B Sonjica: Transcript of Post-Cabinet media briefing on Electricity
Master Plan and Biofuels strategy

6 December 2007

Themba Maseko: Ladies and gentlemen, please welcome the Minister of Minerals
and Energy. She'll be talking to you about the Electricity Master Plan and the
Biofuels Strategy, and we'll take questions when she's done. Thank you very
much.

Minister Sonjica: Thank you very much, Themba. I suppose that you have
copies of the statement that I'm going to read, but I've had a few matters that
I thought were important for both strategies. And I'm starting with the
Biofuels Strategy. The Biofuels Strategy is a response to the security of
supply challenge, as we know that we have a growing economy, there is more
demand for energy in the country. Another factor that we looked at which is
affecting all of us is the crude oil price. It demands that we try to become
self-sufficient in terms of fuel. Especially given that South Africa is not a
crude oil producing country. The third issue that I want to be noted about the
strategy is that it promoted renewable fuels, this being a contribution to the
reduction of emissions, helping to mitigate against climate change. The
Biofuels Strategy development will be done in phases with the first phases of
development being from 2008 to 2013, a five year period. After which we will
review the target. The strategy proposes a 2% bio fuels production by 2013,
which is a revised target from the initial 4.5% target proposed in the draft
strategy. The revision on the target is in consideration of the agricultural
concerns.

The strategy further proposes that the use of maize be excluded in the
development of the bio fuels in the initial stages of this industry
development. This is largely to food security concerns, fears around price
increases, and the fact that maize is a staple food source for the majority of
the poor in the country. A blending target for bio fuels is of E8 that is 8% of
bio-ethanol and B2, 2% for bio diesel. There will be levy exemptions for bio
diesel. We are increasing the current 40% to 50%, and for bio ethanol we will
have 100% bio fuels producer. This is actually more maintaining the status quo
when it comes to the bio ethanol levies. Should I proceed to the next one or
are you going to ask questions now? Okay.

The Electricity Master Plan constitutes the second part of the integrated
energy master plan and makes South Africa the third country in the world after
the United States of America and Norway. Why did we decide to develop a Master
Plan? I'm sure you'll appreciate that in the South African economy there are
sectors that contribute 59% to the country's Gross Domestic Product (GDP). And
most of them are dependent to a greater or lesser extent on energy. Recent
experiences with blackouts and brownouts in South Africa and abroad have
demonstrated the vulnerability of world economies to electricity shortages, and
they point to the need for co-ordinated long term planning. This Master Plan
intends to address this imperative, by firstly providing a critical analysis of
the status quo, and then providing a broad framework of interventions that are
necessary in the interest of energy security. The Master Plan is premised on
achieving goals that have been set for the electricity sector. Due to the
uncertainty over the planning horizon, some assumptions are made regarding,
inter alia, demand projections and the economic outlook.

The Master Plan reflects on the White Paper on Energy Policy, the Renewable
White Paper Policy, and Strategy, and the Energy Efficiency Policy and
Strategy. It must be made clear that it is a high-level plan and not
necessarily a pronouncement of new policy. Policy formulation insofar as new
policy needs to be developed that will impact on the electricity sector. Those
will be handled in a separate parallel process. The plan will be reviewed
regularly and we're proposing a three-year cycle for that review process, to
ensure that it is implementable and that it stays relevant to the challenges
facing the electricity sector going forward. The proposed interventions at
various levels of the electricity value chain will be implemented in phases and
will be prioritised depending on the urgency. For an example, the acceleration
of demand side management and energy efficiency interventions has been
identified as a critical strategy that can mitigate against increasing
electricity demand growth, rather than the building of new power stations. The
electricity sector is regulated and licensees like Eskom and municipalities
will see to the implementation of the Master Plan.

The Master Plan implementation matrix is available in the strategy document.
Thank you very much.

Themba Maseko: Okay, ladies and gentlemen, with your questions.

Journalist: Two questions on the electricity master plan. The first would
be… and it's not maybe specifically towards the plan, but the first would be
the National Energy Regulator (Nersa) hearings about the tariff increase for
Eskom is currently ongoing, and it looks set to be around 14%. But many of the
participants at these hearings, public hearings, which includes business,
private people and so on, organisations, seems to suggest that government
should contribute at least some of the expansion program that Eskom is
considering and that would mitigate that 14% making it a little less, because a
lot of that increase would go towards the expansion program, saying government
is the single shareholder in Eskom so it should bring some of them… you know,
contribute at least some of that money. And then secondly you talk about the
demand side management, and energy efficiency. Is there a circular or something
going out to government departments saying they should switch off their lights
at night? I'm not saying the Union Buildings should be dark, but some of the
government departments in the city might consider switching off their lights in
the evenings.

