Department Strategic Plan and Budget 2006/07: briefing

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Mineral Resources and Energy

17 May 2006
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PORTFOLIO COMMITTEE ON MINERALS & ENERGY AND SELECT COMMITTEE ON ECONOMIC AND FOREIGN AFFAIRS
17 May 2006
DEPARTMENT STRATEGIC PLAN AND BUDGET 2006/07: BRIEFING

Chairperson: Mr EN Mthethwa (ANC)

Documents handed out:
Presentation of the 2006/07 MTEF Department of Minerals and Energy Strategic Plan
Director General’s Speaking Notes
Department of Minerals and Energy: speech by Lindiwe Hendricks

SUMMARY
The Department of Minerals and Energy continued its presentation of its Strategic Plan and Budget for 2006/07 from the previous day. The Chairperson pointed out that the Committee was likely to experience oversight problems with the Department. He explained that the Committee had been following developments at the Pebble-bed Modular Reactor Company and had been under the impression that it fell under the Department of Trade and Industry. Now it had been informed that the Company fell under the Department of Public Enterprises. He wondered how the Committee was expected to do its job of oversight when the boundaries relating to the Company were blurred.

On other issues, the Committee wanted to know if solar power systems would make any impact on employment creation in South Africa and whether the biofuels project should not resort under the Department. This it feared might lead to a situation where the Committee would be the last to hear about developments about biofuels which should in terms of energy policy be in the domain of the Department of Minerals and Energy.

MINUTES
Department of Minerals and Energy (DME) presentation
Adv S Nogxima (Director-General) explained that in line with the strategic objective of keeping the environment cleaner, healthier and safer, the department intends to phase out the use of paraffin as household energy. He added that the department had no illusions that this would be easy, considering the wide availability of paraffin. He pointed out that the department’s intention was to look at alternative modern energy sources to ensure that they were made available and affordable. Also, he added that the strategy would include pricing of liquified petroleum gas (LPG), low smoke fuels and safe use of other energy sources.

Adv Nogxima explained to the Committee that with the policy on radioactive waste management being approved, the department believed that it was now the opportune time to create certainty on the future of nuclear energy in South Africa. He added that the department believed that the success of the Pebble-bed Modular Reactor (PBMR), which was currently under the governance of the Department of Public Enterprises, was crucial in ensuring the success of nuclear energy policy. He explained that the National Nuclear Regulator (NNR) was currently awaiting a safety analysis report, and the PBMR Company was confident that construction would begin next year.

Discussion

Mr GR Morgan (DA) commented that electricity demand side management is very important in contributing to South Africa’s security. He added that May 2006 was energy efficiency month. He wondered why Adv Nogxima did not dwell much on energy efficiency in his presentation to the Committee, when this should be one of the issues that the department should inform the Committee about.

Adv Nogxima pointed out that South Aficans have not paid much attention to the demand side management. He explained that this was due to the history of South Africa; a history of abundance. He remarked that South Africans for years had a surplus of electricity in terms of generation capacity and therefore South Africans for a long time had more power than they needed. Adv Nogxima explained that this situation informed the behaviour of most South Africans. He pointed out that there was a need to develop strategies to strengthen demand side management.

Mr Morgan remarked that a number of countries, including Australia, Canada, the European Union (EU) as a group in particular, and even the federal government of the United States have a way of encouraging energy efficiency. For example, some of these countries instituted procurement policies in the government for appliances. The governments in these countries were a big buyer of computers, airconditioners, kettles, TVs and DVDs.

Adv Nogxima explained that it was wise to tread carefully when one wanted to develop policies that were going to have far-reaching effects on people’s businesses. He added that because of this, the Members of the Committee might not be aware of the impact resulting from the work that the department has been doing in relation to energy efficieny. Adv Nogxima pointed out that the department has been engaging with the industry.

Mr Morgan reiterated that it was important that the South African government encouraged the public to buy energy efficient products, especially when approximately five percent of electricity is wasted on standby time.

