ZA HANSARDS

→ Parliamentary → National Council of Provinces - 25 March 2008

« Previous Debate

Next Debate »

National Council of Provinces - 25 March 2008

TUESDAY, 25 MARCH 2008 __

          PROCEEDINGS OF THE NATIONAL COUNCIL OF PROVINCES
                                ____

The Council met at 14:07.

The Acting Chairperson took the Chair and requested members to observe a moment of silence for prayers or meditation.

ANNOUNCEMENTS, TABLINGS AND COMMITTEE REPORTS – see col 581.

                        MOTION OF CONDOLENCE

                      (The late Ms N C Kondlo)

The ACTING CHAIRPERSON OF THE NCOP (Ms P M Hollander): Hon members, before we proceed, I would like us to observe a moment of silence to honour the memory of the late chairperson of the ANC caucus, the hon Kondlo, who has passed on to higher service. Could you please stand for a minute.

Agreed to unanimously, all the members standing.

                       WELCOMING OF MINISTERS The ACTING CHAIRPERSON OF THE NCOP (P M Hollander): I welcome the hon Ministers: the Minister for Public Enterprises, hon Erwin; the Minister of Minerals and Energy, hon Sonjica; the Minister of Labour, hon Mdladlana; the Deputy Minister of Trade and Industry, the hon Davies; and the Minister of Public Works, the hon Didiza. The Minister of Transport, the hon Jeff Radebe, has been excused. He will not be with us this afternoon. The Minister of Public Works, the hon Thoko Didiza, has requested that we group together the questions related to her portfolio as she has another engagement which requires her attention. We will then relieve her of her duties in the NCOP.

           NO NOTICES OF MOTION OR MOTIONS WITHOUT NOTICE

The ACTING CHAIRPERSON OF THE NCOP (Ms P M Hollander):Hon members, I have been informed that the Whippery have agreed that there will be no notices of motion or motions without notice today.

We now proceed to the questions as printed on the Question Paper. I call on the Minister of Public Works, the hon Thoko Didiza, to respond. The time for asking supplementary questions will be two minutes; the time for replying to supplementary questions will be four minutes; and only four supplementary questions will be allowed per question.

QUESTIONS FOR ORAL REPLY

                              ECONOMICS
                              Cluster 3

MINISTERS:

       Outcomes of national workshop on laws on expropriation

Mr J W le Roux (DA) asked the Minister of Public Works:

(1) What were the outcomes of the national workshop held on 15 February 2008 regarding her department’s revisiting of the current laws on expropriation;

(2) whether any stakeholders were invited to attend the workshop; if not, why not; if so, (a) which stakeholders and (b) when will this new legislation be introduced in Parliament? CO1056E

The MINISTER OF PUBLIC WORKS: Thank you very much, hon Acting Chairperson. The answer to Question 41, asked by the hon Le Roux, relates to a matter that will be serving in the National Assembly portfolio committee tomorrow with regard to the Expropriation Act. I am not going to deal with the details, because I think that will be pre-empting what the Bill is all about, which, in my view, might be inappropriate. However, it relates to the process.

The question asked is what the outcomes were of the national workshop held on 15 February regarding the department’s revisiting of the current law on expropriation.

There was an agreement reached by the various stakeholders that were at the workshop on the need for the amendment of the current Act, which is the Expropriation Act of 1975, in that indeed it was not in line with the current Constitution. There were obviously some issues, as we would appreciate, from various stakeholders about certain issues, one of those relating to the nature of compensation and the powers of the executive and the powers of the courts.

As I said earlier, I am not going to deal with the details of that question because they would be matters for debate in the portfolio committee and the select committee as the Bill has already been passed by Cabinet and is now with the state law advisers for certification.

The second part of the question was whether any stakeholders were invited to attend the workshop; and if not, why not. Actually, a number of stakeholders who will be affected directly by the legislation were invited. This includes government departments which have to exercise the powers with regard to expropriation. Farmers’ organisations were also invited, and property organisations, represented by the SA Property Owners Association, were also invited. The invitation was actually open to other parties that would have liked to participate, including political parties. Thank you very much, hon Chair.

Mr J W LE ROUX: Thank you, Acting Chairperson. I can understand the Minister in that this will only be in Parliament tomorrow or whenever, but can she give us any indication of how price will be determined when expropriation takes place?

