Report of the
Portfolio Committee on Public Enterprises on the Oversight visit to State Owned
Enterprises (16 – 19 November 2009), dated 2 March 2010
1. Background
The Portfolio Committee on Public Enterprises
undertook oversight visits to State Owned Enterprises as part of executing its
oversight mandate as promulgated by the Constitution of South Africa. The visits were also aimed at familiarising
the Committee with operational sites and challenges faced by the entities.
The delegation of the committee consisted of the
following: Ms M. P. Mentor (ANC, Chairperson of the Committee), Dr S. Pillay
(ANC), Ms G Borman (ANC), Mr C Gololo (ANC), Dr GW Koornhof (ANC), Ms F Hajaig
(ANC), Mr Pieter van Dalen (DA), Mr M.
Nhanha (Cope), Dr M. Mangena (Azapo), Mr D. Mocumi (Committee Secretary), Mr M.
Erasmus (Committee Assistant) and Mr E. Boskati (Researcher)
2. Entities visited
•
Transnet pipeline
(Freight rail) in
Airways and Airports Company South
on the 16 November 2009.
•
Pebble Bed Modular
Reactor site and Transnet Rail Engineering Warehouse (
•
Eskom’s Medupi and Matimba power stations
in
•
Port of Nqgura and the
3.
Visit to Transnet
Freight Rail, Rail Engineering Warehouse and
3.1 Background
The visit revolved around the following key issues: complaints
received by the Port Elizaberth Regional Chamber of Commerce regarding the oil
leakages from the tank farm and the adverse effects on the environment; the environmental
risks caused by the manganese terminal, and the effects on the immediate
communities and businesses in particular; progress on plans to move the
manganese terminal from the PE harbour to an alternative site; the issue of
high cargo dues at the harbours and ports and the infrastructure program of
Transnet.
3.2 Site visit to the Transnet Pipeline in
On arrival at the Transnet Oil Refinery in
The Project Manager responsible for the Pipeline
construction made a presentation to the Committee in which he highlighted the
following:
•
The challenge for
most industry players, such as Engen, BP and Chevron is that they need to
transport oil from the coast into inland areas.
•
Regarding the
Infrastructure Plan of Transnet, the only project that is planned by Transnet
Freight Rail is to build a Multi-Purpose Pipeline which is nearing completion.
There were no build programs that Transnet do not honour, as alleged by ACSA in
their presentation to the Portfolio Committee in Parliament. The main reason
there is no dedicated jet fuel pipeline for the aiports, is because ACSA did
not upgrade capacity that was needed for a dedicated jet fuel supply pipeline.
•
There is a National
Task Team which comprises of representatives from the Department of Energy,
Transnet Freight Rail and other stakeholders who are responsible for ensuring
there is security of fuel supply for 2010.
•
There is an Energy
Security Master plan that sought to maintain that there is sufficient local and
indigenous production levels of fuel.
•
The usage of
Transnet pipelines as storage facilities remains a challenge.
•
There is a National
Infrastructure Plan to which all layers of government and relevant stakeholders
have contributed to.
•
The growth in
residential areas which moved closer to the tank farm and the harbour, made it
difficult for Transnet to expand its operations.
•
Transnet has not
experienced any fuel theft in the past, and that was mainly due to the
difficulty of stealing from a pipeline and security put in place.
The Committee visited the construction sites of the
pipelines. Security measures were in place to prevent sabotage and theft. The
Pipelines are coated with concrete cement. The 16 inch pipes are manufactured
in
3.3 Recommendations
A report should be forwarded to the Portfolio
Committee on Public Enterprises regarding the progress made on the
implementation of the bridging plan for fuel supply. There is a request to
develop underutilised ports such as Port Nollorth, in order to stimulate the
economy. Transnet must plan to procure locally, especially locally manufactured
Steel. The Committee will meet with NERSA to look into the Transnet Pipeline
tariff increase which was identified as a challenge by Transnet Freight Rail.
The Committee would invite Transnet to present the National Infrastructure Plan
to Parliament.
