Stakeholders meeting on the rollout of electricity and accompanying challenges

Meeting report

Opening remarks

The Chairperson said the Committee conducted oversight on the Departments of Mineral Resources (DMR), Energy (DoE) and Economic Development (DED). Stakeholders from the energy sector had been invited to the meeting to brief the Committee on the universal access to electricity as well as the roll out of the Integrated National Energy Plan. This would help Members understand where the backlog was and the length of the pipeline. Since 1994, the tendency had been for officials to claim delivery was “in the pipeline”. It was important to know how long this pipeline was because delivery had to start happening urgently. The information was important because people needed to have access to free basic electricity. He failed to understand why people would still battle with electricity 20 years into democracy, and yet no-one seemed willing in accepting responsibility. The Committee wanted to understand how it could assist with the backlogs. The Committee would not take a destructive approach in trying to understand challenges. The important thing was to be of service to the people and collectively solve challenges. Parliament should join hands with entities to improve the lives of the people and deliver what it had promised together with government. People’s lives needed to be touched and bettered.

The Chairperson clarified that the National Council of Provinces (NCOP) was equally as important as the National Assembly (NA). Officials often made a mistake to think when they had appeared before the NA they had been to Parliament. NA was equally important as the NCOP. This was the House that was tasked with representing the interest of provinces and people on the ground inside Parliament.

Mr A Sincair (Cope; Northern Cape) said he was concerned that National Treasury (NT) was not at the meeting. The problems identified were related to a lack of funding, because often DoE had plans but was challenged for budget. He sought clarity on why NT and the Department of the Cooperative Governance and Traditional Affairs (Cogta) were not in the meeting.

The Chairperson responded that apologies had been received from the Development Bank of SA; South African Local Government Association (SALGA), the Fiscal and Financial Commission (FFC) and Cogta. All these stakeholders had received letters saying that apologies were not accepted as they had known for a while about the meeting. The Committee would write to all the departments as they owed the people an explanation as to why rollout was so slow. There was no reason why they should not be present at the meeting as they were written to soon after the decision was taken to have the meeting.

Mr Sinclair commented that the intention was to influence the adjustment of the Appropriations Bills, such that it allowed shifts within budget votes. He doubted that Members regarded the NCOP as important, especially as only five provinces were represented at the meeting. Where were the rest of the provinces? SALGA, which was an integral part to the NCOP, was not present. It was unacceptable that SALGA was not represented.

Department of Energy (DoE) presentation

Dr Wolsey Barnad, Deputy Director-General (DDG), Energy programme and Projects, DoE , said it was important to ponder the mandate when a programme had been running for over 10 years. Electricity distribution was entrenched in all the different policy changes, including the National Development Plan (NDP). The NDP stipulated that over 90% of the population should enjoy access to connection to the grid. The electrification programme belonged to Outcome 12 in the outcomes-based approached used by Government departments.

DoE contributed to the Presidential Infrastructure Coordination Commission (PICC) and the Strategic Integrated Projects (SIPs), by not only looking at delivering electricity to households but also supporting infrastructure projects in the country. The Department reported on four of the SIPs – 4, 6, 8, and 10 – but also reported on various outcomes of Government delivery programmes. Up to now progress had been realised; over 203 000 connections were made, and this was over what was targeted.

In that financial year – up to the end of August, 83 000 connections had been achieved. The Department was set for a high number of connections that year. The different infrastructure upgrades and new builds progressed well and by year end would be ready for implementation. Over 15 000 households would be connected using the island form of connection. This was making good progress in KwaZulu Natal. The non-grid programme was also becoming an important programme for DoE. There were challenges, such as a lack of knowledge from customers. The funding model for the non-grid programme made it unattractive. This should be improved. Municipalities and Eskom were not at all involved in this.

DoE needed to provide other fresh investments to the infrastructure. The Development Bank of Southern Africa (DBSA) had signed an agreement with the Department. Long term infrastructure programmes were funded by DBSA and the bank had been supportive to the Department. There was a pool of municipalities that had applied and qualified for the allocations. He provided the list of municipalities that were benefiting. The Department was not getting approvals from NT. There was still a huge number of households that had not been provided with metered supply of electricity. DoE should plan around the figures.

