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Madame Speaker,
Deputy Speaker,
Chairperson,
Deputy Chairperson of the NCOP,
Honourable Members,

ENERGY

Overview

Energy comprises approximately 15% of our GDP. The total electricity sales in 2001 grew by 1.8% to 181 511 GWh. Total liquid fuels sales in 2001 grew by 0,3% to 20 934 million litres. These figures demonstrate growth of the South African economy and the importance of energy as a key driver of our economy.

The Integrated National Electrification Programme (INEP)

This programme remains the flagship of the Department of Minerals and Energy (DME) as it constitutes our main vehicle for the delivery of better life to all. Accordingly, the total number of connections for 2001 were 336 858, of which 141 707 were installed in rural areas, and 195 191 in urban areas.

The electrification Programme has been delivering above target. In 2001/2002, there were 336,858 connections as against the 300,000 targets. Real costs per connection are also coming down at a rate of about two and a half percent per annum. Many thanks to Eskom, our Implementing Agency.

During 2002/2003, a further 300 000 households, 700 schools, and 100 clinics will be electrified. This will be done at a cost of R950 million during 2002/2003 financial year with more emphasis placed on integration with other infrastructure and service providers.

Rural Electrification and Non-Grid Electrification

The Integrated National Electrification Programme is inclusive of Grid and Non-Grid energy. This ensures that Non-Grid customers, who are generally poor and rural, are secured and catered for. A total of 34 per cent remains un-energized in the whole of South Africa.

Rural areas are particularly costly and difficult to electrify due to large distances from the national grid, low densities and small settlements. We will need, Honourable members, to take a keen interest to ensure public co-operation and understanding.

The NER has been working on regulations that will ensure that non-grid concessionaires are to be regulated in such a way that they provide a comprehensive service, which is linked to the local economic needs of the non-grid communities. Non-grid providers cannot be satisfied with only providing lights and cooking. We need to power economic infrastructure in the first instance.

Mini Grid Hybrid Systems

During 2001 we did a pilot for the Hluleka Nature Reserve in the Eastern Cape province. An integrated approach resulted in the design consisting of an energy system, a water purification system and a telecommunications system. The energy system will make use of renewable energy solar, water heaters and liquid petroleum gas. This combination of energy carriers will result in increased energy efficiency.

Two villages adjacent to Hluleka Nature Reserve have been identified as sites for pilot hybrid mini-grid systems. Emphasis has been placed on linking these mini grids to new economic activities in collaboration with the Agricultural Research Council (ARC). High value crops have been planted in a number of demonstration plants.

This is what we expect from our non-grid operators in the whole country overtime.

Theft and crime threaten electrification and safety

Rural electrification efforts are undermined by vandalism and theft especially that of solar panels. Parents and Community policing forums, especially in the rural areas, must look to their responsibilities and deal firmly with these mindless vandals. MPs also please stimulate efforts in your constituencies. Such actions are making the cost of Solar Home Systems prohibitively expensive, as theft proof gadgets have to be added. We also need your help to ensure that such vandals will face the full might of the law.

Government is also not going to tolerate illegal connections because they endanger innocent lives. Consider this a stern warning! Customer frustrations should be dealt with using proper channels, which exist everywhere. Government and Eskom will not allow abuse of the system and will fight recent and continued irresponsible actions in Soweto.

My last conversation with Minister Tshwete on our work was about our plans to visit some of the areas worst affected by this theft. Thangana, I would still appeal to you, to use whatever powers you may now have to continue attending to this issue and to help me and Comrade Nqakula, whom we welcome and congratulate as our new Minister of Safety and Security.

Electricity Distribution Industry

In May 2001 Cabinet approved the establishment of an EDI Holdings Company, which will implement the restructuring of the Electricity Distribution industry and ensure the establishment of the six Regional Electricity Distributors (REDS). EDI reform will lead to a sustainable, well governed, affordable electricity market. It will give a stable industry to large users and cost managed tariffs to the poor. Interviews for the Board and CEO are almost complete.

