Minister Jeff Radebe: Experience Sharing Workshop on Investment

14 Sep 2018

Remarks by Hon. Jeff Radebe, Minister of Energy An Experience Sharing Workshop on Investment GE Innovation Centre, Melrose, Johannesburg 

Programme Director,
Executives of General Electric South Africa,
Senior Government Officials Here Representing the Various Governments,
The Director General of Energy: Mr Thabane Zulu,
CEOs & Chairpersons Here Present,
Honoured guests,
Members of the Media,
Ladies and gentlemen

It gives me great pleasure to have the opportunity to welcome and address this distinguished audience.

First and foremost, I would like to thank General Electric South Africa for hosting this knowledge sharing event and to bring their partners from across the globe to come and share their expertise and experiences with South Africa, we are grateful indeed. Your willingness to devote time to this engagement is testimony of your commitment and the great value that you attach to this workshop and the developmental agenda of South Africa.

I hope that this will be an inspiring day that will give us an opportunity to exchange valuable lessons and take aways from the successful initiatives from your respective countries. This event should also be a catalyst for further deliberations on how Government and Industry could work together towards achieving the “African Dream” where her children are emancipated from the clutches of energy poverty, poor health, inadequate transportation system and the inability to develop the resources that are so abundant in our midst.

Innovation in the energy sector is a key driver in achieving these objectives.

For a meaningful development to take place in Africa, learning from successful programmes and projects implementation, wherever they occur, needs to be replicated and adapted wherever possible. This would in turn be supportive to growth ambitions and stimulate investments, thus bringing about growth and prosperity.

Today, we are gathered here at the GE Innovation Centre to learn about innovative solutions that General Electric is deploying to various challenges across a number of sectors. These include Gas to Power projects, Oil Refinery projects, Hybrid Rural Electrification, Clean Coal Technologies for power generation, Localisation issues, Aviation, Healthcare facilities maintenance solutions, etc.

These are amongst the challenges that South Africa is grappling with and we are keen to learn from knowledge sharing and best practices on the above mentioned projects. Other key factors that would be of interest would be how the supply chain could be better optimised for local industrialisation and skills development to create employment opportunities.

I am acutely aware that some of the innovative work you do requires policy certainty and flexibility in some instances, so those must be pointed out during the deliberations so that there is benefit all round.

Ladies and gentlemen,

Our overall economic goals are derived from the National Development Plan, which are:

  1. Eliminating poverty – reducing the proportion of households with a monthly income below R419 per person in 2009 prices to zero
  2. Reducing inequality – reducing the GINI coefficient from 0,69 to 0,6
  3. Increasing employment – from 13 mn in 2010 to 24 mn by 2030
  4. Increasing average annual GDP growth to 5.4 percent by 2030
  5. Increasing investment – gross fixed capital formation should be 30% of GDP by 2030 with public sector investment reaching 10% of GDP

Consistent with this, President Cyril Ramaphosa has emphasised to the world that South Africa is on a journey to economic recovery. All spheres of government are hard at work creating an enabling environment that offers policy certainty and address areas that inhibit investment, growth and social inclusion. Government, together with social partners in business, labour and civil society is working to build a new and inclusive economy for South Africa. It is most gratifying to see everyone working together towards a common goal.

In line with this commitment, the Department of Energy published the long term electricity generation plan commonly known as the Integrated Resource Plan (IRP). The planning documents will provide much needed policy certainty and provide further clarity required by both local and international investors, who are keen to play in the South African energy sector.

Ladies and gentlemen, allow me to outline some of the challenges that our Government is faced with and are hard at work preparing solutions that will ensure investment into our economy.

Refinery capacity

The liquid fuels sector is currently dependent on imports to meet local demand as the current production capacity does not meet national and export demand. No investments have been made in new refinery capacity since the start of the new democracy. On average refineries in South Africa are more than forty years old.

