ATC110802: Report on Oversight Visit to Eastern Cape Province on the 22-25 February 2011

NCOP Economic and Business Development

Report of the Select Committee on Economic Development on its Oversight Visit to the Province of the Eastern Cape on the 22-25 February 2011, dated 02 August 2011

 

The Select Committee on Economic Development, having undertaken the above oversight visit, reports as follows:

 

1. Introduction

 

The Eastern Cape is the second largest of South Africa’s nine provinces. However, in terms of contribution to national gross domestic product, the province is placed fourth contributing about 8.1 per cent.

 

The Eastern Cape region has traditionally been lagging behind the rest of South Africa’s provinces. The unemployment rate is high at 28 per cent (about 4 per cent higher than the national unemployment rate) and the province suffers abject poverty. Such high levels of poverty and unemployment rates in the province may be linked directly to the historical economic neglect of these areas.

 

The province has abundant capacity to accommodate further industrial expansion and cheap industrial land in most towns. Coega is situated near Port Elizabeth and is South Africa’s largest Industrial Development zone (IDZ).  The Coega Development Corporation (CDC provides a one stop investment service to assist investors with all aspects of setting up business in the zone. Most activities found in Coega IDZ include light electronics and commercial, automotives, textiles and agro-processing, academic and training, services, and heavy to medium manufacturing.

 

It should be noted that these sectors, are to an extent, labour intensive and further investment in them will lead to the creation of jobs and thus reduce poverty. For instance, during the construction period of three to four years, it is estimated that 27 500 temporary jobs will be created and, once the refinery is operational, another 18 500 direct and indirect permanent jobs will be created.

 

Therefore, the Coega refinery serves as an economic catalyst that will contribute significantly to the restoring the Eastern Cape’s employment and growth patterns to match those of other regions of the country.

 

The proposed nuclear plant in Thyspunt is one of the projects set to address electricity problems, particularly in the province and country in general. In addition to addressing the electricity crisis, wind powered turbines are also in the government’s agenda within the Eastern Caperegion.

 

Regarding the construction of the refinery, the state-owned company, PetroSA has indicated that once approved by cabinet, will begin in 2012 and is expected to be completed by 2015. The Coega Development Corporation (CDC) notes that the refinery will be the largest in Africa with the capacity to process 360 000 barrels per day.

 

The automotive sector is a critical segment of the economy as it links several industries and services. The production of a vehicle incorporates a wide range of industrial activities; inter alia, metal fabrication, tooling, fitting, and leather and rubber products. This tends to benefit the downstream industry increasing the value chain. The automotive industry can be seen as a symbol of economic success in most developing countries. As the industry continues to grow with its modern technologies, development is also achieved.  Important to note is the role of government in support of this sector. Assistance to the automotive industry in South Africa began in the 1920s lasting until 1961.  The Motor Industry Development Programme (MIDP) was introduced in September 1995 and has been successful in steering the sector’s development. The MIDP has been recognised around the world as a successful and innovative national strategy to develop automotive manufacturing and open up a domestic market in the new environment of globalisation.

 

Despite the effort by government on these projects, concerns have been raised against the aforementioned projects. Of major concern to the community of Thyspunt is the proposed nuclear plant and wind powered turbines. These concerns range from failure by relevant government departments in consulting the community, possibility of regional jobs being threatened to biodiversity challenges. Against this background, the Select Committee on Economic Development (SCED) together with the relevant stakeholders sought to conduct an oversight to try and address some of the concerns raised regarding these projects

 

2. Delegation

The delegation was made of the following Members:

Hon. F Adams (ANC) Chairperson, Hon. MC Dikgale (ANC,Hon. DD Gamede (ANC),Hon. MC Maine (ANC), Hon. AJ Nyambi (ANC, Hon. RA Lees (DA), Hon B Abrahams (DA), Hon. EC Van Lingen (DA), Hon. JJ Gunda (ID), Hon. K Sinclair (COPE),

 

The delegation was accompanied by staff: Ms NG Dinizulu (Committee Secretary), Mr L Mahlangu (Committee Researcher) and Mr M Erasmus (Committee Assistant).

