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                 BUFFALO CITY.
                        27 OCTOBER 2008

Programme Director
Executive Mayor of Buffalo City Municipality, Councillor Peter,
AMEU President, Mr Sandile Maphumulo,
Mayors and Councillors of our Local Sphere of Government
Representatives of various national and international bodies
involved in the energy sector;
Distinguished Guests
Ladies and Gentlemen

Allow me the opportunity to thank the organisers of this
conference for the kind invitation extended to me to be part of this
important occasion.

I must congratulate the City for being a trailblazer in the
establishment of the REDS.

VS Naupal, one the world’s best writers and a perennial Afro-
pessimist, wrote a book called A Bend in the River, which had
the following lines: “…the world is what it is …and those who are
nothing will forever remain nothing…” Naupal wrote this book in
the aftermath of the victory of the African and Latin American
revolutions in the 1960s. This was an exciting period of Uhuru.
Our peoples had high hopes, for they had gotten rid of the yoke of
oppression and colonialism. They wanted something profoundly
better than the typical doomsday predictions of a VS Naupal.
They wanted to move away from forever “remain(ing) nothing”
and all they wanted was to become something. All of us know
that, in the main, the wishes and aspirations of these masses
were betrayed largely by their post-colonial leaders. It is thanks to
the leadership of our country together with like minded fellow
African leaders who have decided to push the for the second
regeneration of our continent.

Accordingly, the confluence of a sustained and unprecedented
period of load shedding that we experienced in January and the
difficult period our country is currently facing would invariably, and
perhaps unsurprisingly, convince the likes of Naupal that indeed
we, South Africans, shall “forever remain nothing”. It is our
considered view that, out of these calamities, we have emerged
stronger and with experiences to further sharpen our strategies.

This annual event takes place at a time when there are major
challenges facing the energy and minerals sector around the
world. It also takes place when opportunities to address these

challenges are within reach, but now seem to be dogged by
global financial woes and economic down turns.

Despite these global challenges our people still look up to us as
governments to deliver to them sustainably, the basic services
that they need for their survival-these also being essential and
central to the growth of our economies.

Over time South Africa has enjoyed a relatively efficient service
from Eskom, through the whole value chain, i.e. generation,
transmission and distribution. This kind of service and reliable
electricity supply continued after 1994 even though the clientele of
Eskom had increased significantly as services were expanded to
previously excluded people. January 2008 was the first major
challenge that we experienced after thirteen years of
uninterrupted service during our fledgling democracy.

I am on record citing the issues that led to the January challenges
which included the following:

    Growth in demand of electricity more than it had been

    Growth in demand of energy globally – more coal being
     exported, thus affecting strategic stock.

    We also should have planned better

    A faster growth of the economy.

By the time the problem hit us our reserve margin was
between 8 to 10 percent while it was supposed to be at 15%.

Looking at the aims and objectives of AMEU, I observed that
the thrust of your mandate is on promoting quality of service
and managerial excellence in the field of electricity supply,
facilitate communication between members and the technical,
economic and potential environment. This is an invaluable
contribution much needed in an industry that has no option but
to be efficient in a sustainable way or ad infinitum. If anything
South Africa should have less of are such challenges.

In South Africa distribution of electricity is a function shared by
Eskom and municipalities with the constitution giving powers
to the latter to carry out that function. It is also a service of
revenue generation for municipalities. However, while we
seem to be enjoying relatively stable services there are many
weaknesses within the system that need our attention.

Firstly, information reveals that there has been under
investment in maintenance and refurbishment of infrastructure
by some municipalities.

Secondly, which may explain the above is that some,
especially the smaller municipalities lack the technical capacity
to do the necessary maintenance of the distribution

The third challenge relates to varied tariffs. There are about
2000 different tariffs, more often that not this situation
disadvantages the poor.

The fourth is the implementation or capacity to implement the
FBE policy. I have not heard of any municipality even the rich
ones that have 100% coverage of those who qualify for FBE.

Surely the status quo must change hence the introduction of
the Regional Electricity Distributor model. The ANC – the
ruling party- over 3 consecutive conferences resolved that the
distribution industry be restructured and the Reds be
established. Consequently, the DME established EDI
Holdings to implement that resolution. It is almost 10 years
that we started the process which has proved to be very

The main issue of contestation is the revenue that the
municipalities are generating from electricity distribution. We
have been sensitive to this matter such that we have designed
a legally binding shareholder agreement that would guarantee
that the municipality gets what is due to it. There is already an
Act in place giving that legal assurance.