3.4 Visit to
Transnet Rail Engineering Warehouse (Koedoespoort)
The Portfolio Committee
members were welcomed by the Chief Executive of Transnet Rail Engineering, Mr
Richard Vallihu and Executive Committee members, the group executive of
Transnet, Mr Pradeep Maharaj, Mr Vuyo Kahla, as well as the management team of
the Koedoespoort plant.
The chairperson of the
Portfolio Committee, Ms Mentor, briefly outlined the reason for the visit and
thanked Transnet for affording them the opportunity to visit the site.
Due to time constraints,
only a limited number of businesses were visited during the day. These were:
Coach Business,
The
Committee toured the Rail Engineering Warehouse of Transnet. The warehouse has the
following capabilities:
•
Body Assembly of
locomotives, production of small parts of the locomotives and is the fastest
setup production plant in the world
•
Capacity of
manufacturing 150 coaches per year
•
Transnet School of
Engineering has an intake of 269 learners trained on different trades for the
year 2008/09, and the program is funded by the SETA
•
There are 6 rail
engineering plants and 130 depots spread over the country
•
The first new diesel locomotive (Class
39-200), was built in
The Portfolio Committee noted with concern the low
levels of orders received by the plant, that have led to retrenchments of more
than 650 contract employees. The engineering site has a capacity for
manufacturing 150 coaches per year, but is being underutilised with an order of
only 80 locomotives for the current year, and 100 for the year 2010. There are
orders from neighbouring countries such as
3.5 Recommendations
The Committee recommends that a detailed report be
forwarded to it outlining the legislative impediments that exist, and a status
report on production at Koedespoort. The report should further outline the
interventions that Transnet Rail Engineering would require from the Portfolio
Committee. Transnet should consider embarking
on a national skills campaign, conducting training for other SOE’s and ensuring
that young people are self employed and become entrepreneurs.
3.6 Visit to
The
Committee visited the harbour and
• The Port has a
500 000 container capacity, and is in optimal use, with 8 cranes at the PE terminal.
• There is
capacity for 100 000 cars at the terminal, and it is being used by VW and
General Motors.
• R600m was
spent on the refurbishment of the manganese terminal, which was still being
revamped.
• In terms of
the loading and offloading of containers, it took an hour to move 26 containers by crane, depending on the
size of the ship.
3.7 Committee
Observations
•
The Committee raised concern at the health
hazards that the community might get exposed to. The Committee was informed
that the Manganese terminal housed unprocessed manganese, which was less
harmful in that form. There were pre-tests done on employees, and on a
quarterly basis to asses the contamination on workers. There have been no cases
of manganese infection on the employees thus far and measures were taken to
address the levels of dust and impact on communities.
• Regarding the
complaints on oil leakages on the tank farm, the Committee was informed that
all avenues have been exploited to determine which tank farm had leaked the
oil. An Isotope test was undertaken to
get a breakdown of the oil particles from the contaminated water, and results
were due in December 2009. A test done in the
• Regarding
the removal of the manganese terminal, the Committee was informed that there
were feasibility studies commissioned and plans in place to move the manganese
terminal out of the PE terminal by 2016.
There was a steering Committee that comprised of the Regional Chamber of
Commerce, the Municipality, safety and environment lobby groups, and Transnet
that met regularly to ensure that there was progress on plans to move the manganese
terminal and address all problems.
3.8 Conclusion and
recommendations
The Committee would receive a detailed progress report
by end of November 2009 from the steering committee, on the plans to move the
manganese terminal out of
4. Visit to South African Airways (SAA) and
Airports Company of South
4.1
Introduction
On arrival at SAA Headquarters in
The Chairperson confirmed that the appointment of the SAA
Chief Executive Officer would be made by the end of December 2009.
She indicated that in terms of the Articles of
Association, the Board would have to meet at least 4 times a year, and that
there would be a need to draft a questionnaire, or hold discussions with
Chairpersons of Committees and Members of Parliament, to iron out differences
and attend to their concerns, especially those who do not fly SAA.
Mr Chris Smyth, acting CEO of SAA, informed the
Committee that the issue of increasing air ticket fares during the FIFA World
Cup was an international norm practiced by airlines around the globe and was
based mainly on demand.
