Chairperson, Minister Patel, hon members of this august House, the National Council of Provinces, in September last year, working together with Ezinqoleni municipality in KwaZulu-Natal, we launched the Safe Illuminating Paraffin Stove Project in the town of Ezingolweni.
As we did that, we were once again reminded of the scale of poverty and underdevelopment that characterises our communities. In particular, what stood out was the plight of one resident who barely had a house to live in, let alone the bare necessities for survival. Working together with business leaders in the area, we were able to offer the lady and her two teenage sons a home and a sense of hope for a better tomorrow.
There was also a story that was shown on television last year of the death of three children from KwaZulu-Natal, who died when the generator they were using exploded. This happened after they had travelled for 10 km to watch the soccer game between our national soccer team, Bafana Bafana, and Uruguay.
It is these tragic events that continuously remind us of the enormousness of the tasks that face the democratic developmental state as it seeks to usher in a new era in energy planning, modelling, forecasting and service delivery.
Tomorrow, 23 April, I will be travelling to Grahamstown at the invitation of our national oil company, PetroSA, to participate in the opening of classrooms at a primary school that was established by the nuns of the Anglican Church in 1844. The new structure will provide a science and computer laboratory for about 200 children.
We are also going to offer these children a sense of hope and a promise of a better tomorrow. To date, PetroSA, a subsidiary of the Central Energy Fund, has spent a total of R260 million on such initiatives throughout the country.
For us to achieve social justice, we will continue with the implementation of the Integrated National Electrification Programme as a vehicle for social change. In spite of the challenges facing us as a department in relation to the implementation of this programme, we have made significant progress. I must indicate that, out of the 237 local municipalities, 128 of them will eradicate existing backlogs with regard to the electrification of formal households by 2011 and 2012.
The majority of these municipalities are in Gauteng, North West, the Western Cape, Free State, Mpumalanga and the Northern Cape. Accordingly, my department will prioritise the extension of the rural electricity network capacity to ensure that the rural communities of Limpopo, KwaZulu-Natal and the Eastern Cape achieve the same level of electrification as the provinces mentioned above.
To indicate our commitment to the goal of making sure that we prioritise these provinces, 64% of the total allocation of R2,8 billion has been allocated to the three provinces. In this regard, we have identified the municipalities that have backlogs of less than 5 000 to achieve universal access to electrification. In the Eastern Cape, we are targeting about 14 municipalities with a backlog of less than 5 000; in the Free State it is 17; in Gauteng it is 4, in KwaZulu-Natal it is 11; and in Limpopo it is 18. In Mpumalanga it is 4 municipalities; North West, 11 municipalities; Northern Cape, 26; and the Western Cape, 23.
You would have understood that these are the municipalities with backlogs of less than 5 000. Those with backlogs of more than 5 000 are as follows: In the Eastern Cape it is 24; Free State, three; Gauteng, eight; KwaZulu- Natal, 40; Limpopo, seven; Mpumalanga, 14; North West, 10; Northern Cape, one; and the Western Cape, two.
Out of the totals, there are 128 municipalities with a backlog of less than 5 000, and 109 municipalities with a backlog of more than 5 000. As regards the total budget for these municipalities in the year 2011-12, the Eastern Cape will receive about R167 million; Free State, R198 million; Gauteng, R80 million; KwaZulu-Natal, R180 million; Limpopo, R270 million; Mpumalanga, R35 million; North West, R216 million; Northern Cape, R94 million; and the Western Cape, R186 million. This makes a total of about R1,426 billion.
All metros have been left out of these arrangements, except Ekurhuleni, where 64 000 formal households still have to be electrified. In this regard, the rest of the metros will work on eradicating their backlogs and this they will do through the Breaking New Ground programme of the Department of Human Settlements.
I am pleased to report that restructuring of the distribution side of electricity has gained tremendous momentum over the past year. The state of readiness for the consolidation of the 187 municipalities and Eskom distribution systems into single, viable regional electricity distributors, REDs, as directed by the Cabinet decision of 25 October 2006, has reached its highest level ever.
Working together with the SA Local Government Association, Salga, our mayors, councillors and officials of the 147 municipalities out of 187 that distribute electricity, EDI Holdings has signed accession to co-operative agreements with these entities. They have subsequently committed themselves to actively participate in the EDI restructuring process.
Furthermore, over 30 municipalities, which together with Eskom constitute about 90% of the entire electricity distribution in the country, have undertaken the process of ring-fencing their electricity distribution assets in preparation for incorporating their electricity assets into REDs. Thus far, EDI Holdings has spent about R62 million to assist municipalities and Eskom with the ring-fencing exercise.