We have made a lot of progress in reaching our target, which is that by the last quarter of 2003; the 1st RED will be established. Government, the South African Local Government Association, National Electricity Regulator, and Eskom now have a shared understanding and have established a framework for co-operation.

In the meantime, the EDI Restructuring Bill will provide the framework through which relevant officers, employees, assets, liabilities, rights and obligations will be transferred to the REDs.

We will continue to dialogue with organised labour on matters of difference.

Our study shows that this restructuring will yield a benefit of R5 billion over ten years. At the end of the 10 years we would have created a solid industry that will continue to provide a low input cost to the economy. It will have cost reflective tariffs and subsidies for the poor.

The Central Energy Fund (CEF) group of companies

The controversy of the future of Mossgas is now behind us. This year we will formally launch the new and first national oil company of SA, PetroSA. Cabinet approved the merger of Soekor and Mossgas that form the basis of PetroSA and its business plan. This commercial entity has a new Board of Directors and a new CEO. It will pay dividends to the government without the Government putting money into it.

Our intention is that PetroSA increase its total oil reserves to 100 million barrels by 2014, mainly outside of South Africa.

Integrated Energy Plan

Last year we promised that we would ensure that progress is made on the IEP. That progress has been made. The final IEP will be presented to the Portfolio Committee in July 2002.

Why is the IEP so important? It is a planning tool needed to make critical choices and long range planning about all our energy sources. Energy is a strategic resource. We should be able to plan for 50 years and beyond.

Our IEP projections show that South Africa does not have the luxury of writing off any of our energy sources. For many more years we will be heavily dependent on coal, nuclear and hydrocarbons. All have controversy, both environmental and safety.

The use of gas and renewables will increase and both are good environmentally but they have real limitations i.e. available size of reserves on the former and technology limitations of the latter.

We are poised to push renewables much higher and even people with grid electricity need to be given the choice. Renewables currently cannot replace or compete with either coal or nuclear. For coal we intend to encourage even greater investments by industry in clean coal technologies through our new renewable energy policy. Intensive coal users and producers will in future contribute towards renewable energy investments.

Investment by both the private and public sector over the past five years in renewables was R255 million and for nuclear, R778 million.

Natural Gas

We are on track as far as the delivery of gas from Mozambique is concerned. The two Presidents of Mozambique and South Africa launched the gas pipeline project last week in Mozambique. Although it is intended mainly for big industry our State gas development company iGas is, investigating how gas can be brought to low income communities for small and micro businesses and to empower communities along the pipeline path.

I would ask Sasol to come and brief the Parliamentary Portfolio Committee (PPC) on the progress they are making on the project including community empowerment on the pipeline route.

Along the West Coast, discussions with all gas producers are underway. A Letter of Intent has been signed with Shell. PetroSA is in discussions with Forrest Oil/Mvelaphanda. We are committed to developing the gas infrastructure at the earliest possible time with all players. This project will see the viability of PetroSA, and Coega improved and energy users offered the choice of another energy carrier.

FREE BASIC ENERGY

Free basic energy pilot studies in 16 locations are being implemented to determine what the problems, costs, metering requirements etc. would be to implement such a policy on a national basis.

So far over 9550 households are benefiting from the Free Basic Energy pilots. The second and last phase of EBSST pilot projects will be concluded in September 2002. Based on findings from these pilot studies, policy proposals on EBSST will be made to Cabinet in mid-year.

Integrated Energy Centres

Integrated Energy Centres are designed to provide a one-stop service regarding access to affordable and reliable energy carriers for rural and peri-urban communities.

The Centres are also intended to provide an economic push for community development, linking energy sector provision into local economic development. With the help of corporate sponsors we will open seven this year. We thank Total, Sasol, PASASA for their contribution.

Four are already under construction in Kgalagadi, (Kuruman) Ngwabe,
(N. Province) Amajuba (KZN) and Eshane (KZN). Registers for Energy Co-ops have been developed and communities are being trained in the running of the Co-ops.

We salute the late Pretty Javu, our official who died in a car accident on her way to work on this programme in Kgalagadi two weeks ago. May she rest in peace.

