Departmental Budget and Year Plan; Eskom: briefing

Meeting report

MINERALS AND ENERGY PORTFOLIO COMMITTEE
19 March 2003
DEPARTMENTAL BUDGET AND YEAR PLAN; ESKOM: BRIEFING

Chairperson: Mr M Goniwe (ANC)

Documents handed out:
Department of Minerals & Energy Powerpoint Presentation
Eskom Powerpoint Presentation

SUMMARY
The Department and Eskom briefed the Committee on a range of issues with implications for socio-economic development and black economic empowerment. The Committee highlighted a number of concerns around service delivery and the implementation of broad policy objectives as South Africa's democratic dispensation approached its tenth anniversary.

MINUTES
Briefing by Department Acting Director-General, Ms Hermanus
Ms M Hermanus, Acting Director-General, appraised members of the Department's mandate, vision, mission and key strategic objectives before focusing on the Directorate of Mine Health and Safety, its major achievements during the previous year and its priorities for 2003/4. She advised the committee that, while the implementation of public service regulations and the restructuring of the Department had themselves presented numerous challenges, work on developing and maintaining effective policy, legislation and enforcement capacity in the Mine Health and Safety Inspectorate had proceeded with the aim of arriving at a full body of regulations and codes of practice to support the Mine Health and Safety Act (29 of 1996).

Enforcement capacity continued to be an area of concern given the shortage of appropriately skilled personnel. In this regard, the Department was now considering introducing career-tracking programmes for technically skilled personnel similar to those already in place for management in order to attract and retain people with the high levels of technical expertise required for effective enforcement. During the year ahead the Inspectorate would endeavour to isolate problem areas within the industry as a whole and to focus on reducing accidents, fatalities and hazards to health in these sectors. In this regard, Ms Hermanus drew the committee's attention to a tendency for safety standards to be compromised in the burgeoning platinum and marginal gold mines, high levels of dust in the mechanised coal industry and the ongoing challenge of reducing the impact of HIV/AIDS throughout the sector. Against this background, the budget reflected a six percent increase in expenditure on mine health and safety.

Discussion
Mr A Nel (NNP) expressed concern about a perceived emphasis on volume rather than efficacy of regulations.

Ms N Mtsweni (ANC) enquired what measures were in place to support the families of mine employees affected by HIV/AIDS.

Professor I Mohamed (ANC) commented that injury and fatality figures for the previous year did not reflect a significant real improvement. Why did the budget for administration appear to be increasing at a higher rate than the health and safety budget?

Mr J Kgarimetsa (ANC) commented on the need to completely eliminate mining-related fatalities and enquired about training on health and safety standards in the small-scale mining sector.

Mr J Nash (ANC) asked if the Department already had a full complement of inspectors, what progress had been made in training more and how much of the budget had been allocated to skills development.

Mr N Ngcobo (ANC) expressed concern about the number of suitably qualified professionals from historically disadvantaged South African (HDSA) communities who remained unemployed but whose skills could be further developed and utilised, enquiring what measures were being taken to reverse this trend and over what period of time.

Ms Hermanus explained that the volume of regulations being developed and introduced stemmed from wide-ranging discussions conducted three years previously on priority needs and international trends relevant to South African mining practice.

She advised members of ongoing interactions with the Departments of Labour, Health and Social Services on the role of the public sector in addressing the issue of support for the families of mine workers affected by HIV/AIDS, noting nevertheless that an appropriate response to the impact of HIV/AIDS on mining communities remained an industry responsibility. She reassured the committee that the efficacy of existing programmes were being reviewed, particularly in the arena of home-based care.

In respect of statistics on mine-related injuries and fatalities, Ms Hermanus appraised members of the committee of issues impacting on mine health and safety in marginal gold mines and expanding platinum mining operations. In the case of marginal gold mines, where continuous safe mining tended neither to be cost-effective nor profitable, she conceded that the practice of mining when it was no longer safe to do so must be addressed. In the case of new and expanding operations in the platinum mining sector, Ms Hermanus advised that, while controls were difficult to enforce, the Inspectorate had stopped work on entire sections of several turnkey projects in order to address health and safety concerns.