Census figures in 2010 indicated that 85% of households used electricity for lights. Confusion reigned on the definition of a household. From this time more households had been electrified, but there were still a number of households that needed to be addressed. Two challenges contributed to the backlogs and included the fact that the electricity distribution ran short on infrastructure. The Electricity Distribution Infrastructure (EDI) had been under strain for the past couple of years. The programme was implemented with a view that it would deal with the backlogs.

The country needed to move away from the view that connection was only to the grid, if it were to achieve the 90% connection of households by 2025. The outstanding households would be supplied by the non-grid systems. The rollout programme was easy in the early years; dynamics had changed and that necessitated that DoE follow a specific plan. The Medium Term Expenditure Framework (MTEF) allocations that had been made and discussed with NT were in the presentation, and the rollout was based on the figures.

There was a master plan that would assist the country deliver much quicker. The Department was committed to achieving universal access by 2025, but that would largely depend on the funding that was available. The Department could employ more than 100 engineers annually if there was sufficient funding, and that there was enough work to keep them occupied for a year. If the country wanted to achieve universal access by 2025, strict compliance to the master plan was necessary. The EDI challenges would have to be addressed as well as the backlogs.

The danger of focusing too much on infrastructure backlogs was that there would be implications for connections and DoE needed to find the right balance. Cooperation among the spheres of government and various entities was non-negotiable if delivery was to be improved. Political support was required on the non-grid programme; it had been found that local councillors were a challenge to the programme. DoE could not report effectively if the municipalities failed to do their reporting. The Department was 100% committed to deliver.

Eskom comment

Ms Ayanda Noah, Group Executive: Distribution, Eskom, said there was total alignment between Eskom and what DoE had presented. This signalled the working relations that were there, but also that all stakeholders were committed in achieving universal access. It was important that when one looked at the numbers should bear in mind that focus was on the contribution that Eskom made to the implementation of electrification programme. Eskom was a vertical company that dealt with generation, transmission and distribution.

From the sales perspective the company had sold 216 000 gigawatt hours, and had 5 million customers on the database. The company’s mandate was simply to provide reliable electricity and also to partner in industry issues. Restructuring issues within the EDI programme still needed to be addressed especially electrification. One could not put additional customers on networks that were not performing. Distribution division was committed in partnering in the industry and the EDI. The electrification connections sector had a potential to create a number of jobs. Last year about 4300 jobs were created on the electrification programme.

On the planning side the company produced two key documents, the Networks Development Plan – updated every three years and was a licence condition - and the Distribution Master Plan which was a longer term document. This was a plan for all customers and informed Eskom on how it should go about planning and allocating resources to provinces. A note focus study would then be compiled to indicate where upgrades would happen. On the input side one had to get the stakeholders together in order to know where electrification would happen. If one did not match the demand supply there would be an increase in illegal connections. This often became a safety issue, and a performance issue in terms of the networks. The networks capacity was crucial.

The master planning process was in-depth and important. It helped with production plans in terms of the material that the company required. Government policy also assisted as was the case with the NDP; Eskom knew what was required but also needed to be creative in identifying areas where growth opportunities existed. Interaction with municipalities was crucial especially on the Integrated Development Plans (IDPs) to ensure there was alignment, but also to ensure the required connections were met.

Increased funding would provide much relief in the networks. Ms Noah showed the Committee a graph which she said was crucial, as it detailed where Eskom could make connections. The tendency was that electricity demand increased in winter and electricity tripped often. As the graph indicated illegal connections contributed to that. The country needed to release congestion in order for Eskom to do electrification. This largely hinged on the National Energy Regulator SA (NERSA) determination that was made for MYPD3 (multi-year price determination 3). Eskom applied for R54b from the distribution point of view and it wanted to do strengthening, refurbishments and liability. NERSA allowed R43b and this was short of what was asked for.

