Minerals and Energy Minister Buyelwa Sonjica recently addressed the media at a Post-Cabinet media briefing on Electricity Master Plan and Biofuels Strategy.

Buyelwa-Sonjica

Minerals and Energy Minister
Buyelwa Sonjica

Sonjica noted that the Biofuels Strategy is a response to the security of supply challenge: “As we know that we have a growing economy, there is more demand for energy in the country. Another factor that we looked at which is affecting all of us is the crude oil price. It demands that we try to become self-sufficient in terms of fuel. Especially given that South Africa is not a crude oil producing country. The third issue that I want to be noted about the strategy is that it promoted renewable fuels, this being a contribution to the reduction of emissions, helping to mitigate against climate change.”

The Biofuels Strategy development will be done in phases with the first phases of development being from 2008 to 2013, a five year period. After which we will review the target. The strategy proposes a 2% bio fuels production by 2013, which is a revised target from the initial 4.5% target proposed in the draft strategy. The revision on the target is in consideration of the agricultural concerns.

The strategy further proposes that the use of maize be excluded in the development of the bio fuels in the initial stages of this industry development. This is largely because of food security concerns, fears around price increases, and the fact that maize is a staple food source for the majority of the poor in South Africa. A blending target for bio fuels is of E8 that is 8% of bio-ethanol and B2, 2% for bio diesel. There will be levy exemptions for bio diesel. The current levy exemption for bio diesel will increase from 40% to 50%.

The Electricity Master Plan constitutes the second part of the integrated energy master plan and makes South Africa the third country in the world after the United States of America and Norway. The minister pointed out that in the South African economy there are sectors that contribute 59% to the country’s Gross Domestic Product (GDP). And most of them are dependent to a greater or lesser extent on energy. Recent experiences with blackouts and brownouts in South Africa and abroad have demonstrated the vulnerability of world economies to electricity shortages, and point to the need for co-ordinated long term planning. This Master Plan intends to address this imperative, by firstly providing a critical analysis of the status quo, and then providing a broad framework of interventions that are necessary in the interest of energy security. The Master Plan is premised on achieving goals that have been set for the electricity sector. Due to the uncertainty over the planning horizon, some assumptions are made regarding, inter alia, demand projections and the economic outlook.

The Master Plan reflects on the White Paper on Energy Policy, the Renewable White Paper Policy, and Strategy, and the Energy Efficiency Policy and Strategy. It must be made clear that it is a high-level plan and not necessarily a pronouncement of new policy.

Policy formulation insofar as new policy needs to be developed that will impact on the electricity sector. Those will be handled in a separate parallel process. The plan will be reviewed regularly and the minister proposed a three-year cycle for that review process, to ensure that it is implementable and that it stays relevant to the challenges facing the electricity sector going forward. The proposed interventions at various levels of the electricity value chain will be implemented in phases and will be prioritised depending on the urgency. For example, the acceleration of demand side management and energy efficiency interventions has been identified as a critical strategy that can mitigate against increasing electricity demand growth, rather than the building of new power stations. The electricity sector is regulated and licensees like Eskom and municipalities will see to the implementation of the Master Plan.

Questions and Answers

The minister took questions from the floor relating the strategy and general issues as well:

Journalist: Two questions on the electricity master plan. The first relates to the National Energy Regulator (Nersa) hearings about the tariff increase for Eskom is currently ongoing, and it looks set to be around 14%. Many of the participants at these hearings suggest that government should contribute at least some of the expansion programme that Eskom is considering, thus mitigating a hike and reducing the need for such a steep increase. Should government, as the single shareholder in Eskom, not contribute at least some of that money? And then secondly you talk about the demand side management, and energy efficiency. Is there a circular or something going out to government departments saying they should switch off their lights at night? I’m not saying the Union Buildings should be dark, but some of the government departments in the city might consider switching off their lights in the evenings.

Minister Sonjica: On the first question about the 14% hike of the tariffs. Really this is a matter that Nersa is dealing with. I stand here as an executive authority and an appeal authority, so that if the two parties do not agree on a certain point then I come in to intervene. As to whether government will contribute an amount, that matter would then have to be taken to government if Eskom feels that they want a contribution from government and it would be at that point that decision would be taken. We do have a number of activities that we are doing under the energy efficiency program. We have recently established the Energy Efficiency Agency, which is going to take up the programme, hopefully vigorously, of energy efficiency in the country. We are involved with a number of stakeholders like the industry. We have what we call an energy efficiency report, whereby presently we have 37 big companies that have signed up to save energy and there are gains that they are making already. With regards to government, truly I don’t think we are as energy efficient as we should be as government. It’s something that we are working on, me and the Minister of Public Works, given that she is the custodian of the maintenance and everything that happens in the government buildings. But also we have to include all spheres of government. Local government, provincial government, and maybe… maybe anecdotal of you to say that one… at some stage I was on SAfm and one caller said there are streetlights that are on 24/7…365 days. Minister, you must do something about that. And I agreed that we should do something about that. And that really indicates to the necessity to bring in on board local government. Actually this business of energy efficiency is everybody’s business, all of us, individuals, wherever we are. And I’m saying whenever I talk to this matter I’m saying it has to be a culture, it has to come automatically that when you go out of the house you switch off the lights. So I’m saying it’s everybody’s business.