The MINISTER OF PUBLIC WORKS: Hon Le Roux, as I have indicated, these are matters that are at the centre of the legislation that is being amended. Obviously, as a department we have made proposals on the legislation on what we think should be the calculations towards reaching a fair and equitable compensation as indicated in section 25(3) of our Constitution. However, Parliament, including the NCOP select committee, will still conduct public consultation on the matter. I don’t think we need to pre- empt this, because the current Bill is not yet an Act. We cannot say this is how it will be determined because that may be changed in the course of the discussion on that matter. Thank you.

Ms J F TERBLANCHE: It is said that it would be in the public interest to expropriate certain pieces of private land. Wouldn’t it also be in the public interest for the department to do an audit of state-owned land that is not being used or is underutilised to see whether that can’t be expropriated as well?

The MINISTER OF PUBLIC WORKS: Hon Terblanche, you know as well as I do that the issue of the state land audit is not a new matter, and that has always been debated. As we stand, for land reform purposes the state has actually donated land in terms of the disposal Act that is currently our legislation and our policy.

Secondly, with regard to expropriation, if you were to read our own Constitution, section 25(3), you would see that this deals with the issue of property rights and the powers for the state to expropriate both in the public interest and for public purposes, among other things, to address the issues of land reform and of equitable access to land and other natural resources.

If you look at the Expropriation Act of 1975, it gives powers to the state to expropriate for public purposes - where you need a road, the state will expropriate; where you need a railway line, the state will expropriate even today. So, the expropriation instrument is not a new instrument on the South African Statute Book; neither is it unique to South Africa. It is a worldwide instrument that is used by governments in order to make compulsory the acquiring of particular pieces of land for development purposes. Whether it is the state or the private individual, I don’t think that is a matter of debate. In my view the question, with due respect, doesn’t arise in respect of this legislation. Thank you very much.

Position regarding allocation of new tenants to commercial farm, and
     employment and accommodation of employees of current tenant

Mr D A Worth (DA) asked the Minister of Public Works:

(1) Whether, in view of her department’s intention to allocate new tenants to a certain commercial farm owned by her department (name furnished), her department has allocated any other property to the current tenant in order to allow the commercial enterprise to continue; if not, why not; if so, what are the relevant details;

(2) whether her department will find new (a) employment and (b) accommodation for the five employees of the current tenant and their families; if so, what are the relevant details; if not, why not;

(3) whether these persons will be evicted; if so, what are the relevant details;

(4) whether her department will (a) ensure that the new tenants will utilise the property for commercial purposes and (b) employ the current employees residing on the property; if not, why not; if so, (i) what are the relevant details in each case and (ii) what rental amount will be paid for the property by the new tenant? CO1059E

The MINISTER OF PUBLIC WORKS: Acting Chair, I would like to preface the answer to this question by first indicating that the question, as asked, by the hon D A Worth is a question that was asked in the department last year

in detail with no change in each paragraph.

So, our answer to that question remains the same, but for the sake of the hon member, we want to repeat that again, indeed, the national Department of Public Works will not allocate any property to the current tenant. That was a lease, and in the conditions of the lease we had indicated that when the lease expired, the state would indeed take over its property.

So, that position still stands. We can give the details to the hon member, but he has the answer because it has not changed from what it was last year. Thank you.

The ACTING CHAIRPERSON OF THE NCOP (Ms P M Hollander): Thank you, hon Minister. Are there any other follow-up questions to the Minister on Question 44. [Interjections.] Order! We then move to Question 46 to the hon Minister, and I ask the hon Minister to respond.

Number of permanent and temporary jobs created under Expanded Public Works Programme

Mrs A N D Qikani (UDM) asked the Minister of Public Works:

How many (a) permanent and (b) temporary jobs had been created under the Expanded Public Works Programme as at the latest specified date for which information is available? CO1065E

The MINISTER OF PUBLIC WORKS: Acting Chair, well, Question 46 relates to the number of job opportunities that have been created. But once again the question has been asked as though the intention of the Expanded Public Works Programme is to create permanent employment. I would like to indicate that that has never been the intention of this programme.

The intention of this programme was to create possibilities for employment to ensure that once people exited the programme, they could be permanently employed either in the areas in which an opportunity had been created or elsewhere. Also, such individuals would also be able to be self-employed in the future. As at October 2007, 857 job opportunities were created by government. Thank you very much.

Kgoshi M L MOKOENA: Acting Chair, arising from the Minister’s response, I want to find out from my hon Minister what impact this programme had on people who had never had employment in their entire lives, but because of this programme they were able to put food on their table. What impact did this programme have? Thank you.

