Minister of Transport Sibusiso Ndebele: The Infrastructure Development Cluster media briefing, Cape Town
28 Feb 2012
Members of the media
Ladies and gentlemen
We welcome you to the Infrastructure Cluster briefing to share with you progress and to provide more detail on the work of the Cluster to fulfil its mandate of building an efficient, competitive and responsive economic infrastructure network.
It is the mandate of the Presidential Infrastructure Coordination Commission (PICC) to oversee the implementation of infrastructure projects that stimulate social and economic growth.
President Jacob Zuma pronounced during the SoNA on South Africa’s infrastructure plans, which include both our economic and social infrastructure that will unlock key mineral resources and exports. This infrastructure plan is coordinated by the Presidential Infrastructure Coordinating Commission which was established in September 2011, bringing together Ministers, Premiers and Metro Mayors under the leadership of the President.
There is a total of 43 major infrastructure projects over the next three years amounting to R845 billion of which R300 billion is in the energy sector and R262 billion in transport and logistics projects.
These cover the economic infrastructure projects which are the mandate of the Infrastructure Development Cluster. We are reporting on the five key economic infrastructure areas and these are:
- Public Works
The PICC has already identified projects and clarifying long-term investment plans to drive economic change.
These projects include the construction of roads, power stations, rail and pipelines infrastructure. These are aimed at addressing South Africa’s infrastructure to boost economic growth and create much needed jobs. Government has succeeded in rolling out a massive infrastructure programme, which was able to allow us to broaden universal access to basic services like electricity, water and housing, etc.
Infrastructure development plan
Government took a decision to ensure that infrastructure investment is one of the central priorities of this year (2012) to address several weaknesses in the State’s infrastructure capacity.
Investment in large-scale infrastructure developments such as electricity plants, rail and road upgrades and water management, is government’s contribution to job creation and economic growth. This will be supported through the build programme which itself will help sustain between 50 000 and 100 000 jobs in the construction sector up to 2015.
Over the next three years, government plans to invest R844 billion to remedy the skewed implementation of infrastructure during the apartheid years, and to meet the demands of a growing economy and population by building roads, hospitals, dams, schools, electricity plants and ports and rail systems.
In his budget speech, Finance Minister Pravin Gordhan announced that the budget review lists 43 major infrastructure projects, adding up to R3.2 trillion in expenditure in the next 3 years.
The development and integration of rail, road, water, energy and Information and Communication Technology is central to the country’s growth initiatives. Our rail, road and water infrastructure is centred on two main areas in Limpopo; the Waterberg in the Western part of the province and Steelpoort in the eastern part.
To ensure that the benefits of the infrastructure programme are widely spread, government intends to include development targets in the project and tender specifications covering jobs, skills, industrialisation and local content, small and medium enterprises and empowerment and greening the economy.
As part of South Africa’s Public Transport Strategy (PTS), we are moving towards a high quality integrated Mass Rapid Transport Network which includes: rail, taxi, and bus services. So far the Bus Rapid Transit System has recorded 45 000 passenger trips in Johannesburg, and 100 000 in Nelson Mandela Bay.
People need a public transport that is safe, reliable and confortable to travel to work, school or anywhere else they need to go. We are achieving an effective, affordable and safe Integrated Rapid Public Transport Network in our cities.
The Taxi Recapitalisation Programme together with trains and buses form part of the mass mover concept of transporting people to various destinations of choice. In 2011, 44 184 old taxi vehicles were scrapped with over R2,2 billion paid out as scrapping allowances.
Roads Infrastructure projects
Government is committed to building a modern and sustainable transport system – one that connects our communities, supports our economy and protects our environment. The Department of Transport through the South African National Roads Agency Limited and Provincial Departments of Transport is making sure that national and provincial roads get the necessary attention to address the backlog in road construction and maintenance programmes.
Through the S’hamba Sonke Roads Programme launched in April last year, government makes a clear commitment for a targeted capital investment programme on the roads infrastructure particularly in the rural areas.