Journalist: I’ve got a couple of questions on the Bio fuels Strategy. First, are you budgeting incentives at all? Some of the big players are saying it’s not really economically viable without incentives. You say that we’re embracing the strategy because we want security of supply, but with due respect I don’t think a 2% production target of our total consumption will really make much of a difference. However, there are kind of growing concerns about South Africa, the impact of climate change on our agriculture, and I would like to know have you at all taken that into consideration in formulating this policy? Can I have another two or three? I’ve noticed that you’ve dropped… that import tariffs on soya beans have been drooped. Is that because we’re looking at importing feed stock for bio fuel production? The first draft of the biofuel strategy was very ambitious on job creation. I think between 55 000 and 60 000 jobs it was assumed would be created and critics of that strategy were very sceptical of those targets. Have you revised those targets downwards? And I see that’s not really part of the motivation for developing this sector.

Minister Sonjica: Yes, so many questions. But let me start with the levies. I’ve indicated already that the incentives that would be given would be in the form of levies. Mainly we are increasing the 40% that is on bio diesel, to 50%. That’s some kind of incentive that we’ll be giving. On the bio ethanol, the bio ethanol was… presently is enjoying 100% exemption on levies, and we are maintaining the status quo. So there’s still an incentive in as far as that is concerned for producers. On the percentage we agonised in bringing down the initial 4.5% yield and there was a lot of noise raised around the security… food security. And we had to respond to that. It’s not only South Africa that has concerns about food security for this program. So we had to… we had to respond positively to that. But also, I mean, in a way accommodating that concern. Hence we also decided to exclude maize as a crop for feed stock. So it is really mainly about food security, that’s the main reason why we decided to drop. I agree, the percentage is a little bit small. We should be a little bit more ambitious if we wanted to make an impact. But I want you to appreciate that the period between 2008 and 2013 is really a pilot stage, where we will then evaluate the impact of it on the contribution to fuel, but also on the food situation, or the agriculture situation in the country. We still have soya beans. Soya beans, canola and sunflower will be used as feed stock for biodiesel, and for bio ethanol we are using sugarcane and sugar beet. I hope I’ve responded to all the questions.

Journalist: If you could just elaborate further on those agricultural concerns, and if there is anything further than the food security issues. Also, sugarcane has been said by some analysts and researchers involved in renewable energy to be too thirsty for South Africa’s water scarce environment as viable for… as feed stock. They have also criticised the fact that maize will be excluded without the presentation of other viable options as feed stock. What is your view on that? And then also separate to the two issues that you’ve presented here, can you just give some comment on the national strike yesterday by the members of the National Union of Mineworkers?

Minister Sonjica: Okay. On the crops referred to, I would say that there was the involvement of the agriculture, there was an inter-ministerial committee that was set up and a task team which brought in a number of players that would be key in developing the strategy. And what we… the final product that have come from the input made by the agricultural component of the team. We consulted extensively on this matter. The strategy was due to come in May 2007. But because there were concerns around the kind of crop that we would be using we were given extensions for the completion of the strategy. Sugarcane, I wouldn’t really say that it would be such a threat to use sugarcane, it would impact so much on food security. Given that provinces like KwaZulu-Natal will enjoy a lot of sugarcane in those provinces. But as I said earlier on, we will be reviewing the impact of the programme on crop itself. On the overall factors that will help us get the fuels that we need.

Well, I would say that the workers have a right to strike. They can strike for anything they want to strike on. But when it comes to matters of safety I’ve been very vocal on this one. I think that we still need to do more in terms of achieving our own standards when it comes to safety in the mines, and I believe that some of the accidents that occur in the mines that lead to fatalities are really because of some negligence. Some of the cases we are busy investigating. So that would be my view on the matter, but really the mineworkers have a right to strike, that’s constitutional.

Journalist: Thank you. Three short questions if I may, Minister. Pardon my ignorance, but what is the difference between a blackout and a brownout. Secondly, can you tell us if the latest versions of both the Electricity Master Plan and the Bio fuels Strategy are now available and can we get that on the website. And then finally related to the mine strikes, would you respond to comments by the Human Rights Commission that South Africa is the most dangerous mining country in the world?

