Report of the Select Committee on
Economic Development on its Oversight Visit to the Province of the Eastern Cape
on the 22-25 February 2011, dated 02 August 2011
The Select Committee on Economic Development, having undertaken the
above oversight visit, reports as follows:
1. Introduction
The
The
The province has
abundant capacity to accommodate further industrial expansion and cheap
industrial land in most towns. Coega is situated near
It should be noted that
these sectors, are to an extent, labour intensive and further investment in
them will lead to the creation of jobs and thus reduce poverty. For instance,
during the construction period of three to four years, it is estimated that 27
500 temporary jobs will be created and, once the refinery is operational, another
18 500 direct and indirect permanent jobs will be created.
Therefore, the Coega
refinery serves as an economic catalyst that will contribute significantly to
the restoring the
The proposed nuclear
plant in Thyspunt is one of the projects set to address electricity problems,
particularly in the province and country in general. In addition to addressing
the electricity crisis, wind powered turbines are also in the government’s
agenda within the
Regarding the construction
of the refinery, the state-owned company, PetroSA has indicated that once
approved by cabinet, will begin in 2012 and is expected to be completed by
2015. The Coega Development Corporation (CDC) notes that the refinery will be
the largest in
The automotive sector is a
critical segment of the economy as it links several industries and services.
The production of a vehicle incorporates a wide range of industrial activities;
inter alia, metal fabrication,
tooling, fitting, and leather and rubber products. This tends to benefit the
downstream industry increasing the value chain. The automotive industry can
be seen as a symbol of economic success in most developing countries. As the
industry continues to grow with its modern technologies, development is also
achieved. Important to note is the role of
government in support of this sector. Assistance to the automotive industry in
Despite the effort by
government on these projects, concerns have been raised against the aforementioned
projects. Of major concern to the community of Thyspunt is the proposed nuclear
plant and wind powered turbines. These concerns range from failure by relevant
government departments in consulting the community, possibility of regional
jobs being threatened to biodiversity challenges. Against this background, the
Select Committee on Economic Development (SCED) together with the relevant
stakeholders sought to conduct an oversight to try and address some of the
concerns raised regarding these projects
2.
Delegation
The
delegation was made of the following Members:
Hon. F Adams (ANC) Chairperson, Hon. MC Dikgale (ANC,Hon. DD Gamede (ANC),Hon.
MC Maine (ANC), Hon. AJ Nyambi (ANC, Hon. RA Lees (DA), Hon B Abrahams (DA), Hon.
EC Van Lingen (DA), Hon. JJ Gunda (ID), Hon. K Sinclair (COPE),
The delegation was
accompanied by staff: Ms NG Dinizulu (Committee Secretary), Mr L Mahlangu
(Committee Researcher) and Mr M Erasmus (Committee Assistant).