 

3. Provincial Delegation

 

Kouga Municipality: Ms G Dadamasi: Manager, Solid Waste and Environmental Manager, Me E De Lange: Acting Director: Community Services, Mr C Strydon: Manager Tourism, Mr F Lloyd: Chairperson of the Portfolio Committee on Infrastructure and Human Settlements, Mr EC Oosthuizen: Manager Civil Service Technical Services, Mr AL Marais: Manager Electro Technology, Mr J Ngcayisa: Director Strategic Services, Ms VC Benjamin: Ward Councillor,  Mr BF Rheeder: Ward Councillor and Ms C Strydom: Manager Tourism,

 

Eskom: Mr D Herbot: Senior Manager Environment, Mr G Greef: Manager Environmental, Mr M Theron: Nuclear build project team, Mr B Mccont: Manager, Ms N Mdoda: Customer Service and Area Manager, Mr T Toni: Portfolio Manager (Electrification and Customer project), Mr ME Myoli: Electrification Planning Manager,

 

Thyspunt Alliance and Kromme Trust: Ms T Malan, Ms Y Bosman and PH, Bosman: KrommeTrust, Mr C Barnett: Chairperson Kromme Trust, Mr A Malgas: Chairperson Sea Vista Forum, Mr P Leen: Sea Vista Forum, Mr G Christy: Sasmin Committee Member and Mr F Silberbauer: Chairperson,

 

General Motors: Mr I Nicholls: Vice President Planning, Mr E Dold: Vice President, Global purchasing and supply chain, Mr W Osborne: Manager, Training and Organisational Development and Mr J Vermeulen: Manager, Manufacturing Engineering

 

Department of Energy: Mr E Cloete: Regional Director, Mr D Sankoloba: Regional Energisation Manager, Mr L Madzhie: Manager Electrification Planning, Mr J Keshaw: Director Nuclear-Policy and Technology, Ms M Langlands: Wind Energy Portfolio Coordinator, Mr D Sankoloba: Regional Energisation Manager and Mr E Cloete: Regional Director

 

Coega Development Corporation: Mr P Silinga: Chief Executive, Mr T Koza: Executive Manager: Operations, De M Mabula: executive Manager: CDC Services, Adv Z Mapoma: Executive Manager, Human Capital Solutions, Mr H van der Kolf: Acting Executive Manager; Infrastructure Development, Mr C Mashigo: Acting Executive Manager; Business Development, Ms B Jojo: Acting Financial Officer; Finance, Dr P Inman: Senior Manager; Office of the Chief Executive, Mr F Ndema, Manager, Mr W Olivier: Senior project manager, Mr L Mkontwana: Manager, and Ms N Mxenge-Mayende: Manager Investment Promotions. PetroSA. Mr V Khulu:Manager Integration Resources,

 

King Sabata Dalindyebo Municipality: Mr T Mashiyi: Chairperson Infrastructure Department, Mr L Ngcukayitoba: Project Manager, Ms K Mdikane: Councillor, Mr S Mlamli:  Mayor of KSD and Mr MMP Tom: The Municipal Manager.

 

4. Objective of the Oversight Trip

As a committee consisting of economic development, mineral resources and energy, the oversight trip sought to cover as much ground as possible regarding issues relevant to the committee. The objectives of the trip were to:

 

• Oversee the concerns of the Thyspunt residents regarding the proposed Nuclear plant as well as the wind powered turbines within the Kouga Local government municipality;

 

• Meet with the Coega Industrial Development Zone stakeholders regarding the current (ports and Mthombo refinery) and future plans;

 

• Meet with General Motors (GM) to discuss their challenges in the automotive industry as an OEM and their concerns over the impact of government levies on imports and exports;

 

• Oversee the Nelson Mandela Bay Logistics Park and how the suppliers of components within the park relate to the automotive, especially VW;

 

• Meet with the Mayor of King Sabata Dalindyebo Municipality (in Umthatha) to discuss the challenges facing the municipality regarding electrification, rolling out of SWH, Water crisis, urban and rural infrastructure; and

 

• Visit a community-run Integrated Energy Centre (IEC) in Qunu and discuss challenges facing the centre in terms of functionality and support needed;

 

5. Kouga Municipality

 

The Kouga Municipality briefed the Committee on the status quo of the electrical distribution industry in the supply area.

 

5.1 Findings

• The Municipality supply electricity to the following towns; namely: Jeffreys Bay, Humansdorp, St Francis Bay, Cape St Francis andOyster Bay.

 

5.1.1 Growth

• There has been a steady growth in electricity consumption in the areas mentioned above, at approximately 2 4% per annum.
• The growth is largely due to sub-economic houses being electrified in all the areas at a rate of approximately 300 to 500 houses per annum and to a lesser extent a growth in the number of holiday houses being built and an increase in commercial load.
• It was mentioned that the proposed Thyspunt nuclear power station near Cape St Francis would have a profound effect on load growth in the area should the project come to fruition.

