Sonjica, National Council of Provinces
7 June 2007
Chairperson
Colleagues
Members of Parliament
Ladies and gentlemen
The programmes of the Department of Minerals and Energy are geared towards
the upliftment of vulnerable groups, which include women and youth. Being the
month of June, where we celebrate the contribution made by our youth, we would
like to strengthen our endeavours to uplift them and integrate them more
meaningfully into our society and economy. In so doing, they will be able to
carry the baton, continue to alleviate poverty and create a better life for all
in our country beyond our time.
It is through the vibrancy, energy and enthusiasm of our youth, as well as
the compassion and perseverance of our women that we will achieve our
objectives of transforming and empowering all communities in our country. This
is why it is important for us to ensure that these groups have access to
opportunities in two of the sectors that are central to South Africaâs economy
â the mining and energy sectors.
Honourable members, the Department of Minerals and Energy (DME) is well
placed to heed the call made by President Mbeki of a South Africa that has a
sustainable energy supply and mineral wealth that is shared by all her people,
including our vulnerable groups. The budget that we are tabling responds to the
challenges and government priorities that have been articulated. I therefore
would like to table the Department's 2007/08 budget of R2.96 billion of which
63% is allocated to the electrification programme, which includes transfers to
Eskom and municipalities. The Department only receives 21% of this amount. In
the 2006/07 financial year, the Department was allocated a budget of R2.6
billion and members will be pleased to note that we spent 99% of that
budget.
Energy
Madam Speaker, Energy, both electricity and liquid fuels, are a necessity in
the lives of all our people, and one of the tools through which we can achieve
sustainable development in the country. As a result, capacity challenges that
have manifested themselves in frequent blackouts and fuel shortages have been a
concern for me as a Minister charged with the security of energy supply. These
are as a consequence of infrastructure constraints as well as the inadequacy of
some of the demand and supply plans that were put in place years ago. In
addressing these challenges we will present an Energy Master Plan which
incorporates a detailed energy infrastructure plan covering the next five years
(including 2010) by June this year. Following this, we will develop an
integrated energy modelling system that will inform integrated energy planning.
This modelling system which will be in place by 2009 will allow for data
capturing and the development of a long term energy plan.
In support of renewable energies, energy efficiency and planning we would
have, by the end of October 2007, introduced a piece of legislation that will
mandate provision of energy data and the use of healthy, safe, energy efficient
and energy friendly appliances.
Energy efficiency will be key in our comprehensive strategy aimed at
ensuring security of energy supply. This morning I launched an Intensive Multi
Media Energy Efficiency Campaign in partnership with the Department of Public
Enterprises (DPE), Eskom and other state organs. The campaign targets ordinary
households and industrial consumers with a view of influencing prudent consumer
behavioural patterns without negatively impacting on the economy.
Electricity
A few weeks ago the National Energy Regulator of South Africa (Nersa)
released an audit report conducted in 11 electricity distribution utilities in
the country. The report showed that the distribution industry's operations are
sub-optimal with an infrastructure maintenance backlog of approximately R7
billion. This scenario poses a serious challenge for the restructuring of the
electricity industry in the country and calls for the acceleration of the EDI
restructuring process.
To this end, I will be presenting the Electricity Distribution Industry
(EDI) Restructuring Bill to Parliament before the end of this year. This will
be in line with the Cabinet decision of 25 October 2006 in terms of which the
EDI will be restructured into six wall-to-wall Regional Electricity
Distributors (REDs) as public entities managed through the Public Finance
Management Act and regulated by Nersa.
Within the implementation of the Integrated National Electrification
Programme (INEP), the absence of bulk infrastructure, especially in rural areas
has put a strain on the performance of the programme. Last year an amount of
R282 million had to be channelled from electricity connections to bulk
infrastructure resulting in a reduced number of connections planned for the
year. This year again, out of a total of R1.4 billion allocated for household
electrification, a further R380 million has been set aside for the building of
10 substations. This year, we will electrify 150 000 households, 700 schools
and also improve the quality of supply in preparation for the 2010 FIFA World
Cup and beyond. We will eradicate the backlog of all clinics by the end of this
financial year and all schools within three years.
A challenge which continues to confront us is that most of our people
especially the vulnerable groups have limited access to energy to meet their
thermal needs. Even when they have electricity, they continue to use low-grade
coal and paraffin for heating and cooking. In studying ways to uplift the
vulnerable groups through efficient energy resources, we have launched a pilot
project in partnership with municipalities in Tshwane and Tembisile to provide
30 000 households with modern thermal fuels, in the form of LP Gas (LPG). This
pilot will allow us to review our regulatory framework on two counts: (1) the
promotion of a more energy efficient carrier like LP Gas as an electricity
demand side management initiative and (2) for the development of an appropriate
pricing mechanism for LPG. We have over years made noises that we thought would
trigger an appropriate market solution to the high LPG prices but it has
remained unacceptably high. We now have no choice but to regulate the LPG
industry.