Other divisions from Eskom would have to be prioritised and this was being attended to. This was a major challenge. There were backlogs in the Eastern Cape (EC), Limpopo, Gauteng as well and KwaZulu Natal (KZN). These were provinces that had to be focussed on. In provinces like Gauteng and KZN one found multiple stands on an earth and this challenge was being addressed with DoE. Provinces that had rapid economic activity had a lot of cross-subsidisation in terms of the electrification cost. The challenge that Eskom had with the MYPD3 application that had been approved was that amounts that were approved limited Eskom in terms of what it could do in terms of customer growth. The network upgrades funded by Eskom became a challenge as a result of municipalities that exceeded what their infrastructure could handle. In such areas it became a challenge to connect more customers. Other challenges concerned sparsely located communities and skills within Eskom. This was an area that required effort if Eskom would deliver at an accelerated rate.

It was important that the entity finalised the master plan. This would be used as a guideline to indicate where electrification would be done. It would also address the issues that people raised where the quality of the grid was not the same as the grid supply. This might have happened in the olden days; historically that might have happened in the past. Those service levels would need to be aligned. The people that had the off-grid systems also felt they did not loose on the 50 kilowatt hours.

The housing programmes were a challenge for Eskom. A number of projects had to be abandoned because housing projects were not being delivered. In some instances people were moved from electrified informal settlements to formal housing projects with no electricity. There was a need to harmonise Eskom programmes with the housing department. Multiple houses on a stand should be addressed. It was key for Eskom to receive funding in order to deliver on the programme, otherwise it would be difficult to implement if there was no money for the programme.

Municipal Infrastructure Support Agency (MISA) presentation

Mr Shephard Gadzikwa, Energy Sector Coordinator, MISA, said the presentation would outline the entities support programmes contributing to the achievement of the investor access to electricity and ensuring sustainable energy supply. MISA’s mandate was to provide technical capacity to municipalities for improved delivery and service provision. MISA’s programmes mainly supported low and medium capacity municipalities – not the metros. These municipalities continued to struggle with development of infrastructure and service provision.

Key focus areas had been on water, sanitation, waste management, energy, and roads and storm-water. Areas of performance for MISA were guided by government policies such as the NDP, New Growth Path (NGP), the SIPs, as well as the broader legislative framework on energy supply. The focus of MISA programme on energy was intended to address electricity backlogs, as well as maintenance and refurbishing of existing infrastructure, and contributing to technical skills development.

The establishment of MISA in 2012 was key for local government as it was meant to support and build technical capacity in local government. Anticipating the formation of MISA, Government then disbanded the Siyenza Manje which was administered by the Department of Public Service and Administration (DPSA). Siyenza Manje had two components: there was a finance component, which during the unbundling moved over to National Treasury; and then the technical component, then moved over to MISA. Officials often thought MISA was a funding mechanism, and yet it was founded to provide technical support.

MISA had been allocated an operational budget of R820m over the Medium Term Expenditure Framework (MTEF). This may seem like a lot of money, but when compared to the needs on the ground, over a period of three years, the money was inadequate. MISA had a two-pronged mandate: to provide technical support and also to develop planning programmes for municipalities. It was not within MISA’s mandate to provide grants, although there were departments that thought MISA was there to give funding.

MISA had three programmes that were being implemented: Municipal Technical Support; the Sector Support Coordination Grant; and Capacity Development. These were key and strategic programmes that talked to the need to promote and capacity. MISA offered bursaries in the engineering sector with a view to building a pipeline. The shortage of engineers in local government had to be continuously addressed. Often, once qualified the engineers were poached by the private sector. This programme sought to address that challenge.

MISA, although new, had done some work in the field of energy, but surely not to the point of satisfaction. The entity sat at the board of the NEHC that met every second month on the INET programme. The intention was to try and identify challenge for INET; based on this MISA would then direct its technical experts to where support was required. MISA also sat at the national steering committee that looked at the implementation and rollout of the distribution of assets programme. All these were programmes within the Department. Another programme that also MISA undertook with Eskom was Adopt a Municipality. The programme entailed supporting struggling municipalities. It was implemented in collaboration with Eskom, and 27 municipalities had been identified.