 

5.1.2 Income

• The income from electricity sales against expenditure is reasonable, but in recent times this has become problematic, due to more and more consumer falling in arrears as a result of the poor economic conditions and the sharp rise in the cost of electricity being over 20% per annum.
• In the past the Municipality experienced problems with service provider for the prepayment meter vending system which have now been attended together with the implementation of measure to improve revenue protection.
• The Electricity tariffs are reviewed annually and approved following the NERSA guidelines.
•  Income Budget for 2010/2011 is approximately R128 million.

 

5.1.3 Future Plans

• The Kouga Municipality has a roll-out plan in place for the building and electrification of more sub-economic houses, which is expected to exceed 6 000 houses in the next five years.
• Consultants have been appointed to assist the Municipality with a master plan and capital expenditure programme for the electrical distribution network to ensure that all upgrading work take place in an orderly manner to meet the future load requirements.
• Currently the Municipality is engaged in a process to obtain funds from Eskom to extend its load management system to in particular switch domestic geysers and thereby reduce the peak demand at Eskom’s bulk supply point and improve the load profiles of the network.
• The Municipality has also embarked on a programme to have solar heated geyser installed free of charge at sub-economic houses. About 7 500 households will benefit from this programme which is funded by Eskom via a local service provider.

 

6. Community Meeting

A public meeting was held at St Francis Links, to hear the concerns of the community around the nuclear plant and wind energy (wind powered turbines. Among the people attended, were different forums representing the community such as St Francis Community, Jeffery’s Bay Community, St Francis Kromme Trust, and Thyspunt Alliance, Representatives from Sylvester and Councillors from Kouga, Department of Energy, Eskom, National Nuclear Regulator, and Department of Public Enterprises.

 

6.1 Concerns raised by the Communities

The following concerns were raised by the broader community in the region:

 

6.1.1 Nuclear Plant

Concerns centre on the location of the nuclear pant (i.e. in Thyspunt). Residents of Cape St. Francis and Jeffrey’s Bay are against such plant as they believe that it will not create any jobs and will not solve any electricity problems facing the region. Technology being proposed is rather too expensive for government and this may seem or prove to be a fruitless exercise. There were also concerns about the suitability of land as the area experiences geological hazards such as earthquakes

 

6.1.2 Wind Turbines

There seem to be concerns on the unregulated proliferation of wind energy facilities in South Africa and this call for an urgent need to regulate and not provide guidelines. Huge areas of land, if this sector is not regulated, could be blanketed in the equivalent of skyscrapers resulting in cumulative impacts on ecology (e.g. bird habitats). Concerns were also raised on the lack of extensive consultation especially with farmers around since the area consists of wetlands. Wetlands are considered the most biologically diverse of all ecosystems.

 

6.1.3 Committee findings

 

·         Misalignment and misunderstanding between the municipalities and National departments.

·          Lack of information and understanding of broader government objectives regarding the nuclear plant and renewable energy.

·         Communities at the public meeting were not fully geographically represented as the interests groups dominated the meeting.

 

7. Eskom

 

The meetings was held at St Francis Links on the issues related to the environmental impact assessment and other studies that are currently underway regarding the potential use of the Thyspunt site for a proposed nuclear power station.

 

7.1 Background

 

7.1.1 The Nuclear Site Investigation Programme

 

The importance of locating nuclear power stations on the coast was already recognised in the 1980’s, and resulted in the commissioning by Eskom of the Nuclear Site Investigation Programme (NSIP). The NSIP studies were restricted to the South African coastline on the basis of various factors, for example, that sea water would be used for cooling thus avoiding the need for using scarce natural water resources, and that future load growth would be in coastal regions.

 

Most of the South African coastline was investigated as part of the NSIP studies. The parts that were not investigated were areas within 50 km of the coastal cities and the coastline of the previous homeland areas of the Ciskei and Transkei. The studies, undertaken by consultants contracted by Eskom, were predicated on a number of criteria, such as demography (existing population densities), ecological sensitivity, geology, the characteristics of the coastal area and the tides and wave action and seismicity, amongst others.