Minister Sonjica: Okay, on the first question about the 14% hike of the
tariffs. Really this is a matter that Nersa is dealing with. I stand here as an
executive authority and an appeal authority, so that if the two parties do not
agree on a certain point then I come in to intervene. As to whether government
will contribute an amount, that matter would then have to be taken to
government if Eskom feels that they want a contribution from government and it
would be at that point that decision would be taken. The… yes, the energy
efficiency, we do have a number of activities that we are doing under the
energy efficiency program. We have recently established the Energy Efficiency
Agency, which is going to take up the programme, hopefully vigorously, of
energy efficiency in the country. We are involved with a number of stakeholders
like the industry. We have what we call an energy efficiency report, whereby
presently we have 37 big companies that have signed up to save energy and there
are gains that they are making already. With regards to government, truly I
don't think we are as energy efficient as we should be as government. It's
something that we are working on, me and the Minister of Public Works, given
that she is the custodian of the maintenance and everything that happens in the
government buildings. But also we have to include all spheres of government.
Local government, provincial government, and maybe… maybe anecdotal of you to
say that one… at some stage I was on SAfm and one caller said there are
streetlights that are on 24/7…365 days. Minister, you must do something about
that. And I agreed that we should do something about that. And that really
indicates to the necessity to bring in on board local government. Actually this
business of energy efficiency is everybody's business, all of us, individuals,
wherever we are. And I'm saying whenever I talk to this matter I'm saying it
has to be a culture, it has to come automatically that when you go out of the
house you switch off the lights. So I'm saying it's everybody's business.

Themba Maseko: Coming to Cape Town.

Journalist: I've got a couple of questions on the Bio fuels Strategy. First,
are you budgeting incentives at all? Some of the big players are saying it's
not really economically viable without incentives. You say that we're embracing
the strategy because we want security of supply, but with due respect I don't
think a 2% production target of our total consumption will really make much of
a difference. However, there are kind of growing concerns about South Africa,
the impact of climate change on our agriculture, and I would like to know have
you at all taken that into consideration in formulating this policy? Can I have
another two or three? I've noticed that you've dropped… that import tariffs on
soya beans have been drooped. Is that because we're looking at importing feed
stock for bio fuel production?

And… sorry, just one more. The first draft of the biofuel strategy was very
ambitious on job creation. I think between 55 000 and 60 000 jobs it was
assumed would be created and critics of that strategy was… were very sceptical
of those targets. Have you revised those targets downwards? And I see that's
not really part of the motivation for developing this sector.

Minister Sonjica: Yes, so many questions. But let me start with the levies.
I've indicated already that the incentives that would be given would be in the
form of levies. Mainly we are increasing the 40% that is on bio diesel, to 50%.
That's some kind of incentive that we'll be giving. On the bio ethanol, the bio
ethanol was… presently is enjoying 100% exemption on levies, and we are
maintaining the status quo. So there's still an incentive in as far as that is
concerned for producers. On the percentage we agonised in bringing down the
initial 4.5% yield and there was a lot of noise raised around the security…
food security. And we had to respond to that. It's not only South Africa that
has concerns about food security for this program. So we had to… we had to
respond positively to that. But also, I mean, in a way accommodating that
concern. Hence we also decided to exclude maize as a crop for feed stock. So it
is really mainly about food security, that's the main reason why we decided to
drop. I agree, the percentage is a little bit small. We should be a little bit
more ambitious if we wanted to make an impact. But I want you to appreciate
that the period between 2008 and 2013 is really a pilot stage, where we will
then evaluate the impact of it on the contribution to fuel, but also on the
food situation, or the agriculture situation in the country. We still have soya
beans. Soya beans, canola and sunflower will be used as feed stock for
biodiesel, and for bio ethanol we are using sugarcane and sugar beet. I hope
I've responded to all the questions.

Journalist: [Inaudible –]

Minister Sonjica: Yes, it has been factored into the strategy. I mean, we
are looking at… we are looking at the fact that South Africa is a dry country,
we had to accommodate that. There's talk about rotating the crop as you're
planting it. We are identifying fallow land, so all of these things are part of
the strategy.

Themba Maseko: We'll take the last question from Pretoria, and then we'll
come to Cape Town.

