municipality, did not want to be. Therefore, the only thing that had be procured was the services of the specialist to make sure of this, as well as make sure about the BEE rating, local content and local empowerment in that the correct percentages were attached to it.
In terms of the BEE fronting, the municipality did not support any fronting when doing business with anyone. The Chairperson rightfully raised a lot of points of being at a disadvantage of not having the information when doing the oversight visit to Kannaland, which he agreed with. He had to mention it because he was transparent and wanted to inform the Committee about the exciting project being dealt with in the municipality. He reconfirmed the commitment to send the whole bundle of documents to the Committee so that Members could have it. The advertisement in the newspaper and the linkages on the website also covered the whole range of everything that was done until up until now. he was hopeful that Members might also give their comments and views on the matter.
Regarding Kannaland’s “good standing”, it had been very tough in the municipality in terms of what they had gone through over the years. The governance in the municipality had certainly improved. In the 2015/16 financial year, just before his arrival, Kannaland had received a disclaimer opinion from the Auditor-General, which was the worst that a public institution could get. The year thereafter he joined the municipality in 2016 and was there for six months, as he could only act for six months, and the municipality was able to skip the adverse opinion and move into the qualified status opinion. They then improved the audit outcomes the year thereafter to an unqualified audit opinion with quite a number of findings. In the financial year that ended last year June, the municipality was very fortunate to maintain the Unqualified audit with fewer findings. The municipality was hopeful and working towards getting much less findings if any for the current financial year ending in June. The elected representatives were trying very hard to improve things in Kannaland.
Reference was made to what was currently being paid to Eskom. He had not prepared to present this nitty gritty information but he asked the Chief Financial Officer, Mr Roland Butler, to provide some input and he was on his way to the present a response to the Committee. With regards to how the structure of the project would work, he understood that there would be a solar panel plant, storage facility and connecting point with the Eskom grid. The process was currently being dealt with, and he reconfirmed that the idea was to strengthen the process and have a final PPP agreement that protected the interests of the residents, council and himself in the sense of his accountability and responsibility role that he played in the municipality.
Mr Lourens added that he had previously mentioned that InovaSure as a company was a conglomeration of a lot of different companies, groupings and people. All together there were about 70 engineers that were involved with the way in which the project had unfolded in South Africa. InovaSure also had people in Australia, companies on the go in Mozambique, as well as in some other neighbouring countries to South Africa. With regard to BEE and Mr Phosa, he was indeed the individual mentioned and his company had dealt with InovaSure for many years in terms of their interaction with Mozambique and Maputo specifically. Some Members might know that he started the Limpopo Corridor initiative more than 10 years ago. In this process, InovaSure had come to deal with Mr Phosa in both sides of South Africa and Mozambique. This was not on a regional or municipality basis, but on a country basis. This was in terms of the fact that the project that InovaSure had on the go in Mozambique was linked to South Africa and the project in South Africa that was linked to all municipalities that they had liked to implement in. Accordingly, InovaSure had had a long relationship with Mr Phosa and he was included as a result of the capabilities that he and his team had with regard to interaction with InovaSure in Mozambique and South Africa.
Further, he previously said that InovaSure would be dealing with the structure of the company when ending up with the final special purpose vehicle for Kannaland and other future municipalities and reiterated that the goal was to have at least a 51% shareholding. This would be done by including various other groups that InovaSure had been dealing with for many years in South Africa, the Western Cape, all provinces and in Kannaland specifically, with regard to cooperative structures that dealt with communities and the ways in which they could be included from a shareholding point of view. The diagram that Mr Stevens had alluded to and shown earlier was the ideal final structure that InovaSure still needed to work towards putting in place once the final unsolicited bid process has been dealt with.