Nuclear energy
The President in his SONA indicated that government will be accelerating
preparatory work to ensure greater reliance on nuclear energy and renewable
energies. With regard to nuclear energy, the Department recently tabled a draft
nuclear energy policy and strategy in Cabinet. The policy will guide the
expanded nuclear build programme and address the issue of investment in uranium
beneficiation. The policy will ensure that uranium output from our mines shall
always be used to first satisfy our own beneficiation needs. In keeping with
the empowerment of women, we will as we have in the past continue to support
their participation through the "Women in Nuclear South Africa" (WINSA)
programme.
Liquid fuels
Honourable Speaker, in response to the Moerane Commission's recommendations,
the Department together with the oil industry established a Fuel Strategic
Supply Task Team (FSSTT). The task team identified short and long-term
constraints and made proposals on how the identified constraints could be
eliminated. The initial indications pointed at a need for investment by
State-owned entities in pipelines, storage and handling facilities but further
analysis has also pointed to inefficiencies emanating from current industry
practices, especially in port and railway operations, which will have to be
corrected for security of fuel supply to be guaranteed. The FSSTT is finalising
plans, which are part of energy Masterplan, to take recommendations
forward.
Last year we started with the licensing of petroleum activities. Before the
end of the financial year, we will be rolling out petroleum licensing and
inspection services to our regional offices. We have received over 12 500
applications to date. We expect to issue all licences by the end of this
financial year.
The transformation of the petroleum sector has been slow. Licensing under
the Petroleum Products Amendment Act provides us with an invaluable tool to
effect transformation in the sector.
Biofuels
The draft biofuels strategy served before Cabinet last year and was
published for public comment early this year. We have just completed this
extensive public consultation process. The final strategy will be concluded
before the end of the financial year after all issues that were raised during
the consultation process have been extensively debated and addressed.
Integrated Energy Centres Programme
As part of our efforts to ensure access to energy by all South Africans, the
Department in collaboration with municipalities and some Oil Companies, has
committed to increase the number of Integrated Energy Centres (IECs)
countrywide. The main objective is to bring affordable and sustainable energy
services and information closer to the poor communities. A strategy and roll
out plan to establish more IECs until 2015 has been approved.
Energy summit
Previously, the role played by energy globally was under estimated but
recent geopolitical and technological developments have shown beyond doubt the
significance of energy in shaping economies and foreign policies of many
countries in the world. To this end I will be convening a stakeholder summit in
September, during which these issues would be discussed.
Mining
Honourable members, the commodities boom of 2005 continued into 2006. Sadly
this strong growth in mineral sales was initially not matched by any meaningful
fixed capital investment unlike in other mining countries. However, recently we
have noted a marked improvement in this area. We have also seen new Black
Economic Empowerment (BEE) compliant mines opening especially in Limpopo and
North West. Last week near Brits in the North West, International Ferrometal
South Africa was officially opened. This is a further sign of confidence in our
regulatory environment.
Reports about lack of direct investment in the sector resulted in the DME
conducting international road shows to understand the obstacles to investments.
In addition, we together with the Chamber of Mines and the National Union of
Mineworkers conducted a desktop study that helped provide us with an indication
of what some of the causes of this lack of investment were. We are also
organising an all-inclusive indaba for 11 June 2007, where we will be
discussing all the aspects of the industry in order to come up with concrete
strategies. All players as well as suppliers of infrastructure are urged to
attend. The results from this indaba will be fed into the work of the
Accelerated and Shared Growth Initiative for South Africa (AsgiSA) and possibly
form part of future Parliamentary debates.
Small-scale mining
The Department has continued to roll out its support to the development of
small-scale mining and for the first time, this year, extended this support to
jewellery fabrication projects as they are easily portable. Both these
interventions have an immense contribution to the second economy. With the
annual budget of R21 million we have been able to support for example four
projects in Limpopo to the tune of 14, 6 million and three in KwaZulu-Natal at
R7,2 million. Last year we received more than 80 applications for financial
assistance and we expect the figure to double this year.
Beneficiation
We are developing skills in the jewellery sector for our people to be able
to take leadership roles and for the provinces to be able to play a supporting
role when we start implementing the Diamond Amendment Act, the Second Diamond
Amendment Act and the Precious Metals Act before the end of August. These
amendments will usher in a more representative South African Diamonds and
Precious Metals Regulator to replace the South African Diamond Board. The
Diamond Exchange and Export Centre to be introduced will monitor the export of
diamonds whilst the State Diamond Trader would make diamonds available solely
to the diamond beneficiators. The State Diamond Trader will initially open in
Johannesburg but with time will permanently move to Kimberly to make Kimberly
the real diamond hub of South Africa.