The MINISTER OF PUBLIC WORKS: Thank you very much, hon member. Indeed, one of the impacts that we have observed, and as has been indicated by the Medium-Term Budget Review, is that we have seen the change in the quality of lives of those members of the community who participated in this programme. To cite an example, in the long run that the Business Trust had, they visited one of the projects in Tugela Ferry in KwaZulu-Natal. Part of the Zibambele project, which is on road maintenance as part of the Expanded Public Works Programme, involves a family being given an opportunity to maintain a kilometre of road. One of the women who was part of that programme said:

One of the things that this programme has done for us as this community and for me as an individual …

I will mention only two -

… has been to open access to mobility for our communities. There was never a road before that came to my village. Now, there are taxis close by. We can move to visit our families in other areas, and even go to town without having to walk a long distance to access transport. Secondly, she said:

I was actually an embarrassment to my neighbours because every night I would have had to send a child to go and ask for food from the neighbours because there was nothing I could eat. I was not part of those who could benefit from the social grant because my circumstances did not put me in that position. However, after this programme started, today I am able to feed myself and my family, secondly, one of my daughters is training as a nurse in one of the colleges.

What this says to us is that where people are given opportunities, they are able to actually come out of a poverty-stricken situation and break the cycle of poverty going forward, because they will be able to take their children to school. Indeed, one of the issues we have been grappling with working with the Department of Labour and others has been to see the extent to which we can actually look at improving this programme going forward.

I’m sure the next government will learn lessons from what we have done thus far and ensure that, as this programme continues, it adds other elements to deal with the issue of sustainability that members have raised around this programme before. One of the questions asked even today by Mrs A N D Qikane was on the issue of permanence, which is really about the issue of sustainability. I’m sure that through the lessons that we’ve learnt from this programme, we can see what the other possibilities are that can emerge from it. Thank you.

The ACTING CHAIRPERSON OF THE NCOP (Ms P M Hollander): Thank you, hon Minister. Are there any follow-up questions to the Minister? If there is none, I then relieve the Minister of her duties here in the NCOP. Thank you, Minister Didiza, for participating in this question session.

Plans to restore Athlone Power Station in light of electricity supply
                             constraints

Mr N J Mack (ANC) asked the Minister of Minerals and Energy:

Whether her department has any plans to restore the Athlone Power Station in light of the current electricity supply constraints; if not, why not; if so, what are the relevant details? CO771E

The MINISTER OF MINERALS AND ENERGY: Thank you very much, Acting Chairperson. The answer to the question is no, there are no plans to demothball the Athlone Power Station.

I should probably give some background that led to that decision. The Athlone Power Station stopped generating energy for the City of Cape Town some years ago when it was more economical to purchase energy from Eskom than to use the power station. Realising that the demand for electricity was increasing, the City of Cape Town issued a proposal for the running of the power station. A number of proposals were received and evaluated from interested parties, and none of them was found to be viable.

Over the years that the power station was mothballed, its condition deteriorated to the point at which bringing it back into operation was not a viable proposition. The City of Cape Town has embarked on a process to formally decommission the power station and apportion the land for use by other services within the city. That then should close the matter. Thank you, Chair.

Steps taken to ensure conclusion of commercial agreement by Infraco and Neotel

Ms N D Ntwanambi (ANC) asked the Minister for Public Enterprises:

What steps has his department taken in ensuring (a) that the conclusion of the commercial agreement between Infraco and Neotel is expedited in terms of the understanding upon which the Broadband Infraco Bill [B26D—] was passed and (b) that the terms of the commercial agreement are acceptable to all involved and interested parties? CO1040E The MINISTER FOR PUBLIC ENTERPRISES: Thank you very much, Acting Chair. Yes, the department did assist in the conclusion of the commercial agreement between Infraco and Neotel. That agreement has been concluded. Infraco is in operation in terms of that agreement and I believe that the agreement is to the mutual benefit of all parties.

Just to inform the House, as I am sure it is already aware, this is an arrangement that would apply until such time that Infraco is self-licensed and the process of licensing, in terms of the amendment to the Electronic Communications Act that was passed last year, is in progress. So I believe that the objectives of creating Infraco and licensing it are well on track, and the current operations are going well. I believe that the volume of traffic now being conducted on the infrastructure is very significant indeed.

