ATC121128: Report of the Select Committee on Labour and Public Enterprises on the oversight visit to Transnet and Medupi Coal-Fired Power Station, dated 27 November 2012

NCOP Public Enterprises and Communication

Report of the Select Committee on Labour and Public Enterprises on the oversight visit to Transnet and Medupi Coal-Fired Power Station, dated 27 November 2012

Report of the Select Committee on Labour and Public Enterprises on the oversight visit to Transnet and Medupi Coal-Fired Power Station, dated 27 November 2012

1. Introduction

The Select Committee on Labour and Public Enterprises (the Committee) undertook an oversight visit to Medupi Coal-Fired Power Station. This included an oversight visit to the Transnet offices in Johannesburg . The visit took place from 22 – 24 August 2012.

The main purpose of the visit was to assess the progress made in the construction of the power station and the impact of the construction on the immediate communities around the power station. Key focus areas included job creation, skills development, promotion of local businesses and localisation.

Furthermore, the Committee’s visit was aimed at interacting with the board of directors of Transnet in order to understand the challenges faced and progress made with regard to its infrastructure development projects.

1.1. Delegation

The Committee delegation included the following members: Mrs MP Themba (Chairperson of the Committee, ANC); Mr MP Sibande (ANC); Mr HB Groenewald (DA); Mr Z Mlenzana (Cope); and Mr DB Feldman (Cope).

The delegation was accompanied by the following parliamentary officials: Ms PH Sibisi (Committee Secretary), Mrs O Siebritz (Committee Assistant) and Mrs R Barreto (Committee Researcher).

2. Visit to Transnet

2.1. General

T ransnet freight rail is the largest division of Transnet. It is a world class heavy haul freight rail company that specialises in the transportation of freight. This company has approximately 25 000 employees, who are spread throughout the country.

Transnet maintains an extensive rail network across South Africa that connects with other rail networks in the sub-Saharan region, with its rail infrastructure representing about 80% of Africa 's total.

The company is proud of its reputation for technological leadership beyond Africa as well as within Africa , where it is active in some 17 countries. Transnet freight rail has positioned itself to become a profitable and sustainable freight railway business, assisting in driving the competitiveness of the South African economy.

Transnet freight rail is proudly placed to dramatically alter the South African rail industry. This enables Transnet to play a positive and active role in the transformation of South African society. This is done against the backdrop of sound business principles, a regulatory framework and the challenges of meeting the expectations of its customers.

There are several strategic infrastructure projects (Sips), among which was a plan to develop and integrate rail, road and water infrastructure, centred around the Waterberg and Steelpoort areas of Limpopo, to unlock coal, platinum, palladium, chrome and other minerals, as well as the stepped-up beneficiation of minerals.

There are initiatives to improve the movement of goods through the Durban-Free State-Gauteng logistics and industrial corridor by prioritising a range of rail and port improvements, supported significantly by a R300 billion investment programme by Transnet over the coming seven years. The programme aims to meet market demand by 2019. There are several external and internal factors that pose challenges, although risks had been identified and mitigating action developed.

Of the R300 billion capital investment, R210 billion would come from Transnet’s own cash flow. The additional R90 billion would largely come from commercial paper and domestic bonds. The programme would also assist in job-creation. Job increase depends on the requirements of jobs at the time. Transnet employed 3 000 people during the period 2011/12. The programme is expected to create 588 000 job opportunities at its peak and would focus on skills and capacity building.

Transnet’s own staff would increase by 25%, but there would be a larger effect on indirect jobs and an economy-wide impact. There would be an increased intake in schools of excellence and R4.6 billion would be spent on bursaries and grants. The entity would also help 2 000 apprentices to attain skills - more than Transnet would need.

A new ‘South Eastern node’ was being planned for the Eastern Cape to bolster that province’s industrial and agricultural development and export capacity. Initiatives within the node would include logistics linkages with the Northern Cape and KwaZulu-Natal , the construction of a dam on the Umzimvubu River to support farming and the Mthatha revitalisation project. It would also embrace a new 16 million-ton-a-year manganese export channel through the Port of Ngqura .

An initiative was outlined for the roll-out of water, roads, rail and electricity infrastructure in the North West , including the upgrade of ten priority roads.

A range of projects was planned for the West Coast, including the expansion of the Sishen-Saldanha iron-ore corridor to above 80 million tons.

Between 2012 and 2019, export coal would increase by 44% and export iron ore would increase by 57%. General freight business is expected to meet market demand by 2017 and would increase by 113%. Maritime containers would rise by 76%.

