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20 May 2008

Programme Director
H.E. Ministers of energy and minerals (miners) resources and their representatives
H.E. Mayors of our local sphere of government
Chairpersons of boards and chief executive officers amongst us;
Members of the regulatory boards in our midst;
Members of the financing houses
Captains of the energy industry
Distinguished ladies and gentlemen
Good morning

Let me take this opportunity to thank the organisers of this conference for the kind invitation to be part of this auspicious occasion. I am indeed honoured. Let me also welcome you all to this wonderful country of ours whose vibrancy and sense of freedom are so obvious. It has to be noted that there has been an escalation in xenophobic events in some parts of the country in recent weeks, but I should point that this runs directly counter to mainstream opinion in South Africa and certainly to the strivings of our democratic government.

These events are to be condemned in the strongest possible terms. As government we are doing everything possible to get to the root of this problem. Our resolve is clear. As African countries, we need one another and we need a strong and stable Africa if we are to become and remain a meaningful player on the global socio-economic and political stage.

This annual event takes place at a time when there are discernible challenges facing the energy and minerals sectors around the world in general and Africa and South Africa in particular. It also takes place when opportunities to address these challenges are within reach. I am encouraged by the numbers and the diversity of stakeholders (governments, utilities, regulators, manufactures, implementers, financiers) that I see sitting here. I am equally impressed by the extent of response that the private sector has shown in this event by the exhibitions that have responded to invitations to be on show. This is evidence of the great capacity of the industry to respond when called upon to address infrastructure challenges at utility and government level.

The challenge for a gathering like this is to package solutions in ways that are saleable, sustainable and affordable to decision-makers. Africa needs occasions like these where experts have an opportunity openly to debate energy issues and learn from experiences of others on a more levelled playing field. While different stakeholders have different expectations and requirements from the sectors represented here, the challenge before us in Africa is to create a platform upon which relevant stakeholders, comprising governments, the private sector, neighbours in the region and across regions, can interact and have a discourse which will enable a win-win situation for all to emerge.

This may need the creation of relevant institutions (public and private enterprise), legal and regulatory frameworks, creation of governance and institutional arrangements to facilitate the development of the necessary utility infrastructures for delivery of public service industries. Furthermore, there is a need to create and facilitate smart financing mechanisms, creation of smart billing and revenue collections systems, innovative job creation, effective training and skills development all in a bid to grow our economies and improve the quality of life of our people in a sustainable way.

For most of the African countries, the challenges that we face stem partly from our colonial past and the institutionalisation of historical practices that hindered efficient operation of our energy and other infrastructure systems. Some of the challenges, of course, are of our own making in being slow to respond to technological innovations and institutional change requirements that are currently sweeping across the globe. In this, Programme Director, I am referring to changes in technology in the information and communication technology (ICT) field, improved co-operation and collaboration on water services and pooling of energy trading and regional regulation and co-operation protocols.

You must be aware of the sweeping changes of development, co-operation and strengthening of trading within and among trade blocks which have seen the governments and utilities pooling scarce resources. These include trade protocols, diplomatic relations, electricity, oil and gas, water, ICT - to name but a few. We have recently seen the liberalisation of the skies between Europe and North America. We have seen examples of the benefits of co-operation, standardisation and collaboration on matters of common interest.

The question that we need to ask ourselves is this: As African countries, what are we doing to get to where we want to be? It is not that we are doing nothing. You may be aware that infrastructure and services issues have been on our agendas for a long time now; both at regional level, being at Southern African Development (SADC), inter-regional, and continental levels (New Partnership for Africa’s Development [Nepad] and the African Union). We can name a few of our achievements emanating from these structures. The success of some of our institutions like SADC, Southern African Power Pool (SAPP), African Forum for Utility Regulators (Afur), Regional Electricity Regulator Association (RERA) and Nepad, Development Bank of Southern Africa, African Development Bank, are examples of our resolve to deal with our challenges. Equally, there will of course be opportunities for international bodies (private and public) to participate in the African energy sector.

It is very clear, in our perspective, that not only do we want to be exporting primary resources. A day should come very soon where we will be able to export finished value-added goods and mineral and energy services to our western and eastern trade blocks. We need to see the export of electricity, gas, refined petroleum products, processed minerals and end products that are ready to use by our end customers outside the African borders. We all need to reverse the trend of a one-way flow of capital to developed countries. We need to restore balances of payments to surpluses rather that ever-escalating deficits.

In the late 90s to early 2000s, the biggest challenge was seen as the reform of the energy sector. This was within the context of excessive state involvement in the power sector and the inability of state utilities in general to deliver on their mandates, lack of maintenance of their infrastructure, lack of billing and metering, lack of collection and hence the unsustainable nature of the electricity businesses characterised this era. This led to the national and international finance houses being reluctant to fund the refurbishment of existing infrastructure and development of new plant. There are of course other political factors (civil wars and political instability, natural disasters like droughts and floods) and macro economic impediments (international spot prices of commodities, currency volatility and inflation), which have made debt funding particularly difficult.

