Questions & Replies: Public Enterprises

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2382. Dr S M van Dyk (DA) to ask the Minister of Public Enterprises:

(a) How much will Eskom pay a certain company (name furnished) for work done at the Kusile and Medupi power stations and (b) what are the further relevant details? NW2951E


(a-b) No money will be paid by Eskom to the company, as Eskom does not have a contract with the company in question for it to perform any work at the Kusile and Medupi power stations.



2381. Dr S M van Dyk (DA) to ask the Minister of Public Enterprises:†

(1) What are Eskom's tariff structures for industry, mining, municipalities, neighbouring countries and agriculture;

(2) whether she intends to introduce a lower electricity tariff for agriculture with a view to lower input costs and sustainable agricultural production; if not, why not; if so, what are the relevant details? NW2950E


(1) Eskom does not have - different tariffs for the different economic sectors.

Eskom's tariffs are based on the cost of supply in accordance with the requirements of NERSA's Grid Code and the Department of Energy's Electricity Pricing Policy, where costs are allocated to different cost drivers based on how the consumers use energy, their location on the network, and the customer service being provided for each customer category.

Except for residential consumers, consumers are able to choose the standard Eskom retail tariff that best suits their load profile (the way they use electricity). One will, therefore, find that customers in the different economic sectors are linked across the spectrum of available Eskom tariffs, depending on their specific requirements and usage profile. Details of the Eskom tariffs can be found at

The prices charged to neighbouring utilities are individually negotiated using the standard Megaflex tariff as a basis, with an appropriate premium. Escalation on these utility invoices is in line with the NERSA-approved escalation, thus retaining the premium.

(2) Eskom has a regulated revenue requirement that needs to be recovered from the customer base. Therefore, the moment lower tariffs are introduced to one sector, other sectors must pay higher prices, and cross-subsidies are introduced in order to ensure that the revenue requirement is still met.

Any implementation, changes to, or the introduction of, cross-subsidies is a policy matter that is the mandate of Government, more specifically the Department of Energy and National Treasury (due to the potential impact on the economy of South Africa) and subject to NERSA's determination.

From an Eskom perspective, there is no intention to introduce a lower electricity tariff for agriculture, as this sector is already subsidised by Eskom's large customers.



2347. Mr P van Dalen (DA) to ask the Minister of Public Enterprises:

With reference to the presentation by the SA Airways to the Portfolio Committee on Public Enterprises on 17 August 2010, what (a) is the nature of each of the (i) onerous contracts and (ii) legacy issues referred to, (b) is the start and end date of each contract, (c) is the monetary value of each contract, (d) are the details of the process that was undertaken for the signing of each contract, (e) are the names and details of the other companies that submitted tenders for each of the specified contracts and (f) amount did each of them quote in each case?NW2916E


(a)(i-ii)(b-f) South African Airways (SAA) informed the Portfolio Committee on Public Enterprises on 17 August 2010 that a comprehensive review of contracts is currently being undertaken. I have requested SAA to brief the Portfolio Committee early in 2011 on this review, including measures introduced to enhance contract administration.



2323. Dr G W Koornhof (ANC) to ask the Minister of Public Enterprises:

(1) Whether Eskom will consider introducing a system of rewarding consumers who record a saving and a more efficient use of electricity; if not, why not; if so, what will the content of such an incentive system be;

(2) whether the system will include installation of pre-paid meters; if not, why not; if so, what are the relevant details;

(3) whether Eskom will consider financing such a reward system; if not, why not; if so, what are the relevant details? NW2858E


(1) It is important to note that saving electricity and using it more productively provides an immediate benefit to consumers in terms of a reduced electricity bill, it supports security of supply, and it reduces the impact on the environment.

Eskom is currently working on a standard-offer programme to incentivise customers. Under this programme, Eskom shall pay for verified energy savings using a predetermined and pre-published rate in c/kWh for the implementation of an approved technology. Any energy user (customer) or energy service company (ESCO) that can deliver verifiable energy savings shall be paid the fixed amount per kWh over a period of three years. Achieved savings will be verified by an authorised measurement and verification (M&V) organisation. The current programme focuses on the industrial and commercial market, but investigations are under way to incorporate the residential sector.

Eskom's focus in the next three years is to achieve as much savings as possible using the revenue allocated through the Multi-year Price Determination by NERSA.