Role of department and government, as well as pricing, in assisting Eskom’s capacity expansion

Mr J M Sibiya (ANC) asked the Minister for Public Enterprises:

(1) How is his department assisting Eskom’s capacity expansion;

(2) whether the government will inject capital into Eskom for the building project; if so, how; if not, why not; (3) whether Eskom will have to resort to charging higher prices to the consumer; if so, what are the relevant details? CO1041E

The MINISTER FOR PUBLIC ENTERPRISES: Acting Chair, I think the House knows that this build programme is a massive programme. As the shareholder Ministry of Eskom, we are clearly very actively involved in a number of ways in dealing with this. Firstly, it has been to develop, jointly with the Department of Minerals and Energy, what the build programme should be. As you know, we must diversify our primary energy sources. So we are examining the nuclear build programme as well so that we can diversify away from coal to a high degree.

Included in the build programme are also various other forms of primary energy. The one using diesel is an expensive form. It is used for peaking stations and does pose a number of problems for us, particularly with the rise in diesel prices. But we are currently building what is called a pumped storage station which is a form of hydropower in the Drakensberg where water is pumped up and down to operate turbines which are used mainly for peaking, also for what is called “mid-range”, ie for slightly longer periods of usage. So the department has been very active in assisting Eskom in the build programme and is working very closely with the policy department – the Department of Minerals and Energy.

With regard to the capitalisation of the programme, this was evident from the Budget Speech – a pretty complex issue. Essentially, it has been many, many decades since Eskom was last capitalised. It has been able to operate on its own balance sheet for some decades now. However, if we are going to double the size of our energy system, which we have to do in the next two decades, the implications are very large indeed.

As you know, electricity prices are regulated prices with some clear formulas and rules as to how you can claim for the costs of producing energy. This is clearly a very topical matter right at the moments because, with the rise in the cost of coal and fuel, and our need to introduce solar geysers and smart metering, there are a number of pass-through costs in that we are currently applying for a reopening of the pricing for this year.

What the Treasury announced was that it would support Eskom to an amount of R60 billion over the next five years. The exact form of that support - whether this will be in cash or guarantees and what pace it will have - is a matter still under discussion because this depends largely on our decisions on pricing. If you do not raise the price of electricity, then Eskom’s ability to raise capital in the capital market declines. That would mean we would have to do it on budget. And, as you have seen, for an amount of R340 billion over the next five years, it is not feasible to do that on budget. This will be so disruptive of our fiscal position that we can’t do it. So, in short, the department has been very actively involved in supporting Eskom for the build programme. It is a massive build programme - one of the biggest in the world currently. The state has agreed to an amount of R60 billion in the form of cash or guarantees for Eskom to assist its capitalisation programme. This is necessary in order to ensure that we can raise funds in the national and international capital markets.

Mr J M SIBIYA: Thank you very much, Comrade Acting Chairperson and Comrade Minister. You indicated that Eskom has been assisted by government for some time and is in a position to stand on its own. Regarding the current assistance the government is giving to Eskom, is it coupled with some arrangement whereby the assistance given will have to be recouped either in part or in total, or is it assistance that just goes to Eskom to enable it to stand on its own and proceed with business as usual? Thank you.

The MINISTER FOR PUBLIC ENTERPRISES: Hon Sibiya, that is a good question. This is a capital injection. This means that as Eskom is profitable in the future, dividends will be paid back to the shareholder. As you have probably seen in the period up until 2004, Eskom did in fact pay dividends and it has paid dividends in the past.

However, for such a large build programme, we finance some of it by debt and some of it by retained earnings – approximately what is called a gearing ratio. This is the ratio between what you borrow and what you self- finance. It is approximately 50:50. So half of what we need to build the new programme will be borrowed in the markets and half will be financed from self-financing in an agreement with the regulator. So the price that the regulator gives us is designed to give us a rate of return on assets that would allow us to self-finance to the extent of half of the programme.

The regulator originally indicated that, and we supported this, the increase of 14% that was envisaged was the price that would be the last increase in the three-year cycle that was due to end next year. So the regulator has been giving us three-year cycle increases. What the regulator had originally planned was that from the next three-year cycle, we would begin to give price increases that would allow us to finance this very big build programme. However, with the rapid rise in costs of energy, the figures that we were working on, which are from more than a year back, are no longer appropriate. This is why we have to reopen this in terms of the rules of the regulator. This is not something that is unusual. You can reopen if costs rise very rapidly.