She reassured the committee that good progress against international benchmarks continued to be made in the coal mining industry.

In the light of the Department's commitment to facilitating the provision of an enabling environment for small-scale mining activities by HDSA communities, Ms Hermanus noted that regulating this sector presented particular challenges. Rising accident rates in a low employment base remained a source of concern. She advised members of an initiative by the Mining Qualifications Authority (MQA) that was exploring appropriate training programmes for small-scale mine operators, possibly using a mobile training facility.

On the issue of building and retaining the required levels of technical expertise within the Department itself, Ms Hermanus appraised members of the difficulties posed by operating in a highly competitive market for increasingly scarce technical and engineering skills, noting that opportunities for professional development in the private sector and the more attractive remuneration packages offered tended to be at the root of the Department's high turnover in technical personnel. The same issues affected the development and retention of occupational health professionals. Nevertheless, policies underpinning MQA and National Skills Fund training interventions were beginning to impact positively on the demographics of student intake to related faculties at tertiary institutions across South Africa. Ms Hermanus advised that a document especially prepared for Cabinet on the building and retention of a pool of suitably skilled professionals would be made available to the public shortly.

In response to a concern raised about increased rates of spending on administrative support as compared with relatively low increases in the health and safety budget, Ms Hermanus assured the committee that the Department was now in a position to justify increased expenditure on the enforcement of health and safety regulations, having completed its review of existing structures and programmes. The implementation of plans for addressing key priorities would be reflected in next year's budget.

Mr N Ngcobo (ANC) reiterated his dismay at the extent to which HDSAs continued to experience difficulty in finding opportunities both to utilise their existing technical qualifications and to acquire the necessary experience to secure suitable employment.

The Committee Chairman enquired about the possibility of compiling a database of suitably qualified and trained people from these communities, to which the Department could then refer in identifying potential new recruits.

Ms F Mathibela (ANC), a new member of the committee, commented that the Department's commitment to reducing injuries and addressing occupational health issues might not be achievable in the face of such serious skills shortages.

Mr J Kgarimetsa (ANC) asked for a comprehensive report on mining-related fatalities and the names of each mine concerned.

Mr J Nash enquired about the possibility of introducing conditions in terms of which new trainees were obliged to remain with the Department for a specific post-training period. He also referred the Department to a successful campaign underway in Botswana claiming to have reduced HIV/AIDS-related deaths and enquired whether there were specific criteria in terms of which programmes for reducing the impact of HIV/AIDS in mining communities were developed and implemented, noting that all mines should have such programmes in place and not just a select few.

The Committee Chairman asked about the extent to which highly skilled technical personnel were being poached by the private sector and what steps the industry itself was taking to ensure that the Department's capacity to enforce regulations was not compromised by this trend.

Ms Hermanus noted the merits of compiling a database of suitably qualified people from HDSA communities from which potential new recruits could be drawn. She expressed hope that learnership contracts would facilitate the retention of trainees, at least for a specific post-training period.

Ms Hermanus assured members that the Botswana campaign and the implications of its outcomes for South African programmes would be explored at the forthcoming summit on HIV/AIDS. She advised the committee that guidelines on programmes aimed at reducing the impact of HIV/AIDS on mining were in place to which the industry as a whole was committed.

On the issue of private sector skills poaching she commented that, although the industry in general remains committed to effective regulatory enforcement, some mining houses are of the view that the service should be privatised anyway.

Ms Hermanus referred members to the Department's annual report for statistics on mine-related fatalities, noting that slow progress in implementing some areas of Act 29 of 1996 was beginning to give clearer perspective to the challenges implicit in putting ambitious new legislation into practice.

Mr N Moloi, Deputy Director-General, Mineral Development, advised the committee of the successful conclusion of the Department's eight-year programme aimed at transforming the mineral resource industry to correct past imbalances and to ensure the industry's commitment to equitable and sustainable socio-economic development. He appraised members of developments in implementing the National Mining Promotion System (NMPS), noting the extent to which the administrative component of this new system should reduce turn-around time in processing mining licence applications and the anticipated impact of the broad-based socio-economic empowerment charter (Mining Charter) on mine ownership and management profiles over the next ten years.

