Infrastructure Development Cluster Media Briefing

[Note: This transcript prepared by Government Communications (GCIS) can be located here.]

Journalist: Just a couple of clarifications: the first is that on page 7 you refer to spending 18 billion on road and 23 billion on the Gauteng freeway. I wonder it that can be right is that 23 billion on the freeway and 18 billion on roads in general. Secondly you say twice the Cape Town Airport - does that mean that we have to put up with it as it is for the rest of existence, it really doesn’t seem complete to me. You travel a lot more than I do – I presume you're aware of this. There is another numerical report of Kusile port on its way to become operational in 2009. Is it operational or not operational, is it this year or next year.

Jeremy Cronin: That was a printing gremlin. The operational side is not completed, so you are right with that. The beginnings of operations at the port Kusile came with the first vessel that docked. In terms of the road-spend, basically 23 billion is the multiyear figure for the Gauteng freeways, in addition 18 billion is being spend on roads nationally in this financial year.

We are aware of the Bus Rapid Transit (BRT) that is underway, the parking is still a problem. There is massive progress on the airport building; it is completed or near completion, and the first plane should land there in May this year.

Journalist: On page 14, the sentence under broadband roll out, It says the cluster will be increasing penetration from 2% to 5%. I don’t understand that sentence are you talking about percentage of population or geographical area. Then on set top boxes - when will we see the first manufacturing begin for digital migration. Can you give us some idea on the update on the upgrading of the Infraco that took over the transfer from Transtel that is becoming a bit old right now. Can you give us some idea how much it will increase by. Also Infraco percentage in the West.

Mr Tiyani Rikhotso (Ministerial Spokesperson for Department of Communications): With regard to your question of 2%/5% the current information that we have on the research we conducted, is that only 2% of South Africans use broadband, We aim to increase it to 5% and with regard to the set top boxes, it also a matter serving before cabinet. The document is ready, Cabinet will look at them after which they will make comments, and get on the process of manufacturing.

Journalist: Minister Hogan just shortly after the budget the Director-General (DG) spoke about the renationalisation or review of state-owned enterprises and that you were part of that process. Could you just elaborate where we are with that review and speak to some details.
Then on page 12 it says here as a result of Eskom build programme it is estimated that 40 000 direct construction jobs will be created and then it speaks of 160 000 new jobs direct and indirect. Are these new targets and where do they fit in with the overall job target - that is for any of the other ministers. Could you also give an update on the Expanded Public Works Programme, the job opportunities that supports the 97% target that the President spoke of. I’m not sure how we got to that total given the problem we have with municipalities and the Expanded Public Works Programme

Barbara Hogan: The question on the inter-ministerial - we‘ve done work on the terms of reference and the Minister and I are about to begin the review. .
On the question of the job target, this isn’t the Public Works target. You must clearly distinguish between the two. These are not just job opportunities, these are real jobs on site for construction in Eskom. The construction in the Medupi construction alone is the biggest build in the southern hemisphere. When I went to visit the site recently there were 5 000 workers on site. You find that the local unskilled labour is being recruited entirely in that area round Lephalale, and it is a huge amount of people that has been employed. When we talk about 40 000 jobs it's 40 000 in real construction work and 160 000 jobs that are indirectly created as a consequence of that. On the Medupi Power Station for instance finally 1 000 jobs will be created for the operation and maintenance of that project. The Extended Public Works Programme isn’t really part of this cluster, it relates to the social cluster where jobs are created into infrastructural investment. There is a small extended public works programme in transport around road creation and maybe the Minister wants to speak about that.

Journalist: If you could just give a more details on that review process. You just talked of the terms of reference, or are you not able to say.

Barbara Hogan: We will be reviewing performance and financial performance as well and we are making recommendations to Cabinet in that regard. I’m not certain of a time frame and I don’t want to commit at this stage - remember we have over 200 parastatals in our stable.

Journalist: Minister if I can ask a follow up, it’s been a number of months since government announced that it would be reviewing state-own enterprises and yet the targets haven’t been finalised, the dates haven’t been finalised. The state-owned enterprises are supposed to be a key economic driver in the country and we have the President speaking about the problems, we had massive lobby groups speak about the problems, we have calls for boards to be scrapped, it doesn’t seem any work has been done in this regard.

Barbara Hogan: You are very incorrect. A huge amount of work is being done individually by government departments that are responsible for the different state-owned enterprises. The review doesn’t replace the ongoing shareholder responsibility. Please do not confuse the review with share holder management. Secondly the Minister of Finance and myself have both been involved in budget processes, we had the budget meeting, policy statement and these, but now the budget process is finalised we will be able to move forward on these.

Journalist: Just on that will the review include the update on state-owned enterprises. Is there a concern by Government over the extent of the guarantees and the repeated payouts? I understand from the Minister of Energy that the Department of Public Enterprises (DPE) is involved with the funding options for Eskom?

Barbara Hogan: The question of the funding options is very important for Government, as you can see from the Infrastructure Cluster we are engaged in the biggest infrastructure investment that this country has ever seen, and one of the biggest infrastructure investments in the world. The funding options then becomes the important issue, how is this done and I think we have seen this in the Eskom Build Programme that loading onto the tariff the Capital Expansion Programme has enormous consequences for the country, So that definitely is going to be one of the issues that the Inter-ministerial Committee will be looking at.

But it would be incorrect to deduce from that, that the funding for the present Infrastructure Investment Programme is not there. That has been secured and that is going forward as seen in the budget. The extended guarantees, Government do not extend guarantees if it’s not able to back that guarantee up. The Assets and Liability Unit of the National Treasury is very careful around the guarantees and you can sit in endless guarantee meetings with them and they are very careful not to overexpose - in terms of contingent liabilities - South Africa to the guarantees, so we are very confident that the guarantees that we have given we can meet.