MISA had supported about seven municipalities around Gauteng. There were a number of electrical engineers that the entity had, but hoped it would expand that so that it could attend to as many municipalities as possible. MISA realised it was short staffed to cover a larger area and then went to procure additional services. Investors needed to inject money into the programme, but also address high technical losses of electricity.

The Presidential Infrastructure Coordinating Commission (PICC) programme took a decision to recommend that municipalities follow a central procurement approach when purchasing electricity. The approach was intended to apply for both the purchase of equipment for electrification infrastructure and of existing infrastructure projects. This would be discussed with the Department and Eskom as their procurement system would be used. Discussions would have to happen around this as municipalities were likely not to like this. MISA was linked to two SIPs – 8 and 10 – that were related to energy.

Most municipalities were faced with massive and growing backlogs. MISA had a programme of refurbishment and maintenance. Municipalities did not allocate adequate funding for the distribution of electricity in order to achieve the universal access. Technical support could be provided but there was a need for Eskom and DoE to have the necessary funding to roll out accordingly. There was poor uptake of alternative energy. There was a big of challenge to have renewable energy being accepted by the communities as well as municipalities. This might change if the political leadership could intervene. Stakeholders needed to foster strong relations so that they could leverage from each other expertise. In trying to beef capacity, MISA had taken a decision to appoint 9, for now, electrical engineers, one per province. The intention was to have these experts work closely with DoE regional managers. If there was a need to add on this support, MISA would need to look into that.

Discussion

Mr K Sinclair (Cope; Northern Cape) said the Committee needed to agree on what needed to be done from a budget perspective. The critical policy question that Eskom needed to answer was whether it was right to continuously drive electricity monopoly in the country. Underlying many of the challenges that had been raised related to the fact that the country created “the elephant in the room” (Eskom). The country should not continue to make the elephant bigger; it should create small little elephants also. He noted that the big elephant spoke as if it wanted to get bigger. Nowhere in Eskom’s presentation was it pointed to the need of smaller enterprises to counter the challenges. Eskom had become too big and Members needed to make it small.

Mr Sinclair said the funding model that DoE referred to did not reflect in the documents that were given to Members. This was not necessarily a finance committee, but it dealt with the budgets. Continuously there were issues about budgets constraints. There was a need to move the focus of Government away from the social portfolios, rather focus on those that grew the economy. The Fiscal and Financial Commission (FFC) should come up with possible proposals as to how to go about this.

Mr Sinclair said that it was an unfortunate reality that public representatives could have wonderful plans, but if they were not implemented then the objectives were a waste of time. The challenges raised by MISA were based at municipalities. These had to do with the fact that local government did not have capacity to deliver. He concurred with MISA that there was a lack of political will to push implementation. The implementation phase was the most important factor. If Members did not take a position in the Division of Revenue Bill that instructed that funds be shifted among votes, things would remain as they were.

Mr J Nyambi (ANC; Mpumalanga) said presenters reflected well on what was happening in provinces. He requested clarity from MISA on the statement that universal access could only be reached in 17 years. It would appear there was a challenge of coordination. How could Members come in and assist so that there was an improvement when it came to coordination?

Ms C van Lingen (DA; Eastern Cape) said the conversation was as incomplete as the last time. NT was not present, and yet they proclaimed that they were not availing any more money as R38b was already in the system. Where was this money? One could not talk to DoE and Eskom in the absence of Cogta and SALGA.

Ms van Lingen raised doubts about MISA’s claim that it was founded for technical support, and asked how big the entity was. She said MISA was not involved with the Coega Municipality in the Eastern Cape (EC); the 27 municipalities that MISA supported were not enough. What would happen with those projects where top structures had already been provided? She failed to understand the role of MISA and said she was concerned the entity was another layer of bureaucracy.