Regarding environmental management, Mr Moloi advised the committee that a strategy was now in place for identifying the owners of abandoned mines impacting negatively on the environment and holding them accountable. He assured members of ongoing improvements in the Department's capacity to enforce new policies and related legislation in respect not only of environmental management but also in implementing the social plan aimed at addressing the implications of down-sizing and mine closure for affected communities.

The committee was appraised of the many challenges faced by the Department in implementing the Mineral and Petroleum Resources Development Act (28 of 2002), which will be dependant on the promulgation of the Money Bill and the Mining Titles Registration Bill, as well as on the development and implementation of an appropriate regulatory framework.

Mr Moloi advised members that the restructuring required for the effective monitoring of compliance with black economic empowerment (BEE) objectives was now complete and that, where appropriate, relevant new competencies had been introduced.

Small-scale mining continues to present significant challenges, with the success of pilot projects varying according to the level of intervention required. Tensions continue to exist between the need for programmes that will protect and sustain subsistence mining and the need to facilitate the growth of the profitable small-scale mining sector. Economic development beyond the life of a small-scale mining operation remains an area of concern.

Professor I Mohamed (ANC) asked for clarity on the issue of transfer payments and why these have increased. He also enquired whether personnel increases would adequately meet the demands of each stated objective, commenting on the need for measurable targets.

Mr S Mongwaketse (ANC) congratulated the Department on the extent to which efforts at revitalising the industry appeared to be bearing fruit. He expressed concern about the length of time promulgation of the Money Bill was likely to take and the implications of this for the implementation of the Mineral and Petroleum Resources Development Act. He also urged the Department to further reduce the turn-around time on processing applications for mining licences and the importance of arriving at a clear ruling on mine dumps.

Mr E Lucas (IFP) asked for a timeframe on the promulgation of the Money Bill. He also drew the Department's attention to the need for a more civil, humane and empathetic approach on the part of officials in dealing with the enforcement of departmental regulations. Emphasising the potential for job creation in minerals beneficiation, Mr Lucas enquired what practical steps were being taken on this issue.

Ms N Cindi (ANC) expressed concern about difficulties experienced by small-scale mining operators in accessing departmental institutions.

Mr Moloi advised the committee of contributions to the Industrial Development Corporation (IDC) for the provision of support to small-scale mining initiatives that were responsible for the increase in transfer payments. He conceded that the time taken to process mining licence applications was often unnecessarily prolonged, expressing confidence in the capacity of the new NMPS to address this and the many factors contributing towards recurring processing delays. He assured members that the attitudes of officials would improve as training programmes aimed at improving service delivery proceed.

Mr Moloi reminded members that the Money Bill is a National Treasury responsibility, nevertheless advising the committee that the Bill is currently with Cabinet and that public submissions should be invited soon. Transitional measures had been built into the Mineral and Petroleum Resources Development Bill to manage the impact of any further delays in the process of promulgating related legislation on proceeding with key implementation programmes. Submissions on the Mining Titles Registration Bill were currently being incorporated into the text of the Bill by the state's law advisors and that promulgation was expected by mid-year.

On the issue of old mine dumps and the economic opportunities and environmental liabilities underpinning their ownership, Mr Moloi advised members that Mintek was looking into this matter.

He noted the potential of minerals beneficiation to create jobs, advising members of the committee that the Mineral and Petroleum Resources Development Bill does address this and, particularly, regulatory problems around handling and utilising gold and diamonds for this purpose.

Mr Moloi reminded the committee that the Mining Charter determined equity targets for the private sector and that, as a result, the Department itself sets only internal targets.

Mr G (ANC) commented that delays in the processing of mining licence applications appear to stem from inefficiencies in Pretoria rather than in the regions. He also alerted the Department to a perception that the large mining houses were deliberately obstructing broader access to good mineral deposits and appealed for measures to address this, suggesting that less time and effort should be devoted to pleasing big players in the industry at the expense of HDSA communities.