Implementation of the Mining and Petroleum Resources Development Act
(MPRDA)
Our efforts to pursue and consolidate gender empowerment in the mining
industry have culminated in the revitalisation of South African Women in Mining
Association (SAWIMA) and the official launch of their national offices in
Johannesburg. Women empowerment is duly assured when womenâs organisations are
placed on sound administrative and financial footing. It is through SAWIMA that
we will continue to lend assistance to women in mining to ensure that this
sector does not continue to be the domain of men only.
Madam Speaker, our demonstrable will to facilitate the participation of
women and youth in the minerals and energy sectors saw the birth of yet another
sector group during 2006, Youth in Energy and Mining (YEM) which serves as a
vehicle to facilitate youth programmes and also to reach out to as many youth
in our country as possible. To further fulfil the objectives of the Joint
Initiative for Priority Skills Acquisition (JIPSA), the Council for Geoscience,
the Central Energy Fund (CEF) group of companies together with the University
of Fort Hare have entered into a collaborative programme for skills development
in the fields of geology, chemistry, and economics.
The Department has received 11 447 applications for various types of rights
since the promulgation of the MPRDA in April 2004. The number of applications
received is unprecedented in the history of mining in South Africa. I also want
to inform you that there is no backlog in respect of applications received, as
all applications are finalized within the timeframes prescribed in the
MPRDA.
The Department further utilises the MPRDA through its requirements for a
social and labour plan to intensify the "struggle against poverty" which also
act as a catalyst in the upliftment of the vulnerable groups. We want to ensure
that the communities where these mining activities occur survive beyond the
depletion of the ore-body. We appreciate the companies that have undertaken
some projects in this regard for example: the housing by Umcebo Mining at
Middelkraal in Mpumalanga; Housing projects by Lonmin, Hernic Ferrocrhome and
Aquarius at Bojanala District Municipality; and skills development centers by
Transhex, United Manganese of Kalahari and SAMANCO in the Northern Cape. We
expect the mining companies to continue acting as a catalyst for positive
change in areas where there could be little opportunities for economic and
social development.
A few weeks ago I had the privilege to meet 10 students from OR Tambo and 10
others from Taung who have been granted bursaries by Implats for their study as
part of the social and labour plan, which is one the pillars in the Mining
Charter. This is laudable given the fact that these are poverty nodes affected
by mining in different ways, one as a dense labour sending area and the other
as a hosting community.
Rehabilitation
A database for derelict and ownerless mines and a ranking system were
developed to assist the Department in prioritising the rehabilitation of
derelict and ownerless mines. This will form part of a bigger strategy on the
rehabilitation of derelict and ownerless mines to be finalised in the next
financial year. The rehabilitation of unsafe derelict and ownerless mine shafts
and subsidence project was initiated by the DME in 2005 and 600 of the shafts
and subsidence were identified. Forty-four extremely hazardous openings and
subsidence have been closed as part of phase 1. Of the 600, 201 are ownerless
and will become government's responsibility to close and rehabilitate in the
interest of the communities. Mining companies who are responsible for the
closure and rehabilitation of the rest (399) will be instructed to do so in
terms of the Mine Health and Safety Act, 1996. We will continue to forge links
with local authorities in identified these hotspots.
Mine health and safety
Honourable members, we must pay tribute to 199 miners who lost their lives
in the mines in 2006. Unfortunately, the mining sector failed to achieve the
targets agreed to in 2003, of reducing the fatality rate by at least 20% per
annum. A further analysis shows that the platinum sector had a 21% reduction in
fatality rates but there is still room for improvement. On Monday, three miners
lost their lives in a mud-rush accident at Paardekraal Mine. This matter is of
great concern. In response, the Department has put together an investigation
team of experts to assist us in getting to the root causes of the accident.
Last year there was a seismic event at Tau Tona that claimed the lives of
five miners. Subsequently I have called for a mini indaba to be held in
September 2007 in Carletonville to focus on technological solutions in
ameliorating the magnitude and the location of seismic events.
Conclusion
In conclusion, I would like to thank the two Chairpersons and members of
their committees, namely the Portfolio Committee and the Select Committee for
their unwavering support, as well as the Director-General and staff of the
Department for their loyalty and commitment to their work, Chairpersons and
CEOs of State Owned Entities reporting to the DME for continuing to share my
vision. I would also like to thank my family for their understanding.
Chairperson, I request the House to approve my Department's budget of R2.9
billion for the 2007/08 financial year.
Issued by: Department of Minerals and Energy
7 June 2007
Source: Department of Minerals and Energy (http://www.dme.gov/za)