Ms van Lingen said a situation where children still had to go fetch wood had to be done away with. She doubted that the country spent wisely in trying to electrify broadly. Too much emphasis had been on coal generated electricity as oppose to renewable energy. She cited a situation where an electric line was built to service a school for R18m, while it would have cost a R100 000 had renewable energy be used. Little regard had been given to cost saving measures. Why should the PICC decide all municipalities must procure centrally? How did this comply with local government policies and financial systems? What was the reason for having municipalities procuring centrally?

Ms B Abrahams (DA; Gauteng) asked if the 5 million customers that had been added to the grid had resulted in increased revenues. She asked about the overlap of networks, and asked when impoverished areas would be serviced.

Ms Abrahams sought clarity on the pilot project that had been installed in Chiawelo (Soweto, Gauteng) especially given that people had been protesting since the project started. What was this split system and why was it only implemented in Chiawelo?

Ms Abrahams asked what technical assistance MISA had been giving on the solar side. How many municipalities throughout the country received technical support from MISA?

Mr D Gamede (ANC; KwaZulu Natal) recorded an apology from the CEO of DBSA. He said he agreed with Members about the purpose of the meeting, as the last meeting indicated that decisions had to be taken. Presenters had indicated the need for more money and yet DBSA and NT were not present. The next two weeks were so significant because Parliament looked at the issue of budgets. He requested that the Committee specify an increased budget request for DoE and Cogta during adjustments.

Mr Gamede requested that the presenters indicate the target for the electrification programme, and said backlogs could never be addressed as electricity was a moving target. What was the strategy in terms of arriving at a reduced backlog figure? The country would not catch up with it.

Mr Gamede commented that he welcomed the training, but sought clarity on the retention strategy. Government could no longer tolerate a situation where it produced technical skills only for the private sector to usurp that skill. He requested that Eskom and DoE presented to the Committee exactly what they needed in two days’ time, and also indicated the programmes such funding was requested for.

Mr Gamede asked how well MISA was marketed especially in rural municipalities.

Overall responses

Dr Barnaad replied that Eskom did not report to DoE, except on its role and delivery in the electrification programme. The PICC environment drove infrastructure environment in the country. There was a perspective from Government that these entities ought to play a bigger role. This meant that all options to improve infrastructure should be looked at. An R1b increase was received, mainly for the distribution industry. This allocation did not address electrification. Electrification service had always been the driver for economic development and was opened to other technologies. The question on whether spending was wise in rural areas was crucial and it was further reason the Department needed the master plan. There was enough money for free basic electricity both on the grid and non-grid supply. NT ignored municipalities that did not have a policy to deal with applications for free basic electricity annually. Normally the problem lay with municipalities where they did not apply for the funds. He concurred that electricity provision was a moving target and this necessitated that Government planned in order to decrease it. One needed efficiency and to be aware of what happened on the ground, and be open to new technologies not only grid, but non-grid as well. In informal settlements where there was movement of those targets, DoE supplied them with solar geysers. He said the Department would provide the Committee with a list of funding sources it could expedite.

Ms Noah replied that the issue of Eskom being an elephant was a policy issue. When asked to re-organise the entity into an EDI, Eskom organised itself as such. Eskom was ready to go into that mode. The structure that was there in distribution was aligned with what was asked by Government but that did not go further. The organisation supported the structure.

A major challenge was that some customers did not pay their electricity bills. Eskom had acknowledged this challenge already and even threatened to cut those customers off. The Soweto debt was an issue; the payment levels in Soweto were a challenge. The township had about 200 000 Eskom customers. Only about 25% of the money was generated from the bills that were sent to those customers. This was concerning, and the organisation had decided that it needed to explore and implement in all the networks. She clarified how a speed meter worked.