The difficulty we face is that given the projected rises at 14% and given what we know is happening to costs, it became evident in the discussions with Eskom, Minerals and Energy, Public Enterprises and the National Treasury that Eskom’s balance sheet would deteriorate very rapidly; that in the coming financial year it will be forced into a loss position; and that the price rise would not be sufficient to re-establish our profitability in terms of the rate of return on assets.

Also, certain financial ratios for the fiscal boffins here or the financial boffins: Your cash interest cover, your gearing ratios, financial ratios that are important on a balance sheet – all of these ratios were going into a terrain or a set of figures which meant that the rating that Eskom has, which is a very favourable rating that allows us to borrow money on the international capital markets at a very competitive rate, was going to be lowered, as you saw in the press.

This would change the cost of capital. It would change the financing programme. And, in terms of what we can raise at current market rates and the capital markets and what we projected we would earn in terms of retained earnings, there was a gap. That gap would have the effect of reducing Eskom’s rating, increasing the cost of capital and putting us into a whole new downward cycle.

So, the Treasury gave us a bridging capital injection. Technically, we can adopt various forms: It can be a shareholder loan, or it can be cash. There are various financial implications for each of these, but they are a capital injection to keep the balance sheet of Eskom strong enough to be able to raise finance and self-finance so that we can build this massive programme. Obviously, the reason the Treasury supported us on this is that it is absolutely crucial for our economy. If we don’t keep the build programme moving as fast as possible, we could get a much more serious crisis, and that is obviously what we want to avoid.

Mr A WATSON: Thank you, hon Chair. Hon Minister, you said a lot about the financial implications and the servicing of the finances, etc. But I think the more important question for the people of South Africa is: What impact do you envisage this injection having, which you call the biggest in the world, on the increased generation of energy for South Africa so that we can relieve the problems that we are currently experiencing, particularly in the mining industry?

The MINISTER FOR PUBLIC ENTERPRISES: Well, the cause of the current situation, I think, by now is very well known. If we do away with a lot of the speculation, what becomes very clear is that the demand for electricity increased by unprecedented amounts for South Africa. So, the overall demand jumped at above 4% - it was growing at above 4%. But more problematic than that was that the peak demand – the highest level of demand - increased by just under 5%. This is unprecedented in South Africa’s history. So, this rapid growth in demand reduced our reserve margin, particularly at peaking periods.

This caused a cycle of events, which is what we are grappling with now. Because this demand is very high and in order to avoid the last resort which is load shedding, we have had to run our plant at levels which have never been achieved in South Africa before. So, currently, we are running our plant on average at a 75% utilisation level, which for coal-fired power stations is very, very high indeed. The historic average in Eskom is round about 65%.

When you start running complicated equipment – and many of you here are engineers - you will know that as you run it, you are going to get more faults, particularly since we know that the bulk of Eskom’s equipment – that is why we are building more stuff - is beyond its mid-life period. So, a power station’s life is 40 years; if it is nuclear, maybe 60 years. Most of our equipment is beyond its mid-life cycle. So, we are dealing with equipment in the second half of its lifespan.

This causes more faults and leads to a situation in which you have unplanned outages. In summer, we take 5 000 megawatts out of our commission in order to carry out maintenance activities. With the situation I have just described, you get more unplanned outages. On 24 January we had the situation with the mines when we had just under 10 000 megawatts out. This can be through maintenance problems, lightning, fires – it was a whole range of things that occurred that just brought everything together at that time. So, what we have to do is carry out the power recovery programme, that is, to reduce the current demand by 3 000 megawatts. If we can do that, we can drop the utilisation of equipment. This means that the maintenance problems can be reduced and we can carry out a more organised maintenance programme than we can if we are in a situation of a lot of unplanned outages and essentially many crises throughout the system.

So, each year from 2004, we have been bringing new capacity on stream. Our target for this year, which we are on course to reach, is another 1 110 megawatts. Next year, in terms of the original build programme, we will have brought on 2 400 megawatts, and then each year, another 1 000 to 2 000 megawatts. Finally, when we bring the Madupi on in 2012, we will have brought 2 000 megawatts and then 4 000 megawatts on shortly one after the other. So, that was the programme as we envisaged it.

Given the problems we have had and given our inability to be more efficient in energy use, we are now negotiating for what is called co-generation. This is to look for other partners to come in, and we have called for another independent power producer, IPP. But no project, it doesn’t matter what it is, can be brought on in a few days. Most projects are going to take us 12 to 24 months to bring on stream. This is why we have to have, in the current period, the national response programme, as we announced recently. Eskom will begin with scheduled load shedding to avoid a situation in which you have load shedding in an unplanned manner. We would rather make it predictable.