Journalist: I'm probably going to repeat a bit of what she's just gone over.
But if you could just elaborate further on those agricultural concerns, and if
there is anything further than the food security issues. Also sugarcane has
been said by some analysts and researchers involved in renewable energy to be
too thirsty for South Africa's water scarce environment as viable for… as feed
stock.

Minister Sonjica Which one is that?

Journalist: They have also criticised the fact that maize will be excluded
without the presentation of other viable options as feed stock. What is your
view on that? And then also separate to the two issues that you've presented
here, can you just give some comment on the national strike yesterday by the
members of the National Union of Mineworkers?

Minister Sonjica: Okay. On the crops referred to, I would say that there was
the involvement of the agriculture, there was an inter-ministerial committee
that was set up and a task team which brought in a number of players that would
be key in developing the strategy. And what we… the final product that have
come from the input made by the agricultural component of the team. But also
this is a result of… from wide consultation. We consulted extensively on this
matter. The strategy if we all remember was due to come in May 2007. But we…
because there were concerns around the kind of crop that we would be using we
had to extend… we were given extension for us… for the completion of the
strategy. Sugarcane, I wouldn't really say that it would be such a threat to
use sugarcane, it would impact so much on food security. Given that, I mean,
provinces like KwaZulu-Natal you will enjoy a lot of sugarcane in those
provinces. But as I said earlier on, we will be reviewing the impact of the
program on crop itself. On the overall factors that will help us get the fuels
that we need.

Well, I would say that the workers have a right to strike. They can strike
for anything they want to strike on. But when it comes to matters of safety
I've been very vocal on this one. I think that we still need to do more in
terms of achieving our own standards when it comes to safety in the mines, and
I believe that some of the accidents that occur in the mines that lead to
fatalities are really because of some negligence. Some of the cases we are busy
investigating. So that would be my view on the matter, but really the
mineworkers have a right to strike, that's constitutional.

Themba Maseko: Okay, we'll come back. Let's deal with the policy issues, if
there's time we'll then deal with miner strike. Deon, over to you.

Journalist: Thank you. Three short questions if I may, Minister. Pardon my
ignorance, but what is the difference between a blackout and a brownout.
Secondly, can you tell us if the latest versions of both the Electricity Master
Plan and the Bio fuels Strategy are now available and can we get that on the
website. And then finally related to the mine strikes, would you respond to
comments by the Human Rights Commission that South Africa is the most dangerous
mining country in the world?

Minister Sonjica: Repeat. Repeat the last one.

Journalist: I'm sorry. The last question was the Human Rights Commission
said yesterday that South Africa is the most dangerous country in the world to
be a miner in, would you mind commenting on that please?

Minister Sonjica: Okay. You were asking if the two plans are in the… on the
website already. Yes, they will be available on the website. We'll make them
available on the website.

Journalist: Thank you, Minister.

Minister Sonjica: And hopefully my liaison person, you all know Sputnik,
this lovely man here, will be able to post them and he'll indicate to you that
it is… they are on the website. Dangerous mines, yes. They are quite dangerous
because we have the deepest mines in the world. We may be far advanced in terms
of our experience in mining, but we still have the deepest mines in the world.
If you take the Mponeng mine for an example, it goes down to about three
kilometres and it's quite deep. And when you get there, very dangerous
circumstances under which our people mine. It is a fact. But I think we can
still improve in spite of the fact that we have the deepest mines in the world.
We can still improve on our safety. Oh, the difference between a blackout. A
brownout is about fuel shortage and a blackout is when all of us talk about
outages and go to bed very early.

Journalist: Minister, since we don't have a copy yet of the Electricity
Master Plan, I was hoping that you could share with us some of what it contains
on the findings on the status quo on the demand projections, and on the
interventions that it proposes.

Minister Sonjica: Well, I don't have the strategy with me, unfortunately.
But we would make that information readily available to you.

Journalist: I wondered while you were explaining various difference if you
could explain to me the difference between a high level plan and the
pronouncement of a new policy.

Minister Sonjica: Well, a plan is a plan, Michael. And… but a plan. High
level in the sense that it looks at the national situation, the country's
national energy situation. That's what we mean about high level. It's going to
look at all… it's comprehensive. It's a blueprint that will guide us as a
country in pursuing our energy program. So that's what we meant about that.

Journalist: And it doesn't involve planning?

Minister Sonjica: It is a plan, so it is about planning. It is a plan,
Michael. That's why we call it a master plan.