The question of bailouts, it’s become a catch all phrase and I just want to clarify this. Government is a shareholder. Normally shareholders provide equity to provide for capacity expansion, for all manner of operations. So a company operates on equity and borrowings and they operate on retained earnings. A bailout is when a company is going insolvent and you bail it out as the whole of Western Europe, America and north America, United States have been doing this constantly on scales that South Africa could never exemplify. A 60 billion investment in Eskom is not a bailout, that is Government contributing towards Eskom’s infrastructure build. If you look at Transnet for instance, all their lending, all their investments which is the biggest investment Transnet has ever made and a massive upscale, all of it has been done off their balance sheet; they haven’t asked Government for extras. There are instances where Government has had to bail out and assist. I think the issue with the funding model is if Government is a shareholder what Government is then required to bring, is an equity partner and I think this is one of the issues that state-owned enterprises are raising with us and they are saying what recapitalisation can we expect from Government given that they can’t issue shares on the stock exchange. You are on the cliff edge when you call something a bailout when it’s a recapitalisation. Certainly those are the big issues that this Committee will have to be looking at.

Journalist: Two aspects I want to follow up on, one was the review. President Zuma said he has a final solution for the state-owned enterprises which will solve their problems forever. Has he shared that with you, can you tell us anything about it. The figures will now have to change in the recent announcement by Nersa. What do we expect on that, what can you tell us about that? What recapitalisation can Eskom expect from Government? Is that still in discussion the idea of further recapitalisation?

Journalist: There was an issue that Eskom had two political heads / ministers. I just want to find out if that is also part of the review.

Barbara Hogan: The Nersa ruling - we are examining it and I do not want to comment too extensively on it at the moment until we have had a good opportunity to examine its consequences. What the Nersa ruling does, is that it allows Eskom the requisite income revenue for it to be able in its operations as they stand at the moment. We all know that the tariff has been very low and Eskom has seen a dramatic plunging in its revenue from 1991 until now because the tariff was kept so very low. So Eskom has not even been able to meet its operational expenditure because the revenue was simply not able to cover it. With this in increase it will be able to cover its operational expenditure but what was loaded into the tariff was also part, and I stress only part, of its Build Programme going forward. The other part was funding, that Build Programme going forward is borrowings and Eskom had projected that they would borrow R123 billion over the next three years, Government would give R60 billion and Eskom was hoping to recover the remainder of that out of the tariff.

Now we will need to make a judgement call as to how much of the Build Program will now be covered by that tariff and then will have to make a judgement on how that will affect Eskom’s Build Programme and what will be done in order to mitigate that risk. At this stage Eskom asked for 45%, they revised their application to 35% and now they have received 25%. So from the original application it’s gone down 20% so obviously there is a serious implication for Eskom going forward, so we will be dealing with those issues.

The recapitalisation from Government, that will be part of the discussion. But bear in mind that the Build Programme at the moment has built in its operational costs, and now incorporated this will go up to about R486 billion. What is our national budget, it’s about what - roughly 700 as a country, this is significant expenditure. If we are asking from some quarters for Government to fund the Build of Eskom you are asking Government to essentially provide two thirds of its entire national budget to one company to build energy going forward, we can’t do that. And that is why Eskom is borrowing, but there is also a limit on Eskom’s balance sheet for borrowing and so we will have to be looking at this. But the important issue is which is what I think many of us are looking at here is the involvement of independent producers? We can no longer I think in the future regard Eskom as the single provider of energy in the country. Eskom is very shortly due to sign some co-generation contracts so those companies that are already generating power, SAPPI, Sasol those kinds of companies will be signing co-generation agreements with Eskom to provide additional power.

The Independent Power Producer’s Framework is virtually in place for Eskom now to purchase power from within the country from people who will be building generators, power stations as well as from outside the country. I think we are facing the fact that a Government parastatal is no longer in a position to provide total energy for the country and we will be looking to supplement that energy from independent power producers providing power from whatever source, renewable and coal going forward. Eskom has never had two political heads; the Minister of Public Enterprises has always been the Minister of Eskom. But the Minister of Energy plays an overarching role on energy; the Minister of Energy is responsible for ensuring the security of supply of energy. So that Minister would have a close working relationship with DPE and with Eskom given the centrality of Eskom’s role in the economy and in the provision of energy. I have had discussions with the President on this matter and there is going to be an alignment of his measures with the Inter-ministerial Committee.

Minister Ndebele: Thank you very much I think it’s a matter that we have addressed a lot but I think basically as a country this cluster in particular is charged with the task of moving us from underdevelopment to being a developing country to a developed country and the criteria for that is infrastructure.

Is there water, is there road, is there energy and that is what defines whether you want to reside in a place or you want to invest in a place that defines whether the place is worth going to or not. One of the key challenges therefore is to maintain the first class infrastructure that exists in South Africa, particularly the road network, you want to maintain that and expand it; at the same time you want to reach out to that areas that don’t have that infrastructure so that it becomes a programme to then bridge what we call the first World and the second economy so that whether we are first World or a second economy you have the basics, you have clean water, roads and energy because without those as a human species we are not going to survive.

In the provision of road and other infrastructure particularly in the second economy you then employ the Expanded Public Works Programme - we have done that quite a lot as a country in several provinces. We have done in KwaZulu-Natal, Mpumalanga and Eastern Cape to ensure you don’t necessarily have to bring sophisticated machines to construct roads when you can actually do it through Expanded Public Works Programme and employ more people, both in the construction and the maintenance.

We want to be measurable, we want to say here we are 2010, where are we going to be in terms of the provision of that infrastructure for 2012, where are we going to be by 2014, its quite measurable to say we must have reached all the public facilities like schools, clinics and communities. There should be no communities without these facilities and therefore you want to measure that and say in two years' time we should have reduced this by such a percentage and by 2014 we should be here, generally that is our thrust.