Through the S’hamba Sonke Programme, the Department of Transport has created more than 13 280 jobs and spent more than R1.7 billion since its launch. During the 2011/12 financial year the S’hamba Sonke Programme created 68 000 full-time employment opportunities, and between 2012 and 2014, 50 000 employment opportunities are envisaged.
Rail Network projects
A feasibility study which covered engineering, economic, legal and financial analysis for the procurement, financing, operating and maintenance of new rolling stock was completed during 2011. The study found that the project for the acquisition of new rolling stock was economically viable.The results of the feasibility study were submitted to Cabinet on 9 November 2011, who supported the Passenger Rail Agencies of South Africa’s (PRASA) intension to proceed with the acquisition of the new commuter coaches.
The acquisition of the coaches will be divided into two 10-year batches, with approximately 3 600 vehicles included in each batch. The cost will be approximately R5,2 billion per annum (2011 Rands) with the first payments to be made during the 2014/15 financial year. It should be noted that it is not possible for PRASA to purchase the new coaches off its balance sheet and the cost of the coaches will be funded from the fiscus.
As the new fleet will be introduced over a period of 20 years while the existing fleet is being phased out, new depots with the necessary equipment to maintain a modern fleet will be required, whilst the existing depots are retained to maintain the existing fleet.
At this stage it is anticipated that a minimum of five new depots will be required for the new trains at a total cost of approximately R4,6 billion. Furthermore, infrastructure interventions amounting to R13,5 billion will be made on the existing networks to optimise the technological benefits of the new coaches.
The establishment of local manufacturing industries will result in substantial sustainable jobs over the twenty-year procurement period and the redevelopment of rail engineering capacity and skills that have been lost over decades of underinvestment in the local rail engineering industry. The feasibility study on rail projects estimates that over the 20-year duration of the project, approximately 65 000 direct, indirect and induced jobs will be created.
Movement of goods and economic integration
We are working on an efficient movement of goods and economic integration through a Durban-Free State-Gauteng logistics and industrial corridor. This project is intended to connect the major economic centres of Gauteng and Durban and at the same time connect these centres with improved export capacity through our sea-ports.
There is going to be expansion of rail transport in Mpumalanga, connecting coalfields to power stations. This will enhance a shift from road to rail in the transportation of coal, which has caused a deterioration of roads in the province.
South Africa champions the North-South Road and Rail Corridor, which is part of the African Union’s NEPAD Presidential Infrastructure Championing initiative.
Durban – Johannesburg Corridor Infrastructure Projects
There is need for us to maintain a balance between freight and passenger services. Without freight logistics the economy would grind to a halt. The 2010-2050 Vision for the Durban – Gauteng Transport Corridor provides an integrated transport solution to the growing expansion requirements of the corridor which will form the foundation for the establishment of a Southern African Regional Freight Corridor. The work that is being done includes the expansion of ports, finalization of rail and road projects; finalising the concept of the Harrismith Freight Logistics Gateway, Cato Ridge and Tembo-Springs.
The Port of Durban, the Durban-Gauteng Corridor, Logistics Hubs and Terminals are project development components aimed at speeding up the transportation of goods. The State is also looking at the necessity of reducing port charges, as part of reducing the costs of doing business as this was raised sharply by the automotive sector in Port Elizabeth and Uitenhage during the performance monitoring visit to the sector last year.
The expansion of the iron-ore rail line between Sishen in Northern Cape and Saldanha Bay in the Western Cape will create large numbers of jobs in both provinces. The iron-ore capacity on the transport-side will increase capacity to 100 million tons per annum and this will allow for the expansion of iron-ore mining over the next decade to feed the developing world’s growing investment in infrastructure and industrial activities.
The development of a major new South Eastern node
Government will develop a major new South Eastern node that will improve the industrial and agricultural development and export capacity of the Eastern Cape region, and expand the province’s economic and logistics linkages with the Northern Cape and KwaZulu-Natal.
Mthatha revitalisation project
The implementation of the Mthatha revitalisation project is proceeding very well and this is a Presidential special project. Work is at an advanced stage to improve water, sanitation, electricity, roads, human settlements, airport development and institutional and governance issues.