Minister Sonjica: Okay. You were asking if the two plans are in the… on the website already. Yes, they will be available on the website. We’ll make them available on the website. And hopefully my liaison person, you all know Sputnik, this lovely man here, will be able to post them and he’ll indicate to you that they are on the website. Dangerous mines, yes. They are quite dangerous because we have the deepest mines in the world. We may be far advanced in terms of our experience in mining, but we still have the deepest mines in the world. If you take the Mponeng mine for an example, it goes down to about three kilometres and it’s quite deep. And when you get there, very dangerous circumstances under which our people mine. It is a fact. But I think we can still improve in spite of the fact that we have the deepest mines in the world. We can still improve on our safety. Oh, the difference between a blackout. A brownout is about fuel shortage and a blackout is when all of us talk about outages and go to bed very early.

Journalist: Minister, since we don’t have a copy yet of the Electricity Master Plan, I was hoping that you could share with us some of what it contains on the findings on the status quo on the demand projections, and on the interventions that it proposes.

Minister Sonjica: Well, I don’t have the strategy with me, unfortunately. But we would make that information readily available to you.

Journalist: I wondered while you were explaining various differences if you could explain to me the difference between a high level plan and the pronouncement of a new policy.

Minister Sonjica: Well, a plan is a plan. High level in the sense that it looks at the national situation, the country’s national energy situation. That’s what we mean about high level. It’s comprehensive. It’s a blueprint that will guide us as a country in pursuing our energy program. So that’s what we meant about that.

Journalist: Minister, you’re talking about reduction of emissions under the Bio fuels Strategy. I was just wondering how you see this panning out, given Eskom’s planned expansion of coal fired power stations. Also how you view South Africa reacting given that they’ve stated that you would consider emissions reductions under the post-Kyoto agreement. How can that pan out given Eskom’s expansion? Thanks.

Minister Sonjica: Well, of course we can’t avoid using coal as a source for generating electricity. We have an abundance of coal in the country. And even in the world we’re still going to… the world is still going to use 40% of coal for electricity generation. So it’s unavoidable. But what we are saying… Eskom has begun to implement that. We are introducing clean coal technology in the new power stations that we are building, in that way you’re trying to mitigate and implementing the principle of carbon capture and storage in those power stations. So we are mindful and we’re trying to reduce emissions, even as we will be using coal. We’re still going to use coal, but in a much more cleaner way than we have been doing.

Journalist: Madam Minister, aluminium smelting is a really exceedingly energy intensive process, yet South Africa is persisting in trying to attract these. There were recent reports that your departments are also speaking to a player in India who wants to bring an aluminium smelter to South Africa. Are you at all factoring in these kind of issues of promising new foreign investors cheaper electricity which seriously no one can entertain anymore, I mean, going forward our electricity is going to become exceedingly expensive. To attract these direct… these investors and that they will continue to receive electricity at far cheaper prices than South African consumers, yet we cannot actually secure… guarantee them security of supply. Are these matters factored into that Master Plan?

Minister Sonjica: No, we have not really referred those matters to the Master Plan. There’re actually matters that overlap between myself and the Minister of Public Enterprises. But the issue of exemptions for smelters and industries like that…it’s international practice. Because we still have to attract investment into the country, we still need a growing economy. It’s that balance that as a department and as a country that you always need to maintain. Not a very easy one, not a very easy question to respond to. But hopefully the other programs would help us mitigate against any negative impact on electricity from the smelters and what have you. But we still need this economy to grow. One of the questions that we have been asking ourselves is as we are bringing the new industrial policy, what is going to be electricity consumption that we will need for the industrial policy, for the implementation of the industrial… it’s a question that we’re grappling with together with the Department of Trade and Industry. Because all of these things…unfortunately have to happen. So the balance is really what we need to be grappling with. And all of these policies are trying to address those… that balance.

Journalist: Going back to the mining issue. You had said previously that you would be taking stronger action against mining management and CEOs should safety not improve. With fatalities now going over the 200 mark, to the end of this year, what do you foresee that stronger action being going into 2008?

Minister Sonjica: Well, we are looking at tightening the mine health and safety policy. But the problem, the biggest problem that we have is to charge people. We investigate the cases, we hand them over to the Department of Justice, and because they have capacity limitations we have a problem of seeing a completion of that process, which would then enable us to identify the person who should have been accountable in the event of an accident. So we still have a problem in as far as that is concerned. And as soon as we make a breakthrough, I’m sure you’ll appreciate that at one stage I proposed that maybe we need a tribunal and we are looking at all of these matters. Because at the end of the day the culprit must be brought to book. And at this stage we have not been able to bring the culprits to book. That is for the period that I’m in the department. And I know that there are old cases in the department where we have not reached finality in terms of who was responsible or who should be seen to be accountable for negligence or whatever it is that we think were the cause of the accident.

Issued by: Government Communications (GCIS)
6 December 2007