 

The NSIP studies identified four suitable sites (other than the existing Koeberg site) on the South African Coast that met the criteria for a Koeberg-type (i.e. using pressurized water reactor (PWR) technology) nuclear power station:

 

• East coast (KwaZulu-Natal): No suitable sites were identified, due to the high population density and regional seismic activity.
• Eastern Cape coast: The most suitable site identified was that of Thyspunt(originally referred to as a “double” site called Tony’s Bay and Thyspunt) situated between the towns of Oyster Bay in the west and

 

• Southern Cape coast: The most suitable site identified was that of Bantamsklip, situated near Gansbaai approximately mid-way between Danger Point and Quoin Point

 

• West coast in the Northern Cape: Two suitable sites were identified, Brazil and Schulpfontein, located between Kleinsee in the north and Hondeklipbaai in the south.

 

7.1.2 Cooperative Agreement between the National Nuclear Regulator and the Department of Environmental Affairs

 

The National Nuclear Regulator Act assigns responsibility to the National Nuclear Regulator (NNR) to licence nuclear installations. The applicant for a licence was required to submit a safety report and any other supporting documents, including a site safety report, which the NNR evaluates before taking a decision on granting the licence. The NNR Act defines the objects of the Regulator as, amongst others, to provide for the protection of persons, property and the environment against nuclear damage through the establishment of safety standards and regulatory practices and to ensure that the provisions for nuclear emergency planning are in place.

 

The National Environmental Management Act assigns responsibility to Environmental Authorities (such as the Department of Environmental Affairs - DEA) to protect the environment. The definition of the environment however includes both the physical and the social environment.

 

There is thus an overlap of responsibilities between the NNR and the Environmental Authorities with respect to radiological impacts on the environment. A cooperative agreement was signed between the NNR and DEA to manage their respective responsibilities and avoid duplication of legislative oversight. From the Cooperative Agreement it is clear that the NNR is responsible to evaluate the safety of the proposed power station and determining what emergency planning zones and activities are required.

 

The NNR can only commence the formal evaluation of the safety of the proposed power station and determine the emergency planning requirements after Government/ Eskom has determined the vendor and hence the design for the

proposed nuclear power station. The granting of a positive environmental authorisation does not preclude the requirement for a nuclear installation licence and vice versa

 

8. Coega Development Corporation (IDZ)

 

Briefing on the Coega Industrial Zone (IDZ) challenges and future plans

 

8.1 Conventional Energy – Strategic Importance

●        Country's requirements for base load electricity production

●        Ensuring that IDZ minimise transmission losses and serve as anchor for the electricity transmission network in the Province

●        Provides primary energy and technology diversification which uses cleaner and more efficient fuel

●        Ensuring that there is development in the NMBM & IDZ

●        Job creation (backward and forward linkages)

●        Ensuring that IDZ produce own petrochemical cluster and not reliant on imports

●        Meeting SA Renewable Energy Commitments towards climate change & carbon emission reduction

●        Contribution towards Rural Development Targets – electrification programmes

●        Creation of new industries and green technologies in SA

●        Linkages with the agricultural sector

 

8.2 Conventional Energy project

●        CCGT:

–         Prefeasibility Study

–         Discussions with Eskom and DoE ongoing

–         IRP2010 being finalised

–         ISMO under discussion

8.3 Peaking Power Plant

–         GDF Suez & DoE

–         EIA completed (Expiring in September 2011)

–         Generation Licence and site ready

–         PPA discussions being finalized

●        Wind:

–         Electrawinds      25 Turbines       (Belgium)

●        EIA to be completed by Q2

●        Operational turbine in the IDZ (40 construction; 2 operational jobs)

●        Sponsoring 3 Engineering students at NMMU

–         Innowind 16 Turbines      (France)

●        EIA to be completed by Q3

●        Wind mast have been erected for over 6 months

●        Adopted an orphanage in Zwide

–         Universal Wind 20 Turbines         (Sweden)

●        EIA to be completed Q1 2012

●        In discussions with Women empowerment groups

●        Solar – 12 MW

–         German Company with operations in Europe

 

●        The Coega Development Corporation (CDC)  doing a large amount of work in the energy sector

●        The Energy Sector can contributes immensely to CDC’s and the provinces objectives to:

–         Jobs

–         Revenue generation

–         Skills development

–         Rural development

–         Social responsibility

–         Private sector is ready to invest

–         There are challenges with the regulatory environment and facilitating IPP’s to take off

 

9. The Nelson Mandela Bal Logistic Park (NMBLP)

 

9.1 Achievements:

 

NMBLP in the past eighteen months has achieved the following:

·         Five new factories,

·         Suppliers Job created approximately 685,

·         Supplier investment R600 million

·         Volkswagen South Africa R485 million

·         Public Sector investment R371 milion

The total Private Investment equal to R1,085 Billion

 

9.2 TDM Powered Apprenticeship Programme

 

The TDM Powered is a pilot programme facilitated by the Coega Training College in Port Elizabeth. About twenty five students were selected out of 400 applications. The programme is a joint initiative between the National Tooling Initiative (NTI), the Toolmaking Association of South Africa (TASA) and the Department of Trade and Industry to alleviate critical skills shortages in the all-important tool, die and mould making industry – a key support industry for manufacturing in South Africa.