Black Economic Empowerment

Honourable Members will remember that during 2001 I announced that we had signed an Empowerment Charter with the oil industry. At the time of the signing of the Charter, blacks only owned 5,8 per cent of the industry. At the end of 2001 nearly 14 % of the industry was in the hands of companies owned by historically disadvantaged individuals. We are more than half way!

The share of operating profits accruing to these companies is nearly 11%, up from 3,5% in 1999. This is a substantial achievement and I commend the industry for their efforts but it is not sufficient. In the very near future I want the industry to achieve the 25% target so I will not rest until that is done. A lot more will have to be done to bring women into the industry.

In March this year we launched the Women in Oil and Energy - South Africa (WOESA). This organisation is designed to open up opportunities for women in the energy sector and to facilitate their participation in the activities of the oil and energy industry in South Africa.

Since the Charter, Shell and BP have done two major deals. Thus far BP is the only company to meaningfully bring women into the industry. I am very impatient on this score that is regarded as a "make or break" for Government, as is a move towards broad based Empowerment. As long as Government is a facilitator, we will insist on benefiting many more people. If you do not want to empower more people then do not bother about Government's facilitated deals.

I am establishing a monitoring and evaluation mechanism that will monitor progress and evaluate partnerships in consultation with the industry. I will soon appoint a Compliance and Monitoring Advisory Committee to advise me in the application of these mechanisms, which will be points, based system. It will comprise both private and public sector representatives. This will form part of an overall system of recognition, incentives and penalties. This is in line with the announcement of the President at the beginning of the year.

I would like to tell empowerment companies, Government couldn't be leant upon forever. They must take responsibility, in particular over the kind of agreements they get themselves into. They must protect the overall empowerment initiative and its integrity.

Government does not like being seen as the "spoiler" because you have not applied yourselves diligently and we have to disapprove pseudo-empowerment. We give a lot of credit to operational BEE and self-made companies such as Exel. We need to see more of these. Excel also won the prize for having the best customer care service in the petrol retail sector.

As an aspect of the roll-out of the Charter, we have begun a process of focusing on various aspects of the Charter. Key among these areas is a Supplier Development Strategy. A team comprising government and industry has just returned from a study tour of the USA, to look at best practice, regarding affirmative procurement. As a result we should now see faster progress on this front. Our approach is in line with Government policy, to put in place sector based empowerment strategies and legislation as may be needed.

The Energy Industry

As the country has moved to update and modernise regulation in the energy sector the industries affected have had to endure change, which most do not find comfortable. I would like to thank the industries for the co-operation that they have given to their respective regulatory authorities during this time. While I will insist on overall compliance with the charter and we will legislate support for the charter, I do want to congratulate AMEF, SAPIA, and the retailers associations for a very robust and healthy working relationship and service to the country.

ENERGY EFFICIENCY

I concede that as Government we should and can do much more on energy efficiency. DME now hopes to lead by example - our head office is being made into a highly energy efficient office and we plan to spread this to other Government Departments and institutions. The House will be updated. I commend the mining industry and other bulk users on their co-operation with Eskom on this front.

Honourable members, efficiency means that all of us must be more vigilant about the energy consuming appliances and technologies that we purchase and use. We must make informed choices. Government and individuals in this way, particularly in electricity and fuel consumption, can save millions of Rands.

Mining
Overview

Mining has continued to play an important role in the national economy. Provisional figures for 2001 indicate that mining contributed R66.8 billion to GDP compared with R59.1 billion in 2000, which is a 13 per cent increase. This constitutes 7.5 per cent of GDP in 2001. There is still a lot of potential for growth in the exploitation of minerals in the country, especially where the country is ranked number one in terms of reserves.

For example, in manganese, chrome and PGMs where we have 80 per cent, 76 per cent and 56 per cent of World reserves respectively. This is where the use it and lose it principle is critical. We do not necessarily mean that we want to deplete the reserves faster - a balanced approached will be maintained.