4.2
Presentation by ACSA
In its presentation, ACSA explained how customers’
baggage was handled for both departure and arrivals, and the sites on which
cameras were located for security purposes.
ACSA explained that the number of reported baggage
thefts had been reduced to 8% from 28% a few years ago. They also explained
that most reported cases of baggage theft were not necessarily committed in
their airports but merely discovered there.
ACSA’s presentation involved two main issues namely,
fuel shortages as well as airport taxes. On airport tax, ACSA explained that
the figures reflected on the tickets as airport tax did not mean that all the
money went to ACSA. ACSA acknowledged that there were other charges in the
airport tax bracket that had nothing to do with them. The airports company gave
an explanation on the money they received in the airport tax bracket as
follows:
4.3
Presentation by SAA Technical (SAAT)
SAAT’s presentation was mainly about what the division
does on a day to day basis, which was full-service maintenance, repair and
overhaul of aircrafts. SAAT is recognised world over and overseas companies
always recruit some of their staff. The division is the most advanced in the
continent.
SAAT has received licences and certified by EASA of
the European Union as well as FAA of America.
SAAT has a complement of 2600 staff members. In their
presentation SAAT showed the Committee the aircraft Black Box and explained
that it was one of the most important equipments during air-crashes as it
contained most of the information about what might have led to an accident.
They also showed the committee a piece of an aircraft
wing component that was hit by a bird, which they called a ‘bird-strike.’ The
point was to demonstrate the impact a bird could have on aircraft especially
during take-off which might lead to accidents.
On the possibility of SAA selling its technical
division, the Chief Executive Officer, Mr Chris Smyth said that, if that
happened SAA would either have 51% or 25% of shareholding whichever the
shareholder found suitable, but it would not be wholesale.
4.4 Site
visit to the SAA Technical workshop
The Committee was taken to the SAAT workshop site to
see SAAT’s staff at work and the repairs and refurbishments made on some of the
aircraft. The work included working on the engines, wires, etc.
Among the aircrafts that were on site was a Boeing
340-600, the biggest aircraft on SAA’s fleet. Members of the Committee had the
opportunity to go inside the aircraft which was at that moment given a full
service. Once SAAT finished working on an aircraft what follows is test flying
before it is ready for commercial flights.
4.5 Site
visit to the baggage handling facilities
The Committee was taken to SAA’s baggage handling
system. ACSA has a R24 million baggage handling facility where staff members
are screened as they enter the facility. The company also has a Baggage
Reactive Team linked to the baggage control room that advises on baggage
pilfering based on statistics from all airlines.
ACSA’s Project Manager explained that some of the
causes of broken locks on bags and suitcases was as a result of bags or
suitcases getting stuck on the corners of conveyer belts.
ACSA also has 17 machines which process baggage and if
a bag is pilfered or opened the machine rejects it and if it is not rejected it
goes to the next level. Once it reaches ground level it becomes SwissPort’s
responsibility and ACSA has no further control over bags.
All staff members handling baggage for ACSA are vetted.
Nonetheless, pilfer age of customers’ baggage continues. This includes drug
trafficking. There is also a Baggage Pilferage Committee involving the
following stakeholders – the police, ACSA and the airline’s representatives.
The Portfolio Committee went through the baggage
handling process to see for themselves how baggage was handled through the
cameras and the baggage control room. In the process, members of the committee observed
at what stage the opportunity for pilfering arises. The likelihood of baggage
pilfering, according to the Committee’s observations was either at ground level
inside the building or when handled by the luggage handling companies appointed
by airlines, during loading or off-loading of baggage from aircraft.
4.6
Recommendations
ACSA is requested to forward to the Committee a
breakdown of all the taxes that are charged on a ticket, with a comparative
analysis of all airlines. The Committee further recommends that security
vetting be done periodically for staff working for SAA and ACSA. SAA Technical
should table a plan regarding its future within SAA to the Committee by end of
March 2010.