Mr de la Rouviere continued, saying that the most important part was to get some clarity on what the project was all about. There was a construction of a PV system, big battery, big storage facility, lots of technology built within the battery storage facility, and smart distribution devices which included communication devices in collaboration with meta and some other technology as well. These were the major three driers and the reason for the existence of the three portions was made clear by Mr Stevens. It was to be compliant with trying to adjudicate the high tariffs in the two peaks, being one in the morning and one in the afternoon. Off-peak energy was stored that was received from Eskom by InovaSure on behalf of the municipality, using the municipal equipment invested into for the purpose of dispatching the energy in the morning between 06h00 and 08h00. The PV energy is then used, which is generated by the municipality in collaboration with InovaSure and stored into the battery facility for the evening peak. The reason why the two peaks were targeted was because, if energy utilisation by municipalities is reduced in the peaks, the cumulative effect is that the demand curve of Eskom is flatlined. From the central government and Eskom perspective, this was worth an enormous amount of money and would increase the capital efficiency of Eskom, which is the largest asset in the country, by 30%. From an economic perspective it made a lot of sense and was the driving mathematics initially envisaged to make the project work.
When InovaSure initially started defining the mathematical rules to see if they could make feasibility, they had to define the rules and say that they cumulatively wished to flatline the demand curve for Eskom. The reason for this was simple: if Eskom’s machines were working at 100% 24/7, it was working at its highest efficiency. This lowered CO2 emission rates and thus the cumulative value to the country was enormous. It also reduced the use of very expensive technologies like the gas-operated turbines in Mossel Bay which generate electricity on an emergency basis in peak at a tariff of R5.80 billing diesel. This costed the country R38 billion on peak energy generation using diesel-fired power stations in the previous year alone. Attacking these problems as the major issues was the necessity for the three portions. One of the questions was related to the technology and base of the technology, and from an intellectual property perspective this was owned by South Africa. Although a lot of technology had been used from Russian and China, the thought processes and integration of the software requirements in this specific deployment was owned by South Africans. It would make it a plausible export product in the future.
Some of the questions related to the export environment, this was complex to understand. The PPP process was not the alleviation of the approach to National Energy Regulator of South Africa (NERSA). NERSA’s approach or not to be approached is vested in the IPPs. A license from NERSA was necessary to become an IPP. InovaSure in the PPP was not an IPP. He reiterated that the PPP was related to a financial structure between the municipality and private entity, and from a technological perspective was a supplier of technology to the municipality. InovaSure was not an IPP. The Constitution was abundantly clear that a municipality had the right to generate energy which many municipalities were doing, the right to distribute which was currently being done, the right to sell which was currently being done, and the right to transmit which was done in several places in the country. The municipality thus had the right to do all of the licenses that NERSA currently issued. When NERSA was created several years ago, they had a list of all of the compliant municipalities which had licenses. This list changed a bit but many municipalities had licenses to produce energy. The municipalities did not become an IPP. As InovaSure was not enacting that portion of the Act, the PPP had nothing to do with it. It was just InovaSure investing onto the balance sheet of the municipality to enable the municipality to generate energy.
When talking about local involvement, because the investments on the local municipality were closer to the hands of the local individuals and because InovaSure was hedging the PV panels and its energy directly into the peak energy of the evening peak, this reduced the future tariff. It might not have a direct impact on the current tariffs. The tariffs being paid by Kannaland were called night tariffs, which was a Time Of Use tariff structure by Eskom. The agreement was signed by Kannaland to distribute energy into their distribution network based on their Time of Use tariff which was night tariffs. Most other municipalities in the country were using the Megaflex tariffs. There was not a big difference between the two but it was Time Of Use tariffs and they sold into single time use tariffs. This was country wide. The country was and had always been to trying to correlate the Time of Use tariffs being paid by municipalities and then offsetting that against Time of Use tariffs on end users. The equipment could not do this as the meters did not meet at Time Of Use but measured energy that was distributed.