The strategy aimed to position South Africa as an integrated hub into sub-Saharan Africa . Africa ’s regional integration potential, currently low, would inevitably improve. Transnet’s Africa strategy initiatives include the export of wagons, locomotives and rail maintenance services. Growth in the Maputo Corridor and increased collaboration, such as a Swaziland rail link, were offered as an example of progress in this direction. Infrastructural plans in surrounding countries such as Namibia , Botswana and Mozambique were not considered competition but they are complementary.

2.2. The Market Demand Strategy (MDS)

The MDS involves the following:

· R300 billion capital investment programme;

· Expanding rail, port and pipeline infrastructure;

· Increase incapacity to meet market demand;

· Continued financial stability and strength;

· Significant productivity and operational efficiency improvements;

· Shift from road to rail - reducing the cost of doing business and carbon emissions;

· Enabling economic growth;

· Job creation, skills development, localisation, empowerment and transformation opportunities. [1]

Based on Transnet’s solid foundations, it aims to capture identified growth opportunities over the next seven years whilst maintaining a solid financial position and credit rating. Transnet stated that 70% of its capital investment will be funded from operating cash flows and it is confident that it can raise the balance internally. Transnet’s planned infrastructure build will achieve various policy objectives.

The majority of Transnet’s investment will be in rail business. The major programmes in this regard will be:

· GFB rail capacity growth to meet market demand volumes from 79.7mt to 170.2mt, including Waterberg;

· Increase in fleet and improvement to infrastructure in order to:

o Increase in coal to 97.5mt;

o Increase export iron ore to 82.5mt; and

o Increase export manganese to 16mt;

· Completion of the new Multi-Product Pipeline (NMPP).

The impact of the infrastructure development will be felt nation-wide. The national, countrywide investments will equal R153.3 billion.

The provincial contribution to direct and indirect jobs are as follows for all nine provinces:

· 2011/12: 83 000

· 2012/13: 99 000

· 2013/14:110 000

· 2014/15:106 000

· 2016/17: 123 000

· 2016/17:136 000

· 2017/18: 108 000

· 2018/19: 88 000

2.3. Details of Mega Capital Projects

Transnet presented various maps to the Committee showing the current network of its general freight line and heavy haul lines and the planned network of the same over the next 30 years.

Maps were also presented in regard to the long-term shared network between PRASA and Transnet (passengers). They stated that the high-speed railway between Durban and Gauteng would have a dual purpose of carrying passengers and freight as passengers alone was not financially viable. With regard to the PRASA/Transnet lines, the maps presented showed the proposals for general freight lines, heavy haul lines and high-grade lines. Transnet mentioned that in terms of their strategic plans for South Africa , they wanted to move coal away from Mpumalanga and perhaps to move it through the Kalahari.

Transnet presented various maps to the Committee showing the long-term vision of the national port system. The current port developments and the developments in 30 years time were compared for the following ports:

· Western ports: Saldanha Bay , Cape Town , Mossel Bay ;

· Central ports: Port Elizabeth , Ngqura, East London ;

· Eastern ports: Durban ; Durban digout, Richards Bay .

Transnet informed the Committee that the pipelines form part of a regulated industry and they have not done much planning in this regard. They are however engaging on a long-term basis to extend the pipelines.

2.4. Graduates-in-Training Programme

Transnet runs a two-year graduate programme, after which a person gets permanent employment. The programme provides candidates with relevant workplace experience through a structured learning programme and organisational support to grow them into positions/roles within Transnet Rail Engineering, if available. This drive is aimed at addressing skills requirements and ensuring alignment with the Market Demand Strategy. The Graduates-in-Training Programme is conducted over a 24-month period, during which the graduate-in-training will be assessed on a 6-monthly basis.

2.5. School of Excellence for Football Players

Transnet Foundation is constantly searching for innovative ways in which to ensure that its social responsibility programmes fit with the needs of South African communities. In 1994 Transnet observed the lack of a dedicated institution that would harness the abundance of football talent amongst youth from across the country. This is how the School of Excellence came into being – a commitment on the part of Transnet to make a difference, as well as an abundance of football talent and enthusiasm amongst the South African youth.

One hundred and twenty boys from across South Africa live in residence at the school and attend curriculum-based tuition from grade eight to grade twelve. In addition, they receive coaching in football to groom their talent towards a professional career in football.

Transnet has a sport incubator that seeks talent and then nurtures it to grow in a holistic and productive manner. To Transnet Foundation, the School cannot be an educational institution like any other; it has to set itself apart in that its mission is to prepare youngsters to be professional football players. Although football is their first love, the Foundation insists that the growth of the learners at the School should encompass a broad range of life skills that will benefit them as individuals, both on and off the sports field.