The Committee Chairman emphasised that the implementation rate on key priorities in this regard must improve and the committee briefed accordingly so that it could assist the Department in meeting its targets and, where possible, share ownership of the programmes entailed.

Briefing by Deputy Director-General, Hydrocarbons and Energy Planning,
Dr R Crompton
Dr R Crompton, Deputy Director-General, Hydrocarbons and Energy Planning informed members of the committee on progress in the introduction of new legislation including the Petroleum Pipelines Bill, the Gas Money Act, the Draft White Paper on Renewable Energy and the Energy Bill. He advised members that the need to incorporate legal and constitutional developments into the process of arriving at amendments to the Petroleum Products Act had been responsible for delays in this particular legislative process. In regard to the proposed Integrated Energy Plan, Dr Crompton informed the committee that the process of synthesising information from reports submitted by a wide variety of stakeholders is now in progress. If promulgated, the Energy Bill would empower the Department to collect data critical to the planning process that, currently, was not readily accessible.

Referring members to a press conference in progress, Dr Crompton confirmed that Petro South Africa had now been formally launched. He also reminded the committee of recent developments in respect of changes in the formula for calculating the price of liquid fuels and the positive economic implications of this. Regarding proposals for regulating the liquid petroleum and gas (LPG) industry, Dr Crompton advised members that interactions with producers on this issue had drawn attention to aspects of the proposed regulatory framework that could be in breach of the Competitions Act . Approval had since been granted for the process to proceed as planned.

On the issue of greenhouse gas emissions, Dr Crompton appraised members of developments during the World Summit on Sustainable Development (WSSD) and, in particular, the need for progress in securing commitments from the coal industry and Eskom to the use of low-smoke fuels in South Africa's inland residential areas still dependent on coal for cooking and heating. He advised the committee of the establishment of the Clean Soweto Air Fund to finance this initiative.

In closing, Dr Crompton regretfully confirmed developments in respect of the Kudu gas field in Namibia, where disappointing geological results had prompted key investment partners to withdraw from the project.

Discussion
Mr E Lucas (IFP) enquired why Eskom and the coal mining industry had chosen not to endorse proposals for the use of low-smoke fuels in South Africa's inland residential areas.

Mr G (ANC) asked whether other prospective investors exploring the potential of the Kudu gas field had also withdrawn from the process and, if so, what had happened to the exploration information concerned. In the light of impending war in the Gulf region and the implications of this for the security of South Africa's liquid fuel supplies, every effort should be made to optimise opportunities for self-sufficiency. He also enquired whether the LPG regulation process was working towards introducing a single regulator.

Dr Crompton replied that proposals for cleaner inland residential air required financial contributions from Eskom and the coal mining industry but that discussions would nevertheless be taken forward.

In response to an enquiry from the Committee Chairman as to when these discussions were expected to resume, Dr Crompton explained that low-smoke fuels were beneficiated and therefore more expensive than raw coal. The process of arriving at competitively priced low-smoke fuels that comply with South African Bureau of Standards (SABS) specifications could be costly. Nevertheless, the Department was already engaging with the National Treasury on this matter and had also piloted a programme in Orange Farm aimed at educating people on ways of lighting fires that will reduce emissions.

Regarding the Kudu gas field, Dr Crompton reminded members that this was a Namibian project. As in South Africa, existing legislation allowed shareholders to retain exploration data for one year on a 'use or lose' basis after which that information automatically became the property of the Namibian government. He advised the committee that, together, Petro South Africa and Sasol already supply thirty per cent of South Africa's liquid fuel requirements, thereby providing a reassuring buffer to any negative impact of international developments on crude oil supply. Strategic reserves provide an additional buffer. Nevertheless, although no interruption in supply was anticipated as a result of developments in the Gulf, crude oil prices were likely to be affected. With this in mind, measures may well have to be introduced to reduce speed limits on South African roads and to enforce changes in driver behaviour with a view to reducing fuel consumption.

Dr Crompton advised members that the proposed regulation of LPG products would work towards introducing a single regulator and that this would entail repealing the three existing Acts concerned, replacing them with a single, integrated Act.

Noting time constraints and the number of agenda items remaining, the Committee Chairman then asked members to address any further questions directly to Dr Crompton in writing.