Journalist: A follow up on the issue around world class road and bridges. We have had a situation of Limpopo where a senior person in the African National Congress' (ANC) company is linked to the building of bridges. A newspaper reported that those bridges have collapsed, can the Minister explain if he has been in contact with the province regarding the quality of the services provided there?

Sibusiso Ndebele: Not yet, it’s a serious matter, roads are a responsibility of the national Department of Transport, provincial departments and local municipalities all those have original powers as far as building of roads is concerned. We do have this overall task of ensuring that standards are maintained in our country so that a road should be a road whether it’s built by a municipality, a bridge should be a bridge whether it’s built by a municipality or a province or national. So we will be looking at what has happened there.

Journalist: Any indication what the total megawatts of the coal generation that Eskom will sign? Also, when do you expect the decision to be made on the Kusile 30% private sale, I see you paper mentions June 2010, is that when you expect the final decision to be made?

Journalist: On the Independent Power Producers (IPPs), when would you think that coal generation will actually materialise? And how will the price be set, I mean at what price is Eskom going to buy that. To the Minister of Transport it seems you are saying roads have been underfunded by the tune of R50 billion, what is the solution?

Journalist: It seems as if the mechanism at national level is working in having a National Roads Agency and the toll road system. Is that a recipe for provincial and especially local government where the roads at local government seem to be by far the worst and what is the funding mechanism if it is not that?

Journalist: Your statement says the Inter-Ministerial Committee (IMC) will present its findings on protection of the poor from the impact of the electricity price increase to Cabinet in June 2010. Does that means the poor will pay the same increase price as everyone else for the interim? I notice your press statement is silent on the growing concerns around reports that the African National Congress (ANC) front company, Chancellor House, is set to benefit financially from the Build Programme. Surely you have something to say about this as leading members of the ruling party, I mean there is quite a backlash against this from people who can’t afford to pay for electricity as it is.

Barbara Hogan: On the coal generation we anticipate about 1 143 megawatts coming through on coal generation, we are also anticipating that it’s going to be signed very shortly, within in this month.

One of Nersa’s rulings has allowed for Eskom to pass through the cost of that coal generation so at least Eskom can now move on coal generation going forward.

The question of mitigations for the poor, you would have seen in the Budget, about R6.2 billion budgeted to assist with the mitigation for the poor around electricity. What we are doing is a re intensive study in the IMC around how the poor and the impact on different income groups because it’s not only the poor, it’s people who earning salaries like teachers, nurses, police, they are also affected by that so it’s a study to see the differential impact, so mitigation for the poor goes ahead.

On the Chancellor House, I’m not certain of the kind of question you are asking. Are you referring to it because Chancellor House is one of the companies that is part of the Build Programme that costs have increased? Is that the suggestion?

Journalist: I mean the African National Congress (ANC) Treasurer General said in the end of 2008 that he was going to divest Chancellor House from its shareholding in Hitachi Africa because obviously it’s a conflict of interest. How can the public be sure if the costs of that power station go up that they can actually rely on that being genuine? It could be that more money needs to find its way into the ruling party’s coffers, people might have that perception. As Ministers surely you are aware of that, I mean what do you want to say to the public about that.

Barbara Hogan: Firstly as I understand it, Chancellor House is a minor subcontractor but you know the question of the disassembling of Chancellor House must be directed to the Treasury General, it’s really not for me to be answering on those. Quite certainly if a small subcontractor is able to escalate the costs of the Medupi Project which is a massive R200 billion project, I would be very surprised, but if you do have evidence in that effect we will certainly be open to it, but it’s a very small part of a huge contract.

Journalist: Sorry, just a follow up, are you not aware that there is a big public perception out there that this is a massive conflict of interest?

Barbara Hogan: A conflict of interest in the sense that the ruling party benefitted from this thing? Yes certainly, it’s not desirable but as Mr Phosa himself has said, shutting down the Chancellor House thing is one of his projects and I would imagine that he would have the same view on this, but this was a contract that was established two or three years ago, so you know I’m not certain if you are requesting us now to cancel that contract. I’m not sure.

Jeremy Cronin: We do acknowledge in the statement a major challenge on the road network. That doesn’t imply there is no maintenance backlog. There are some challenges on the national road network and certainly as the Department of Transport we are quite proud of the role that the South African National Roads Agency Limited (Sanral) plays as an effective agency, it’s one of the really good agencies under Government and generally we have wonderful national road network which visitors to our country often remark favourably about.

However, the problems do tend to occur at a provincial and municipal level and the reasons for this are several. First of all there is underfunding, not as seriously as I’ve seen some news reports suggest, I have seen figures of R120 billion, R130 billion, R170 billion. We asked Sanral to do a national survey and the figure we have here is R64 billion for the totality of roads in our country. As you fall back from one year to another the conditions of the road gets worse and they deteriorate quite rapidly. So there is a big challenge here, part of an answer is to get more funding and every year we try to do that but as a Department we understand that there are many pressures on the Budget.

We have spend a lot of infrastructure and road infrastructure spend ahead of the 2010 World Cup on the major cities and after hosting the World Cup we can begin to shift both in terms of infrastructure but also public transport spending in general, operations and so on to focus much more on smaller towns and rural areas. So hopefully we can divert some of the spending in that direction, hopefully we can get a little more out of Treasury because Government is very committed to this infrastructure spend and one was very interested to hear the Minister of Finance in his Budget speech say that this has been our principle measure input and it has seen us through reasonably well through this major global recession.

The Minister of Finance has said that our commitment to this infrastructure spending is not over because hopefully the recession was over although he mentioned the possibility of a w rather than a v when it comes to future prospects globally and locally. There is this commitment and therefore I think post 2010 much of the infrastructure spending on the transport side has been 2010 related, airports and so on and hopefully we can now begin to focus on some of the other critical areas of infrastructure including municipal and provincial road infrastructure.