The mission of this unique establishment is to:

  • Identify and develop above average soccer talent and potential amongst school going boys.
  • Provide them with academic, as well as holistic life skills education.
  • In an environment that is conducive for both football and academic excellence equip them towards a sustainable professional career in football.

The School ensures that the boys have the necessary grounding in football, that they are emotionally prepared for the demanding lifestyles of being a football player in South Africa and anywhere in the world, and most importantly, also ensures that the learners have been given the insight into the fickle nature of their trade and are able to, even with the current stars in their eyes, see productive lives for themselves beyond football. Transnet prides itself in adopting such a broad approach to the School .

2.6. Conclusions and recommendations

· The Committee would like to see progress with regard to the asset register (with specific reference to the dilapidated buildings owned by Transnet). This is specifically the case with Transnet’s non-core property where there were issues of security involved. The register needs to be consolidated and made available to the Committee.

· Information in relation to what Transnet’s plans are in relation to the buildings that it owns in each province should be provided to the Committee.

· The Committee raised issues of security with Transnet especially in relation to the theft of cables.

· The Committee requested that more be done to involve the stakeholders in the provinces in regard to the Transnet projects. Members raised the Eastern Cape as an example of a lack of joint planning between Transnet and the stakeholders in that province.

Transnet specifically requested that the Committee consider the dangers in regard to level crossings for railways. These crossings were determined by municipalities. Transnet would ideally like to see that municipalities are compelled by law to erect booms at the crossings to minimise the terrible accidents that occur at these crossings.

3. Visit to Medupi Power Station (Lephalale)

The Committee was welcomed by Eskom’s General Manager, Mr Roman Crookes. The Committee was taken through the safety induction by Ms Loria Mohlafatse. Medupi ensured the safety of its employees and also that of visitors.

Construction at Medupi started in 2007. The first unit (Unit 6) is expected to be the first South African power station to incorporate super-critical technology, enabling it to operate with greater efficiency than the previous generation boilers. This would be the biggest dry-cooled power station in the world, reducing the need for water consumption as Limpopo , especially Medupi, is a water-scarce area. On completion Medupi would be able to produce 4800 megawatts of electricity.

3.1. Overview of the Medupi project

Medupi is an important project for improving South Africa ’s infrastructure. This project had provided significant socio-economic benefits. The construction of the Medupi power station was well underway and was within schedule. It would be completed in December 2013. Medupi would increase South Africa ’s installed base load by 12% once fully operational. Coal supply for the power station would be supplied by Exxaro. Medupi has a capacity of storing about 2 million tonnes of coal that could last for 40 days.

3.2. Job creation and skills development

Ninety five per cent (95%) of workers were from South Africa and 50% of those were from within a 70km radius of the Lephalale area. Sixty four per cent of the Medupi workers are from local areas and 36% are non-local. Hitachi and Siemens have invested in local training colleges in order to produce the required skills for the project. The challenge remained the shortage of welders, as the project required 55 000 specialist welders. This has resulted in the recruitment of foreign nationals in addressing the problem of scarce skills. Medupi has high quality drinking water coming from Magolo Dam which is about 30 km from Medupi. There is medicinal care provided for Medupi employees.

3.3. Promotion of local small and medium businesses

Eskom informed the Committee that 64% of the R51 billion was spent locally. There was a project labour agreement with the contractors which made provision for a bargaining council between labourers and contractors. There were clear conditions stipulated in the contracts with companies with regard to localisation. The contractors were responsible for the working conditions and any grievances lodged by their workers, as per the project labour agreement.

3.4. Community involvements and development

Eskom had opened six Central Information Management Offices around Lephalale, where information regarding developmental and business opportunities is distributed. Management informed the Committee that there was decent housing provided to four workers per communal unit.

4. Conclusions and Recommendations

The Committee resolved that:

(1) Eskom should not give contracts to companies that do not adhere to labour legislation and treat workers as sub-human beings. It was ultimately responsible for the workers employed by the contractors, because Eskom is the custodian of the project.

2) Eskom should improve the participation and empowerment of women and people with disabilities.

(3) Eskom should expand its skills development to professions which are needed by society such as doctors, social workers, and not only skills for the economic market.

It further recommended that Eskom should convene a stakeholder forum with representatives of local business, organised labour and the local authority and develop a joint proposal on how to respond to the concerns of the community and workers.

Eskom should review the project labour agreement as the interpretation was not clear to the parties concerned. The communication strategy of Eskom and its interface with the community should be improved.

Report to be considered.

[1] Transnet presentation to the Select Committee on Labour and Public Enterprises 22 August 2012, Johannesburg . P.2.


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