Briefing by Deputy Director-General Electricity, Ms N Magubane
Ms N Magubane, Deputy Director-General, Electricity, appraised committee members of developments in arriving at mechanisms for the provision of free basic electricity to poor households, noting that provincial and local government would implement this policy. She advised members of the status of the Electricity Supply Industry (ESI) and Electricity Distribution Industry (EDI) Bills, both of which should soon be made available for public comment with a view to being promulgated by the end of the year. Noting that one billion rand had been dedicated to implementing the Integrated National Electrification Programme over ten years, aimed at ensuring universal household access to basic electricity services and the electrification of all schools and clinics, Ms Magubane appraised the committee of reasons behind the accumulating backlog, low delivery-levels by some municipalities and the non-utilisation of allocated funding by others as well as measures in place to address these difficulties. She advised members that, in view of the high cost implications of providing basic electricity services to remote rural areas with the highest levels of poverty and the extent to which this could jeopardise service delivery, alternative technologies were being explored.

Ms Magubane confirmed that investigations were continuing into restructuring the South African Nuclear Energy Corporation (NECSA), advising members that proposals for the management of radioactive waste in South Africa were currently with Cabinet. In compliance with the regulations concerned, the ongoing assessment and improvement of physical security at South Africa's nuclear installation continued to receive attention.

Discussion
Mr N Ngcobo (ANC) requested more detailed information on the restructuring of NECSA.

Mr J Nash (ANC) requested confirmation that the provision of free basic electricity to poor households was now policy and was assured by Ms Magubane.

Mr S Louw (ANC) enquired if in view of an already full programme for the current parliamentary term, Parliament will be required to consider the ESI and EDI Bills during the second term for 2003 and whether provision has been made for this.

Professor I Mohamed (ANC) requested clarity on the status of discussions on pebble bed modular reactor (PBMR) technology in the South African context, enquiring whether Eskom had, in fact withdrawn from this process as is the perception in some quarters.

Mr N Ngcobo (ANC) asked for more detail on proposals for the management of radioactive waste and enquired whether the construction of a PBMR plant would form part of the NECSA restructuring process. He also enquired whether the recent decommissioning of existing nuclear power facilities was in line with current policy developments.

Mr S Mongwaketse (ANC) expressed dismay at the modesty of plans for electrifying only nine more clinics during the coming year.

Mr G (ANC) enquired to what extent the electrification of provinces with the highest backlogs, most densely populated rural areas and areas with the highest levels of poverty was likely to delay implementation of the National Electrification Programme in other, non-prioritised provinces. He also asked what measures were in place to ensure that municipalities comply with specific standards of quality control in implementing the programme, commenting that many may not have the capacity to respond adequately to programme requirements in their areas. He expressed hope that standards would exceed those of previous programmes.

The Committee Chairman requested a list of all municipalities that had returned Departmental allocations for the programme.

Ms N Mtsweni (ANC) asked whether municipalities experiencing difficulty in spending their entire allocations and meeting their targets in time had the capacity to do so by the end of the extension period on 30 June 2003.

Mr E Lucas (IFP) applauded the prioritisation of remote rural areas and the decision to explore alternative technologies for the provision of basic electricity services.

In response to questions on the National Electrification Programme, Ms Magubane regretfully advised members of the committee that, currently, only nine clinics among those still to be electrified could afford to pay for electricity once the necessary infrastructure is in place. Accordingly, developments in the Departments of Health and Education will continued to inform planning and budgeting for the electrification of clinics and schools over the ten-year period concerned. She reassured members that, while priority provinces and areas received the highest allocations, this should not impact negatively on implementing the programme elsewhere in South Africa.

Ms Magubane assured the committee that spot checks were regularly conducted in respect of the financial and technical capacity to effectively spend allocations at local government level so that the quality of electricity services provided by municipalities was not compromised.