The question about learning something from the Sanral example, to be applied at provincial and local level. There is a provincial road agency established a few years ago, it functioned quite well and it was established on the Sanral model for the provincial level but if one wants to believe newspaper reports then there seems to be some challenges there in that provincial road agency. So the model is not necessarily the golden solution, one needs a good professionally run and clean road agency whether it’s a provincial or national level. The agency issue then relates to two things the capacity to project manage because the construction is contracted by private companies and that means the State has got to have the capacity to not just spend money and award tenders but to be able to manage effectively and monitor that. I think SANRAL has shown an ability to do that and what is quite interesting is that Sanral’s road network has increased to 16 000km and it’s due to go up to 20 000k m and that is partly because it’s signing memorandum of agreements with a number of provinces to also assist them with project management on some of their road maintenance and construction.

The whole area of tenders is a massive challenge and there is a lot of money devoted through the Budget either nationally or at sub-national level in one form or another and it simply doesn’t hit the tar or becomes very shallow and that is partly weaknesses in the ability to project manage but there are other challenges as well and we need to look at the dangers of corruption and so on in this area.

The other difficulty is that much of the allocation for roads at the sub-national level is just on the equitable share basis and what we see with this infrastructure and other forms of infrastructure as well is that allocations for roads for instance ends up addressing some other provincial crisis, salaries or whatever and so we are discussing with treasury how we can effectively move to ring fence funding for instance road infrastructure and other forms of infrastructure.

That has worked very nicely with what’s called the Public Transport Infrastructure Systems Grant which we have used for the 2010 infrastructure so we have related directly to cities and we are pleased with what Cape Town is doing, what Johannesburg has done and so on with this dedicated ring fence funding for infrastructure and the BRT and other Integrated Rapid Transit Systems.

It’s a very important challenge and of course it’s not just about spending, spending effectively, efficiently and without corruption in the system, there are also other challenges and a key problem on our roads is the massive migration of freight, very heavy freight onto roads and it’s freight that should be on the rail system and this is where we are working very closely with our colleagues in the Department of Public Enterprises because we have to improve the Transnet Freight Railway System and they are committed to that and in the report you will see that.

Sometimes certain forms of freight are more efficiently carried on road but we need to get much more freight back onto rail. Heavy trucks on our road system is one of the main reasons for the damage to our road systems and when we come to the big power station build we are going to face challenges in terms of getting coal to power stations and what that does to infrastructure, so that’s another discussion we are involved in.

Journalist: I don’t know which Minister will answer the questions on water. I see that a R195 million is allocated to upgrade the waste water treatment works. The Minister of Water Affairs said about a month ago only 33 of our waste water treatment works are actually 100% operational and functionally correct. Is this enough money to upgrade the waste water treatment works? On page 3 the Minister said in the current recession the cost of borrowing may impact negatively on water tariffs, what does this mean are we going to pay more for water? If so when and what can we expect?

Journalist: Hopefully a lot of tourists here for the World Cup will want to go to the Cradle of Humankind and apparently there is raw sewerage flowing in the river through the site. People have predicted that the next pothole crisis is actually the maintenance of waste treatment plants and their upgrading and modernisation. Could you add that to the mix?

Journalist: Minister of Transport regarding the taxi industry and the World Cup, have you reached any agreement with them on what their role will be during the World Cup?

Minister Ndebele: We are working very well with the taxi industry SANTACO as well as all the operating associations UTAF. You saw last week that there were strikes in Johannesburg, we were able to intervene together with the province and the city. Generally there is an understanding that matters should be solved jaw to jaw rather than fist to fist so there is a good understanding. The experiment of the Confederation Cup was actually very good because we employed the taxi industry to work with all the other modes, the Passenger Rail Agency of South Africa (PRASA) on the one side and the bus industry on the other side and the taxi industry and it worked in a seamless manner, everybody was a winner out of it and we want to repeat that. So the taxi industry I don’t think should be an area of concern.

Journalist: After the President delivered his speech a few weeks ago he said that there will be performance agreements signed with the Ministers, Chabane told us that the details of what you agreed on will be given to us during the briefings but I don’t find a sense of that in this document. He said that the Ministers will give us the answers to those questions.

Minister Ndebele: There is a process underway and all of us are going to gladly sign those contracts with the Presidency. In my other life we signed with the Citizen’s Charter where each community knows what to expect and by when, so its under way and its going to make our life easy because everybody knows what to expect.

 

STATEMENT OF THE INFRASTRUCTURE DEVELOPMENT CLUSTER (POA)

DATE 1 MARCH 2010                                                                                           

 

Colleagues

Members of the Media

Ladies and Gentlemen

 

In an effort to catalyse economic growth and development Government has embarked on the largest infrastructure investment programme this country has ever seen.

The cluster’s integrated programme includes developing a transport system that ensures effective and efficient ports, roads, rail, aviation and, maritime. A massive build programmes in energy, telecommunications and water infrastructure is underway. The cluster is key to driving the country onto a new developmental growth path in which job creation is a priority..

One of the key deliverables of this cluster is the stimulation of local production through fleet procurement of, for instance, rail rolling stock, or the manufacture of turbines. This year’s infrastructure budget has increased from R784 to R846billion over the medium term expenditure period making it one of the largest expenditure programmes in the history of this country. The accelerated infrastructure programme will allow us to deliver among others the 2010 FIFA World Cup and set our country firmly on the growth path.  So what is the progress so far?

WATER INFRASTRUCTURE FOR HUMAN CONSUMPTION AND ECONOMIC SECTORS

Water - a scarce resource in South Africa- remains a key requirement in the country’s growth and development strategy. In this regard government has identified key projects to provide the water resource.