3. Provincial Delegation
Kouga
Municipality: Ms G Dadamasi: Manager, Solid Waste and Environmental Manager, Me E De
Lange: Acting Director: Community Services, Mr C Strydon: Manager Tourism, Mr F
Lloyd: Chairperson of the Portfolio Committee on Infrastructure and Human Settlements,
Mr EC Oosthuizen: Manager Civil Service Technical Services, Mr AL Marais:
Manager Electro Technology, Mr J Ngcayisa: Director Strategic Services, Ms VC
Benjamin: Ward Councillor, Mr BF
Rheeder: Ward Councillor and Ms C Strydom: Manager Tourism,
Eskom:
Mr
D Herbot: Senior Manager Environment, Mr G Greef: Manager Environmental, Mr M
Theron: Nuclear build project team, Mr B Mccont: Manager, Ms N Mdoda: Customer
Service and Area Manager, Mr T Toni: Portfolio Manager (Electrification and
Customer project), Mr ME Myoli: Electrification Planning Manager,
Thyspunt
General
Motors: Mr I Nicholls: Vice President Planning, Mr E Dold: Vice President,
Global purchasing and supply chain, Mr W Osborne: Manager, Training and
Organisational Development and Mr J Vermeulen: Manager, Manufacturing Engineering
Department
of Energy: Mr E Cloete: Regional Director, Mr D Sankoloba: Regional Energisation
Manager, Mr L Madzhie: Manager Electrification Planning, Mr J Keshaw: Director
Nuclear-Policy and Technology, Ms M Langlands: Wind Energy Portfolio Coordinator,
Mr D Sankoloba: Regional Energisation Manager and Mr E Cloete: Regional
Director
Coega
Development Corporation: Mr P Silinga: Chief Executive, Mr T Koza: Executive
Manager: Operations, De M Mabula: executive Manager: CDC Services, Adv Z
Mapoma: Executive Manager, Human Capital Solutions, Mr H van der Kolf: Acting
Executive Manager; Infrastructure Development, Mr C Mashigo: Acting Executive
Manager; Business Development, Ms B Jojo: Acting Financial Officer; Finance, Dr
P Inman: Senior Manager; Office of the Chief Executive, Mr F Ndema, Manager, Mr
W Olivier: Senior project manager, Mr L Mkontwana: Manager, and Ms N
Mxenge-Mayende: Manager Investment Promotions. PetroSA. Mr V Khulu:Manager Integration Resources,
4. Objective of the
Oversight Trip
As a committee consisting
of economic development, mineral resources and energy, the oversight trip
sought to cover as much ground as possible regarding issues relevant to the
committee. The objectives of the trip were to:
5.
The
5.1 Findings
5.1.1 Growth
5.1.2 Income
5.1.3 Future Plans
6. Community Meeting
A public meeting was held at St Francis Links, to hear the concerns of
the community around the nuclear plant and wind energy (wind powered turbines.
Among the people attended, were different forums representing the community
such as St Francis Community, Jeffery’s Bay Community, St Francis Kromme Trust,
and Thyspunt Alliance, Representatives from Sylvester and Councillors from
Kouga, Department of Energy, Eskom, National Nuclear Regulator, and Department
of Public Enterprises.
6.1 Concerns raised by the
Communities
The following concerns were raised by the broader community in the region:
6.1.1 Nuclear Plant
Concerns centre on the location of the nuclear pant
(i.e. in Thyspunt). Residents of Cape St. Francis and Jeffrey’s Bay are against
such plant as they believe that it will not create any jobs and will not solve
any electricity problems facing the region. Technology being proposed is rather
too expensive for government and this may seem or prove to be a fruitless
exercise. There were also concerns about the suitability of land as the area
experiences geological hazards such as earthquakes
6.1.2 Wind Turbines
There seem to be concerns on the unregulated
proliferation of wind energy facilities in
6.1.3 Committee findings
·
Misalignment and
misunderstanding between the municipalities and National departments.
·
Lack of information and understanding of
broader government objectives regarding the nuclear plant and renewable energy.
·
Communities at the public
meeting were not fully geographically represented as the interests groups
dominated the meeting.
7. Eskom
The meetings was held at St Francis Links on the issues
related to the environmental impact assessment and other studies that are
currently underway regarding the potential use of the Thyspunt site for a
proposed nuclear power station.
7.1 Background
7.1.1 The Nuclear Site Investigation Programme
The importance of locating nuclear power stations on the
coast was already recognised in the 1980’s, and resulted in the commissioning
by Eskom of the Nuclear Site Investigation Programme (NSIP). The NSIP studies
were restricted to the South African coastline on the basis of various factors,
for example, that sea water would be used for cooling thus avoiding the need
for using scarce natural water resources, and that future load growth would be
in coastal regions.