Integrated Resource Plan
Through the Integrated Resource Plan (IRP) 2010-30 the Department of Energy has commenced and implemented a number of policies and strategies that address the mandate of energy provision and the need to reduce dependence on coal which has a negative impact on the environment.
The IRP proposes the development of new generation capacity for South Africa which takes cognisance of the need to optimise costs, promote job creation and mitigate adverse climate change. It makes provision for 9,6 Gigawatts of nuclear power; 6,3 GW of coal, 11,4 GW of renewable, and 11,0 GW of other generation sources.
To date the implementation of the IRP is evidenced by the Renewable Energy Independent Power Producers (IPP) Bidding Programme for the provision of 3 625 Megawatts of capacity from Independent Power Producers. So far the IPP process has lived up to expectations by attracting international investment worth R50 billion which will boost sector employment growth.
The first of the five window bidding processes commenced in August 2011 and, was successfully concluded with the announcement on 7 December 2011 of 28 (out of 53) preferred bidders at COP17 for a total of 1 416 Megawatts.
Preferred bidders offer to build 631.53 MW of Solar Photovoltaic; 150 MW of Concentrating Solar Power; and 633.99 MW wind energy projects. Some of the outstanding 2 309 MW will be offered in the second window which closes on 5 March 2012. Soon after this, government intends to initiate a bidding round for the other technologies, viz. Biomass (including sugar and paper), Biogas, Landfill Gas, cogeneration and Small Hydro.
In order to increase competition in each subsequent window, the MWs are capped per technology. The maximum MW available in the Second Bid Submission window of 5 March 2012 is Onshore Wind, 650 MW, Solar Photovoltaic, 450 MW, Concentrated Solar Power, 50 MW, Biomass, 12,5 MW, Biogas, 12,5 MW, Landfill Gas, 25 MW, and Small Hydro, 75 MW.
In this way we hope to increase competition and to increase local content. Note that the target for local content has been increased for window two (to a target of 60% in respect of certain technologies) whilst the minimum 40% South African Equity Participation remains the same.
An interdepartmental team is considering the best approach for determining the next round of electricity tariff increases for Eskom, due to take effect from April 2013. This involves developing a model that seeks to balance the socio-economic impact of increasing electricity prices, the country’s competitiveness, Eskom's financial viability and the necessary policy considerations for implementing the Integrated Resource Plan.
The IRP provides for up-scaling nuclear capacity by 9,6 Gigawatts, in order to boost the national base load for electricity supply in recognition of current generation shortages. Concerns regarding the safety of nuclear energy in light of the recent Fukushima incident will be factored into the South African approach, to ensure that proper safety measures are put in place and that they are overseen by the appropriate expert authorities.
In November 2011 Cabinet approved the establishment of the National Nuclear Energy Executive Coordination Committee (NNEECC) to oversee the roll-out of the nuclear build programme, and the Department of Energy is currently leading the interdepartmental team in finalising the implementation plan. The NNEECC is headed by the Deputy President as the authority for decision-making, monitoring and ensuring general oversight of the nuclear energy expansion programme.
The Integrated National Electrification Programme (INEP) is the backbone of the electricity delivery programme for communities who have previously been under-served in terms of grid and non-grid connections. The INEP focuses primarily on servicing rural areas and newly established formal urban and informal settlements. By the end of March 2012 the programme will have connected more than 64 356 households compared to 41 431 in 2010/11.
A total of 2 million connections have been completed through the Government’s electrification programme over the last 10 years. To date 45 000 Solar Home Systems have been installed and are managed by independent energy service providers (referred to as Concessionaires).
In addition to the Solar Home Systems programme, to date 220 000 Solar Water Heaters have been installed nationwide against the 1million target to be reached by 2014/15.
We have come up with a Road Map which will provide government with a clear picture of infrastructure requirements. Examples of the requirements are refineries, storage and handling facilities. We need to create an environment that encourages investment in the sector; improves price stability of liquid fuels; promotes an integrated government-wide approach to deal with liquid fuels; and empowers stakeholders to deal with sector supply disruptions.