In response to a question from the Committee Chairman regarding the need to address disparities in the quality of infrastructure already in place according to the socio-economic status and, by implication, racial composition of residential areas, Ms Magubane explained that many municipalities were waiting for the industry itself to be restructured before spending their allocations. Once the ESI and EDI Bills had been promulgated, business-planning units utilising skilled personnel seconded from Eskom would work with provincial governments in facilitating service delivery at local government level. Ms Magubane advised members that municipalities who cannot realistically meet the 30 June deadline would be monitored closely with a view to asking Eskom to intervene in providing the necessary infrastructure if necessary. She undertook to furnish the committee with a list of municipalities who had returned their allocations to the Department.

Ms Magubane promised to liaise with Mr Louw in his capacity as Chief ANC Whip with a view to fast-tracking the process of promulgating the ESI and EDI Bills.

Regarding investigations into the use of PBMR technology for the generation of power, Ms Magubane advised that this technology was financially viable and that the matter was currently with Cabinet. She confirmed that Eskom had withdrawn from the process. Ms Magubane then referred other nuclear-energy-related questions to Mr T Maqubela, Chief Director, Nuclear Energy.

Mr Maqubela appraised the committee of developments in the restructuring of NECSA, advising members that existing competencies in respect of chemical and nuclear technology would be corporatised as profit-making entities. He advised the committee that knowledge and expertise in the field of radioisotopes would be incorporated into the health system.

Regarding the management of nuclear waste, Mr Maqubela informed the committee that the Departments of Health, Water and Forestry, Environmental Affairs and Tourism and Minerals and Energy were reviewing existing policy jointly. Once new policy proposals have been presented to Cabinet they would follow the usual legislative process. He advised that, currently, policy did not allow for nuclear waste to be exported.

Mr Maqubela informed members that a decision was awaited from the Department of Environmental Affairs and Tourism on the environmental impact assessment conducted in respect of the proposed nuclear energy plant. While decommissioned enrichment plants cannot be adapted to accommodate PBMR technology, some buildings at these plants could nevertheless be utilised.

Noting the limited time available for attending to the balance of business for the day, the Committee Chairman asked members to forward any further questions to Mr Maqubela in writing.

Briefing by Department's Chief Financial Officer, Ms N Pityana
Mrs N Pityana, Chief Financial Officer,presented a summary of the Department's budget for 2003/04 and an analysis of above-baseline allocations.

Professor I Mohamed (ANC) requested clarity on a significant decrease in the allocation for nuclear energy as opposed to an increase in the allocation for nuclear energy management.

Mr J Nash (ANC) asked for clarity on the increasing allocations for audit fees in respect of the Cahora Bassa loan to Portugal.

Mr S Mongwaketse (ANC) asked what proportion of the IDC transfer had directly benefited small-scale mining operations and how such operations might access information on the budget concerned.

Ms Magubane explained that the increased allocation for nuclear energy management made provision for professional fees that previously resided with NECSA.

Regarding the Cahora Bassa loan, she advised members that the figures concerned represent audit fees on capitalised interest. In the light of proposals for the restructuring of Cahora Bassa, auditing fees would continue to be paid until a decision had been reached on the loan itself.

Mr E Lucas (IFP) enquired about the merits of writing off the loan, to which Mr G Oliphant (ANC) retorted that a decision in this regard would need to be properly informed.

The Committee Chairman questioned the cost-effectiveness of the current arrangement, to which Ms Magubane replied that the two-hundred-and seventy-one million rand still outstanding could prove to be a useful bargaining chip in negotiating ownership of the Cahora Bassa scheme during the restructuring process.

Ms Pityana asked the committee to submit a written request for details of the IDC transfer, advising that this information should be available the following week. Noting that a whole directorate had been dedicated to facilitating effective small-scale mining and related issues, she expressed confidence that the programme emerging should address the issue of access to relevant information.

Professor I Mohamed (ANC) alerted the Department to a typographical error in respect of the 2002/03 allocation for assistance to mines and was advised that this should, in fact, read as twenty-eight million, nine-hundred and fourteen thousand rand.

Mr S Louw (ANC) enquired about the roles of business and labour in financing programmes aimed at reducing the impact of HIV/Aids on mining, to which Ms Hermanus replied that, since programme implementation was an industry responsibility, the costs entailed were met by business.