Journalist: Surely that also implies that it's creating policy, or have I
got that totally…

Minister Sonjica: Well, it would create policy for planning, Michael, in a
sense. But it won't… it would create policy for planning to implement the
existing policy. So there is no fundamental departure from the policy that
exists. If I may take you back to some of the problems that we are experiencing
now, we have been accused as government of not having a plan in place to… for
an example, for infrastructure… for energy infrastructure development, which
has to an extent led to the challenges that we are facing, outages and what
have you. We have been accused that we did not plan well and this is what we
are bringing in, this plan which will take the policy that we have in the
country forward.

Themba Maseko: Okay, we'll take one final question in Cape Town and one in
Pretoria and conclude.

Journalist: Minister, hi, you're talking about reduction of emissions under
the Bio fuels Strategy. I was just wondering how you see this panning out,
given Eskom's planned expansion of coal fired power stations. Also how you view
South Africa reacting given that they've stated that you would consider
emissions reductions under the post-Kyoto agreement. How can that pan out given
Eskom's expansion? Thanks.

Minister Sonjica: Well, of course we can't avoid using coal as a source for
generating electricity. We have an abundance of coal in the country. And even
in the world we're still going to… the world is still going to use 40% of coal
for electricity generation. So it's unavoidable. But what we are saying… Eskom
has begun to implement that. We are introducing clean coal technology in the
new power stations that we are building, in that way you're trying to mitigate
and implementing the principle of carbon capture and storage in those power
stations. So we are mindful and we're trying to reduce emissions, even as we
will be using coal. We're still going to use coal, but in a much more cleaner
way than we have been doing.

Journalist: Madam Minister, aluminium smelting is a really exceedingly
energy intensive process, yet South Africa is persisting in trying to attract
these. There were recent reports that we're now also… that your departments are
also speaking to a player in India who wants to bring an aluminium smelter to
South Africa. Are you at all factoring in these kind of issues of promising new
foreign investors cheaper electricity which seriously no one can entertain
anymore, I mean, going forward our electricity is going to become exceedingly
expensive. To attract these direct… these investors and that they will continue
to receive electricity at far cheaper prices than South African consumers, yet
we cannot actually secure… guarantee them security of supply. Are these matters
factored into that Master Plan?

Minister Sonjica: No, we have not really referred those matters to the
Master Plan. There're actually matters that overlap between myself and the
Minister of Public Enterprises. But the issue of exemptions for smelters and
industries like that…it's international practise. Because we still have to
attract investment into the country, we still need a growing economy. It's that
balance that as a department and as a country that you always need to maintain.
Not a very easy one, not a very easy question to respond to. But hopefully the
other programs would help us mitigate against any negative impact on
electricity from the smelters and what have you. But we still need this economy
to grow. One of the questions that we have been asking ourselves is as we are
bringing the new industrial policy, what is going to be electricity consumption
that we will need for the industrial policy, for the implementation of the
industrial… it's a question that we're grappling with together with the
Department of Trade and Industry. Because all of these things…unfortunately
have to happen. So the balance is really what we need to be grappling with. And
all of these policies are trying to address those… that balance.

Themba Maseko: This will be the very last… I've exceeded my time limit with
the Minister. But we'll take the final question.

Journalist: Sorry, just going back to the mining issue. You had said
previously that you would be taking stronger action against mining management
and CEOs should safety not improve. With fatalities now going over the 200
mark, to the end of this year, what do you foresee that stronger action being
going into 2008?

Minister Sonjica: Well, we are looking at tightening the mine health and
safety policy. But the problem, the biggest problem that we have is to charge
people. We investigate the cases, we hand them over to the Department of
Justice, and because they have capacity limitations we have a problem of seeing
a completion of that process, which would then enable us to identify the person
who should have been accountable in the event of an accident. So we still have
a problem in as far as that is concerned. And as soon as we make a
breakthrough, I'm sure you'll appreciate that at one stage I proposed that
maybe we need a tribunal and we are looking at all of these matters. Because at
the end of the day the culprit must be brought to book. And at this stage we
have not been able to bring the culprits to book. That is for the period that
I'm in the department. And I know that there are old cases in the department
where we have not reached finality in terms of who was responsible or who
should be seen to be accountable for negligence or whatever it is that we think
were the cause of the accident.

Themba Maseko: Minister, let me take the opportunity to thank you very much
for reducing the load on my shoulders this morning. Ladies… ladies thank you
very much for coming and have a merry Christmas and happy New Year. Don't drink
and drive. Have a merry Christmas and happy New Year. Thank you… oh, and
gentlemen as well, sorry. It's adjourned. Thank you.

Issued by: Government Communications (GCIS)
6 December 2007