There will be fully subsidised programmes such as the mass roll-out of compact fluorescent light bulbs (CFLs), incentive programmes such as the standard-offer programme for certain customers where it makes sense, and partnerships where initial funding from Eskom leverages other funding mechanisms for customers (solar water geysers).

(2) At this stage, the proposed systems do not require the installation of a particular meter type.

(3) The reward, which is the incentive as offered by Eskom on the standard-offer programme, is indicated in part one of the reply above.



2322. Dr G W Koornhof (ANC) to ask the Minister of Public Enterprises:

(1) With reference to the current or planned construction of the coal power stations at Medupi and Kusile, (a) what (i) is the updated budgeted amount for each of these projects, (ii) actual amount has been spent on these projects to date and (iii) are the target dates for the completion of these power stations and (b) from what sources will these projects be funded;

(2) what are (a) the (i) legal and (ii) financial commitments and (b) the details of subcontracts entered into for these projects? NW2857E


(1)(a)(i-iii)(b) The table below indicates the budgeted and actual amount spent on Medupi and Kusile.

Power station

(a)(i) Updated budget amount

(ii) Actual amount spent to date

(iii)Target dates for completion

(b)Funding source


R 125bn (including interest capitalised of R 25bn)

R 36bn


Medupi – various sources from External Credit Agencies (ECA), African Development Bank (AFDB), World Bank and local bonds


R 141,5bn (including interest capitalized of R 31bn)

R 17bn

Kusile is expected to be fully commissioned by 2017

Currently unfunded

(2)(a)(i)(ii)(b) Both projects consist of various packages all of which are signed in terms of the Federation of Consulting Engineers (Federation Internationale Des Ingenieurs-Conseils) standard conditions contract. The legal and financial commitments of the sub-contracts are deemed commercially sensitive information.



2310. Mr M A Nhanha (Cope) to ask the Minister of Public Enterprises:

Whether, in view of BP's misfortunes in the Gulf of Mexico, he has taken steps to launch an investigation to determine whether all state-owned enterprises had fail-safe second and third-tier safety mechanisms to ensure the safe shutdown of plants or rigs without danger to people or any impact on the environment; if not, why not; if so, what are the relevant details? NW2805E


All State Owned Enterprises (SOE) reporting to the Department of Public Enterprises adhere to relevant health, safety and environmental regulations and legislation to mitigate the risk to people's health and safety and minimise the impact on the environment.



2309. Mr M A Nhanha (Cope) to ask the Minister of Public Enterprises:

Whether the Government has decided what to do with all the facilities, materials, goods and equipment procured for the pebble-bed modular nuclear reactor (PBMR), including the tank that is being shipped from Spain, in order to recoup part of its massive investment in the project; if not, why not; if so, what are the relevant details? NW2804E


In proposing that PBMR Company moves to a care and maintenance mode, consideration was given to ensure protection of valuable intellectual property and assets held by PBMR and the retention of nuclear skills developed by PBMR for the South African nuclear industry.

In terms of the assets, the following has been proposed and approved by Cabinet:

· The activities on the Fuel Development Laboratory (FDL) have been suspended. This triggers a decommissioning of the facility in terms of the law. In terms of the back to back agreement with Necsa on the decommissioning liability Necsa will call on the provision that PBMR has made for the dismantling and decommissioning of the facility.

· PBMR has suspended all operation at the Helium Test Facility (HTF), also on the NECSA premises. This will be mothballed to allow for activities to be restarted in the future.

· The HTTF facility at Northwest University will only be mothballed should that University not wish to continue to utilise the facility.

The Reactor Pressure Vessel (RPV) was one of the components of the Demonstration Power Plant. The RPV was designed specifically for PBMR needs. The RPV is being imported to South Africa from Spain. NECSA has indicated that they will be willing to store the RPV for PBMR at no charge until it is known if this RPV can be used in future for another purpose.