In addition to the initial Road Map, in November Minister Peters directed the department to conduct an audit on the existing six (6) refineries as a mechanism to establish the status of their reliability, availability, and capacity levels. With an average capacity of 708, 000 barrels of crude oil equivalence per day, it has become difficult that the country’s liquid fuel demand far outstrips supply. The audit is expected to be completed by the end of March 2012.
The Electricity Regulation Amendment Bill seeks to provide for an improved regulatory framework given the massive capital expansion programme in the sector. It also improves the procedure for the expropriation (with compensation) for energy services servitudes by creating clarity on the process the Minister of Energy follows in requesting the Minister of Public Works to grant permission for expropriation.
With regard to ensuring the development and implementation of Coal Haulage Road-to-Rail Logistics for Eskom2’s fleet of coal-fired power stations, a Cooperation Agreement between Eskom and Transnet has been concluded and signed by both parties in November 2011. The Cooperating agreement will therefore guide the Haulage agreement which will detail the routes and sources of coal to be transported.
About 8 million tonnes of coal per annum are projected to be transported via rail by end of March 2012, increasing this to 28 million tonnes by 2018/19.
As part of government’s contribution towards climate change objectives, Eskom is expected to start construction of the 100MW Wind Power Plant in Sere in the Western Cape and a 100MW Concentrating Solar Power Plant in Upington in Northern Cape respectively.
It is anticipated that both projects should be completed by 2016/17. These projects have been made possible by the successful negotiations of the loan agreements linked to the Clean Technology Fund for Eskom’s Renewable Support Projects. These projects, which are co-financed by the World Bank and the African Development Bank, will be used as catalysts for Government to achieve its Renewable Energy targets as set out in the Integrated Resource Plan (IRP).
The total amount secured for these projects from the developing funding institutions is a total $615million, which has been guaranteed by the Government. President Zuma will formally open the Port of Ngqura next month and a formal handover should accelerate the growth of the latest port.
The Grand INGAMoU signed with the Democratic Republic of Congo is a milestone in working towards sustainable African partnerships aimed at developing strategies for low carbon economies and interconnected energy systems. Located on the Congo River, the Grand INGA project is expected to generate approximately 40 000MW of hydroelectric power for regional distribution.
Water Infrastructure Projects
Water infrastructure contributes to the strength and backbone of our economy. Our government together with the government of Lesotho concluded a bilateral cooperation agreement for the construction of the Lesotho Highlands Water Project 2 which is set to augment water supply to the Vaal River System.
The area supplied by the Vaal River System stretches far beyond the catchment boundaries of the Vaal River and includes most of Gauteng, Eskom’s power-stations and Sasol’s petro-chemical plants on the Mpumalanga Highveld.
The area also includes the North-West and Free State goldfields around Klerksdorp and Welkom respectively, iron and manganese mines in the Northern Cape, Kimberley, a number of small towns along the main course of the river as well as several large irrigation schemes.
In addition the Vaal River System meets the water resource needs of 60% of the national economy and serves 45%, or 20 million, of the people in the country. This will add an additional 151 million cubic metres to the existing yield of 2 986 million cubic metres per annum by the year 2020.
Through the related infrastructure development, comprising mainly the Polihali Dam water and energy initiatives, security for both countries will be enhanced. The water supply from this project will also provide additional water security for SASOL and Eskom.
The department has and will continue to invest heavily in the maintenance and construction of bulk water supply infrastructure over the next two years. We expect to complete among others, Phase 2A of the Olifants River Water Resources Development Project in the Limpopo province which entails the completion of the construction of the dam wall at the Dehoop Dam.
In addition, the Mokolo from Crocodile Water Augmentation Project Phase1 – which comprises the construction of a pump station and a 46 kilometre pipeline that will deliver water from the Mokolo Dam to the Medupi Power station and for the expected growth in the Lephalale Municipality, is also to be completed this year (2012) at a cost of R2.077 billion. The Komati Water Augmentation Project will supply water to Duhva and Matla Power stations, this will also be completed this year.
