ATC140313: Report of the Portfolio Committee on Energy on its oversight visit to the Western Cape, scheduled on 31 July – 01 August 2013, dated 11 March 2014
of the Portfolio Committee on Energy on its oversight visit to the Western
Cape, scheduled on 31 July 01 August 2013, dated 11 March 2014
The Portfolio Committee on
Energy (PCE) undertook oversight visits on various projects in the Western Cape
Province from 31 July 2013 to 01 August 2013.
The report gives an overview of the visits, observations and recommendations
The Members of the
Committee who took part on the 31
July visit were: Mr. SJ.
Njikelana (Chairperson), Mr.
and Mrs. B. Ferguson. On the 1
August, Members who took part were
Mr. SJ. Njikelana, Mr. L. Greyling and Mrs. B. Ferguson (only for the morning
The support staff assisting
the committee were: Mr. A. Kotze (Committee Secretary), Mr. S. Maboda
(Committee Researcher), Mr. P. Rampersadh (Content Advisor), and Mr. M. Dodo
(Committee Assistant), Mrs Y. Landu (Media) and Mr. B. Vilakazi (Photographer -
The objectives of the
Committee visits were to gain an insight on implementation of projects,
challenges and opportunities of solar home systems (Enkanini), solar water
heaters (Klapmuts and Nuwe Begin), gas infrastructure (BPSA and Easigas) and
waste-to-energy (SA Breweries), respectively. The delegation visited the
project) and Sustainability Institute in Stellenbosch
National Electrification Projects, Klapmuts in Stellenbosch and Nuwe Begin
in Blue Downs.
sites on Liquid Petroleum Gas (LPG), a visit to Easigas and British
Petroleum (BP), and
African Breweries (SABMiller) Waste to Energy Project in Newlands, Cape
2. Day 1: 31
Visit to Enkanini Informal
Enkanini informal settlement has about 8 000 residents; it is an illegal
informal settlement hence the name Enkanini.
estimated 8 000 people who live in Enkanini have to make do with 36 taps, 60
toilets, no electricity, inadequate waste disposal and flimsy dwellings subject
to floods and fires. The Stellenbosch Sustainability Institute initiated a
project which officially started in July 2012 the aim of the project is to
provide sustainable energy and sustainable housing solutions to the poor. The project
involves the improvement of the selected 20 shacks in Enkanini informal
settlement. In short the project is called iShack wherein I stands for
iShack is a 14.2m
structure equipped with the following features:
Picture 1: Enkanini Improved Shacks (iShacks)
principles that are
incorporated in the
comfort levels by:
Orientating the shack in a northernly direction to capitalise on the
Strategically placing windows for adaptive temperature control and
Insulating walls and roof-spaces to moderate indoor temperature levels
Creating a slanted roof with overhang for rain water collection and to
shield the facade from the midday summer sun,
Applying water-proofing and using fire retardant paint.
is harnessed through a Solar Photovoltaic (PV)
direct current (
DC) Microgrid developed by Specialised
Solar Systems based in George, South Africa. Households can upgrade the solar infrastructure
from an entry level to include:
A cell phone charger and a security light to
appliances such as
radio, television, DVD
component has recently been
introduced as part of the iShack project. This involves the provision of
bio-digester toilets. The biogas from the bio-digester (which produces
electricity) will be used for cooking by the beneficiaries. Currently there are
four bio-digester toilets which cater for 20 households. It is hoped that
electricity from the bio-digester will be produced in the next six months.
technological interventions in community upgrading have often failed owing to
inadequate operations and maintenance plans. To address the operational
challenge in this project, local entrepreneurs are trained in basic business
and technical skills which are then applied in the servicing of iShack
customers within their territory.
e-spaza or energy hub will provide a physical base from which a trained
operator will conduct his or her business and service their customers. The sale
of appliances, improvement of shacks, answering customer queries and topping-up
energy user accounts will be directed from the energy spaza.
of the stakeholders involved in the project, the Sustainability Institute
Innovation Lab liaises with the community of Enkanini, the Stellenbosch
Municipality, the Community Organisation Resource Centre (CORC), the Informal
Settlement Network (ISN) and Specialised Solar Systems.
project is funded by the Gates Foundation and National Research Foundation
(NRF). The Water Research Commission funded the sanitation (toilet) component
of the project. National Treasury, in the current budget, has allocated R17
million from the Green Fund for this project the aim is to upscale the
of the Committee and the support staff toured the Enkanini area. After the
tour, presentations about the project were made by the Sustainability Institute
and the beneficiaries. Members welcomed the project and appreciated the
innovative idea that the Sustainability Institute and its team came up with.