2268. Dr S M van Dyk (DA) to ask the Minister of Public Enterprises:

Whether his department and/or any of its entities has purchased any 2010 Fifa World Cup Soccer tournament (a) clothing or (b) other specified paraphernalia; if not, what is the position in each case; if so, in each case, (i) what are (aa) the details and (bb) the total cost of the items purchased, (ii)(aa) how many items have been purchased and (bb) why, (iii)(aa) to whom has each of these items been allocated and (bb) why have these items been allocated to these persons and (iv)(aa) on what basis was the decision taken to purchase each of these items and (bb) on whose authority was the decision taken to make these purchases? NW2776E


(a-b)((i-ii)(aa-bb)(iii)(aa)(iv)(aa-bb) The Department of Public Enterprises and its SOE namely Alexkor, Broadband Infraco, Denel, Eskom, SAFCOL, South African Airways, South Africa Express and Transnet purchased 2010 Fifa World Cup Soccer related items fin celebration of the World Cup tournament. Details are outlined in Annexure A (attached).



2176. Mr N Singh (IFP) to ask the Minister of Public Enterprises:

(1) What is the exact amount of money that the State has invested in the pebble-bed modular nuclear reactor (PBMR) scheme since the project's inception;

(2) whether the State will receive any return on its substantial monetary investment in this project now that it has been terminated; if not, why not; if so, what are the relevant details? NW2682E


(1) A total of R 9.244 billion has been invested in the PBMR project, over the last decade; the government has contributed R 7.419 billion or 80.3% of the amount.

(2) Due to PBMR's inability to acquire additional investment or an anchor customer despite its revised business model, coupled with other competing demands on the fiscus, led government to review its continued funding of PBMR. As a consequence, Cabinet approved that the PBMR move to care and maintenance mode which is aimed at the following:

a) The protection of the investment made by protecting and preserving Intellectual Property and Assets created in PBMR;

b) Retaining and developing nuclear skills currently in PBMR for use in the South African nuclear industry; and

c) Protecting South Africa's (Government and nuclear industry) international reputation in the nuclear sector.

The Integrated Resource Plan, which is expected to be published by the end of the year, will indicate whether South Africa will have nuclear technology as part of its energy mix. The PBMR programme was instrumental in ensuring that South Africa retained a substantial nuclear skills base and associated industries, which will stand the country in a good stead should the country decide to pursue a substantial nuclear build programme.



2169. Mrs J D Kilian (Cope) to ask the Minister of Public Enterprises:

Whether, with reference to the findings of the Public Protector (PP) (details furnished), she will (a) take any steps to ensure that Transnet finalise its enquiry into the legality of the contract that formed the basis of the PP's enquiry, (b) implement measures to improve compliance with the Public Finance Management Act, Act 1 of 1999, and (c) implement procurement prescripts within Transnet and Transnet Freight Rail (TFR); if not, why not; if so, what are the relevant details in each case? NW2616E


(a) With reference to the legality of the contract entered into with the company, the following should be noted:

· A letter of award of business was forwarded to the company in question on behalf of Transnet Freight Rail (TFR) on 6 December 2007;

· A formal contract from TFR was signed by the company on 4 June 2008;

· The contract term ended on 30 November 2008;

· The period of the contract with the company was extended and continued to provide services to TFR until 31 January 2010.

Subsequent to the findings of the investigation, the following has transpired:

· Disciplinary processes were initiated against four TFR employees relating to the award and management of the company's contract. The disciplinary processes resulted in a summary dismissal of all employees;

· The month-to-month contract with the company was terminated as of 31 January 2010, in relation to all services provided;

· Legal proceedings are being pursued by Transnet against the company.

(b) With reference to the implementation of measures to improve compliance with the Public Finance Management Act, 1999 (Act No. 1 of 1999) ("PFMA"), the following facts should be noted:

Since the inception of the PFMA, Transnet has rolled out the following initiatives to ensure compliance:

· Developed a PFMA policy and compliance guidelines;

· Rolled out training to employees across the organisation;

· Established governance structures reporting to the Audit Committee and the Transnet Board of Directors, and;

· The non compliance with the PFMA, with specific focus on Section 55 (2), is viewed in a serious light and has resulted in a number of disciplinary actions as in this instance.

During the current financial year, awareness and compliance with the PFMA has been reiterated through the following initiatives:

· Refresher training;

· Development of the PFMA pocket guide that was distributed to all extended Exco members, including a copy of the PFMA, and;

· Developed IT enablers to facilitate monitoring and tracking of disciplinary actions, control implementation/improvements, and maintenance of a PFMA register of violations and control breakdowns.