 

The foundation level of the TDM Powered Apprenticeship Programme prepares students and industry incumbents, who might need special support, for apprenticeship training in the machine and tooling manufacturing industry. The 2010 pilot Foundation Phase was presented over a period of three semesters from February to November and comprised applied and fundamental theory. Applied theory focused on mathematics, safety, drawing, measurement, employability skills and company excursions. Fundamental theory included English communication, basic computer skills, mathematics, science and life skills.

 

Phase 2 of the Foundation Level entailed workshop training teach participants basic hand skills and machining techniques. On completion of the workshop training students were given the option to submit two work pieces for independent adjudication. Once the work pieces had been approved, students were allowed to do the American NIMS accreditation online.

 

Students who successfully completed the Foundation Phase can now enter an entry level career in tooling manufacturing or can continue their TDM Powered Apprenticeship studies to qualify as artisans, master artisans or engineers.

The TDM Powered Apprenticeship Programme enables students to pursue exciting careers in a wide range of industries such as automotive, aerospace, mining chemical, defence and electronics industries. Aritisans and engineers can work in these industries as a tool designers, project managers, tool die and mould makers, metrologists, specialist computer numerically controlled machinists, engineering analysts and the like.

 

10. Project Mthombo – PetroSA

 

The Committee was briefed by PetroSa on the project Mthombo which is the world class refinery Africa. The project is an initiative to develop a world class crude refinery in the Coega Industrial Development Zone in the Eastern Cape (IDZ). It will be the largest in Africa and provide commercially competitive national security of supply for South Africa’s future fuel requirements well into the next decade.

 

It is estimated that by 2015 South Africa will have to import approximately 8.5 billion litres of fuel per annum (equivalent to 150 000 barrels per day) if there is not significant new investment in local refining capacity. Importing this much refined fuel will have a negative impact on the  country’s foreign exchange reserves, render national supply more vulnerable to external factors, and will not contribute to the creation of new jobs in the industry.

 

The South African government is concerned about the nation’s considerable dependence on international oil companies to secure the country’s future liquid fuels energy needs, as their global strategies are focussed, mainly on up-stream activities, not new refining investment. The government has introduced an Energy Security Master Plan to address this, which calls for PetroSA to provide strategic leadership to achieve security supply.

 

10.1 Broad–Based Black Economic Empowerment and Competitive Supplier Development Programme

 

PetroSA regards the South African government’s BBBEE policy as a necessary socio-economic process to redress the imbalances of the past and to facilitate the participation of black people in the economy. PetroSA to maximise the participation of BBBEE companies in the project.

 

The project will create sustainable BBBEE opportunities across the value chain, including equity in trading and wholesale opportunities; competitive supplier development; skills development; employment equity; and corporate social investment.

 

10.2 Corporate Social Investment

te Social Investment strategy which is aligned to the company’s strategy, contributing to the company’s overall mission and vision, whilst making a significant impact in the communities in which the company operates.

 

PetroSA has chosen to focus on four main areas of development:

• Education and Training
• Health
• Community Development
• Environment and sustainability development

 

10.3 Project progress

• The feasibility studies were completed in 2009 and the project will proceed to the Front End Engineering and Design (FEED) once the approval has been obtained.

 

• All aspects of Project Mthombo will be subject to a full Environmental Impact Assessment (EIA) that will commence during the FEED Phase.
• Final approval for investment, after FEED and a successful EIA, will be sought early in 2012. Thereafter, construction will commence and is planned to be completed by the end of 2015. The refinery will be commissioned during 2016.

 

11. General Motors

 

General Motors briefed the Committee on their operations, challenges and future plans towards growth of the automotive industry and the province in general.

 

11.1 Key challenges

 

• Specification and technology differences across Original Equipment Manufactures
• Low volumes resulting in low economies of scale and not business case
• Uncompetitive local supply base:  rapidly escalating input costs e.g. labour, electricity and raw materials and fierce competition from major emerging markets e.g. India, China and Korea
• Competitiveness of Services –reliability, cost, productivity e.g. electricity, ports and railways
• Key traditional local content under threat.