Committee proceeded to another site visit on electrification projects in Nuwe
Begin and Klapmuts.
3. Visit to the Integrated
Electrification Projects in Klapmuts and Nuwe Begin (Blue Downs)
3.1. Visit to Klapmuts project
Klapmuts site the delegation was briefed on the status of the Klapmuts and Nuwe
Begin solar water heater programmes, respectively. This was followed by visits
to a few of the households in both Klapmuts and Nuwe Begin.
is a settlement in Cape Winelands District Municipality in the Western Cape
province. A little town just off the R45 road between Kraaifontein and Paarl.
Klapmuts is well known for its surrounding wine farms. It is a small village
situated approximately 15km from Paarl, Kraaifontein and Stellenbosch in the
valleys of the Hottentots Holland mountain range. As the area is almost
surrounded by vineyards; it provides numerous opportunities for wine tours and
wine tastings at various wine farms around the village.
Mr M. Mzalisi
of the Department of Energy (DoE) gave a presentation on the status of the two
projects. In attendance, as well, were representatives from the Stellenbosch
Mzalisi indicated that 95 percent of households in the Western Cape Province
are electrified. The first project that the Committee visited is in
. The project in Klapmuts is an
Eskom project and was allocated R5 790 000 for 579 connections in the 2013/14
financial year. The total number of connections in this project is 832. This
means that Eskom will have to apply to the DoE for the 253 connections that are
not allocated funds. The project was started in the 2012/13 financial year.
Regarding the social and economic impact of the project, Mr Mzalisi and his
team indicated that a formal study on this hasnt happened and that the study
that was conducted by Shack Dwellers International focused on informal
settlements not formal houses.
The Project Managers at
Klapmuts indicated to the PCE that there are some challenges that need to be
addressed in terms of electrification programme and are as follows:
Project Management: it was indicated that
electrification projects involving Eskom results in the appointment of three
project managers, one for the council, one at the DoE and one from
Eskom. This results in some tripping up
(Managers defeating each others efforts) and hence projects getting delayed.
Eskom: there appears to be problems in communication
within departments. Councils get approval from Eskom technical for higher rated
electrical installations however when it comes to payment, Eskom finance only
pays for what DoE approved hence short payment to Municipalities (there is a
problem here as technical approval may not imply financial approval).
DoE pays for municipal electrification projects
that are 80 percent complete while Municipalities can only budget for an
electrification project when they are in possession of the funds or funds are
in municipal account. Therefore there is a need for a change of
in this regard. Project
Managers proposed that the DoE should guarantee payment to municipalities
through written agreement.
3.2. Visit to
Nuwe Begin Blue Downs
second electrification project that the Committee visited is the
Nuwe Begin project
is under Cape Metros jurisdiction but is
serviced by Eskom.
Begin site is located in the Blue Downs area and is surrounded by standard road
and service infrastructure, Hindle Road to the North, Eersteriver Way to the
east and Faure/Klipfontein road to the West. Bardale village is on the left and
the existing residential development of Malibu Village occupies the area east
of Eersteriver Way.
Blue Downs is a suburb of Cape Town. It is part of the Oostenberg
sub-region of the city.
This is a
pilot project managed by the Western Cape Provincial Government; and the
Department of Human Settlements. The project aims to create a new and
innovative direction to the provision of housing showcasing the use of high
density urban planning to create Sustainable Human Settlements. The project
yields 1200 Breaking New Ground (BNG) housing opportunities and 591 Gap housing
opportunities all on single residential erven. The Gap housing prices start
from R299, 000 and the first batch came on sale from October 2012. The
project is implemented by BVN 2000 (Pty) Ltd, a full subsidiary of Motlekar
Cape, a MOTLEKAR holdings company.
Department of Human Settlements (DOHS) aim for the project is to urgently
relocate existing informal settlements, thereby addressing the urgent housing
and development needs of the communities located in the concerned target areas,
which include the Bongani and Nkqubela areas in Khayelitsha and the Ward 17 and
Ward 108 areas of Greater Blue Downs and Mfuleni. Beneficiaries consist of a
large number of flood victims as well as backyard dwellers from the
aforementioned residential areas. The 903 beneficiaries have taken occupation
since June 2012 when the first houses were completed.