The huge backlog in maintenance, refurbishment and investment in EDI infrastructure, which is estimated at no less than R27 billion, continues to be a major challenge. This continues to have a negative impact on service delivery. The government has established an Interministerial Committee on Energy to urgently redress this situation, amongst other things. The process of integrating this programme into the overall Local Government Turnaround Strategy is under way.
The main focus in the months ahead for my department and its implementing agency, EDI Holdings, is to ensure that all stakeholders agree as soon as possible on the implementation plan to ensure the acceleration of the establishment of the six wall-to-wall REDs as agreed upon by Cabinet.
We expect the Department of Justice and Constitutional Development to finalise the processing of the proposed Constitution Seventeenth Amendment Bill after which we will be able to table the RED Establishment Bill.
Members of the National Council of Provinces are the ones who actually understand better than those of the National Assembly the impact of electricity distribution on municipalities, because you are the ones who are dealing directly with municipalities and provinces. You would know the challenges that municipalities have in relation to decaying infrastructure, where in some instances there is electricity, but people would be sitting without lights going on, primarily because the network that leads to the household is unable to provide that service to them.
It is important, therefore, ladies and gentlemen, that all parties who have the interests of South Africans at heart should support the Constitution Seventeenth Amendment Bill so that when people switch on the lights, there will be light.
As electricity tariffs increase, our main concern is the impact on the impoverished, the poorest of the poor. We will mitigate the adverse impact of tariff increases on the poor through a number of mechanisms over and above the free basic electricity programme.
The first mechanism is based on inclining block tariffs, and the second one is related to savings on the electricity bill which are derived from the solar water heating programme. For example, the tariff increase applicable to the indigent will be the lowest part of the block tariff proposed by the National Energy Regulator of South Africa, Nersa, and this is minus 10% for year one for consumption below 50 units per month, followed by 5,4% for year two and 5,5% for year three.
The highest increase is applicable to customers who consume more than 350 units per month, which is in line with the user-pays principle. If you are sitting in this House and your lights are on, your pumps are on, and everything is running, you must pay for that. You must also pay for what you waste, even for the electricity that you are not using. You will have to pay for that.
We will work with the Department of Co-operative Governance and Traditional Affairs, Cogta, and the National Treasury to sort out the funding of municipalities in so far as electricity distribution infrastructure is concerned. We need municipalities on our side as energy champions, and we call on them to apply surcharge increases in a manner that is sensitive to the circumstances of the indigent. We also appeal to the hon members of this House to support the restructuring of this sector.
You will remember that municipalities - and I am sure they have come a number of times to this House - indicated that they rely on the electricity revenue to be able to sustain themselves. Unfortunately, while electricity is providing the revenue, that money is not being used to sustain the infrastructure for electricity. It is being used for other services that municipalities need, so that is why we are appealing to you to engage with the finance committee.
You should be able to motivate for a better funding model for municipalities, so that they do not rely on what we call low-hanging fruit, which is easy for them to get. The increased electricity surcharge means increased revenue for municipalities.
However, that also works against energy efficiency, because if municipalities have to rely on the electricity charges, they would motivate people to use electricity so that they can have more revenue. It also works against their own challenge of revenue collection, because they are not able to collect the full revenue. So, as people use more, municipalities would believe that they would get at least half of that from electricity tariffs in order to sustain their programmes.
In order to encourage energy saving, a financial incentive scheme, to be known as the standard offer, will be introduced. In terms of this, project developers will be able to claim a rebate in respect of the amount of energy they have saved from the electricity system.
It is expected that these interventions will emanate from, firstly, the residential sector, by the replacement of incandescent lighting with energy- saving bulbs; secondly, the industrial sector, through the power conservation programmes in terms of which industrial customers will be able to claim incentives due from less energy-intensive production methods; and lastly, the commercial sector, with energy efficiency interventions like improved insulation in buildings.
We intend to intensify energy efficiency in the estimated 100 000 public buildings, which will be retrofitted to comply with energy efficiency standards. We urge the Department of Public Works to ensure that all provincial governments participate in this project. We once again call upon the hospitality industry to embrace the spirit of this campaign.
We would also like to congratulate the Department of Arts and Culture for working through the SA National Energy Research Institute, Saneri, on making Robben Island one of our major greening projects.
Solar water heaters are one of the key interventions in energy efficiency and demand-side management, EEDSM, in terms of which we are making a commitment to progressively deploy solar water heating for water heating in all residential dwellings. The outcomes of this programme are expected to include electricity demand reduction of about 3 600 megawatts, and localisation of solar water heating technology, design and production.
I am sure you have heard the Minister of Economic Development indicating the type of interventions his department will make to ensure that we emphasise and support localisation and the production of this technology locally. Issues of climate change mitigation and job creation as well as skills development are further expected outcomes.
As you may be aware, next week on 28 April President Zuma will launch the first massified solar water heater project in Winterveldt. This is a precursor to numerous other projects, which will ultimately result in the displacement of coal by the sun as an energy carrier for water heating in this country. Very soon, we will also be launching 5 000 units with the Sol Plaatje municipality.
