Town
12 February 2007
Introduction
The work of the Cluster covers five key areas: macro-economic alignment,
building a competitive and labour-absorbing economy, increasing public
investment, equity and development and skills development.
The earlier Cluster briefing spoke to much of these issues. I will
concentrate on the area of public investment, particularly infrastructure.
Competitive National State-Owned Enterprises (SOE) Supplier Development
Procurement Policy
SOE, particularly Eskom, Pebble Bed Modular Reactor (PBMR) and Transnet, are
dramatically increasing capital and associated operational expenditures over
the next ten to twenty years. The success of this investment programme is
intrinsically bound to the responsiveness and competitiveness of local supplier
industries.
Low expenditures over the past 30 years have compromised supplier industries
in South Africa. In addition, global growth in the demand for infrastructure
related capital goods, particularly in South and East Asia, is creating an
increasing threat to the sustainability of the SOE capital expenditure
programmes.
Relatively speaking, this means that the South African programme is very
small and our needs are crowded out by the demands of bigger customers. The net
effect of this challenge is that the programme will be import intensive.
Current forecasts indicate over a 40% import requirement at Eskom and
Transnet.
It is thus critical to leverage SOE expenditures to optimise the development
of national supplier industries and, where possible, build export capabilities.
The supplier development policy will focus on enhancing competitiveness of
national industries rather than providing price premiums for local content. The
crux of the approach is to ensure that the SOE are adequately mandated,
internally capacitated and provided with appropriate institutional support to
achieve this objective.
The programme will serve to:
* to create a supplier base for SOE
* develop globally competitive supplier industries to sustain the investment
programme
* enhance local enterprise and Broad-Based Black Economic Empowerment
(BBBEE)
Eskom expansion programme
Eskom has made significant progress with its build programme. Spending to
date is about R11 billion. The various projects are progressing according to
schedule. The return to service of the 3 mothballed stations � Camden,
Grootvlei, Komati � is expected to meet their respective deadlines.
Camden should be in operation at the end of March, Grootvlei will be up and
running by May, ahead of its original date and Komati is also expected to be
ahead of target, by September 2007. Commercial operation of four units (2
Atlantis and 2 Mosselbay) is achievable by the end of March and all units
should be operating by May 2007.
Other notable progress is around Projects Alpha and Charlie, which are being
executed simultaneously. The procurement phases have been launched and tenders
for the evaluation of Alpha are underway.
Transnet Capital Investment Programme
There has also been significant progress with the implementation of
Transnet's investment plan. To date a total of about R4,260 billion has been
spent on Capital Projects up to end September 2006; R2,575 billion of this
spend was on rail and another R1,057 billion in port.
Some of the challenges faced by Transnet include:
* delay in the approvals of Environmental Impact Assessments (EIAs) [mainly
National Ports Authority (NPA)]
* delivery of imported supplies
* claims and other legal challenges.
Security of supply
Ensuring security of energy supply in South Africa is also a key priority,
especially in light of the significant economic growth that the country has
experienced. It is important to look at alternative energy sources such as
biofuels, massive ramping up of infrastructure creation, and construction of
liquid fuels infrastructure.
As part of our clean energy strategy and ensuring security of supply we are
looking at the exploration of coal bed methane, which will be utilised for
power generation.
In addition the final Biofuels strategy document will be taken to Cabinet
for approval in May. We will also continue to develop the local nuclear
industry as an affordable and environmentally sound alternative. To that end we
are finalising a national nuclear energy strategy which will be a comprehensive
policy that will look at the utilisation of nuclear energy. Given these
developments around nuclear energy, we have decided to identify uranium as a
strategic mineral. In this regard we are developing a uranium mining and
beneficiation strategy.
The Integrated Security of Supply Strategy, that brings together liquid
fuels and electricity plans, will be tabled in Cabinet Lekgotla in July.
While establishing the Regional Electricity Distributors (REDs), we will
ensure affordable prices to businesses and households (especially rural areas).
We are also finalising the Electricity Distribution Industry (EDI)
restructuring legislation that will deal with all the concerns raised by
stakeholders.
Mining
On the mining front, the legal framework to promote local beneficiation of
minerals has been finalised. The announcement that was made on Friday [De Beers
and the Department of Minerals and Energy (DME)] demonstrates South Africa's
commitment to ensuring that South African diamonds remain largely in South
Africa and benefits the country's peoples.
In addition, the role of the State Diamond Trader was also established to
ensure that this happens.
The DME has amended parts of the legislation around licensing to ensure that
the sector is more investor-friendly. More information around this issue can be
found on http://www.dme.gov.za.
Implementation of the Road Infrastructure Strategic Framework for South
Africa
The transfer of over 3 000 kilometres of roads from provinces to the South
African National Roads Agency Limited (SANRAL) is in accordance with the
Horizon 2010 vision for road network development.