Mr Louw also asked how many mine health and safety inspectors were currently in service, to which Ms Hermanus replied that of a total staff complement of 265, 189 were inspectors.

In response to a question from Mr Louw about implementation in respect of outstanding aspects of the programme for minerals development once the Minerals and Petroleum Resources Development Bill had been promulgated, Ms Pityana advised members that most of the newly created posts had been filled with this in mind.

The Committee Chairman felt confident the information gleaned from the briefing would prove invaluable in laying a firm basis for structured interaction and cooperation between members and the Department on issues of policy implementation.

Briefing by Eskom
In welcoming the Eskom delegation to the meeting, the Committee Chairman expressed hope that the briefing and discussions to follow would mark the beginning of a closer working relationship aimed at improving the lives of ordinary South Africans and ensuring that Eskom itself remained a leading international player in electricity generation, distribution and supply.

Mr T Gcabashe, Chief Executive Officer of Eskom, informed members of developments at Eskom, its achievements domestically and in the context of the New Programme for Africa's Development (NEPAD) and its global position as a wholly state-owned business entity. He focused, in particular, on Eskom's achievements in BEE, the regional scope of the Eskom distribution grid and plans to reinforce this by way of heavy capital investment over the next five years, and the trend towards reducing primary energy and operational costs with a view to doubling net profit and significantly reducing debt equity ratios over the same period. Mr Gcabashe advised committee members that, in the short term however, a slow-down in sales growth was anticipated as Eskom concentrated on extending its services in keeping with its commitment to the national electrification programme. No new power stations were envisaged over the next five years, although three stations 'mothballed' during the 1980s would be re-commissioned.

The Committee Chairman asked Mr Gcabashe for his perspectives on Eskom's non-cooperation on the issue of cleaner air for South Africa's inland residential areas and was assured that this would be investigated.

Ms B Tinto (ANC) enquired how a recently announced intention to increase electricity prices is justified in the light of Eskom's healthy net profit.

Mr J Mongwaketse asked about the origins of the name 'Eskom', why service delivery in the context of the national electrification programme continued at such a slow pace despite significant increases in expenditure, in which areas of Eskom's business BEE policies had made the greatest impact and what arrangements had been made to ensure that revenue from taxes paid by Eskom benefits the Department itself. Was the envisaged slow-down in sales growth likely to lead to retrenchments.

Professor I Mohamed (ANC) asked for clarity on the rationale behind plans to increase the price of electricity, particularly in view of developments in Soweto. He questioned the effectiveness of arrangements in place for departmental allocations to Eskom in the context of the national electrification programme.

Mr E Lucas (IFP) appealed for improved communication on the issue of proposed price increases and enquired to what extent the successful BEE programme at Eskom was leading the way for similar interventions elsewhere.

Mr N Ngcobo (ANC) enquired about the status of South Africa's 'mothballed' power stations, whether lessons could be learned from technologies utilised so effectively by the former Soviet Union in extending its vast distribution grid, and whether plans for the construction of more power stations was in line with the Generation 4 initiative. He also drew Eskom's attention to the potential of PBMR technology to impact positively on electricity generation.

Mr G (ANC) requested more detail on planning for spare capacity, proposed distribution programmes for elsewhere in Africa, the proposed re-commissioning of 'mothballed' plants, employment equity targets and the rationale behind predictions of a slow-down in sales growth.

Mr J Nash (ANC) enquired how the re-commissioning of 'mothballed' power stations was to be financed.

Ms N Cindi (ANC) expressed concern about the safety of communities without adequate street lighting.

Mr Gcabashe explained that, while the wholesale price of electricity had decreased significantly in real terms, savings for retailers was not always passed onto the consumer. Advising members that no price increase had yet been officially announced, Mr Gcabashe nevertheless commented that a policy of steady but minimal increases over the years tended to be a more efficient way of ensuring an improved return on assets than a sudden price hike, which could disrupt heavy industry. He assured the committee that the vandalism of meters in Soweto had been contained.

The Committee Chairman and Professor I Mohamed (ANC)reminded Mr Gcabashe of issues underpinning expressions of dissatisfaction in Soweto regarding electricity supply and, in particular, concerns in respect of disconnections as a result of non-payment.