Most of the South African coastline was investigated as
part of the NSIP studies. The parts that were not investigated were areas within
50 km of the coastal cities and the coastline of the previous homeland areas of
the
The NSIP studies identified four suitable sites (other than the existing Koeberg site)
on the South African Coast that met the criteria for a Koeberg-type (i.e. using
pressurized water reactor (PWR) technology) nuclear power station:
7.1.2 Cooperative Agreement between the National Nuclear
Regulator and the Department of Environmental Affairs
The National Nuclear Regulator Act assigns responsibility
to the National Nuclear Regulator (NNR) to licence nuclear installations. The
applicant for a licence was required to submit a safety report and any other
supporting documents, including a site safety report, which the NNR evaluates
before taking a decision on granting the licence. The NNR Act defines the
objects of the Regulator as, amongst others, to provide for the protection of
persons, property and the environment against nuclear damage through the
establishment of safety standards and regulatory practices and to ensure that
the provisions for nuclear emergency planning are in place.
The National Environmental Management Act assigns
responsibility to Environmental Authorities (such as the Department of Environmental
Affairs - DEA) to protect the environment. The definition of the environment
however includes both the physical and the social environment.
There is thus an overlap of responsibilities between the
NNR and the Environmental Authorities with respect to radiological impacts on
the environment. A cooperative agreement was signed between the NNR and DEA to
manage their respective responsibilities and avoid duplication of legislative
oversight. From the Cooperative Agreement it is clear that the NNR is
responsible to evaluate the safety of the proposed power station and
determining what emergency planning zones and activities are required.
The NNR can only commence the formal evaluation of the
safety of the proposed power station and determine the emergency planning
requirements after Government/ Eskom has determined the vendor and hence the
design for the
proposed nuclear power station. The granting of a positive
environmental authorisation does not preclude the requirement for a nuclear
installation licence and vice versa
8. Coega
Development Corporation (IDZ)
Briefing on the Coega Industrial Zone (IDZ) challenges
and future plans
8.1 Conventional Energy –
Strategic Importance
●
Country's requirements for base load electricity
production
●
Ensuring that IDZ minimise transmission losses
and serve as anchor for the electricity transmission network in the Province
●
Provides primary energy and technology
diversification which uses cleaner and more efficient fuel
●
Ensuring that there is development in the NMBM
& IDZ
●
Job creation (backward and forward linkages)
●
Ensuring that IDZ produce own petrochemical
cluster and not reliant on imports
●
Meeting SA Renewable Energy Commitments towards
climate change & carbon emission reduction
●
Contribution towards Rural Development Targets –
electrification programmes
●
Creation of new industries and green
technologies in SA
●
Linkages with the agricultural sector
8.2 Conventional Energy
project
●
CCGT:
–
Prefeasibility Study
–
Discussions with Eskom and DoE ongoing
–
IRP2010 being finalised
–
ISMO under discussion
8.3
Peaking Power Plant
–
GDF Suez & DoE
–
EIA completed (Expiring in September 2011)
–
Generation Licence and site ready
–
PPA discussions being finalized
●
Wind:
–
Electrawinds 25
Turbines (
●
EIA to be completed by Q2
●
Operational turbine in the IDZ (40 construction;
2 operational jobs)
●
Sponsoring 3 Engineering students at NMMU
–
Innowind 16 Turbines (
●
EIA to be completed by Q3
●
Wind mast have been erected for over 6 months
●
Adopted an orphanage in Zwide
–
Universal Wind 20 Turbines (
●
EIA to be completed Q1 2012
●
In discussions with Women empowerment groups
●
Solar
– 12 MW
–
German Company with operations in
●
The Coega Development Corporation (CDC) doing a large amount of work in the energy
sector
●
The Energy Sector can contributes immensely to
CDC’s and the provinces objectives to:
–
Jobs
–
Revenue generation
–
Skills development
–
Rural development
–
Social responsibility
–
Private sector is ready to invest
–
There are challenges with the regulatory
environment and facilitating IPP’s to take off
9. The Nelson Mandela Bal
Logistic Park (NMBLP)
9.1 Achievements:
NMBLP in the past eighteen months has achieved the following:
·
Five new factories,
·
Suppliers Job created approximately 685,
·
Supplier investment R600 million
·
Volkswagen South Africa R485 million
·
Public Sector investment R371 milion
The total Private Investment equal to R1,085 Billion
9.2 TDM Powered Apprenticeship
Programme
The TDM Powered is a pilot programme facilitated by
the
The foundation level of the TDM Powered
Apprenticeship Programme prepares students and industry incumbents, who might
need special support, for apprenticeship training in the machine and tooling
manufacturing industry. The 2010 pilot Foundation Phase was presented over a
period of three semesters from February to November and comprised applied and
fundamental theory. Applied theory focused on mathematics, safety, drawing,
measurement, employability skills and company excursions. Fundamental theory
included English communication, basic computer skills, mathematics, science and
life skills.