Over the next few months the Department of Transport (DoT) will ensure:
* The enlargement of the Geographical Information System (GIS) at the
Department of Transport to enable informed strategic management of the road
network.
* Consultation of the findings of the Municipal Road Network Assessment Study
with provinces and affected municipalities in order to reach agreement on
necessary actions.
* Continuation of the transfer of remaining primary roads from provinces to
SANRAL to achieve the 20 000 kilometres of strategic national road network and
the intensification on interventions to improve this network.
* Completion of the identification of the Secondary Strategic Road Network and
the intensification of interventions to improve this network.
* Roll-out a programme to scale-up the Expanded Public Works Programme (EPWP)
in the roads sector, with particular focus on access to roads.
* Completion of the development of guidelines for the reclassification of the
road network.
Airports Company South Africa (ACSA)
ACSA has begun its five-year investment programme in all the major airports
in the country. A total amount of R5,2 billion will be spent over 5 years to
accommodate the 2010 Soccer World Cup; R492 million was spent at three
international airports � Johannesburg, Cape Town and Durban and R46 million was
invested at the Port Elizabeth, East London, George, Bloemfontein, Kimberley,
Upington and Pilanesberg national airports. It is projected that ACSA would
handle more than 22 million passengers by 2012.
Public transport
Construction is underway for the Gautrain.
The Consolidated Regional Rail Plan has been approved, which entails among
other things:
* focuses on priority corridors where rail operates at its strength
* sets out the regional rail plans and business plans in areas where Metrorail
operates
* quantifies the actual needs for each corridor, while at the same time giving
an indication of the investment and improvements required.
Metrorail has merged with the South African Rail Commuter Corporation
(SARCC) and the second phase of the consolidation of which will include
Shosholoza Meyl is now being addressed.
The Taxi Recapitalisation Project is on track. Many manufacturers have
responded by making their vehicles compliant with the safety specifications.
Taxi operators are purchasing the new taxi vehicles as a positive response to
the Taxi Recapitalisation Project.
The conversion of permits to operating licences is 99% completed and the
moratorium on new operating licences will be lifted and will proceed on the
basis of supporting the Public Transport Strategy. Scrapping of Old Taxi
Vehicles is on course in the Free State, KwaZulu-Natal, Northern Cape and
Western Cape and the Eastern Cape.
The transformation of the bus subsidy regime to a road based public
transport subsidy will start with the rollout of the holding strategy after
April 2007.
Information and Communication Technologies (ICTs)
ICTs are increasingly changing the way that government, business and
individuals interact with each other. Most developed economies have recognised
the importance of these technologies in all aspects of life and are now in the
process of developing policies that move from universal to ubiquitous access to
ICTs.
The ICT policy landscape has transformed significantly following the
enactment and coming into force of the Electronic Communications Act. The New
Partnership for Africa's Development (NEPAD) ICT Broadband Network Protocol was
signed and is due for ratification; the Second Operator (Neotel) was introduced
to the market.
Broadband is viewed as a key driver of economic growth and wealth generation
and therefore it is essential for South Africa to gain access to universally
available, reliable and affordable broadband.
Studies have shown that affordable national long distance and international
connectivity would have a favourable impact on pricing and availability of
broadband in South Africa.
To this effect, government is pleased to announce that InfraCo will be
launching in March 2007 to provide long distance connectivity on a cost basis
to the market through an initial arrangement with Neotel based on the
telecommunications infrastructure originally built by Eskom and Transnet.
In addition, Sentech will provide the core access to wireless broadband
connectivity for government service delivery prioritising education and health
centres.
International studies have also shown that there is a direct co-relation
between increase in national ICT usage with the uptake and usage of ICTs by
government. To this effect a Ministerial Information Society and Development
(ISAD) Committee has been established to address the uptake and usage of ICTs
by government and its Forum for South African Directors-General (FOSAD) Cluster
will be operational by the end of April this year.
Sentech will begin its roll-out of digital-ready transmitters by the end of
the year, marking the second phase of the broadcasting digital migration
programme.
2010 FIFA World Cup
Priority statements have been submitted and evaluated and over 250 projects
have been approved. The amounts of R241 million, R700 million and R1 billion
have already been allocated for the 2005 to 2008 financial years respectively
for infrastructure and the 2010 Transport Action Agenda has been finalised. A
sum of R400 million has been allocated for 2010 World Cup infrastructure
development.
Government has committed over R150 billion for investment in infrastructure
primarily for the investments in rail, ports, energy and
telecommunications.
Conclusion
Although we are pleased with the progress made to date, as a Cluster we
realise there is a tremendous amount of work ahead of us. We underestimated the
complexity of interventions and the extent of co-ordination and implementation
capacity required. Going forward we realise that most of the projects require a
multi-year Programme of Action (POA) focus. In order for the cluster to
strengthen its capacity we will also develop a dedicated capacity for cluster
co-ordination.
Issued by: Department of Public Enterprises
12 February 2007