 

11.2 The Department of Trade and Industry- Training funding support required:

 

The current hourly employees rate cost 1159, job creation potential at R680 with the total of R1 839-00 and

Training facility required at Struandale Plant to support new car-lines:

 

•          Cost of new facility at Struandale                                     R   6 500 000

•          Cost of training equipment at new facility              R   3 500 000

•          Courseware development                                                R   2 000 000

 

•          Source Plant Training (Korea – travel/accom/exp’s):

 

•          Train the trainer                                                  R   1 000 000

•          Operator skills training                                        R   4 000 000

•          Team Leader training                                                      R   2 000 000

 

•          Total funding required for training (Rands):                                    R 19 000 000

 

11.3 Proposed Changes to Labour Legislation

 

The Minister of Labour gazetted four Bills for public comments during December 2010; namely

•          Labour Relations Act

•           Basic Conditions of Employment Act

•           Employment Equity Act

•           Employment Services Act.

 

It is also significant proposed amendments to the Immigrations Act, which will have a direct impact on the hiring of foreign nationals and the accommodation of international service personnel. This is not seen as encouraging job creation and SA as “employment friendly”, because it restricts Automotive Industry. 

 

11.4 Economic Development Enablers –Resources

 

11.4.1 Electricity

 

•          Estimated shortfall in generation is 6 TWh in 2011 and 9 TWh in 2012 ( 2-4% with no reserves) – plant stoppages,  loss of production, increased manufacturing cost.

•          Bureaucratic time consuming processes granting licences for Independent Power Producers - no short term relief to electricity situation. This is when South Africa needs it most.

•          Municipal budget constraints affecting infrastructure sustainability resulting in poor Quality of Supply. In 2008 power dips and surges resulted in production losses at GM to the est. value of R3,4 million, 2010 – R750 000

•          Local power generation will improve QOS, support growth in the region and create jobs.

•          The proposed Power Conservancy Program targets a select group of larger customers adding additional manufacturing cost to the Automotive industry with associated negative impact on competitiveness therefore not stimulating additional investment in local industry.

•          Proposed Carbon Tax on fuels  - Increased cost of utilities affecting competitiveness

 

11.4.2 Alternative Fuel Strategy

 

•          Liquid Natural Gas supply to Eastern Cape has been socialised for over a decade. This is an economic energy source and should be expedited to the Eastern Cape, perhaps from Mossel bay.

•          LNG generates low CO2 emissions and must be pursued - 2009 Copenhagen climate change negotiations Government announced a 34% reduction in emissions by 2020. LNG is a large enabler.

•          LNG will alleviate the proposed CO2 tax burden on large users of LP Gas such as the motor industry. Increased tax burden will impact on the Automotive industry competitiveness.

•          Recent benchmarking with GM International Operations indicates that the use of LNG vs. LP Gas and the cost thereof is giving other developing countries the competitive advantage.

 

11.4.3 Water

 

•          The extreme drought situation within the NMB region (dams at 34%) is affecting major contributors to the GDP Business is expected to reduce water consumption by 25%.

•          NMBM request for Drought Disaster and Water Infrastructure Funding of R1,6bn has not materialised yet. Applied for in April 2010 and as yet no indication to its approval. These are long lead time large construction projects and will create many jobs in the region. An indication of 28% (R450 Million)of funding allocated

•          Eastern Cape and NMB typically drought region. Current drought due to no major rain for two years. These cycles are set to continue and worsen with global warming Therefore the water infrastructure funding will assist long term sustainability of industry in the region

•          Current infrastructure would not support the development in the Coega IDZ refinery project. This could impact potential ~30 000 direct and indirect jobs.

•          High water users are considering relocation of production to other regions as water quota’s for industry could be imposed once dam levels drop further.

•          Constraints on the local municipal budget affecting repairs to aging infrastructure and reducing leaks.

•          Leaks in the schools in the Metro equate to 8% of the water used – 18 to 20 ML/day is wasted with no accountability and interventions from the department of education.

 

11.4.4 Town Planning

 

•          Lengthy, bureaucratic and inefficient processes encountered with sub-divisions and new developments.

•          This delays investments and job creation to the Eastern Cape as external investors want to establish local operations.

