DEPARTMENT OF MINERALS AND ENERGY PRESENTATION OF THE 2008/9 - 2010/11 STRATEGIC PLAN TO THE NCOP

DIRECTOR GENERAL'S NOTES

Chairperson, Honourable members, thank you for the opportunity to present to you the Department's plans for the 2008/9 MTEF. Today's presentation will cover the Department's legislative framework, Energy and Mining issues, organisational internal developments, youth and women empowerment initiatives and the 2008/9 high level budget allocations.

During our planning session we identified the following key focus areas for this year. These include (1) addressing the challenges of the current electricity emergency, (2) implementing policies to address security of energy supply, energy efficiency, and renewable energy, (3) finalising and reporting on the Mine Health and Safety Presidential compliance Audits, (4) intensifying the implementation of the MPRDA and the proposed amendments, and (5) capacitating the Department to deliver on its mandate.

The Department's 2008/9 legislative programme

As we planned for the 2008/9 financial year, we took cognisance of the fact that 2008/9 will be a short year for both Cabinet and Parliament. Therefore, out of the seven Bills planned for submission during 2008/9, only four, namely, (1) the Electricity Distribution Industry Restructuring

Bill, (2) the National Energy Bill, (3) the Radioactive Waste Management Agency Bill and (4) the Mine Health and Safety Amendment Bill, were included in this year's programme.

ENERGY

The Current electricity challenges

Electricity cannot be treated as just another commodity, it is a key input to our economy and is a basic need for most households. The current electricity challenges facing our country require every citizen with access to electricity to play his/her role. For the ordinary citizen, this calls for a simple change in behaviour patterns and good old fashioned discipline. As the Department, we will continue with the energy saving campaign, with the hope that sooner rather than later, the country's good citizens will together with Government endorse and live the culture of energy saving.

Two weeks ago, Government and relevant stakeholders held an Energy Summit in Johannesburg. As the Department, we are in the process of finalising our strategy to address the summit resolutions. The Minister will elaborate on those plans at her Budget Vote Speech next week.

The past weeks have also been dominated by discussions on the electricity price increase proposed by Eskom to the National Energy Regulator of South Africa (NERSA). These have been very robust discussions, and it is very clear to us that any price increase will need to be treated with sensitivity and be widely consulted amongst stakeholders. This process has also presenting us with the opportunity to assess and identify gaps in our electricity policy

Chairperson, Honourable members, given the importance of electricity both for our economic growth and social needs, government has worked hard in order to formulate policy positions that are to form the cornerstone of our electricity pricing regime. Let us be the first to humbly acknowledge that the electricity pricing regime has largely taken place in a policy vacuum. The policy vacuum has led to speculations about the intention of this policy. Briefly, the intentions of this policy are to:

•	set a clear framework on determining electricity prices

•	achieve an appropriate balance between meeting social equity and economic growth

•	create certainty and predictability and

•	ensure long term financial sustainability of the industry.

It is our intention to consult widely on the policy and develop a societal consensus on the electricity pricing policy.

The Electrification Programme

There have been fears and concerns raised with the Department regarding the possible negative impact that the current electricity challenges might have on the Integrated National Electrification Programme. Honourable members, funding for the electrification programme is ring-fenced, therefore, there is no possibility of channelling these funds outside the electrification programme. We will continue to implement the national electrification programme in an effort to reach the 2012 universal access target as set by the President. The un-audited electrification figures to date indicate that last year we were able to electrify all identified clinics with both grid and non-grid, connect 149 212 households and 876 schools (176 schools more than planned). A shortfall was experienced in the household connections mainly due to administrative issues like delays in finalising contracts, late delivery of equipment and so on. In terms of bulk infrastructure, out of the 10 substations planned, we were able to build 9 and 2 are still in progress.

Our targets for 2008/9 include 2500 schools, 150 000 households and 10 bulk infrastructure substations. The challenge of bulk infrastructure in rural areas still remains. Approximately 80% of the households that do not yet have electricity are in the rural areas of Limpopo, KwaZulu Natal and the Eastern Cape where there is no bulk infrastructure.

Hvdrocarbons and clean energy

The extent of the liquid fuels supply constraints facing South Africa is evident, and the situation is becoming tighter by the day. Our main focus as we go forward is the implementation of both the outcomes of the energy summit of 2007 and programmes and projects arising from the Liquid Fuels Masterplan.

The prices of petrol, diesel and paraffin are currently regulated and bench marked according to the international pricing system. The challenge is that crude price is determined by the international market in which South Africa has no influence and we are net importers as well. Both the country and the Department of Minerals and Energy are unable to influence these prices. With regard to household fuel prices like LPGas, the DME has realised that market- determined prices are far too high compared with those prevailing in other markets. Subsequently, the Department has embarked on a process to regulate LPG as prices. Draft regulations have been gazetted for public comment and it is envisaged that the regulations will be promulgated before the end of the financial year 2008/9.