Investment in the refinery capacity is now more than ever urgent. In sub-Saharan Africa, refinery capacity is constrained with most refineries unable to produce fuels that meet clean fuels 2 specifications requirements.

Clean Fuels 2

In June 2006, the South African energy policy makers promulgated Regulations regarding Petroleum Fuel Specifications and Standards that had the effect of prohibiting the addition of lead to petrol and the reduction of sulphur content in diesel from 3000 parts per million (ppm) to 500 ppm. This initiative was widely referred to as Cleaner Fuels 1 (CF1).           

Since 2006, there has been a shift globally to move to even tighter fuel specifications. We thus introduced further Regulations, referred to as Clean Fuels 2 (CF 2), which sought to reduce sulphur content in both petrol and diesel from 500 ppm to 10 ppm. These regulations were to be effective as of July 2017.

In order for oil companies to comply with CF2 Regulations, there needed to be some investment in upgrades to the existing oil refinery plants. This investment has not happened.           

To avoid widespread non-compliance, the CF2 Regulations were repealed by the Amendment CF2 Regulations promulgated on 23 June 2017. The latter Regulations state that the commencement date is to be determined by the Minister by notice in the Gazette.           

Our challenge in implementing CF2 Regulations is around cost recovery mechanism for oil companies, as they invest in refinery upgrades in the context of a regulated market. We would be keen to learn from stakeholders in this forum how they resolved some these issues.

Gas Market Development

Gas represents a very important and growing part of the global energy system. It is the fasted growing fossil fuel and its consumption is forecasted to increase by 1.4% annually.  South Africa is keen on developing its gas market (supply and demand) as a strategically important component of its energy mix.

In the current Integrated Resource Plan (our electricity master plan, which is currently released for public comment), there is a provision for Gas-to-Power as part of the electricity generation mix. The immediate questions are therefore; where will this gas be sourced from? will this gas come at a price acceptable to South African market?, will the tariff be hedged against international currency fluctuations?, if so, what will be the impact on electricity tariffs? These are the questions we are working hard to provide answers to. We hope that forums such as this will enhance our work in that regard.

It is important to note that the NDP identifies natural gas as a viable alternative to coal. The NDP further provides, as one of the infrastructure priorities, the construction of infrastructure to importing natural gas and increasing exploration to find domestic gas feedstock.

In support of this vision (as espoused in the NDP) for the South Africa gas programme, the Department has started gathering information on the potential of Gas-to-Power procurement programme. This programme, together with a detailed analysis of gas end-use market, will serve as an anchor for gas market and infrastructure development in South Africa. 

Our challenge is how then do we develop a gas industry industry in an orderly manner, given our current reliance on electricity for mining, industrial, commercial and residential use.

The proven gas reserves in the African continent alone are enough to more than cater for the continent’s energy needs.  In this country government has put in place an enabling framework for private sector participation in our energy sector, to enable gas industry development and growth.

We have taken note of the global industry shifts and are encouraged that many countries in our continent have set themselves the vision to enter the global gas market and promote the development of a domestic and regional gas market. 

Natural gas can improve the efficiencies of many industries currently using sub-optimal fuel sources in their production processes. These improved efficiencies will result in a turnaround in the industrial capacity and demand in the region.

SADC has recently initiated the development of a Regional Gas Masterplan to facilitate gas trade within SADC.  At the last SADC Summit in Namibia, the establishment of the Inter-State natural Gas Committee was endorsed.  SADC Ministers also signed a Statement of Intent for cooperation on the development of a Regional Gas Market and Infrastructure.  This collaboration will require support of financial institutions of the region, continent and beyond.  We look forward to the support from the African Development Bank as we pursue this objective.

In conclusion, I would like to thank our presenters for opening up about their country’s experiences in order to help us overcome the challenges that we are faced with and transform our economy, for the betterment of our continental aspirations.

Let me take this opportunity to encourage all of us to seek innovative ideas and draw from our strengths and knowledge in resolving our challenges. 

I thank you

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