·         Some R195m over 2009/2010 and 2010/11 has been allocated for the upgrade and refurbishment of municipal Waste Water Treatment Works (WWTW) across the country 

·         Construction continues on water distribution networks from Nandoni and Inyaka dams for the water supply for communities in Limpopo and Mpumalanga, Hluhluwe and Middle Letaba regional water distribution at a cost of R410 million

In the 2009/2010 financial year the DWA spent R350 million on its Dam Safety and Rehabilitation Programme and will spend R850 million in the 2010/2011 financial year.  The construction of the permanent abstraction works of the Vaal River Eastern Sub-system Augmentation Project will provide a sustained supply of water to Eskom and Sasol in the Secunda after commissioning and completion. Preparations for the augmentation of water supply to the Duvha and Matla power stations are on track to commence by August 2010.

 

·         Planning and implementation are on track for the Mokolo-Crocodile Water Augmentation Project for the provision of water to ESKOM’s Medupi Power station and to the town of Lephalale. This will cost R10.1 Billion. The construction is projected to start during September 2010

·         Preparations are on track for the implementation of the Nwamitwa Dam in Limpopo Province in the 2010/2011 at a cost of R1.1 billion

 

 

NEW WATER RESOURCES INFRASTRUCTURE PROJECTS 2009 – 2014

 

It must be noted that South Africa is reaching the limit of its fresh water resources and therefore a concerted effort towards water conservation is needed quite urgently. 

·         The Vaal River Eastern Sub-System Augmentation Project (VRESAP) in Mpumalanga will provide more water specifically to SASOL and Eskom. Paid for by the users the system is more than 95% complete and will be finalised by the end of 2010/2011.

·         The Komati Water Augmentation Scheme (KWAS) in Mpumalanga is planned for the Mpumalanga province to provide more and better water for energy generation (Eskom). It is awaiting environmental authorization and contractors have been pre-qualified. Some 50 km pipelines will be constructed and more than 500 jobs created over a 5 year period. The project will commence in the second half of the current financial year. In the current recession the cost of borrowing may impact negatively on water tariffs.

·         The Mooi-Mgeni Transfer Scheme (MMTS-2) in KwaZulu-Natal involves the construction of the Spring Grove Dam for domestic water supply in Ethekwini and Umgungundlovu. The project will create between 400-500 job opportunities over 5 years. In addition the construction of a transfer pipeline from Mooi River to Mgeni River will commence by the end of 2010 and the first water delivery will take place by 2013.

·         In Limpopo the Olifants River Water Resource Development Project (ORWRDP) involves the construction of the De Hoop Dam which commenced in 2007 and is progressing well. The dam is about 40% complete. There are currently 752 employed in the project.

·         In the Limpopo Mokolo Crocodile Water Augmentation Project (MCWAP Phase 1) arrangements are advanced to provide water to Medupi power station and Lephalale.  On average about 500 jobs will be created over the next 5 years.

·         In the Western Cape plans to construct the CLAN WILLIAM DAM are at advanced stage. After detailed design construction will commence towards the end of 2010/2011. It is anticipated that 500 jobs will be created when construction starts.

·          Environmental authorization has been received and the department has commenced with the process to acquire the land for the raising of Hazelmere Dam in KwaZulu-Natal. The project is scheduled to take place over 2 years and in that period 100 jobs would be created.

 

TRANSPORT

The key deliverables of the Transport sector broadly include the following:

·         reduction in transport costs;

·         improvement in safety; reduction in the backlog of road and rail infrastructure;

·         aaccessibility to and affordability of quality public transport in both rural and urban areas; and

·         optimisation in freight logistics improving energy efficiency.

In this regard Transnet’s R93.4bn investment in ports, rail and pipelines infrastructure aims to improve efficiencies in these sectors, thereby lowering the cost of doing business. Transnet spent R53.4bn between 2005/06 and 2008/09.

Major projects to be completed in the current financial year include the widening and deepening of the Durban entrance channel as well as the Port of Ngqura, which is on the way to becoming operational during 2009.

Transnet Freight Rail received the first six 19E dual voltage locomotives as well as 18 EMD diesel locomotives as part of a major replacement programme (172 locomotives over the next two years). With more than 25 years of inadequate infrastructure investment, infrastructure supplier industries have been significantly undermined.

The purpose of the DPE macro-economic impact study, which began in February 2009, is to measure the impact that Transnet’s five-year capital investment programme will have on the National and Provincial economies in South Africa. This impact is just over R115.4bn which will be added to the national economy by 2018.

 

This Gross Domestic Product impact (GPD) will amount to just over 4.8% of national GDP by 2018. The investment programme has a major direct impact on the economy (34%). Transnet has had its greatest impact in the KwaZulu Natal province, followed by Mpumalanga and the Northern Cape Province. This is to be expected, given the fact that Transnet has large operations in those provinces. Calculated as a percentage of provincial GDP in the Northern Cape the positive impact of Transnet investments is 54% of provincial GDP, and an additional 57 463 employment opportunities will be created.

 

In KwaZulu-Natal the positive impact of Transnet investments is 18% of provincial GDP, and an additional 143 704 employment opportunities will be created; In Mpumalanga the positive impact of Transnet investments is 15% of provincial GDP, and an additional 46 016 employment opportunities will be created; In the Eastern Cape the positive impact of Transnet investments is 14% of provincial GDP, and an additional 62 435 employment opportunities will be created. Further details of this study will become available during the first quarter of the 2010/11 financial year.  

BUILDING A PUBLIC TRANSPORT LEGACY OUT OF THE WORLD CUP

The DOT has been working closely with all World Cup host cities to ensure the rollout of infrastructure and preparation for the operationalisation of integrated public transport networks. In Johannesburg, Cape Town and Nelson Mandela Bay the Bus Rapid Transit system forms a core part of the public transport system.