What is important about the Reds are the following:

    The REDS are public entities

    They will be able to mobilise the capacity needed by
      municipalities for electricity distribution

    They will assist in rationalising the tariffs, implementing
      the FBE and energy efficiency

    They will give the municipality any assistance that it

   After wide consultation of all stakeholders, including local
   and provincial government, there is still reluctance to
   accept this REDS model by some. What complicates the
   matter is that we cannot obligate the municipalities to
   accept the Reds unless we amend the constitution. We
   have after consultations with the ANC Government and all

other stakeholders opted for that route. Hopefully that will
happen during this term.

Surely your views on these matters will be appreciated.

Illegal connections also pose a big challenge with
unaccounted for electricity supply estimated at 1000 MW.
If we could retrieve these, we would have added about 1/3
to what the country needs.

The issues referred to earlier are important for us to
address so that we can ensure security of supply of
electricity. To achieve this we need and we have dealt with
matters of electricity in an integrated manner, taking the
whole value chain. This includes the policy environment
as an enabler. Interventions include mechanisms that deal
with external problems such as carbon emissions – since
we generate 90% of our electricity from coal.

Going back to the January challenge, we embarked on a
recovery programme that looked at both Demand Side
Management and the supply side. We also learned from
experience that we needed to pay urgent attention to

       distribution infrastructure that is also owned and managed
       by municipalities. We realised or hoped that demand side
       management would deliver quicker to us and put emphasis
       on power conservation while we also continued with the
       supply side projects. Let me share some of the
       interventions and the status of these projects or

In this regard, we developed and are operationalising the
following key enablers:

   Quality of Supply Regulation;

   Prohibitions Regulations Energy Efficiency and Demand
     Side Management Policy and also

   Electricity Pricing Policy

We are also facilitating the development of rules by the National
Energy Regulator to better implement the provisions of the
regulations and strategies.

In order to kick start the Power Conservation Programme, we
have also begun procuring batches of CFLs for implementation in
the remainder of the current financial year. We will also facilitate
access to Solar Water Heaters as well as assist with smart meters
to enable municipalities and Eskom to control the load of their
customers during periods of constricted capacity.

Most of these programmes will be funded through various funding
instruments. These will be effective as from the next financial

We are working with the Department of Trade and Industry to
ensure the successful implementation of the following enabling
Norms and Standards:

   Building (orientation for purposes of passive solar design,
        lighting, and installation of Solar Water Heaters, Insulation,
        Ventilation, Heating and Air Conditioning).

   Installation of Solar Water Heaters in new dwellings and

   Phasing out of incandescent lights for normal lighting

   Reduction of import tariffs exemptions for equipment like
        Solar Water Heaters which are currently in short supply
        nationwide and globally.

In our energy saving campaign we are advocating the following
   Efficient Lighting (Compact Fluorescent Lights)
   Efficient Public Buildings

   Phasing in of the banning of the manufacturing and use of
     incandescent lights.
   Solar Water Heaters subsidies
   Smart Metering roll outs.
   Fuel switching to other sources like LP gas and other
     biofuels and renewable energy technologies.
   Traffic lights and public lighting
   Education, Public Awareness and Communication are
     critical. We are also using prominent South Africans as
     energy champions.

While all the above activities will be unfolding, we will be
embarking, on a parallel process such as:

   Co-generation;

   New and Renewable Energy production;

   The New Build Programmes for both nuclear and

   We will also strengthen our import capacity as the regional
     capacity expands and becomes available and reliable.
     Negotiations are already underway to get more power from

   During the process, the existing plants will be refurbished
     and their useful life extended.

Let us remember that all the above have carbon emission credit
possibilities which we need to harness.

The South African Revenue Service (SARS) is assisting us in
looking at the possibilities of using fiscal instruments to ease the
burden on imported equipment to make it affordable for our

We had set out aggressive programmes in order to become
efficient in the utilisation of energy through the Energy Efficiency
and Demand Side Management Programmes, this in order to
reduce the consumption of electricity through the Power
Conservation Programme, which seeks to have all identified
consumers reduce their electricity consumption by 10%.