In KwaZulu-Natal, the Mooi Umngeni Transfer Scheme 2 along with the construction of the 42 meter high Spring Grove Dam and the associated transfer schemes will supply water to about 5 million people and the industrial sectors in the Durban and Pietermaritzburg areas.
In the Western Cape, resource-poor farmers will benefit from the Olifants-Doorn River Water resources Project, which comprises the raising of the Clan William Dam by 13 meters, to provide additional water.
Our regional bulk water infrastructure programmes are well on course. An investment of R2.23 billion will be made in the 2012/13 financial year. These include the construction of 43 regional bulk-scheme projects that are currently ongoing. Twenty seven (27) of these are in the rural parts of our country while 16 are in urban areas.
The Department of Water Affairs undertook a Water Resource Study of the Mzimvubu Water Project in 2006 in which nineteen (19) possible dam sites were investigated at preliminary level. From the preliminary investigations, a site at Ntabelanga on Tsitsa River, a tributary of the Mzimvubu River, was found the most promising for a dam. This finding will need to be confirmed, in consultation with key stakeholders, in the on-going feasibility study.
Communication Development Projects
Government is committed to reducing the cost of communication, increasing our broadband penetration and reducing the digital divide in both urban and rural contexts.
Broadcasting Digital Migration
With regard to Broadcasting Digital Migration, the Set-Top-Box Manufacturing Sector Development Strategy has been finalised. The strategy makes proposals on how the STB manufacturing sector could be supported through implementing interventions to support the existing manufacturers and introduce new ones.
The Set-Top-Box (STB) Scheme for Ownership Support Rollout Framework has been finalised. It provides a framework within which the STB subsidy will be rolled out to the five million poor TV-owning households. The approval of the strategy and framework will facilitate the manufacturing of STBs in time for digital terrestrial television launch.
The STB industry is expected to create 23 500 direct and indirect jobs. These jobs are expected to come from the actual manufacturing of the STBs and antennae, installation of the STBs and antennae and the repair and maintenance of the STBs.
Expanded Public Works Programme Projects
The Infrastructure sector of the Expanded Public Works Programme (EPWP) contributes significantly to the creation of work opportunities in the country. The target is to contribute 2 374 000 work opportunities out of a targeted 4,5 million work opportunities of the Expanded Public Works Programme; which makes up 53% of the target. The sector has created 781 734 work opportunities against the sector target for EPWP phase 2, which represents 33% of the target.
By the 2nd quarter of the 2011/12 financial year, the infrastructure sector of the Expanded Public Works Programme had created 241 177 work opportunities out of the 440 000 targeted for the 2011/12 financial year. These 241 177 work opportunities were created from 2 802 projects worth R63 billion from all spheres of Government.
Funding for the infrastructure development plan
The government initiative to develop infrastructure will be funded in various ways, some of which were outlined by the Minister of Finance in his budget speech:
1. The fiscus meets the costs of public-service facilities such as schools and courtrooms, hospitals and rural roads.
2. Public entities such as Eskom and Transnet finance their investments from internally generated surpluses and borrowing from the capital market.
3. In some cases, a mix of tax finance and cost recovery is appropriate – we make budget contributions to the costs of commuter transport services and electricity and water service delivery to low-income communities, for example.
4. The first round of over 1 200 MW of renewable energy projects was recently successfully tendered to independent power producers.
5. Private sector capacity can also be mobilised through construction and operating concessions, for example in the management of industrial development zones, freight logistics and ports operations.
The Development Bank of Southern Africa will play a coordinating role in raising finance, in partnership with multilateral finance institutions, foreign investors and other investment funds.
The Industrial Development Corporation similarly invests directly in income-generating projects, in partnership with other investors.
Ladies and gentlemen; Ministers, Deputy Ministers, DGs and DDGs are present to respond to questions targeted in their respective departments and areas.
The President will convene a Presidential Infrastructure Summit to discuss the implementation of the plan with potential investors and social partners.
I thank you.
Nikelwa Tengimfene (Chief Director: Infrastructure Development Cluster)
Issued by: Department of Transport
28 Feb 2012
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