In JHB the first ever BRT in Africa commenced its phase1A in August last year with 17000 passengers daily and with the expansion of feeder systems due in the next weeks.  In Cape Town and Nelson Mandela Bay, BRT infrastructure construction is well under way.  In addition other cities including Ethekwini, Mbombela etc have invested in public transport infrastructure. Overall the commitment has been R4billion up to 2010/11  

AIRPORT INFRASTRUCTURE

On the airport infrastructure side Airport Company South Africa(ACSA’s) R20bn airports development programme has been completed. The major projects are OR Tambo Airport – Central Terminal Building(R2285m), OR Tambo Airport – Golf Apron Development( R424m), OR Tambo  Airport – Multi-Storey Parkade( R496m), Cape Town Airport  Terminal(R1522m), Cape Town Airport Multi-Storey Parkade(R394m), Bloemfontein Airport – Run way rehabilitation ( R121m), Bloemfontein Airport (R46m), Durban La Mercy Airport Development( R6724m).  More than 3 000 jobs were created as a result of these projects

ROAD INFRASTRUCTURE NETWORK

Our road network is benefiting from government investment of R70bn in a 3-year funding period. In this regard here are some of the major projects:

• The project includes the R23bn Gauteng Freeway Improvement Project
• The estimated total proclaimed road network in South Africa is standing at 535 000KM
• The  optimal road network that SANRAL can maintain is 20 000KM which has been identified and will be amalgamated into the network
• Rural development on Expanded Public Works Programme on roads throughout the country has R3billion budget allocated to it.

 

 

 

ADDRESSING ROAD INFRASTRUCTURE BACKLOGS

 

Let us address an issue which has dominated headlines recently- the matter of potholes on our road network. It must be said that as early as 2001 the Department of Transport reported to Cabinet that funding for roads had “fallen to a level where it cannot fully finance the maintenance needs of the existing network”. While subsequent Medium Term Expenditure Framework allocations for roads have been growing, the growth was from a small base.

 

There is no maintenance backlog on the national network. We need to move towards a provincial emphasis where we replicate the systems that at national level allow for a maintenance and construction programme which is world class. Nationally for instance we have a system which addresses potholes within 48 hours. On one hand the issues of potholes reflects a lack of funding to address projected backlogs and identified gaps. Even though this year we are investing R18billion on roads and R23billion on the Gauteng Freeway Improvement scheme, this is not enough.

 

The 2000/01 - 2007/08 National Treasury’s Trends in Intergovernmental Finances said aggregate expenditure on roads grew from R8.2billion to R9.2billion. In contrast the investment requirements for the roads sector were calculated to be in the order of R64billion over 5 years starting with the 2003/04 MTEF. This means that we have been underfunding our own requirements and projections.

 

Strides have been made towards improved funding of roads through the user pay principle. This has resulted in the road sector spending R9.7billion without relying on the fiscus. Other interventions to protect the road network include the overload control strategy. This has seen an increase in the number and operations of weighbridges on the country’s busy corridors and the establishment of industry self-regulation in the form of the Road Traffic Management System. The system targets freight that moves mainly on the secondary road network.

 

We are gathering of information on the extent, condition and investment requirements of all roads authorities in the country so that a composite picture can be drawn and effective plans and strategies implemented. Additional allocations of R3billlion (2007/08 MTEF) and portion of R4billion (2009/10 MTEF) for the roads sector in the Expanded Public Works Programme (EPWP) and the implementation of a rural transport strategy will go some way towards improve access and mobility in rural areas.

 

PASSENGER RAIL AGENCY OF SOUTH AFRICA (PRASA)

Government is investing R25 billion over the Medium Term Expenditure Framework (MTEF) period to stabilise and upgrade rail passenger transport services in our country. Of this R14 billion is being spent to upgrade rail passenger infrastructure and rolling stock whilst the balance will be funding for rail operations. South Africa has gone a long way in arresting the decline in commuter rail services over the past few years. PRASA has since the 2006/07 financial year accelerated the rolling stock investment programme. This has resulted in over 1 500 coaches being refurbished to the tune of R5 billion. An additional 700 coaches will go through this programme this year at an estimated R2 billion. PRASA is on course to eliminate the historical backlogs in the General Overhaul (GO) and Upgrades for Rolling stock.

 

FREIGHT LOGISTICS

Freight logistics is the backbone of the country’s economic development and to that end we are busy developing interventions to bring about the necessary efficiencies in the freight system to enhance the role that freight logistics plays. Currently our freight system is fraught with serious performance challenges brought about by a number of reasons.  The one single most important reason is historical under investment in infrastructure, rolling stock and operating equipment.

 These historical under investments have resulted in serious system unreliability and underperformance.  As a result of this the system is unable to meet current freight demand. To deal with this, Transnet has embarked on a massive infrastructure and operational investment in order to improve service levels, reliability as well as increase capacity across the freight system.

 

Some of the immediate interventions that Government, along with Transnet, are implementing include the revitalization of the railway branch lines by introducing private sector players to operate and invest in them whilst Transnet focuses on investing in the main railway lines, ports and pipelines.

Transnet will in the next five years invest about R93.4bn into ports, rail and pipelines infrastructure and operations to improve efficiencies in these areas of the freight logistics sector.  In the last five years Transnet has invested R75,3bn between 2005/06 and 2009/10.

To increase freight system capacity, Transnet has undertaken the construction of the Port of Ngqura which is 84% complete.

We have also widened the Durban entrance channel which is 87% complete, expanded the Cape Town container terminal and other port expansion programmes which are underway. This will help increase volume throughput through our major ports and will improve flexibility and capacity of the national ports system.

Freight Rail received the first six 19E dual voltage locomotives as well as 18 EMD diesel locomotives as part of a major replacement programme (172 locomotives over the next two years). This will improve volumes and efficiencies within the coal and general freight business.

Through the construction of New Multi Product Pipeline (NMPP) Transnet Pipelines will increase fuel carrying capacity by 8.7 billion litres per annum in 2011 and by 12.2 billion litres per annum in the phase 2 of the project and by 26.2 billion litres in the ultimate phase 5 of the project. This investment is in direct aid of our security of supply of energy going into the future.