Mr Morgan asked why the department did not encourage the government to procure appliances that require no more than 1 Watt for standby mode. He understood that not every appliance can have a 1 Watt standby mode, however, he was suggesting that the government should at least get the best possible products. He added that his idea was not anti-competitive because the World Trade Organisation (WTO) allowed it. Mr Morgan stressed the view that this can only be achieved if the government lead such an initiative. He added that over a life cycle of a product, one can save money, even if it is expensive to procure initially. From a short-term perspective this could push up a few budgets here and there, but the advantage was that the entire lifecycle of the product would save the department money, and would illustrate best practice to the public.

Ms N Magubane (Deputy Director-General: Electricity) explained that energy efficiency has not been receiving the attention it deserved. With regard to procurement of standby time appliances, she expecteds that there would be large number of purchases of such products this year. It made business sense and the department has seen quite a number of energy services companies coming forward to make sure that they got involved in the energy efficiency project. Also, Ms Magubane explained that the department, working with the Central Energy Fund (CEF) had established the Energy Efficiency Agency (EEA) that would deal with demand side management.

Ms NF Mathibela (ANC) asked if the department’s electrification project was on track to meet the deadline for delivery of electricity to the public, which was set by the President in this year’s State of the Nation Address.

Ms Magubane explained that unless the department’s budget situation improved, it would not make the deadline. She added that instead of 300 000 households that the department was supposed to be electrifying annually, the department was electrifying at most 120 000 households per annum due to budget constraints.

Ms Mathibela asked how clean and safe gas was for the environment. She added that she was asking this because Members of Parliament were told that they were going to have to launch awareness campaigns about the benefits of gas.

Adv Nogxima explained that the department was working on the establishment of a gas market in South Africa. He pointed out that, however, the government wanted to make sure that it did not replace an affordable energy source like paraffin with an energy resource that would be beyond the reach of most poor people in South Africa. He explained that gas was dollar denominated, whereas the coal was rand denominated. He added that these were some of the factors that the department was dealing with in its mission to establish a gas market in South Africa.

Mr MH Matlala (ANC) asked why the PBMR was currently under the administration of the Department of Public Enterprises (DPE) and not under the DME.

Adv Nogxima explained that the governance of the PBMR lay within the jurisdiction of the DPE as government was a shareholder in the project. DPE was therefore a shareholder representative department in relation to the PBMR. He explained that DPE was responsible for PBMR governance issues while DME was responsible for energy policy as it related to the PBMR.

Prof IJ Mohamed (ANC) remarked that the Committee was used to talking about nuclear waste management policy. He added that the last time he saw a draft of the policy was a long time ago, and so he would dearly love to see a draft of the policy.

Ms Magubane pointed out that the policy would be circulated to all Members, and that it was an oversight by the department that they did not bring it with them to the presentation. She explained that the department was assessing three options in terms of the cost-benefit analysis to implement in South Africa. These options included temporary storage of nuclear waste, long-term underground storage and sending the nuclear waste to another country.

Prof Mohamed asked if the department had any plans to build more nuclear power stations.

Adv Nogxima explained that the department had indicated in its policies that any specific energy source could not be ruled out for future use. However, the department had not received any applications for a license to build a nuclear power station and therefore did not have any plans to build such a station anytime in the near future.

Mr JJ Combrinck (ANC) expressed concern that highly skilled people were leaving Eskom for the private sector.

Mr CD Kekana (ANC) remarked that importing skills from abroad was fine for short-term purposes, however, he pointed out that what was needed was to train local people and that was the responsibility of education institutions. He therefore asked what was being done along those lines.

Adv Nogxima explained that South African unemployment was what the economists characterised as structural unemployment. It was unemployment that stemmed from the fact that the skills that were on hand did not match the skills that were required by the economy. He explained that this, however, was the legacy of the past. He added that the previous regime had not provided education that was intended to develop human capital.

Adv Nogxima explained that one of the ways of overcoming this legacy was to import the necessary skills from overseas. He added that for such an idea to have long-lasting effects on South African society, for every skill imported from abroad, the person being brought from overseas must train two or three South Africans. He emphasised the point that the development of human capital in South Africa was the collective responsibility of all stakeholders.

The Chairperson thanked the department for the presentation and the Members of the Committee for attending the meeting.

The meeting was adjourned.

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