5. Oversight visit
to Eskom’s power stations and headquarters
5.1
Background
The visits focused on Eskom’s Headquarters at Megawatt
park and the Medupi and Matimba powerstations in Lephalale in the
5.2 Matimba
Power station
On arrival at Matimba Power Station, the Portfolio Committee
was welcomed by the Acting Chairman of the Eskom board, Mr Mpho Makwana, and
some of the management team members. In welcoming the Committee, Mr Makwana
gave a brief history of Lephalale, saying that it started in 1916 as a farm and
in 1929 rail was built. The area is surrounded by coal and iron ore which made
it attractive to mining companies and Eskom.
5.3 Presentation on the Matimba Power station by Christo van Niekerk, Power Station Manager
In his presentation, Mr Van Niekerk highlighted the
following key aspects of the projects:
•
The Matimba Power
Station produces nearly more than 8% in terms of Eskom’s total capacity.
•
The power station is designed to
generate 4000MW of power, large enough to light-up the whole of the
•
Coal is stocked for
thirty-three and a half days in the plant.
•
Matimba employs a
workforce of about 594 with 74 learnerships.
5.4
Presentation on the Medupi Power station
The presentation highlighted the following key issues:
•
Medupi will be the fourth largest
coal-fired power plant in the world.
•
Medupi
electricity represents 16% of current
•
The power station will
have economic spinoffs for the local population in terms of skills development,
employment opportunities, economic growth of the area and infrastructure
development etc.
•
The Medupi Power
Station would cost about R125 billion to complete. Of this amount, R49 billion would
be locally spent while R86 billion would be spent on contracted work from
outside.
•
The first unit would
be commissioned in 2012 and the final unit in 2017 contributing about 40 000
Megawatts to the national grid.
5.5
Committee Observations and Opinions
The Committee raised concerns about coal stock
reserves, asking whether the stock was in line with the recommendations made by
the National Electricity Regulator of South Africa of 40 days of stock in
reserves.
Eskom’s management team indicated that the intention
was to increase current stock levels and possibly meet the 40 days recommended
by NERSA.
On the presentation it was shown that one of the coal
power plants situated at Kriel in
When asked why Eskom is not part of the PBMR project,
Eskom’s management team responded by saying that the project was too costly.
The Committee also raised concerns about the rate of
water usage by the Power Stations in the area in light of reports that there
will not be enough water to supply both Power Stations. Eskom managers
responded by saying that the two power stations would draw water from the
Mokolo dam, the
5.6 Site tour to Matimba and Medupi power stations
The Committee was then taken on a site tour of the
Matimba Plant where the Committee was shown the Turbine Steam Engine. From the
steam engine the Committee was taken to the control room where it was shown how
the controller detects and identifies mechanical faults in the Turbine Steam
Engine.
From the Matimba Power Station the Committee departed for
the Medupi Power Station which is still under construction. This was after a
power-point presentation on the Medupi Power Station.
Eskom would make provision for its workers to stay
with their families not far from the construction site instead of them
commuting or travelling long distances to and from the construction site.
5.6
Committee Observations
The Committee raised concerns about the absence of
timeframes for the finalisation of the Medupi project. Eskom promised to
furnish the Committee with the timeframes as soon as they were available.
Eskom management team stated that some of the funding
came from
Eskom’s management highlighted some of the challenges
they were experiencing, one of which was working on servitude areas through
farms owned by foreigners. They asked the Committee to help them through
legislation (e.g Expropriation Bill) to resolve the matter.
Cable theft in the Lephalale region was at least under
control and over the past 5 years there were only 4 reported cases and a Joint
Committee of Eskom and the police is looking at this situation. In general,
cable theft cost Eskom nearly R400 million per year.
Another challenge Eskom’s management highlighted was
the problem of the supply of coal, maintaining that there were not enough coal
mines. Currently the utility is supplied by Exxaro, BHP Billiton, Anglo-Coal as
well as smaller mining companies such as Shanduka and Extrata.
The high volume of 400 tonnes heavy duty trucks that
transport equipment to Medupi have led to the deterioration of roads, and caused
delays in the delivery of materials and equipment to the construction site. Unless
the roads are upgraded, they will cause unnecessary delays in the construction
of the plant.