ESKOM’S BUILD PROGRAMME

As is well-known, there was a significant under-investment in electricity generation capacity in the period between 1991 and 2004/5 by Eskom (the 10^th largest utility in the world) resulting in the current critical shortage of generation capacity. This was due, amongst other things, to the fact that Independent Power Producers (IPPs) did not come in to fill the gap as had been anticipated, as the right enabling environment did not exist. As a consequence, the country faces a future 40 000MW shortfall which will have to be created by 2025 if this country is going to be able to meet its energy requirements.

Therefore, in 2004/5, Eskom, embarked on a massive build programme, the fifth largest in the world, which will provide the huge, much-needed transmission and generation capacity for the country.

Eskom has a capacity expansion budget, covering the years of the MYPD applications of R385 billion for 2008 to 2013. Out of the capital budget 73% will be spent on Generation, 13% on Transmission and the remainder will be used to strengthen the Distribution networks.

Since its expansion programme started in 2005, an additional 4 653 MW has already been commissioned. The plan is to deliver an additional 16 304 MW in power station capacity by 2017. Of that, 12,476 MW is already under construction (mainly Medupi, and Kusile power stations, return to service stations and the Ingula power station).

Over R48 billion was spent in 2008/09 and R65 billion is planned to be spent in 2009/10 and R96 billion in 2010/11.

To date, Eskom has already expanded capacity of supply to customers through the following projects:

·         The return to service (RTS) of the previously “mothballed” units of Camden, Grootvlei and Komati a coal fired power plants (totaling 2370 MW).

·         Two open cycle gas turbines have been completed, namely Ankerlig (5x148.3MW) and Gourikwa (2x149.2 MW), totalling 2084 MW.

 

·         An increase of the Arnot coal fired power station’s capacity with an additional 200 MW available on the grid. .

·         Around 2696 km of high-voltage transmission has been built in past 4 years, as well as numerous new transmission sub-stations and transmission network upgrade projects.

·    Eskom has electrified more than 3,7 million households since 1991.  About 99% of the municipalities are participating in the Free Basic Electricity programme. Eskom’s electrification projection for FY 2009/10 is 90 000 households.

In addition, Eskom’s current and future capacity expansion projects include:

·         The return to service (RTS) of additional units at Grootvlei (600 MW), which is scheduled to be in commercial operation by the end of 2010, and Komati (750 MW) scheduled to be in commercial operation by the end of 2012.

·         Three new power stations are being planned and built, namely Medupi (4 764 MW), Kusile (with the private sector) (4 800 MW) both coal-fired, and Ingula, a pump storage scheme (1 352 MW). The Medupi project alone is 4 times larger than the Gautrain.

·         The addition of another 100MW of capacity to the Arnot coal fired power station is planned for commission in December 2010.

·         The Duvha, Matla and Kriel coal fired power stations are at an execution planning phase and are being refurbished to extend their life span.

·         The wind energy facility is proposed to accommodate 50 turbines, for a total output of 100 MW

 

In addition to Eskom’s introduction of renewable energy and its demand-side management initiatives which includes its solar water heating programme, its carbon emission mitigation is further enhanced through carbon capture ready new coal power stations fitted with flue-gas desulphurization whilst existing coal fired power stations have been fitted with electrostatic precipitators and bag filters to reduce particulate emissions.

In support of Eskom’s capital investment programme, Government has provided a subordinated R60bn loan to Eskom over three years as well as guarantees totalling R176bn over the next five years (R26bn for existing debt and R150bn for new debt) in support of the capital expansion programme. Borrowings of R123 billion over the MYPD2 period are projected to run as follows: R40 billion 2010/11, R43billion in 2011/12 and R40 billion in 2012/13. (Figures based on MYPD2 application by Eskom). This would have left a R14 billion shortfall. These figures will now change given the recent ruling by Nersa.

Eskom borrowings to support the Build initiative consist of 3 ECAs (export credit agencies) amounting to R27 billion, an African Development Bank Loan of R20,7 billion, and a World Bank loan of 3,75 billion dollars.

Over the MYPD2 period Eskom will continue its initiatives to improve efficiency and will reduce its overall costs by R12 Billion, by cutting operating and primary energy costs by R6, 9billion and R1, 6 billion respectively.

As a result of Eskom’s build programme it is estimated that 40 000 direct construction jobs will be created. Overall the build programme will create approximately 160 000 new jobs (direct and indirect) which may be sustained over the duration (5 years) of the build programme.

 

Government is working towards a national target of one million Solar Water Heaters by 2014, and to date more than 1500 plumbers have been trained and a further 10 000 plumbers will be up skilled, re-skilled and certified.

 

At the same time Government continues to work in earnest to provide certainty for long-term security of electricity supply through the work of the IMC on energy which was established last year. The recent tariff determination by the National Energy Regulator of South Africa (NERSA) has implications not only for consumers, but for Eskom, the security of energy supply and the economy as a whole. The work of the IMC is divided into nine main work-streams which will look at the Protection of the poor from the impact of the electricity price increases, the Country Build Plan , the Macro-economic impact of the price increase on our competitiveness, Demand Side Management and Energy Efficiency, Nuclear Strategy and Implementation, Renewable energy, Private Sector Participation in Power Generation, the facilitation of a strategic equity partner for the Kusile Power Station and  Coal Haulage Logistics for Road and Rail. The IMC is expected to present its findings to Cabinet in June 2010.

South Africa’s energy country plan envisages a progressive introduction of renewable energy capacity towards a target of 1445 MW by 2013 of which 343 MW capacity is planned for 2010.  

TELECOMMUNICATIONS – LOWERING THE COST OF COMMUNICATING

The Broadband Policy will be adopted in 2010 to strengthen government’s capacity around infrastructure expansion and enhance facilities leasing. It will also facilitate the sharing of infrastructure. This policy will contribute to reducing the cost of communicating as outlined in the Cluster’s detailed Programme of Action.