(c) With reference to the implement procurement prescripts within Transnet and Transnet Freight Rail (TFR), the following facts should be noted:

Transnet has developed comprehensive procurement policies, processes and procedures, which govern the manner in which it acquires goods and services from suppliers. These are set out in a document known as the Procurement Procedures Manual (PPM), as well as the Delegation of Authority Framework which governs all procurement within Transnet, except procurement related to construction. In this regard, a separate set of policies, processes and procedures have been developed, based on the policies and procedures of the Construction Industry.

These documents seek to give effect to the principles which govern public procurement, as set out in section 217(1) of the Constitution of the Republic of South Africa, 1996 (No. 108 of 1996) as well as section 51(1)(a)(iii) of the PFMA, namely, that procurement should be conducted in a manner which is fair, equitable, transparent, competitive and cost effective.

To this end, the documents contain detailed rules and procedures pertaining to various procurement related matters, such as declaration of interests, ethical conduct of procurement staff, confidentiality, the various procurement mechanisms, the issuing, receipt, evaluation and adjudication of tenders and the circumstances under which suppliers may be excluded from doing business with Transnet (i.e. blacklisted).

Consequently, Transnet management is satisfied that Transnet's procurement processes are sufficiently robust and that procurement related risks are adequately managed and amid its obligations under the Constitution and the PFMA are being fulfilled.

In addition to the above, Transnet now requires all tenders in excess of R50 million to be subjected to an independent review by its internal auditors before a contract is concluded. The purpose of this review process is to obtain independent verification that Transnet's high value procurement transactions are conducted in accordance with the highest standards of probity and that all relevant legal and compliance requirements are complied with.

Additionally, Transnet has recently appointed an internal Procurement Ombudsman to receive complaints from unsuccessful bidders regarding the award of tenders. The Ombudsman is required to investigate all such complaints in an impartial manner and to make appropriate recommendations to the Chief Procurement Officer or Chief Executive of the operating division concerned.



2052. Mr D C Ross (DA) to ask the Minister of Public Enterprises:

Whether her department has (a) deliberated or and (b) considered privatisation or concessioning of the Richards Bay Container Terminal; if not, why not, in each case; if so, what are the relevant details of the (i) nature and (ii) content of these (aa) considerations and (bb) deliberations? NW2450E


(a-b)(i-ii)(aa-bb) The Department of Public Enterprises has not deliberated or considered privatisation of the Richards Bay Container Terminal. Currently small volumes of containers are handled at the Multi Purpose Terminal (MPT) and as such there is no facility available for concessioning at Richards Bay.

In any event, any deliberations or considerations about privatising or granting concessions are not the exclusive prerogative of the Department. The Department of Transport as the policy department has to be involved in such considerations. Similarly the Transnet National Ports Authority (TNPA) would also have to carry out certain responsibilities in such a process. These obligations are defined in the National Ports Act as follows:

Section 80 (1)(f) makes provision for the Minister of Transport to make regulations in respect of " a framework for economic participation in port operations and services by public entities; private entities and public-private partnerships".

Section 11(1) of the National Ports Act (NPA) provides that the Authority (TNPA) must:

· ensure that adequate, affordable and efficient port services and facilities are provided;

· exercise licensing and controlling functions in respect of port services and port facilities; and

· promote greater representivity, in particular to increase the participation in terminal port operations of historically disadvantaged persons.



1979. Mrs H N Ndude (Cope) to ask the Minister of Public Enterprises:

Whether she had been informed about the risk to the safety and wellbeing out at sea of female marine cadets who were sponsored by Transnet; if not, what is the position in this regard; if so, what steps did she take in this regard? NW2368E


Allow me the opportunity to express my sadness and deep regret with the untimely death of Cadet Akhona Geveza at sea.

It is unacceptable that our cadets, especially women, should be vulnerable while at sea. Transnet is leaving no stone unturned to investigate her untimely death. The United Kingdom Marine Coastal Authority (UKMCA), the Croatian Police and the Transnet Board of Inquiry (BOI) are currently also performing independent investigations.

As Minister, I am informed annually about the marine training initiatives through Transnet's Corporate Plan and the Annual Report. These training programmes cover marine businesses, dredging services, terminal operations and Master's programme in port and shipping, and are part of the objectives of the Transnet National Ports Authority (TNPA) to develop human capital skills.