 

11.4.5 Cargo Dues

 

The Automotive Industry spend, on average between R1000 and R2000 per exported vehicle on Cargo Dues (includes dues on inbound material and the exported vehicle) . It is estimated that the Automotive Industry spends almost R1 Billion per annum on Cargo Dues. By Government shifting the responsibility of providing port infrastructure required to support and grow the country’s economy to Transnet, Transnet is forced to fund this from the port users, significantly impacting our competitiveness. As South African Original Equipment Manufactures (OEMs), the industries are at a distinct disadvantage to our sister plants elsewhere in the world.

 

11.4.6 Automotive Industry

 

The following steps had to be taken by the Automotive Industry to seek a mandate at NAAMSA Chief Executive Officers meeting to prepare a White Paper showing:

 

•          Impact of cargo dues on auto industry

 

•           Alternative models used elsewhere in the world

 

•           Proposals on how Government could fund port infrastructure without cargo dues.

 

The information need to be followed by a meeting between NAAMSA and the Departments of Public Enterprises, Trade & Industry, Economic Development and Public Enterprises.

 

 

12. Meeting at King Sabata Dalindyebo  (KSD) Municipality

The KSD Municipality briefed the Committee on Infrastructural Development.  The whole system is old and not updated to keep pace with the growth demands. It is also in a bad state due to resource and capability reasons

• KSD funded initiative
• KSD increased it financial capacity and raised funds on the market via process and secure a loan of R40m from DBSA
• The First Emergency Upgrade Electrical Services project of R15,5m was awarded in December 2010
• The first phase is to connect CBD to Hillcrest substation and
• The second phase is the upgrade the smaller substations support the businesses in that area

 

13.  Department of Energy

• KSD Municipality received R16m and R8m respectively for bulk upgrades and electrification from the Department of Energy.
• Electrification started in Zimbane and Ilitha for 1082 households for R7,5m
• A request was made to use Mthatha West electrification funds to upgrade Thornhill substation as it is currently overloaded
• KSD is currently preparing the detail designs to go out on tender to upgrade Sidwadwa and Thornhill substations with the existing funds
• KSD did put in funding applications to DME for the upgrade of Sidwadwa and Thornhill substations as well as the upgrade of the network and distribution systems in 2009

 

13.1 Renewable Energy Strategy

• KSD developed in conjunction a renewable energy strategy and September 2010
• It contains the use of wind, solar, hydro power and even energy derived from waste – not only for the institution but also to the individual

 

13.2 Solar Water Heaters

• Eskom and a PPP presented a business model to implement SWH to 10,000 households
• KSD council still needs to adopt the principles
• Await the new FY cycle of funds

 

13.3 Rehabilitation of Roads

• N2 Nelson Mandela Drive
• It was rehabilitated from the bridge to Ultra City and included the upgrade of pavements, fixing a water main and greening
• It cost R63m with a contribution from KSD
• It commenced in December 2009 and be completed by Mid March 2011
• New Bridge & Sprigg Street One Way System
• The contract was awarded in February 2011 on the contractor is moving onto site
• Construction period approx 14 months

 

13.4 Maintenance

• Rural Gravel roads
• Several rural gravel roads were maintained by in-house and local contractors to a tune of R4m this FY
• Pothole repair in town
• KSD are repairing it with our existing team
• KSD has appointed a civil engineer
• Will add resources from DPW (EPWP teams) to double our team and accelerate the pothole project implementation and storm water systems
• Budget allocated is R4m

 

13.5 Stakeholder Responses

 

13.5.1 Nuclear Plant

 

Environmental Impact Assessment (EIA) the nuclear plant are still in progress. Thyspunt was one of the five sites identified for a nuclear plant. Although, there is no decision yet made on the construction of the plant, Eskom has already started buying land in the area. About 90% of land has been bought from farmers as well as residents in surrounding areas.

 

The nuclear plant has a potential to create jobs especially for the local people. Various phases from construction to operations will pave way for new jobs. In addition, there may be spin-offs creating both direct and indirect jobs. The nuclear plant will require large quantities of material and this means that jobs will be created in its value chain.

 

Nuclear power plants typically have high capital costs for building the plant, but low fuel costs as well as maintenance cost. The National Nuclear Regulator (NNR) has not yet received any applications for the nuclear plant so work has not started yet in terms of regulatory framework and nuclear designs. Eskom argues that public meeting on the plant and the site itself were held in the 1990s and extensive consultations took place on the EIAs

 

14. Integrated Energy Centre (Iec) - Qunu

 

The Integrated Energy Centre has been launched by the Minister of Energy Ms D Peters, with the intention to contribute towards job creation and community development overall.  The Department of Energy is partnering with relevant stakeholders, private sector, municipalities in establishing the Integrated Energy Centres.