The remaining beneficiaries were to occupy
the houses in July 2013. According to the project implementers, 3 disabled
beneficiaries received grants and subsidies and were also part of the first
occupants. Furthermore, a total of 213 labourers have been employed as a result
of the project.
Chairperson and his team engaging with the
residents in Nuwe Begin
with Klapmuts, DoE allocated R5 790 000 for 579 connections in the 2013/14
financial year for this project
of the Committee had conversations with the beneficiaries. Generally,
beneficiaries expressed satisfaction with the houses, however, a strong need
for alternative energy, such as solar water heaters was emphasised by the
residents (particularly for the old and disabled). The desire for solar water
heaters was also triggered by a temporary (demonstration, see picture below)
house for contractors which had solar water heaters installed. Representatives
of the residents strongly raised the need for rolling out of solar water heaters,
especially for the old and disabled.
Picture 3: Demonstration
(contractor) houses with solar water heaters.
4. DAY 2: 01 August 2013 Visit
to British Petroleum (BP) South Africa
overview of the BP Liquid Petroleum Gas (LPG) Plant was presented by the BP
officials the aim of which was to familiarise Members with the Plant prior to
the site tour. Regarding the ownership of the space (infrastructure/storage
facilities) within the BP Cape Town Terminal,
2 x 45 m
owned by BP whereas 1 x 68 m
+ 1 x 100m
is owned by Reatile.
Key issues that emerged from the presentations and discussions are as follows:
Basic Fuel Price (BFP) formula
by South African Petroleum Industry Association (SAPIA)
which also affected the price of LPG. However, the concern is that this
exercise did not focus on LPG pricing.
The current Maximum Refinery Gate Price (MRGP) does not reflect true
import parity pricing.
Currently all imports are landed at an MRGP plus a premium and therefore
an importer is not compensated, in other words the costs of production is not
recovered. Secondly, the price of LPG is based on petrol price.
The storage capacity of LPG in the country is inadequate
Prices of appliances are a problem as such
appliances become too expensive for poor households.
The LPG sector has been
sold to Oryx as of the 1
August 2013 and will be moved off site in
the future. This was based on a BP International decision to sell off its gas
business units internationally for safety reasons.
5. Visit to Easigas
Mrs Lorraine Van Wyk and Mr Duane Dennis, from
Easigas gave an overview of Easigas indicating that the company is
dedicated to LPG marketing and distribution
throughout Southern Africa. It operates in Lesotho, Botswana, Swaziland and
South Africa and is owned by Rubis, a French company listed on the French stock
exchange. Key issues emanating from the presentations and the tour were that:
lack of import terminals (currently only two
one in Richards Bay maximum capacity 3.7 kt and two spheres in Port Elizabeth
maximum capacity 1.1kt).
Tenders to build a storage facility were allocated
to certain companies e.g. Reatile and Vopac at Richards Bay in 2008 but nothing
has happened since then;
Avedia Company was also awarded a tender to build
an import terminal in Saldana. However, there are concerns about the legitimacy
of the tender;
Ability to make a return on investment is hampered by the regulated price
No incentive for refineries to produce additional LPG;
No correlation between MRGP and actual logistical cost of imports;
No adjustment to cost recovery elements in regulated pricing during the
last 18 months
Issuing of wholesale licenses to parties that do not have resources or
customer base that leads to a mushrooming of middlemen that charge exorbitant
LPG price is based on Petrol Price and this has
implications (SA is the only country in the world doing so).
An additional point that was raised was the bolt
on fees. Gas refiners add Gantry and transport fees and this is not revealed
but results in the costs escalation.
Easigas is considering at commissioning storage at
Nigel (800t) and Durban (1.2Kt)
It was indicated that there is a host of illegal
fillers in SA which has brand and safety implications. Regulation in this
regard is not easily enforceable
No alignment between the
Gas Bill and the Petroleum Pipelines Act.
No strategy to deliver to low income households and
There needs to be investment in distribution
Easigas introduced a household cylinder (targeting
the indigent population) but this was not widely accepted. There were issues of
pricing and public acceptance.
In terms of manufacturing of cylinders, Easigas
indicated that the price of steel is an issue in SA and should be reviewed.