We will also be working with the Departments of Public Service and Administration and Public Works on a framework to roll out solar water heating systems to public servants. We want to take this opportunity to thank the Japanese Embassy for being the most energy-efficient foreign mission in South Africa. We also want to congratulate the Legacy Group's Da Vinci hotel in Sandton for its retrofitting, from conventional water heating to solar water heating.
This year, the department will be launching the Working for Energy programme, with the primary objective of using the feedstock created from clearing alien biomass vegetation to produce power. We are happy to announce that we are working with municipalities, the Department of Water Affairs and the Department of Economic Development with regard to waste-to- energy projects. You heard the Minister announce the green economy initiatives.
Chairperson, we would like to reaffirm our commitment to establishing more integrated energy centres, IECs, throughout the country in order to reduce the impact of energy poverty. This programme is one of the vehicles that the department is using to contribute to government's commitment to rural development and sustainable job creation.
An integrated energy centre is a one-stop energy shop owned and operated by community co-operatives and organised as a community project. The IECs act as community information hubs and energy shops that sell illuminating paraffin, liquid petroleum gas - which is LPG - candles, petrol and diesel from oil companies directly to the community at more affordable prices.
The department, working together with the affected stakeholders, is currently reviewing the IEC sustainability strategy that was developed in 2005 in order to ensure that these IECs are achieving the desired results.
Discussions are under way with the Department of Rural Development and Land Reform to ensure that the IEC programme is aligned with the Comprehensive Rural Development Programme. This year, we intend to launch two IECs, in King Sabata Dalindyebo and Mbizana Local Municipalities in the Eastern Cape.
My department is also actively involved in assisting operating IECs in places like Ratlou in the North West, Mutale in Limpopo and Moshaweng and John Taolo Gaetsewe municipalities in the Northern Cape.
Through this House, I would like to appeal to you to engage with municipalities to make sure that they can process applications for land, in particular for sites for the IECs as quickly as possible, because the IECs are an instrument with which we can deal a blow to energy poverty.
Illuminating paraffin is the most commonly used and purchased fuel source for low-income communities in the country. It is used in varying degrees in almost half of all South African homes. Like all other fuels, illuminating paraffin is a hazardous substance which, when not properly handled or used, can result in unacceptably high levels of harm to humans, with financial and economic consequences.
To address this problem, the department together with the Central Energy Fund has embarked on a pilot programme to test the efficacy of new, safer illuminating paraffin appliances in areas previously devastated by paraffin- related fires. These areas are: Alexandra in Gauteng, with 350 beneficiaries; Ezinqoleni in KwaZulu-Natal, with 350 beneficiaries; Mbizana in the Eastern Cape, with 150 beneficiaries; and Imizamo Yethu in the Western Cape, with 350 beneficiaries.
The monitoring and evaluation consultants will issue a close-out report to the department in June 2010, and I believe that we will also be reporting back to this House on matters related to the outcome of this investigation or pilot programme. Chairperson, out of the 15 400 licences lodged in the petroleum industry so far, 12 431 have been processed. For the 2009-10 financial year, 3 041 licences were processed. From 1 April 2010, all regional offices were opened and running, and applications can now be lodged in the regions.
I have instructed the department to process licence applications within the stipulated time of 90 days, with the ultimate aim of reducing that time. The licensing of petroleum business activities also assists the department to monitor and enforce the economic empowerment of historically disadvantaged South Africans, as outlined in the Liquid Fuels Charter.
I also want to use the platform of this House to request members, through their constituencies and also through engaging with municipalities, to encourage municipalities to look at ensuring that people are not given sites for trading in petroleum products before getting their licence from the department. It happens at times, and then the licence application is turned down, which creates a problem for the particular individual. This is especially true of people who are just emerging in this particular industry.
The national oil company, PetroSA, is pursuing a number of strategic initiatives aimed at enhancing the national security of energy supply. One of these initiatives is Project Mthombo, the main objective of which is the construction of a crude oil refinery in Coega. My department is currently evaluating information which will enable government to take a decision on proceeding with the front-end engineering and design phase.
The GTL, gas-to-liquids, refinery is PetroSA's main revenue generator and supports a total staff complement of about 1 800 workers. It has generated thousands of jobs in and around the Mossel Bay and greater Southern Cape region, leading to a massive direct and indirect impact on the local economy. It continues to provide support to the local business community and has generated income through wages and salaries for most of the families in this area.
There is a continued search for oil and gas resources, with the primary aim of further sustaining operations at the Mossel Bay GTL Refinery beyond its current estimated economic life. To this end, there is ongoing exploration off the coast of Mossel Bay. Thank you very much. [Applause.]