Phase 2 of the Foundation Level entailed workshop
training teach participants basic hand skills and machining techniques. On
completion of the workshop training students were given the option to submit
two work pieces for independent adjudication. Once the work pieces had been
approved, students were allowed to do the American NIMS accreditation online.
Students who successfully completed the Foundation
Phase can now enter an entry level career in tooling manufacturing or can
continue their TDM Powered Apprenticeship studies to qualify as artisans,
master artisans or engineers.
The TDM Powered Apprenticeship Programme enables
students to pursue exciting careers in a wide range of industries such as
automotive, aerospace, mining chemical, defence and electronics industries.
Aritisans and engineers can work in these industries as a tool designers,
project managers, tool die and mould makers, metrologists, specialist computer
numerically controlled machinists, engineering analysts and the like.
10. Project
Mthombo – PetroSA
The Committee was briefed by PetroSa on the project
Mthombo which is the world class refinery
It is estimated that by 2015
The South African government is concerned about the
nation’s considerable dependence on international oil companies to secure the
country’s future liquid fuels energy needs, as their global strategies are
focussed, mainly on up-stream activities, not new refining investment. The government
has introduced an Energy Security Master Plan to address this, which calls for
PetroSA to provide strategic leadership to achieve security supply.
10.1 Broad–Based
Black Economic Empowerment and Competitive Supplier Development Programme
PetroSA regards the South African government’s BBBEE
policy as a necessary socio-economic process to redress the imbalances of the
past and to facilitate the participation of black people in the economy.
PetroSA to maximise the participation of BBBEE companies in the project.
The project will create sustainable BBBEE
opportunities across the value chain, including equity in trading and wholesale
opportunities; competitive supplier development; skills development; employment
equity; and corporate social investment.
10.2 Corporate
Social Investment
te Social Investment strategy which is aligned to the
company’s strategy, contributing to the company’s overall mission and vision,
whilst making a significant impact in the communities in which the company
operates.
PetroSA has chosen to focus on four main areas of
development:
10.3 Project
progress
11. General
Motors
General Motors briefed the Committee on their
operations, challenges and future plans towards growth of the automotive
industry and the province in general.
11.1 Key
challenges
11.2 The Department of Trade
and Industry- Training funding support required:
The current hourly employees rate cost 1159, job
creation potential at R680 with the total of R1 839-00 and
Training facility required at
Struandale Plant to support new car-lines:
•
Cost of
new facility at Struandale R 6 500 000
•
Cost of
training equipment at new facility R 3 500 000
•
Courseware
development R 2 000 000
•
Source
Plant Training (
•
Train
the trainer R 1 000 000
•
Operator
skills training R 4 000 000
•
Team
Leader training R
2 000 000
•
Total
funding required for training (
11.3 Proposed
Changes to Labour Legislation
The Minister of Labour gazetted four Bills for public
comments during December 2010; namely
•
Labour
Relations Act
•
Basic Conditions of Employment Act
•
Employment Equity Act
•
Employment Services Act.