The speed meter was used for safety reasons. Eskom noted an increase in public incidents as a result of the exposed networks, and also children played in these networks. Eskom valued safety for its customers highly. From a technical operations point of view Eskom derived a lot of benefits. If the systems were exposed they tended to cut off when there was rain. People could overload the system; Eskom tried to protect it so that it was able to provide reliably. If one was on a prepaid system, the person could manage their own consumption. This was piloted in Chiawelo and supplemented with solar geysers. The dissatisfaction in Chiawelo was that the programme was not being rolled-out throughout Soweto. The plan was to start rolling out in all of Soweto and that work had started in Orlando East. There were two suppliers in Gauteng – City Power and Eskom. She said Eskom would avail the kind of budget it required and that information would be forwarded to the Committee. A proposal had been put together over a year ago.

Mr Gadzikwa said electrical engineering apprentices were spread throughout the country and that MISA had the numbers available. In total there were 234, but the number excluded the current financial year. Apprenticeships were deployed for periods of 18 to 24 months. Other apprenticeships were in the fields of plumbing, biochemical, mechanics. There were about four of the areas that MISA provided support on to municipalities.

The retention strategy was a challenge. But whenever municipalities were deployed they signed an agreement that the municipality would adopt in a later stage. Recently MISA had received communication from a certain municipality to indicate that they were adopting the apprenticeships even before their initial contract had finished. There was a demand from municipalities. MISA currently had 91 bursary holders on electrical engineering services. Students were expected to serve MISA for the number of years they had been supported with the bursary.

There also was an orientation programme at municipalities so that students could adjust to the environment. The intention was to ensure local government became an employer of choice. District municipalities had also been roped in so that they could absorb those apprenticeships who could not secure employment when their apprenticeship contracts ended.

Mr Themba Dladla, Head: Municipal Technical Support, MISA, clarified that the R820m was a budget for the MTEF period, and for the current year MISA had a budget of about R214m. Out of 108 municipalities that had a high number of backlogs in the country, 92 were being supported through MISA. Over and above the support that had been offered, 25 professional service providers had been appointed and dispatched in various municipalities. He cited dolomitic areas that required specialised geo-tech knowledge. About 77 technical deployees – sometimes referred to as technical consultants - had been dispatched to municipalities.

These were professionals and they did a range of things. Coega was a recipient project of such people. They had offer support to the municipality with project and programme management of the MIG. They dealt with issues of planning and the actual implementation of the projects. That would require support with the implementation of MIG business plans, plans that had to be submitted to the Department of Water Affairs (DWA), and development of procurement plans.

Mr Victor Mathada, Executive Manager: Chief Executive Officer (CEO), MISA, said not much had been done to market the organisation. The plan was there for the organisation to go out and ensure it was known by municipalities. But the change political leadership also affected the plans. However, it was hoped that the leadership that was there would result in MISA going out and marketing itself. He indicated that even if MISA received funding, without the necessary capacity that could result in other problems. Since establishment there had been other things to deal with regarding the establishment and the operationalisation. The pace MISA was operating on should be improved in order to ensure municipalities built internal capacity to continuously provide the necessary services to communities.

One of the support areas that MISA focussed on was assisting municipalities with maintenance, operational, assets management plans, particularly infrastructure assets management plans. When dealing with issues of developing plans, that took into account how MISA was developing solar infrastructure maintenance systems. This was applicable to the question on the plan to reduce electricity backlogs. Funding, technology and efficiency of the system were all crucial when dealing with the backlogs. Another work that MISA performed was to assist municipalities with regards to refurbishment and upgrading of electricity infrastructure. This contributed to ensuring consistency in the provision of electricity.

Closing remarks

The Chairperson said that more time was required but the Parliamentary schedule did not allow for that. The country really needed an integrated approach on this delivery aspect. An aggressive plan was required into the future. Next year it would be 20 years since the country had a democratic government in place. How could it be explained to people after 20 years that things were still in the pipeline? The public would raise doubts about government planning if things just remained in the pipeline for so long. Parliamentary Committees needed to address the issue of funding from the fiscus. All stakeholders should be engaged on issues of allocation. The role of the private sector should never be undermined if the country was to achieve efficiency, and commitments on equity. Hopefully the legislation that would be coming up would address the challenges that were there.

The meeting was adjourned.