With regard to employment the mining industry employed 408 894 people during 2001. The gold mining industry still remained the largest employer, employing 49.9 per cent. Although the gold mining industry has in the past shed off more jobs, it is not all gloom and doom, as the depreciation of the Rand, coupled with a mood swing towards seeing gold as an investment, brought some relief for the industry, which is largely an export sector. Thousands of jobs have been saved and shareholders have reported very good earnings.

In addition to South Africa's huge potential for mineral exploitation, the mature mining industry has created an innovative world-class mining technological sector. It is in this field that I believe that our mining industry can be competitive for many years to come and export its world-renowned expertise and technology. The industry must endeavour to grow and compete globally, while at the same time not forgetting to address domestic needs such as the advancement of Black Economic Empowerment and ensuring that everyone in the sector contributes to the tax base. South Africa is one of the most competitive mining countries on taxation.

A broader tax base is extremely important to address, amongst others, infrastructural needs and social legacies of the past. We should not forget that the infrastructure in South Africa has been built by all the people of this country - some as taxpayers - some even by their sweat and blood. Most of these people never shared in the wealth of the country and this infrastructure helps all our industries including mining.

Conflict Diamonds

As far as conflict diamonds are concerned, African countries have made great strides. Following extensive consultations, 39 governments and other stakeholders are now part of this process. We have fulfilled the request and met the deadline set by the United Nations General Assembly in respect of developing an International Certification Scheme for rough diamonds.

The scheme will be formally launched at a Ministerial meeting in Switzerland on 5 November 2002. South Africa was requested by participants to continue leading the process.

Beneficiation

In terms of beneficiation, a special Bill is being drafted to ensure growth in the sector. In this regard our key objective is to:

* Remove entry barriers;
* Increase access to rough diamonds;
* Increase access to unwrought precious metals such as gold, platinum and silver;
* Encourage local design and manufacturing of jewellery;
* Increase participation of Blacks and Women in the mineral beneficiation and processing sector;
* Improve human resource development; and
* Encourage retail presence in tourist destinations of South Africa

We are also involved in several initiatives such as the establishment of an emporium to promote indigenous jewellery and ceramic products in areas of high tourist concentration. The first of these will be located in Durban and others are to follow in Cape Town and Johannesburg. With regard to human resource development, we commend the excellent contributions made by the Technikons, Mintek, industry and the South African Jewellery Council.

Another initiative of our own is the Kgabane project, which has been initiated to empower ordinary poor South Africans to develop South African branded jewellery and ceramic products of international standard. This project will be rolled out selectively throughout the country in order to create jobs for producers and find markets. In this regard a central marketing strategy has been planned.

Overall, the vision remains to develop world-class beneficiated industrial products and jewellery to facilitate cottage industries for bulk jewellery manufacturing in order to capture South Africa and overseas markets. Mintek is playing an important role to ensure the success of the project. The Kgabane project will be launch in August 2002.

Minerals and Petroleum Resources Development Bill

The Mineral and Petroleum Resources Development Bill is a very important piece of legislation, which will address fundamental issues in the mining and minerals industry. The Bill will facilitate the transformation of the industry in order to:

* attract new investment
* entrench sustainable development & deal with the legacy of migrant labour
* provide security of tenure
* legitimise mine specific social plan
* Introduce the dedicated use of royalties to communities affected by mining including labour sending areas

The Bill has been introduced to Parliament, the matter is now in the hands of Parliament where interested parties will be given an opportunity to voice their concerns and provide inputs.

As a department we have listened and incorporated very diverse views as far as we could. We always anticipated that in the Bill we may not reach full consensus, Not everybody got what they wanted. We cannot overrule State Law Advisers to give some stakeholders what they want.

We will not compromise with regard to the fundamental principles of the Bill, and its Key Performance Indicators, which include amongst others, a significant change in ownership profile of the industry.

In this regard a Charter is currently being drafted, which will be our contribution as Government to advance the agreement that we have with the Chamber of Mines on the transformation the industry. The Charter will facilitate transformation of the industry. We also call the industry to be proactive by supporting the BEE process. We will present to stakeholders both our proposals and the Charter. The Charter will form part of our regulations and criteria for awarding mining and prospecting permits.