It is also significant proposed
amendments to the Immigrations Act, which will have a direct impact on the
hiring of foreign nationals and the accommodation of international service
personnel. This is not seen as encouraging job creation and SA as “employment friendly”,
because it restricts Automotive Industry.
11.4
Economic Development Enablers –Resources
11.4.1 Electricity
•
Estimated
shortfall in generation is 6 TWh in 2011 and 9 TWh in 2012 ( 2-4% with no
reserves) – plant stoppages, loss of
production, increased manufacturing cost.
•
Bureaucratic
time consuming processes granting licences for Independent Power Producers - no
short term relief to electricity situation. This is when
•
Municipal
budget constraints affecting infrastructure sustainability resulting in poor
Quality of Supply. In 2008 power dips and surges resulted in production losses
at GM to the est. value of R3,4 million, 2010 – R750 000
•
Local
power generation will improve QOS, support growth in the region and create
jobs.
•
The
proposed Power Conservancy Program targets a select group of larger customers
adding additional manufacturing cost to the Automotive industry with associated
negative impact on competitiveness therefore not stimulating additional
investment in local industry.
•
Proposed
Carbon Tax on fuels - Increased cost of
utilities affecting competitiveness
11.4.2 Alternative Fuel
Strategy
•
Liquid
Natural Gas supply to
•
LNG
generates low CO2 emissions and must be pursued - 2009
•
LNG will
alleviate the proposed CO2 tax burden on large users of LP Gas such as the
motor industry. Increased tax burden will impact on the Automotive industry
competitiveness.
•
Recent
benchmarking with GM International Operations indicates that the use of LNG vs.
LP Gas and the cost thereof is giving other developing countries the
competitive advantage.
11.4.3 Water
•
The
extreme drought situation within the NMB region (dams at 34%) is affecting
major contributors to the GDP Business is expected to reduce water consumption
by 25%.
•
NMBM
request for Drought Disaster and Water Infrastructure Funding of R1,6bn has not
materialised yet. Applied for in April 2010 and as yet no indication to its
approval. These are long lead time large construction projects and will create
many jobs in the region. An indication of 28% (R450 Million)of funding
allocated
•
•
Current
infrastructure would not support the development in the Coega IDZ refinery
project. This could impact potential ~30 000 direct and indirect jobs.
•
High
water users are considering relocation of production to other regions as water
quota’s for industry could be imposed once dam levels drop further.
•
Constraints
on the local municipal budget affecting repairs to aging infrastructure and
reducing leaks.
•
Leaks in
the schools in the Metro equate to 8% of the water used – 18 to 20 ML/day is
wasted with no accountability and interventions from the department of
education.
11.4.4 Town Planning
•
Lengthy,
bureaucratic and inefficient processes encountered with sub-divisions and new
developments.
•
This
delays investments and job creation to the
11.4.5 Cargo Dues
The
Automotive Industry spend, on average between
R1000 and R2000 per exported vehicle on Cargo Dues (includes dues on inbound
material and the exported vehicle) . It is estimated that the Automotive
Industry spends almost R1 Billion per annum on Cargo Dues. By Government
shifting the responsibility of providing port infrastructure required to
support and grow the country’s economy to Transnet, Transnet is forced to fund
this from the port users, significantly impacting our competitiveness. As South
African Original Equipment Manufactures (OEMs), the industries are at a
distinct disadvantage to our sister plants elsewhere in the world.
11.4.6 Automotive Industry
The following steps had to be
taken by the Automotive Industry to seek a mandate at NAAMSA Chief Executive
Officers meeting to prepare a White Paper showing:
•
Impact of cargo dues on auto
industry
•
Alternative models used elsewhere in the world
•
Proposals on how Government could fund port
infrastructure without cargo dues.
The information need to be followed
by a meeting between NAAMSA and the Departments of Public Enterprises, Trade
& Industry, Economic Development and Public Enterprises.