We have seen the stabilisation of the electricity supply through
these initiatives. In particular we have seen the contribution of the
mining sector in reducing their electricity consumption for the
benefit of all of us. This contribution cannot be sustainable unless
all of us as individuals and institutions endeavour to make our
contribution in the efficient use of energy.

What is somewhat disturbing, in the last few months, is that we
emerged out of the winter relatively unscathed, thereby resulting
in the emergence of a pseudo comfort zone. South Africans have
falsely convinced themselves that the crisis is over and that the

worst is behind us; that they can go back to their old wasteful
consumption habits. This has to be stopped.

Programme Director, the system is still very tight; reserve margins
are still very low by international standards. It is of concern that as
of today, at national level, we have not managed to save more
than 2.4% of our proposed target of 10%. So, what is the next
best option?

It is palpably clear that voluntary approach to energy saving has
failed. We need to move to the next phase, which is the Power
Conservation Programme (the PCP). The PCP is but one pillar of
the interventions envisaged. It uses a carrot and stick approach to
attain the national saving target we set ourselves. The PCP will
see consumers paying dearly for exceeding their set quotas.

While this may seem heavy handed, it will create an opportunity
for consumers to trade the deficits and excesses among
themselves, thereby minimising the exposure of individual
consumers to punitive tariffs while guaranteeing the overall
attainment of the national savings targets.

We will also aggressively promote the participation of co-
generators so that we can harness as many possible generation
forms as possible. We need to draw inspiration from those people

who are proving Naupal wrong and refuse to remain with nothing
in as far as electricity is concerned.

Experiences in countries such as Brazil have shown that power
rationing can work. We are willing to make ours work too. This we
cannot do without the participation of all our people. We are not
yet looking at the financial incentives (payouts) for those
consumers who are meeting our targets.

You may recall that, in the 2008 Budget Speech, an allocation
was announced to subsidise the costs of investment in energy
efficiency, which includes electricity demand-side management
and renewable energy sources.

To this end in the mini budget, the energy sector, has been
allocated R180 million for the remainder of this financial year for
electricity Demand Side Management. This money will be used to
bring to completion Compact Fluorescent Lighting (CFLs) projects
that are already in the National EEDSM Programme as
implemented in municipalities across the country and overseen by

In addition, R20 million has been allocated for retrofitting public
buildings with efficiency technologies. This Programme will be

undertaken by the Department of Public Works in collaboration
with our Energy Efficiency unit.

The Minister of Finance also announced the implementation of a
2c/kWh environmental levy on electricity generated from non-
renewable resources which is to be collected at source by the
generators of electricity. Electricity produced from renewable
sources (e.g. wind, water and solar) will be exempted from the
levy, as well as power produced through co-generation. The
electricity levy should be seen as the first step towards the
introduction of a more comprehensive emissions-based carbon
tax. The implementation of the levy has been postponed to 1 July
2009 to coincide with the commencement of the next municipal
financial year.

Government is making efforts to reduce carbon emissions
including improving energy efficiency, supporting renewable
energy sources and improving the technologies used in power

Over the medium term, government will scale up these
programmes and support expansion of the renewable energy
sector. Measures to reduce greenhouse gas emissions in public
transport will be explored.

There is a cost associated with all the above energy interventions.
The bulk of these costs will be borne by the consumers through
tariff increases. Are there solutions that the private and public
sectors can provide as a way of minimising the impact on the
national economy and the poor communities?

We are well aware that the road ahead will be rough for all of us,
hence our interest in the outcome of this gathering. Remember
there is always a silver lining behind every dark cloud.

We know that you are all leaders of electricity divisions of your
municipalities or utilities. We know that you can influence the
decisions on what needs to be done to ensure the availability of
reliable and affordable energy services in your licensed areas.

We also know that you have the power to develop skills that will
be required to take our country and SADC to the next level.

I am hopeful that the next three days will be robust as you engage
in debates that are meant to ensure that the Afro pessimism of a
VS Naupal is roundly defeated and proved wrong. We have to
ensure that, out of the calamities and vagaries of our times, we
are able to emerge with something, rather than “forever
remain(ing) nothing”.

I look forward to receiving feed back that will assist and advise us,
as government, in taking the challenges of the energy sector to
new levels.

I wish you well in your deliberations.

Thank you


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