The suggested way forward was that there is a need
for the government to:
Address complaints that have been received about the current regulations
and rules relating to
Maximum Refinery Gate Price [MRGP]
(LPG pricing must be at a level that
encourages importation). Maximum Retail Price for residential customers must be
in line with MRGP/import price;
Enable the industry to build import facilities; and
Promulgate regulated prices in line with current supply/demand situation
in the country.
The prices of appliances are too high (they suggested
a subsidy for appliances)
6. Visit to the SA
Breweries Newlands, Cape Town
South African Breweries
identified energy value in waste water and hence decided to pursue a waste-to-energy
process. SAB identifies this energy value as chemical oxygen demand but is
basically a carbon source that can be converted to methane by biological
methods using bacteria. The methane is thereafter an available energy source.
Currently this provides 12% of the brewerys energy needs but SAB are (with
UCT) looking at waste yeast (6% potential) and spent brewers grain (30%
potential). Hence using waste, this brewery can generate 48% of their energy
needs. Key issues identified included, inter alia, the following:
SAB is looking at electricity
co-generation to provide for its energy needs at its Roslyn plant. Plans were
already approved, but later put on hold. This was so after the NERSA
determination on the price Sasol can charge for gas (Sasol purchases gas from
Mozambique for less than R20 (USD 1.82) GJoule and sells currently for about
R40 GJoule. With the NERSA declaration on maximum prices they can increase
their selling price to R80 GJoule). Hence SAB feels that this make
co-generation not feasible for them anymore. Tony Cole (Engineering Manager)
also part of the Gas User Group (still being formalized) argued that the NERSA
determination will result in job losses. Further gas prices should be dropping,
e.g. US gas price dropped from USD 7 GJoule to USD 3 GJoule since the discovery
of shale gas.
The City of Cape Town charge
industry at the maximum usage rate for the entire month, called a maximum
demand charge, hence industry with power peak demands are affected the most.
The municipality also have other charges included, adding to the cost to
Municipal service charges
This is specifically with
regard to waste water. The City of Cape Town charge separately for Chemical
Oxygen Demand (COD) and volume for waste water. SAB reduced the COD content
hence expected a reduction in cost, however the municipality adjusted the
charges such that SAB sees no financial benefit.
SAB also indicated that the
Municipality required assistance with infrastructure maintenance and
development e.g. water purification works. However SAB feels there should be
Strategic Synergistic Industrial Planning and this should be government
7.1. The Minister of Energy
to address the following:
SAB indicated that they are willing to partner with
government in terms of skills development, investment in energy projects and
job creation (SAB sees great opportunity in clearing alien vegetation).
Institutional arrangements in project management of
electrification projects at municipal level, between the Department of Energy,
ESKOM and a municipality be reviewed and improved.
Technical and financial approvals for electrical
installations be rationalised.
Reviewal of the modus operandi of payment for
electrification projects by the Department of Energy and ESKOM including
exploration of guarantees and improved formalisation.
Installation of solar water heaters in Nuwe Begin
with a priority on the old and disabled.
Arranges a meeting between the Department of Energy
and the gas industry to address all gas related issues raised in the report.
Arranges a meeting with the Gas Users Group to
address their proposals and concerns.
The City of Cape Town to be written a formal letter
and request to address issues raised in 6.2. and 6.3
The PC on Energy to arrange its own meeting with
the Gas Users group to get insight of its programmes, proposals and concerns.
The Committee would require a clarification on how
the proposed changes on the Stellenbosch Municipality Indigent Policy would
affect the Free Basic Electricity (FBE), Free Basic Alternative Energy (FBAE)
subsidies and the R100 monthly fee which the community is currently paying for
Furthermore the Committee noted the idea of
investing on bio-digester toilets through collaboration with the Stellenbosch Municipality
in order to improve household access to sanitation, which would ultimately improve
household access to gas electricity.
The Committee recommended the Sustainability
Institute to collaborate with the Department of Human Settlements and the
Department of Health.
The Sustainability Institute indicated that an
incremental approach to electrification appeared to be a good approach for
It was suggested that the Department of Energy
visits the Institute and discuss options available regarding projects of this
The Director of the Sustainability Institute, Mr Mark
Swilling suggested that the Committee hold Public Hearings on Incremental
Approach to Energisation.
Report to be considered.
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