12. Meeting
at King Sabata Dalindyebo (KSD) Municipality
The
13. Department
of Energy
13.1 Renewable Energy Strategy
13.2 Solar Water Heaters
13.3 Rehabilitation of Roads
13.4 Maintenance
13.5 Stakeholder Responses
13.5.1 Nuclear Plant
Environmental Impact Assessment (EIA) the nuclear
plant are still in progress. Thyspunt was one of the five sites identified for
a nuclear plant. Although, there is no decision yet made on the construction of
the plant, Eskom has already started buying land in the area. About 90% of land
has been bought from farmers as well as residents in surrounding areas.
The nuclear plant has a potential to create jobs
especially for the local people. Various phases from construction to operations
will pave way for new jobs. In addition, there may be spin-offs creating both
direct and indirect jobs. The nuclear plant will require large quantities of
material and this means that jobs will be created in its value chain.
Nuclear power plants typically have high capital
costs for building the plant, but low fuel costs as well as maintenance cost. The
National Nuclear Regulator (NNR) has not yet received any applications for the
nuclear plant so work has not started yet in terms of regulatory framework and
nuclear designs. Eskom argues that public meeting on the plant and the site
itself were held in the 1990s and extensive consultations took place on the
EIAs
14. Integrated Energy
Centre (Iec) - Qunu
The Integrated Energy Centre has been launched by the Minister of Energy
Ms D Peters, with the intention to contribute towards job creation and
community development overall. The
Department of Energy is partnering with relevant stakeholders, private sector,
municipalities in establishing the Integrated Energy Centres.
The Iec in Qunu is a one stop energy shop owned and operated by the
community Cooperative and organised as a community project. The Qunu lec’s
programme is also linked with the library and a computer centre for the
communities.
14.1 Objectives of the IEC
14.1.1 IEC Shareholders
The delegation met with the Councillor and the shareholders of the Qunu Iec,
they briefed the committee on how the cooperative was established. The
shareholders also highlighted their successes with the business as well as the
challenges.
15. Committee recommendations
The Select Committee on Economic Development
recommended the following:
15.1 The issues and concerns
raised must be considered in conjunction with broader government objectives and
policies such as:
These programmes and policies were cited for
further discussion with the communities in order to enhance understanding of
the government goals. Re-visit to the areas once information has been shared to
all affected parties and when the EIAs reports become available.
15.2 Mthombo
Refinery – Petro SA
The refinery for 400,000 barrels/day is set to
contribute to job creation, economic development and address the issue of aging
refineries in
The National Treasury must table a funding
programme to this committee linked to immediate timelines. The proposal to
Cabinet must also be considered on an urgent basis.
15.3 Industrial
Development and Production
15.4 Water
Resources in
The city of
The fact that these dams have not had sufficient
water the Kouga area water restrictions were also implemented in Kouga.
The Gamtoos valley, which includes towns like Patensie, Hankey, Loerie and
Thornhill therefore also have water restrictions for the agricultural
section. The Gamtoos valley is the “vegetable and fruit basket” of the
The National Government (Water Affairs and
National Treasury) must present a plan to the SC on Economic Development on how
and when the matter would be addressed.
15.5 Coega IDZ
Labour intensive projects in the Agro-processing
sector for instance, proved to create decent jobs. The Department of Trade and
Industry must submit plan to revive the spending in Coega IDZ and when the
new funding could be made available for labour intensive industries. Additional
funding is not utilised for labour intensive projects for instance in the Agri
value add chain.
15.6 Labour Legislation
The motor industry made it clear that the current
and proposed labour legislation is hampering labour intensive job creation in
the sector.
15.7 Port Ngqura
This multi-billion rand investment and port is
operating at 70 percent capacity. A full presentation on the future development
of this project, with the necessary time frames and funding should be presented
to the committee. It is also necessary to know what product and materials are
being transported from the port and if any value added benefits can take place
at the Coega IDZ.
15.8 Energy
Report to be considered.