5.7
Conclusion and Recommendations
The Committee will in future arrange to meet jointly
with the Portfolio Committee on Energy to look at issues of coal supply and the
quality thereof. The Committee recommends that a study be commissioned by the
Department of Public Enterprises to look at the effectiveness of the strategies
put in place to cushion the poor against Eskom’s tariff increases.
The Committee
further recommends that conflicts that may exist at the level of the board and
executive management of Eskom be resolved speedily in order to ensure that the
corporate image of Eskom is positively reconstructed.
6. Oversight visit
to the Pebble Bed Modular Reactor (PBMR) in Phelindaba,
6.1 Introduction
The committee was welcomed by the PBMR executive team
including the Chief Executive Officer, Mr Jaco Kriek and NECSA CEO, Dr Rob
Adam. After a few words of welcome, the Committee was taken to the boardroom
for a presentation on PBMR Technology and Nuclear Licensing.
The purpose of the visit included familiarising
members of the Committee with the PBMR project as a renewable source of energy.
The visit was also meant to make members of the Committee understand why PBMR
postponed the tabling of its annual report for the 2008/09 financial year.
6.2 Presentation on PBMR
Technology programme by Dr Jörg Lalk Preng, Manager: PBMR Technology Development & Fuel Design
The
presentation was based on the Technology Development programs and University collaborations. The following
were the key highlights of the presentation:
•
PBMR has signed a $10bn
contract with a US based company.
•
The Department of
Energy has led bilateral talks with
•
The International
Atomic Association permits every country to possess nuclear for peaceful intent.
•
6.3 Presentation
on Nuclear Licensing by Dr Alex Tsela
In his presentation, Dr Tsela highlighted the
following key issues:
•
The main challenge
facing PBMR was the wrong perception regarding the safety of nuclear energy
•
A need for
regulatory reforms for the high temperature reactor, especially regarding roles & responsibilities of operator, owner, designer, etc.
•
The structural and institutional
requirements to ensure the licensing of PBMR
6.4
Problems and concerns raised by Members
•
What were the risks
involved in the project and its safety both to humans and the environment,
something similar to
•
What were the
advantages and prospects of partnering with
•
What were the
advantages of the Pebble Bed Modular Reactor in comparison to other renewable
energy sources.
•
Whether there were
any interactions with
•
Which countries
have successfully implemented the Pebble Bed technology, and what were the main
reasons countries like
•
Concern regarding
6.5
Responses from PBMR team
•
The PBMR team
explained that safety measures were systematically automated and that the
•
The Committee was
informed that
•
PBMR was much more
reliable and safer, notwithstanding the fact that the PBMR was much more
expensive and took longer to produce and most countries did not view it as a
viable option. This explained why countries like
•
The countries that
were using the technology included the
•
•
There had been no
collaborations with
6.6 Site
Visit to the Fuel Development Laboratory
After the presentation, the members of the Portfolio
Committee were taken to the Fuel Development Laboratory where they were shown
how the pebbles were made. The process started with graphite powder which was
mixed with chemicals such as alumine and phenolic and was processed through the
machines until it became a shiny solid pebble ready to be put into the reactor.
From there the Committee was taken to a simulation
reactor where it was explained how the pebbles move and how energy was
produced. The PBMR team explained that they have so far met all the safety
requirements for the continuation of the PBMR project.
The Committee was then taken to the Helium Test
Facility, also known as the control room. Here all the methods and techniques
used were tested and validated. As for the pebbles, their diameter density and
resistance to corrosion are tested.
The PBMR executive team could not provide reasons for
postponing the tabling of their annual report for the 2008/09 financial year. Despite
the fact that the postponement was due to a review of PBMR’s business plan,
which in itself did not clarify whether the PBMR business plan had indeed been
changed.
6.7
Recommendations
The Committee recommends that the Department of Public
Enterprises should embark on a public education campaign, in order to address
the misconception about the dangers of Pebble Bed technology and to inform
society about the broader objective of PBMR apart from nuclear energy.
Report to be considered