The approach to the Department of Energy was to the extreme. In the latter part of 2018 when Mr David Mahlobo was still the Minister of Energy, he appointed InovaSure to drive the Energy Indaba in Johannesburg. Mr de la Rouviere had presented as the driver. The reason for this appointment was because of InovaSure’s involvement with the Department of Energy over the previous five years had been excessive. The disclosure on all levels of the Department of Energy had been done to the extreme. This was the same with NERSA, the Central Energy Fund, the Department of Finance, and the National Treasury. InovaSure had addressed all of the issues. All of the events, documents and paperwork between InovaSure and Kannaland had been disclosed to all of the departments as well.
Mr Stevens responded to two points he had previously missed about whether Eskom’s role was being taken over or not. In his view, the project was actually to enhance Eskom’s capacity and not take over their role. In the presentation he had said that the first phase was a certain capacity megawatt and what the municipality consumed. Eskom levies the municipality when they exceeded certain consumption levels. This was very high and it was difficult for Kannaland’s network to control and maintain itself to stay within the consumption level. There was even a power outage at the present moment. In response to when construction would commence, he provided the timeline as he understood it from the processes he was dealing with and had to mandate. There was a public comment and view process that would end on 9 July 2020. There would then be 32 days for the municipality to send the comments and views to National and Provincial Treasury for their review. This was also in terms of the draft agreement etcetera. When taking this timeline into account, the unsolicited bid in the most favourable scenario could end by 15 August 2020 and the views and comments would then have to be entertained. This left the municipality with a month or two to conclude the document process and for council to sign off the final documents. It would then be up to InovaSure to say when they could actually start and commence. In his view InovaSure was more than ready. He thought that October, in the most favourable scenario, could be the kick-off for commencement. This was if everything went according to how the municipality envisaged and planned it in terms of the applicable compliance. He thanked the Chairperson for the opportunity.
The Chairperson asked if it was possible for Members to stay online for another 10 minutes or so just so that the Committee could get the further answers from Mr Butler and then discuss administration going forward as time was running out.
Mr Xego agreed.
Mr Mitchell agreed.
Mr Butler said that Kannaland’s current assets versus current liabilities at present was not really positive. The norm was usually R2 assets for every R1 liability. The National Treasury even brought this down to R1.50 assets per every R1 of liability. Kannaland’s current case was R0.30 assets per R1 liability. This meant that there was some cash flow problems as such. The reason for this was title. The council inherited about R100 million of outstanding debt which was actually brought down to R35 million. A lot of the money for the past three or four years was absorbed to pay the creditors. In the previous year, Kannaland’s assets per liabilities was as low as R0.125 per R1. There was actually a slight increase as the municipality succeeded to pay the previous outstanding creditors. The municipality was in the fortunate position that they had the capacity to undertake grant capital projects with great success over the years. This meant that, as an institution, the municipality was very focused to achieve these milestones. InovaSure would help the municipality a lot, especially for the institutional capacity in the finance department. This would enhance the financial recovery plan and he could positively say that this would be a turnaround which could serve as a best practice model for the entire country.
The Chairperson told Mr Butler and Mr Stevens that if there were any further questions the Committee would put them in writing to the municipality. She thanked the Kannaland Municipality for being present in the meeting and reiterated that the Committee would await their documentation. She noted that this was not a sprint, but a marathon. It would not be the last time that the Committee engaged with the municipality on this front because Members were very passionate about these topics and projects.
Mr Stevens thanked the Committee for the experience.
Ms Barry thanked the Committee for the meeting as they had been waiting for it for a long time. She knew for sure that this meeting could change the whole of Kannaland. She loved the project and would support it because this project spoke to each and every person in Kannaland – rich and poor. Great things could be done in Zoar especially, because land was sat with but could not be used because there was no capacity, power or water. If this project successfully went through, Kannaland would be secure in terms of food security and this would help the poor a lot as the majority of Kannaland consisted of very poor people.
The Chairperson excused the municipality and the Department for the Committee to continue with administration.