Beyond 2010 the implementation of this Programme of Action will be accelerated to bring the cost of broadband and telephony (both mobile and fixed line) further down. This will make communication more affordable for the majority South Africans. As stated in the President’s State of the Nation Address, the Department of Communications will also focus on increasing broadband speed and on ensuring a high standard of internet service, in line with international norms.

BROADBAND ROLLOUT

The cluster will increase penetration from 2% to 5% increasing access to broadband by 1, 4 million South Africans. The implementation of broadband and voice services will create employment and employment opportunities through the construction, operation and maintenance of the network. The uptake and usage of broadband makes South Africans globally competitive in all spheres of life. The roll out of broadband in rural areas will allow those citizens to compete on an equal footing with their counterparts irrespective of where they are in our country.

BROADCASTING DIGITAL MIGRATION

One of the major impacts of Broadcasting Digital Migration policy is its contribution to the industrial growth in our country. The cluster will be finalizing and implementing the STB Manufacturing Sector Development Strategy this year. The intention is to manufacture 8 million set-top boxes (STB) commencing with 500,000 in the 2010/11 financial year. The focus here will be on providing subsidies to poor TV owning households to enable them to buy STBs. 

This Strategy will also contribute to job creation and job opportunities, with specific reference to the STB value chain, from manufacturing, assembling to installation, repairs and maintenance. Broadband Infraco is a new State-Owned Enterprise (SOE) that will sell high capacity long distance transmission services to licensed fixed and mobile network operators, internet service providers and other value added network service providers.

 

Broadband Infraco has undertaken investment to date to enable it to sell high capacity long distance transmission services to licensed fixed and mobile network operators, internet service providers and other value added network service providers. At the end of 2009 Infraco’s network assets consisted of 11 800 kilometres of fibre optic cable routes.  This provided connectivity from Gauteng to the major metropolitan centres of Bloemfontein, Kimberley, Cape Town, Port Elizabeth, East London, Durban, Nelspruit and Polokwane.

The interconnections to Botswana and Mozambique were successfully completed, requiring the installation of an additional 105 kilometres of fibre network and associated long-distance repeater stations. The interconnections to Namibia and Zimbabwe are nearing completion, requiring the incorporation of an additional 350 kilometres of fibre network and the construction of three new repeater stations. The quality of the network has also been enhanced to achieve availability levels of 99.95%. The system also enables the accurate fault location to reduce response times in the event of fibre cable breaks.

Furthermore, to enhance South Africa’s international connectivity and the speed of broadband, INFRACO is co-investing with the private sector in the deployment of the West African Cable System (WACS) project. WACS is a 14000km International marine cable network infrastructure from South Africa to the United Kingdom and Portugal with landing stations in 12 West Coast African countries.  The system comprises four fibre optic pairs with a maximum capacity of 5.12 Terabits per second (Tb/s) and approximately 400 Gigabits per second expected to be lit on launch.

A recent study indicates that the availability of Infraco’s national network has already had a significant impact on wholesale prices of communication and it is anticipated that its investment in the marine cable will continue this positive trend in downward pricing.

 

 

International Submarine Cable Project

In order to address the international marine cable connectivity, INFRACO is participating in the deployment of the West African Cable System (WACS) project. WACS is a 14000km International marine cable network infrastructure from South Africa to the United Kingdom and Portugal with landing stations in 12 West Coast African countries.  The system comprises four fibre optic pairs with a maximum capacity of 5.12 Terabits per second (Tb/s) and approximately 400 Gigabits per second expected to be lit on launch.

CLIMATE CHANGE

Following Copenhagen in December 2009 we believe an agreement must be concluded within the next year or two i.e. either in Mexico at COP 16 in December 2010 or in South Africa at COP 17 in 2011. Among others the issues raised in the Copenhagen Accord relate to sharing responsibility, commitment and action among all countries”. We need to agree on how to record economy-wide binding emission reduction targets for all developed countries.  How do we measure, report and verify the mitigation actions of developing countries such as Brazil, China, India, Indonesia, Mexico, South Korea, Philippines and Maldives and South Africa. 

Further required is:

·    A commitment from developed countries to provide $30billion “Fast Start Finance” from 2010 to 2012 through existing international institutions and to provide $100billion per year by 2020 through a new Copenhagen Green Fund

·     A mechanism to finance Reduced Emissions from Deforestation and forest degradation using a fund based approach

·         South Africa successfully hosting the Climate Change Conference of Parties at the end of 2011 

 

 

 

TRANSFORMING PUBLIC TRANSPORT IN SOUTH AFRICA

In closing, 100 days before kick off it is all systems go for the World Cup. Upgrades at OR Tambo airport, Cape Town international and Mangaung have been completed to world class standards. On May 1 2010 the first plane will land at the new King Shaka airport. PRASA has ordered 570 additional busses and driver training is underway. There will be 46 public viewing areas around the country.

Additional power substations and generators have already been installed at the stadia to ensure adequate power supply. Six stadiums have already been fitted with 'last mile' fibre optic broadcasting infrastructure and the remaining four stadia will be completed in March 2010.

Public Transport will become one of the sectors to benefit from investments induced by the 2010 World Cup. We are now busy with the contracting of services and ordering fleet services. Services are being determined through demand travel demand management system. We are in the processing of providing overlay services including domestic flights, intercity travelling, fan parks and similar services.

The GAUTRAIN RAPID RAIL LINK is one of our key infrastructure projects to date. We are hopeful that Phase 1 - between OR Tambo Airport and Sandton – will be ready for the FIFA World Cup.  

All of these milestones will be part of the lasting legacy that will be enjoyed by generations of South Africans for many decades, long after the World Cup has come and gone.

Ladies and Gentlemen there is no country in the world that can develop sustainably without providing the necessary infrastructure to grow. We are one such country that has placed growth as the chief goal but in addition ensured that growth benefits the people of this country, the region and the continent.

THANK YOU