The reality is that one of the biggest mining industries in the World is exclusive in terms of ownership and employment equity. For example one white company is holding 63 per cent of South Africa's platinum reserves. In Manganese, only two white companies hold 83 per cent of the total reserves, and in gold also two white companies hold 51 per cent of the total reserves. In Diamonds, one white company controls 95 per cent of South Africa's production. This is not sustainable in the democratic South Africa. Moreover, there is a rush by the same people to apply for more rights. If we allow this, Honourable members, the Bill will just be a lame duck.

We would like voluntary compliance with principle of "use it or lose it" even prior to the promulgation of the law. We invite companies to discuss their voluntary compliance with our Director-General.

I would also like to point out that Black business is concerned that they will be given areas of inferior mineral potential.

Advisory Board

In terms of the Bill, an Advisory Board will be established to provide advice on a wide range of mining and mineral related issues. The process of nominating and appointing relevant Board members will be announced through the press this month.

Royalties

I would like to express my appreciation to the Minister of Finance for his understanding to, amongst others, the use of royalties for community development. This will ensure that mining towns will never evolve without the integration of communities in the mainstream economy. It will also provide the necessary funds for mitigating negative effects caused by the dependency on single economic activity. In future SARS will collect royalties from the mining industry. Again, we appreciate the support of Minister Manuel and his DG on this matter.

I would also like to thank the Minister of Finance for his understanding on marginal mines, which would find it difficult to continue operating without the financial assistance for the pumping of underground water.

Mining and Poverty

Because of the close relationship between the official poverty nodes of South Africa and mining, we intend to make sure that mining contributes significantly to poverty eradication and not just alleviation. Government, business and labour generally agree on the urgency of this matter. We also commissioned the Council for Geosciences to do a study that identifies mineral potential areas in poverty stricken areas including the poverty nodes.

NEPAD & Mining

Mining and energy are certainly some of the pillars for the success of NEPAD. In this regard the following key projects have been identified:

* Upgrading the geoscientific information of Africa;
* Promotion of mineral beneficiation and production of high value mineral products to address infrastructural and agricultural needs;
* Harmonisation of policies; and
* Increasing access to affordable energy.

We thank Eskom for its role in the development of energy infrastructure on the continent. Through Eskom, Council for Geosciences, Mintek and PetroSA we hope to play an important role in NEPAD. Already the Council for Geosciences operates in some 40 African countries.

World Summit for Sustainable Development: Mining and Energy

The importance of this conference is not just that South Africa is hosting it but also that important decisions will be made. Both energy and mining are at the heart of sustainable development.

Our preparations for the WSSD include: -
* An African Ambassadors' caucus on Sustainable Development in Mining and Energy.
* A Mining and Energy Minister's meeting

These meetings are aimed at consolidating our position on Mining and Energy issues, identifying key positions and critical issues for Africa, getting consensus on these, and agreeing on a post-WSSD action plan.

The Summit is important for the mining and energy industries as it focuses on issues that affect the well-being and future of these industries. It is important that these industries ensure that the exploitation of minerals and energy resources is in a balanced way that addresses all the three pillars of sustainable development, namely; social, economic and environment.

With regards to mining, one of the important social legacies of the past is the migratory labour system, which created single hostel accommodation and a host of associated socio-economic problems. It is important that all stakeholders address this social legacy, which legacy is a factor in the prevalence of HIV/ AIDS.

There is also another challenge facing the industry. This relates to the environmental and health impact caused by coal mining and its usage. We cannot continue with business as usual. The industry has to address these environmental and health issues. Rehabilitation remains critical and has to be taken seriously. It is not fair for the industry to shift its costs to communities and future generations.

With regards to energy, our key focus will be increasing access to affordable and sustainable energy and to ensure security of supply through diverse energy sources - As part of WSSD and beyond, we also intend to take this up vigorously.

Bakubung Initiative

The initiative to establish a fund that will support junior companies is well underway. In this regard the IDC has already indicated their commitment towards investing money in the fund - thus becoming one of the founding investors. This is one of the many contributions IDC is making in support of the mining and minerals industry.