Consideration and adoption of the draft Committee Annual Activities Report for 2019/20 and Resolutions/Actions
The Chairperson acknowledged that the presentation had taken quite a while but given the amount of information and interest in the project, she felt that it was important to allow Members to ask their questions and allow for the information to be posed to the Committee. Given that the Committee had essentially already run out of time, she suggested that Members put their resolutions in writing to the Procedural Officer and that the resolutions then be discussed at the next meeting for approval. She also suggested that the Annual Activities Report and two minute’s documents also be left for the next meeting. She asked for any inputs from Members in this regard.
Mr Xego mentioned that the Committee might find themselves negative about the nitty gritty around the project. It was a very profound idea if the Committee could wholeheartedly, for a change, is united in ensuring that there was something that came out of the Western Cape that would be able to deliver a successful project. He was not a permanent Member of the Committee and was not sure what their program looked like, but he was not sure that justice had been done to a presentation of this kind. Members still had to hear, debate and submit some kind of arrangement insofar as the whole process was concerned. He proposed the possibility of the municipality being called again to do justice to their presentation, because it was cut short as a result of time. As a Finance Committee or otherwise they might be able to articulate but they would articulate in a situation where they were less informed. He asked if it was possible to get a full presentation from the municipality, engage with them, ask questions of clarity, and resolve it when unclear. Resolutions might be posed, but they would definitely not be fully informed as time was against the Committee. The municipality might bring something which could be of very much importance for the entire province and not just the municipality itself. The issue of energy was not just a situation of Kannaland or the Western Cape. It was a national crisis where serious challenges around energy were being faced and how to produce food and everything else. He asked that the municipality finalise their presentation so that Members could engage with them going forward.
The Chairperson emphasised her previous point that this was not a sprint but a marathon.
Mr Van der Westhuizen was concerned that if the resolutions were postponed to the next meeting of the Committee, that there might be quite a time lapse in addressing some of the issues raised that day. He proposed that the Committee, through a WhatsApp or email group of the Procedural Officer, pose the questions and action steps and get the resolutions minute-ed and actioned through a round robin process without necessarily postponing to the next meeting.
The Chairperson clarified that the suggestion was, instead of first emailing and then discussing it at the next meeting, that a resolution be posed and then agreed to through a round robin.
Ms Nkondlo said that the Chairperson and Mr Van der Westhuizen’s proposals could be matched. She was considering the time pressures because some Members had another meeting in under an hour. She agreed with the notion that, while the presentation was fresh in Members’ minds, Members should be allowed to make proposals via email. The Committee Coordinator could then consolidate all of the questions and the variety of proposals could then be adopted by the Committee in the next meeting so that Members did not lose their issues. The presentation today was very long and the municipality had some other issues which were not included. She agreed that the Committee had not completed the discussion with the municipality and perhaps more meetings would be needed – which could be the discussion at the next meeting. She supported Mr Xego in not believing that the Committee had an issue with the concept that Members had been raising on how to ensure that there was energy security for municipalities. This was especially because there were also challenges of governance and the financial position of Kannaland. These factors needed to be brought into the picture so that the Committee could ensure that the project was viable. The Chairperson could perhaps check the programming and see whether this conversation could be had at another point. This was so that, if some of the things indicated by the municipality were still not complete, they could come back and update the Committee.
Mr Mitchell thought that Members were in agreement with combining the process of completing the resolutions.
The Chairperson said that resolutions were to be emailed to the Procedural Officers. The reason that she had suggested that the Committee discuss the resolutions at the next meeting was because some Members might have completely different resolutions or there might be resolutions that could be combined, which might have been good for the Committee to discuss at the next meeting so that they could know what the way forward was. For example, if all of the due diligence of the municipality was completed and the project was off of the ground, the Committee might even be able to do an oversight visit over the commencement of the project if safety, health and lockdown allowed. Before then, the Committee might even need more information from the municipality, Provincial or the National Treasury, or the Department of Energy, and might want to invite them for extra information. This was her suggestion.
The Committee agreed.
The Chairperson said that the rest of the administrative documents would then stand over to the next meeting.
The meeting was adjourned.
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