The Department will commission the piloting of safe paraffin appliance stoves in selected areas, the results of which would feed into the South Africa National Standards (SANS 1243). Together with stakeholders, we shall embark on awareness campaigns to educate consumers on how to handle and use paraffin appliances safely. Furthermore, we shall engage with the DPLG and municipalities to discuss and finalise the inclusion of other household energy sources, such as ethanol gel, LPG etc. into the free basic energy service basket.

There is growing interest in investing in clean energy projects through the Clean Development Mechanism (CDM) and as a Department we have embarked on a mass awareness campaign through provincial and sectoral workshops to increase the. number of CDM projects. We actively participate in international multilateral forums on Issues pertaining to sustainable development, desertification and climate change, in relation to energy matters. Investments into clean energy projects through the Clean Development Mechanism (CDM) is increasing and to date the Department has reviewed 70 CDM projects, of which 13 have been registered with the CDM executive board; and one project (Lawley fuel switch) has started claiming carbon credits.

With regard to clean fuels, the DME together with DEAT have agreed to start negotiations on fuel specifications. It is envisaged that the negotiation process will be completed by 2010 and new fuels specifications promulgated to enable companies to make investment decisions in line with recommended specifications. The new specifications should be implemented in 2012.

Security of energy supply

Our Department has been vested with the responsibility of security energy supply for our country. With regard to liquid fuels, we have initiated a study to identify South Africa's country needs to ensure security and continuity of supply of liquid fuels. We are started implementing some of the recommendations of the studies as well as the outcomes emanating from the Liquid Fuels Master Plan. The project focuses on the entire value chain which includes import facilities, logistical infrastructure such as the pipeline, etc, and storage.

The diversification of the energy sector, more particularly attracting new investments in power supply, remains a huge challenge for our fast-growing economy. The importance of Independent Power Producers and Biofuels cannot be overemphasised in this regard. The introduction of new players in the form of IPPs to deliver smaller projects quicker, including co-generation, would thus facilitate better planning for mega-projects and provide short- to medium-term solutions to our power supply constraints.

The merits of alternative clean forms of energy for the security of energy supply in our country, now and into the future, are beyond dispute. As part of the diversification of. energy sources, the Government plans to expand the use of nuclear energy for electricity generation. The implementation of the Nuclear Energy Policy. and Strategy to support the expansion of the nuclear sector will commence during the year. As part of the implementation, the pre-feasibility studies on conversion, enrichment and fuel fabrication will be completed. The communication strategy on nuclear energy issues will be rolled out to ensure that effective and factually correct information is communicated in response to the possible concerns of the public.

In order to ensure the implementation of the Radioactive Waste Management Policy and Strategy, the Department will finalise legislation to establish the National Radioactive Waste Management Agency. The Bill has already been approved by Cabinet. The Department is planning to sign and ratify the amended Convention on the Physical Protection of Nuclear Material during this financial year. The Convention was amended in 2005 to include protection of nuclear facilities and material in peaceful domestic use, storage as well as transport. During the year the Department will introduce new regulations on non proliferation of nuclear material to strengthen the regulatory control on the import and export of nuclear material.

We have on a number of occasions assured South Africans that we will work hard to minimise the impact of the electricity emergency on investments. We have also indicated that 2010 projects are not under threat. We treat the 2010 FIFA Soccer World Cup as a special project in terms of ensuring security of supply for hosting cities. We will continue to work hard and ensure that South Africa as a country has sufficient supply given that the international focus will be on us.

Energy efficiency and renewable energy

We have embarked on a high level national communication and information dissemination campaign on energy efficiency. Adverts have been placed on national radio station, TV and print media. The Department is continuing with the programme of rolling out Compact Fluorescent Lights(CFLs) in households and plans to distribute a total 10 million CFLs in this financial year. Furthermore the DME is leading the process of developing energy efficiency standards in collaboration with the South African Bureau of Standards (SABS) and the industries.

Energy efficiency is well articulated in our National Energy Response Plan in the wake of the energy supply challenges that confront our country. All efforts have to be expended in bolstering the National Energy Efficiency Agency to co-ordinate our national campaign of power conservation in all sectors of our economy and .throughout our society.

We are geared to ensure the increased supply and use of cleaner energy sources through the provision of renewable energy, energy efficiency and the promotion of environmentally friendly energy policies and technologies, in line with the Department's sustainable development objectives. With the Biofuels Industrial Strategy approved by Cabinet in December 2007, the department is now in the process of developing the implementation plans which will clarify the licensing criteria and financing mechanism. We are accelerating the implementation of the Renewable Energy White Paper and as a result, before the end of the financial year, we will host a Renewable Energy Summit to review progress towards the 2013 RE target. The subsidy office within the Department (REFSO office) has achieved the target of subsidising 3 projects to the value of approximately R5 million in the past year. With the interventions that the Department has introduced, we expect that more projects will be subsidised during the 2008/09 financial year. The Department will be taking the lead in a program to roll out solar water heating systems. The Darling Wind Farm power project, with a capacity of 5MW, has been launched. It is the first commercial wind project in the country.