For most of us as governments, having to deal with our social responsibilities within the context of private sector participating in providing basic services served as a rude awakening to the realities of our past. Communities need to be developed simultaneously with the growth of the economy. The mid 2000s have seen a drive towards the establishment of independent utility regulators, and the liberalisation and the unbundling of the electricity sector. As a continent we are at different stages of reform. We are aware that Namibia is steps ahead in the restructuring of the distribution sectors.

As South Africans, we are still grappling with constitutional issues to be able to move ahead on Electronic Data Interchange (EDI) reform. We are also aware that the involvement of the private sector in the utilities is at different levels across the continent. We are also aware that service delivery and the abilities of governments to deliver social services differ from country to country depending on a number of critical success factors.

With the exception of a few, stability in Africa has brought about impressive growth rates. These have resulted in high demand for energy in general and electricity in particular. The challenges that were predicted in the late 90s have now become a reality. In this regard we have seen the scramble for power as governments in their sovereignty are looking for local rather than regional solutions. Most of these projects have not yet materialised because, amongst other things, the necessary Power Purchase Agreements could not be secured across national borders, reserves of primary energy could not be proven, unit costs of new power continues to be too high, interconnections could not be done successfully, or identified technologies have become too expensive or too risky to contemplate as initially envisaged.

As you are aware, over the past few months South Africa has seen unprecedented levels of electricity supply disruptions as a result of both the limitation on capacity (in terms of Mega Watts) and energy (in terms of Mega Watt hours). The questions on the minds of most people: What is the problem with our electricity supply industry which we have known to be world-class; how long is this problem likely to persist and whether authorities are doing enough to resolve it? It is a pity that, when we are affected, so are many of our neighbours who are interconnected with us.

We are doing everything in our power to manage the situation such that all of us, countries in the region, businesses and civil society can have reasonable levels of electricity supply in the short term, while we address the medium and long-term issues. The co-operation of all of us will be necessary if we are to succeed as a nation and as a region. As I said earlier, some of the solutions lie in this gathering.

Interventions

A number of policies and strategies have been developed and approved to ensure that we approach the value chain of electricity supply in an integrated and sustainable manner. To that end, the Nuclear New Build Programme Strategy, Renewable Energy Strategy and Liquid Fuels Strategy were developed and approved, all of which are clearly articulated in our energy policy. In the absence of capacity and energy, we are faced with two options, namely load shedding and power rationing. We are strongly advocating the power rationing option.
For the benefit of this gathering, the following are components of our Power Conservation Programme.

Legislative and Regulatory Measures

The current legislative framework provides for the Minister to make certain regulations pertaining to security of supply, energy efficiency and sustainability of the electricity industry for my department
In order to speed up the Power Conservation Programme, we are also embarking on the development of necessary regulations under existing legislation to enable us to implement our legislative mandates.

In this regard, we are undertaking the following:
* quality of supply regulation;
* prohibitions regulations
* energy efficiency and demand side management policy
* electricity pricing policy

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

Immediate Projects

In order to kick-start the Power Conservation Programme, we will also be procuring the first batch of compact fluorescent lights (CFLs), Solar Water Heaters and will be assisting with the smart meters to enable municipalities and Eskom to control the load of their customers during periods of constricted capacity.

We are also considering the following norms and standards:
* Building (orientation for the purposes of passive solar design, lighting, and installation of solar water heaters, insulation, ventilation, heating and air conditioning).
* Reduction of import tariffs exemptions for equipment like Solar Water Heaters which are currently in short supply nationwide.

The National Treasury

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

Specific Programmes under the Pattern Classification Programme (PCP)

In our energy saving campaign we are advocating the following programmes:
* banning the manufacturing and use of incandescent lights
* solar water heaters
* smart metering
* fuel switching to other sources like LP gas and other bio-fuels and renewable energy technologies
* traffic lights and public lighting
* efficient lighting (compact fluorescent lights)
* efficient public buildings
* education, public awareness and communication.

Medium to Long Term Programmes (18 months to seven years)

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 programme of both a nuclear and hydrocarbon nature will be constructed.
* 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 Mozambique (this has already happened).
* During the process the existing plant will be refurbished and useful life extended.

All the above have carbon emission credit possibilities which we need to harness.

Tariff increase

Programme Director, there is a cost associated with all the above energy interventions. Unfortunately, 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 (to governments) to minimise the impacts on the national economies and the poor communities?

Conclusion

We are well aware that the road ahead will be rough for all of Africa, hence our interest in the outcomes of this gathering. As the global economy grows, so are demands for energy which bring with them the crises of this nature. Africa is not alone in this situation. Nearly all countries have had their fair share of energy shortages.

As a region, we must work together and we will continue to call upon all of our fellow governments and private sectors to collaborate in managing the prosperity of the African continent. I am hopeful that, through a resourceful collective that is here for the next three days, concrete proposals to solving our problems can be found so that our policy makers will return with sufficient information to propose to the decision makers. I believe that a lot will emerge that will benefit both the private and the public sector alike.

Programme Director, I look forward to some feedback that will assist us all, as governments, in taking the challenges of the energy sector to new levels.
I wish you well in your deliberations.

Thank you.

Issued by: Department of Minerals and Energy
20 May 2008