On mining and beneficiation projects, IDC's Strategic Business Unit has made investments totalling R1 billion which generated R 2,5 billion worth of exports and created some 2 500 jobs.

MINE HEALTH AND SAFETY

Governing mining and energy industries as safe and healthy working environments

Since the Mine Health and Safety Act was introduced in 1996, the rate at which workers lose their lives in mine accidents has been steadily decreasing, from 1.02 deaths per 1000 employees in 1995 to 0.78 deaths per 1000 employees at the end of 2001.

Similarly, reportable injury rates are decreasing from 14.76 in 1995 per 1000 employees to 12.33 in 2001. However in 2001, both the fatality and reportable injury rates increased relative to the rates for 2000, owing mainly to the poor performance of the gold and platinum sectors.

The future of gold mining in particular depends on the ability of operators to extract pillars and mine at ultra depth safely. The Inspectorate is monitoring the situation very closely. Fatality rates in the coal sector, on the other hand, reached levels comparable to that of Australia and North America for the first time ever.

A review to be carried out by internationally renowned experts of the Mine Inspectorate and the industry is planned for 2002. The scope of the review has been defined; funds have been set aside, and a call has gone out for tenders. The main thrust of the review is to take stock of developments in safety and health since the new Act was passed, to assess the industry's track record in recent years, and to assess the capacity and approach of the Mine Inspectorate.
MANAGEMENT SERVICES

Addressing past imbalances to promote equitable redistribution of benefits

A Workplace Skills Plan was developed and registered with the Public Service and SETA. We also identified a shortage of the required skills in the minerals and energy sectors. During the current financial year, a Skills Master Plan will be developed in partnership with all the SETAs in both industries.

In addition, my Director General, together with our senior Human Resource officials, are developing a programme through which young people will be encouraged to take careers and develop technical skills in the mining and energy fields.

We remain thankful to Petronas for being partners in our skills development programme. Our skills master plan will be launched in June, the Month of youth.

We implemented an internship programme in 2001. Targets were set for each Directorate within the Department to appoint at least two interns, subject to the availability of funds. It is worth noting that thus far, 26 interns have benefited from this programme, and seven of the interns have already been appointed permanently. This has been a very rewarding initiative as some of the interns have simply excelled. For me personally this is probably one of the most gratifying parts of our job.

RESTRUCTURING PROCESS IN THE DEPARTMENT AND DME BUDGET

Our 2001/2002 budget was R 1, 245 billion and our 2002/2003 budget is R 1,826 billion. The bulk of our allocation is for Electrification at a total of 52,03 % of the overall current budget. The structure of the Department is currently being revised to be in line with our key strategic objectives and the baseline allocations in terms of our Medium Term Expenditure Framework for 2002/03-2004/05.

DME has a very tight budget; we do much more with much less. With all of the additional responsibilities, especially in mining we can definitely use additional resources, which can bring more revenue to the economy faster. On electrification funding, we will continue our dialogue with National Treasury.

The Mineral Development Branch is in the process of being restructured in line with the implementation of the Mineral and Petroleum Resources Development Bill. Additional personnel will be recruited and all personnel will be trained on the new legislative framework. In addition, a simulation exercise will be conducted to assess the readiness of my department in this regard.

Our International Relations Directorate is doing good work with very limited staff and excellent interns. We can do much to the benefit of South Africa with extra resources. We can also do more for job creation and rural development.

Closure

Honourable members, on the whole I believe we have made good progress and I look forward to elaborating on some of these matters to the Portfolio Committee.

I want to thank and salute Almorie Maule, former Chief Executive Officer of Engen, for her sterling contribution to our energy industry.

Thanks to my Deputy Minister for her support, my Director-General for his leadership and loyalty, our senior managers and DME staff for their zeal, colleagues in labour and business, our associated institutions, and my staff in the ministry including my security personnel who work diligently in order to add extra hours every day. I thank my family for their sacrifice, love and support, the Portfolio Committee and my Chair for their political astuteness.

I thank you.

Issued by Ministry of Minerals and Energy

7 May 2002