MINING

Mine Health and Safety

Our safety track record in the mines has been a subject of great concern lately. As of the beginning of this year we have lost 67 miners due to mining accidents, although this is an improvement when compared to the 91 lives lost same time last year, this is not a good picture at all. The safety audits conducted by our Inspectorate in the mines following the instructions of President Mbeki attest to the importance of the culture of safety that should prevail without fail in the industry. The Mine Health and Safety Inspectorate (MHSI) will be finalizing and submitting a report on the Presidential Health and Safety compliance audits soon. The report will cover the findings and recommendations from the audits of the 333 high-risk mines that were identified and targeted.

Although Mine Health and Safety Inspectorate has continued to experience serious capacity challenges into the current financial year, we will work tirelessly in addressing the challenges of safety in the mines. We will continue to put extra effort into the recruitment and retention of skilled staff and building capacity for the MHSI. The Human Resources Development (HRD) plan is currently being implemented and to date there are 23 learner inspectors in full time training and 8 bursary students that the MHSI has been able to recruit to ensure that there will be qualified inspectors to serve the needs of the MHSI in the future. The challenge, however, remains in the short term, i.e. the employment of already qualified and experienced inspectors.

Two initiatives are underway to alleviate the resource constraints of the inspectorate, hence strengthening government capacity to effectively enforce occupational health and safety standards. One, is an investigation of occupation specific dispensation for inspectors and two is the investigation on the possibility of relocating the Inspectorate into an existing entity of government, Mine Health and Safety Council

The MPRDA

Honourable members we have been implementing the MPRDA for a couple of years now (Le since 1 May 2004). One would expect that by now all role players and stakeholders would have embraced the spirit of the MPRDA and its complementary mining charter. However, the Department continues to experience challenges of poor and noncompliance from the industry. However, we will continue to provide the much needed human resource at our regional offices to ensure timely processing of all applications.

The mining of strategic minerals cannot be handled in the same manner as other commodities. The question of national interest, including strategic stockpiling and beneficiation will be taken into account. The need to fast track our beneficiation strategy to optimise benefits from our mineral resources cannot be overemphasised. This beneficiation strategy seeks to fundamentally change the behaviour of business in order to facilitate a seamless and enabled beneficiation environment for affected minerals.

With regard to rehabilitation, twenty three (23) projects on derelict and ownerless asbestos mines were committed for the 2007/8 financial year.

The total expenditure on the said projects amounted to R40,3m. Eleven (11) asbestos rehabilitation projects have been identified for the 2008/9 financial year.

Internal environment

Motivated employees with the right mix of skills and tools operating in an organisational climate designed for sustainable improvements are the key ingredients in driving process improvements, working within financial limitations, and ultimately driving customer and mission success.

The Department has unfortunately continued to experience a fairly high staff turnover rate, although with some improvement when one considers the 17.2 % this year to the 21.7% last year. The total number of vacancies for the same period has improved from 363'in March 2007 to 266 in March this year. Exit interviews conducted with employees leaving the Department indicated the following reasons:

•	Better remuneration packages outside the Public Service;

•	Conditions of service;

•	Better opportunities, growth and exposure;

•	Work overload as a result of the high staff turnover;

•	Career advancement and development; etc

In addition to the staff turnover challenges, the mandate of the Department has also to some extent, grown.

Two major interventions aimed at addressing these challenges will be the implementation of the following initiatives during the year. These are the recently approved Integrated Human Resource Plan and the Master Systems Plan. The HR plan seeks to achieve the re-alignment and repositioning of the HR function to meet the HR needs of the Department, whereas the Master System Plan informs and integrates all systems to be developed and required within the Department. Both these processes will promote the integrated approach towards the improvement of service delivery within the Department.

Youth and Women Empowerment

The participation of Women and Youth in the Mining and Energy sectors is still a challenge. The Department is committed to prioritising government's strategic objective of transforming the Mining and Energy sectors for the benefit of all with specific focus on the vulnerable groups.

We will utilize Small Scale Mining as one of the vehicles to broaden the base of beneficiaries from the mineral resources of the land by introducing new entrants to the industry. Our focus and purposeful intervention in Small Scale Mining will encompass youth development and women empowerment to give content to government's ASGISA and JIPSA initiatives.

Career guidance programmes for learners in grades 10 - 12 who study mathematics, science and technology subjects at school are conducted annually. The Department plans to undertake an impact assessment of this programme this year.

The Department has established a Youth in Energy and Mining (YEM) organisation, with various training programmes to enhance the development of skills among the youth in the Mining and Energy sectors.

The Department has entered into a Memorandum of Understanding with Umsobomvu Youth fund. It is envisaged that the Fund would assist the youth with some of their projects based on the fact that women and youth have challenges in accessing finance. This is in spite of the fact that the Fund purports not to finance mining as it is too capital intensive.

The Department will continue to support initiatives that promote women participation in the mining and energy sectors. These include established structures like SAWIMA and WOESA and other small project presented. Like her predecessors, our Minister is very committed to promoting these initiatives.

FINANCIAL PLANNING

Chairperson,honourable members, I will quickly take you through the summary of our financial plan as presented in the Estimate National Expenditure published late last year.