In addition all Transnet National Ports Authority (TNPA) cadets complete the following ancillary courses and a cadet safety induction programme prior to going to sea: First Aid at Sea, fire fighting, personal survival and social responsibility, personal safety techniques, cadets are completely debriefed by the South African Maritime Training Academy(SAMTRA) on the International Safety Management Systems (ISM) on board vessel, SAMTRA's EAP (ICASS) & the Global Management Safety Systems (GMSS) and the Code of Safe Working Practices by Merchant Seaman.

The safety induction course is a part of the cadet training scheme and is regulated by law. All mariners are legally obliged to attend a familiarisation session each time they join a ship for the first time. The safety aspects peculiar to that ship are then explained to each crew member.

TNPA is also in the process of developing a special module with the input of the Employee Assistance Programme (EAP) service providers that will be specifically aimed at female cadets. This module is intended to prepare the cadets on what to expect at sea and how to respond to different cultures and customs that a cadet may encounter at sea and equip them with the necessary skills on how to deal with and to react to different situations.

Finally all cadets are informed at the induction stage of the different communication channels that are available to them and if they experience a crisis, while at sea, they can request a telephone call from the ship's Captain. Both the service provider and TNPA introduce cadets to their respective EAP programmes and how to access these whilst at sea.



1959. Mr L W Greyling (ID) to ask the Minister of Public Enterprises:

Whether any financial penalties will be incurred if the decision is taken to delay or stop the construction of the Kusile power station; if not, why not; if so, (a) what would these penalties amount to and (b) to whom would Eskom have to pay these penalties? NW2347E


No decision has been taken to delay or stop the construction of the Kusile Power Station. Given that Eskom has already placed around 70% of the contracts related to the project, it would attract penalties should the project be cancelled or delayed.

(a) It is not possible to accurately determine what the penalties would be for a delay or cancellation as those would be subject to negotiation should either eventuality occur.

(b) In the event of a cancellation or delay, contracts affected would include those placed for the turbine, boiler and civil works.



1943. Mr D C Ross (DA) to ask the Minister of Public Enterprises:

(1) Whether any investigation has been launched into the strike that took place at the Medupi Power Station in the week of 11 June 2010; if not, why not; if so, what are the relevant details;

(2) what are the details and costs with regard to the contracts for the provision of (a) food parcels, (b) accommodation and (c) transport for the workers of Medupi Power Station? NW2331E


(1) No. The strike took place on 3 June 2010 at Medupi Power Station when some workers on the construction site protested against the quality of the midday meal at the construction site.

It was difficult to identify the workers involved and the matter was subsequently discussed with the respective labour unions. Eskom together with organised labour officials from Solidarity, the Building Construction and Allied Workers' Union (BCAWU) and the National Union of Mineworkers (NUM) condemned the behaviour of workers and the protest action.

(2)(a)The daily cost of food parcels is R20 per person.

(b) Accommodation is provided for workers in one of the three construction housing villages managed by Eskom. The operating costs for accommodation at the entire Medupi facilities are R256 million per annum. This accommodation incorporates operating costs for catering, laundry, housekeeping, maintenance, security and garden services. Workers who live outside the Lephalale municipal area are accommodated in one of the three housing construction villages.

(c) The cost of transport is the responsibility of contractors. All local employees and those staying in the construction villages are provided with transport to and from their places of residence to the project site. The cost carried by the contractor for this daily service is R25 per return trip.



1941. Mr G R Krumbock (DA) to ask the Minister of Public Enterprises:

(1) Whether, as a result of the recent Transnet strike, any containers were diverted to Brazil and/or delayed prior to unloading; if not, why not; if so, what are the relevant details;

(2) Whether any such containers contained equipment, training material or any other goods required by the 2010 Fifa World Cup Soccer teams, advance parties at team base camps or any other 2010 Fifa World Cup Soccer tournament related venues; if so, what are the relevant details? NW2329E


(1) Yes, 13 (thirteen) vessels chose to bypass South African ports, and this translated to 6 630 containers being diverted to Brazil. Furthermore, in order to avoid berthing delays, certain shipping lines decided to bypass South African ports en route to Brazil.

(2) Transnet is not in a position to indicate whether these containers had equipment, training material or any other goods required by the 2010 FIFA Soccer World Cup teams, advance parties at team base camps or any other World Cup venues. During the Transnet strike a formal communication process between Transnet Port Terminals and the FIFA Soccer World Cup Local Organising Committee was established to expedite the delivery of containers destined for the tournament.