 

The Iec in Qunu is a one stop energy shop owned and operated by the community Cooperative and organised as a community project. The Qunu lec’s programme is also linked with the library and a computer centre for the communities.

 

14.1 Objectives of the IEC

• To provide access to safe and affordable energy sources to poor households.
• To provide access to information regarding the safe, efficient and environmentally sustainable use of energy sources.
• To provide access to safe energy appliances.
• To empower the communities to be able to influence policy in both the public and private sectors regarding access to safe and affordable energy.
• Under-lying these objectives are a very strong social responsibility aimed at poverty alleviation, job creation and capacity building.

14.1.1 IEC Shareholders

The delegation met with the Councillor and the shareholders of the Qunu Iec, they briefed the committee on how the cooperative was established. The shareholders also highlighted their successes with the business as well as the challenges.

15. Committee recommendations

 

The Select Committee on Economic Development recommended the following:

 

15.1   The issues and concerns raised must be considered in conjunction with broader government objectives and policies such as:

• The Industrial Policy Action Plan II (IPAPAII),
• The New Growth Path (NGP) Integrated Resource Plan II (IRPII),
• Integrated National Electrification Programme (INEP) and
• The rural economic development policy.

 

These programmes and policies were cited for further discussion with the communities in order to enhance understanding of the government goals. Re-visit to the areas once information has been shared to all affected parties and when the EIAs reports become available.

15.2 Mthombo Refinery – Petro SA

 

The refinery for 400,000 barrels/day is set to contribute to job creation, economic development and address the issue of aging refineries in South Africa.  The project seems to hang in limbo.  Costs for the scoping and EIA are enormous and there is no further progress.

 

The National Treasury must table a funding programme to this committee linked to immediate timelines. The proposal to Cabinet must also be considered on an urgent basis.

 

15.3 Industrial Development and Production

 

15.4 Water Resources in Port Elizabeth & surrounds

 

The city of Port Elizabeth has had water restrictions for at least the past two years.  Applications to national government for funding of pipeline from theFish River has not even been responded to the application or given an indication when the funding will be provided.  This matter requires immediate attention and funding. The Industry cannot operate without water. The dams supplying water to Port Elizabeth are located in the Kouga municipal areas and are fed from rivers in the Langkloof en Kouga. 

 

The fact that these dams have not had sufficient water the Kouga area water restrictions were also implemented in Kouga.  The Gamtoos valley, which includes towns like Patensie, Hankey, Loerie and Thornhill therefore also have water restrictions for the agricultural section.  The Gamtoos valley is the “vegetable and fruit basket” of the Eastern Cape. The limited water supply has led to smaller fruit which does not qualify for the export market any more.

 

The National Government (Water Affairs and National Treasury) must present a plan to the SC on Economic Development on how and when the matter would be addressed.

 

15.5  Coega IDZ

Labour intensive projects in the Agro-processing sector for instance, proved to create decent jobs. The Department of Trade and Industry must submit plan to revive the spending in Coega IDZ and when the new funding could be made available for labour intensive industries. Additional funding is not utilised for labour intensive projects for instance in the Agri value add chain.

 

15.6 Labour Legislation

The motor industry made it clear that the current and proposed labour legislation is hampering labour intensive job creation in the sector. 

 

• Revise labour legislation to encourage job creation and labour intensive projects;
• This industry makes extensive use of foreign nationals from their national head offices to spend time in various production areas in the industry–Dept of Immigration must table proposals put forward by the motor industry and advise how economic growth can be stimulated through those proposals.

 

15.7 Port Ngqura

This multi-billion rand investment and port is operating at 70 percent capacity. A full presentation on the future development of this project, with the necessary time frames and funding should be presented to the committee. It is also necessary to know what product and materials are being transported from the port and if any value added benefits can take place at the Coega IDZ.

 

15.8 Energy

 

• The National Department of Energy must table a sustainable cost effective funding plan for nuclear energy in South Africa in terms of the IRP 2010 proposals.
• Department of Energy must inform the committee on what are the opportunity costs of a nuclear plant viz-a-viz of renewable energy in relation to cost and job creation.
• The Eastern Cape requires guidelines for environmental threshold and criteria for the establishment and placement for wind and solar farms.
• The amended and proposed REFIT model is a deterrent for future investment in green energy and industry

 

 

Report to be considered.