An Eskom Distribution Manager advised members that, since faulty conventional meters were steadily being replaced with pre-paid meters, the majority of consumers in areas like Soweto were now using pre-paid meters which place budgeting firmly in the hands of each household concerned. On the issues of credit management cut-offs and inaccurate bills as a result of illegal connections and vandalism, he assured the committee that negotiations were ongoing with all relevant stakeholders with a view to managing this more effectively and, possibly, writing off historical debt.

Mr Gcabashe informed members of the committee about the origins of the name 'Eskom', which had been a branded name since the 1980s.

Regarding the slow rate of delivery in respect of the national electrification programme, Mr Gcabashe assured members that the planning and budgeting underpinning what was now a coordinated national initiative should, in time, overcome difficulties experienced as a result of poor municipal capacity to provide the necessary infrastructure. Since there had been no slow-down in service delivery by Eskom itself in the context of the programme, this would appear to suggest that the arrangement between Eskom and the Department was working well.

Mr Gcabashe assured members that the proposed five-year capital expenditure programme should create employment opportunities and that no retrenchments were envisaged as a result of the slow-down in sales growth.

Regarding Eskom's tax contributions, he reminded members that Eskom had always been a value-added tax (VAT) payer but that it had only been liable for income tax since 2000. Although no income tax had yet been paid to Inland Revenue Services (IRS), budgetary provision had been made for this.

Mr Gcabashe advised the committee that BEE policy had impacted on every aspect of Eskom's business, undertaking to submit details on this as soon as possible.

In response to the more technical questions posed, Mr Gcabashe undertook to refer these to the engineering division suggesting that members of the committee would benefit from a visit to one of the Eskom plants and the opportunity to gain first-hand information on many of the issues raised.

Regarding electricity distribution elsewhere in Africa, Mr Gcabashe informed the committee of ambitious and highly technical plans for an interconnected grid in the Southern African Development Community (SADEC). Linked to this was an arrangement in terms of which a Southern African power pool had been established based on bilateral trading arrangements and spot market trading on excess capacity between eight regional utilities. This arrangement had been in operation for six years and would go some way towards ensuring sufficient power for all its members. Domestically, the ongoing monitoring of supply- and demand-side options fed into a planning process aimed at developing new peaking capacity between 2008 and 2010 and new baseline capacity by 2012. International best practice and experience would inform decisions on which technologies to employ. Eskom would itself finance the proposed re-commissioning of 'mothballed' power plants, which could eventually operate as BEE initiatives. It was anticipated that the first of these plants would be back in service by 2006.

On the issue of a short-term slow-down in sales growth, the Distribution Manager advised members that sales volumes were largely determined by performance in the industrial sector and are therefore driven by the economy as a whole.

Mr Gcabashe advised the committee that Eskom met Reconstruction and Development Plan (RDP) employment equity targets a year ahead of schedule and that mechanisms for moving HDSA personnel from the supervisory band into higher levels of management were being explored with an emphasis on appropriate training for more responsibility as well as right-skilling. In this regard, gender equity would receive special attention.

He conceded that the safe use of electricity represented an ongoing challenge, nevertheless assuring members that public education campaigns and measures to adequately protect infrastructure would together continue to reduce accident and fatality levels. Regarding street lighting, the Distribution Manager reminded the committee that this was a municipal responsibility supported by Eskom making the necessary infrastructure available.

Regarding Eskom's involvement with NEPAD programmes, Mr Gcabashe advised members that this stemmed from the Southern African power pool initiative and that details of the five projects to be packaged and funded within the NEPAD development framework would be announced in due course.

On the issue of Eskom's decision to withdraw from the PBMR technology process, he hinted that this might be reviewed pending the outcome of discussions between the Eskom board and a ministerial sub-committee appointed by Cabinet to investigate the matter.

Mr N Ngobo (ANC) suggested that South Africa could benefit from lessons learnt internationally in this regard.

In closing, the Committee Chairman appealed for urgent measures to be taken in order to bring parity to the quality of infrastructure serving HDSA and non-HDSA communities.

Meeting was adjourned.