So, this is a fairly complex situation. If we can reach the saving levels that we want of 3 000 megawatts and hold those levels, we can get back to a situation that we have been used to over the past year and a half. As you know, over the past year and a half, our margin has been 8% to 10%. What the current events in January have illustrated to us is that this margin is much too narrow for reliability. If you have just a configuration of problems hitting you, you have a serious problem. So we must reduce the demand in the short term by 3 000 megawatts. That is an absolute requirement. If we don’t do that, we are going to have more and more problems with load shedding.

Ms J F TERBLANCHE: Thank you, Chairperson. I didn’t hear the Minister’s response to part 3 of the question on whether Eskom would resort to charging consumers high prices. And then I actually want to ask a question about that. The Minister has just explained the financial situation to us - why Eskom will need bridging capital. Is it then, in the current financial circumstances, appropriate for Eskom to pay such high bonuses to the people that work for it when the public is being faced with having to pay more and the government has to fork out more money? Surely, there must be something that can be done about that.

The MINISTER FOR PUBLIC ENTERPRISES: I thought I had dealt with the third part, but I am happy to give more detail. The system works in terms of the regulator, Nersa – the National Energy Regulator of SA – which allows a certain rate of return on assets. That rate of return on assets is designed to generate sufficient surplus. Profit is not technically the right word; let’s call it surplus for Eskom to finance, as I have explained earlier, half of the build.

In addition to that, the regulator does allow what are called pass-through costs. These are costs that arise in the course of operations which can be passed through to the consumer. So if your coal and diesel prices have risen dramatically - because we have to use the gas-fired turbines at a higher level than we would normally use - you can get those prices passed through.

The choice that we face as Public Enterprises and the Department of Minerals and Energy more specifically is that if we delay the pass-through until the next cycle of price increases, we are going to have a very big increase. You are going to have the cost of the coal and the diesel which would have been incurred right through two financial years.

So Eskom, as we now look at it, has probably projected for a loss. You would have that, plus you would have had to factor in the financing of the next increase. Now as I have indicated publicly and as has become public knowledge, in terms of the stability, essentially, of South Africa’s energy system, the price of electricity on average probably has to be doubled in a very short period of not more than two or three years – this is a matter for the regulator to assess and discuss. I will come to poor households in a moment.

How do we do that? Shouldn’t we do it in bigger chunks and quickly - because it makes sense to do it that way? We also need to get people to save electricity. Those who can afford to save it must do so. Certainly, the application that has been put in and publicised is dealing mainly with the pass-through costs. We are proposing that it would be better for everybody to take those costs now rather than wait until 2009 and probably have a 100% increase.

If we don’t do that, Eskom’s financial situation will deteriorate so badly that it will not be able to raise capital and will have to stop its build programme. And, if we were to stop Eskom’s current build programme, by 2010 – which is a very important year for us - we would have a serious energy crisis, much more serious than we have now.

So, really, it makes sense to begin the price increases now. Our original planning, as I have already indicated in my earlier answer, was that the regulator planned to start next year. In view of the experience we have had, we believe we should start this year with those price increases. I hope I have dealt as comprehensively as I can with this matter.

Let me just stress very clearly that we can’t comment in a lot of detail publicly on the proposal we have made to the regulator, because the regulator itself will have a public hearing on this matter. It would be entirely wrong, either for the Minister for Public Enterprises or for Eskom to start having a detailed discussion in the media when the regulator must follow a process which includes public hearings.

But, certainly, we can say that we have structured the proposal in a manner that poor households would be subject to a minimal increase. There will be some, but a very low increase. We are also finding ways to ensure that we reduce the burden on smaller businesses, certain kinds of tariffs which are more aligned with small businesses, small farmers, etc.

It will be the more affluent households that have greater scope for saving. It will be Parliament that has quite a lot of scope for saving, as we can see looking up there. All of those that can save don’t say they are going to pay more. So, we have structured this in a manner that can increase savings. Basically big businesses as you have seen, the mines included – everybody - has said, “Look, the simplest way of dealing with this problem is to raise the price.” So that is what we intend doing.

The bonuses for Eskom executives are contractual matters that relate to the previous financial year. Eskom has, in its bonus system, what are called gatekeeper provisions. If certain key objectives are not met, no one can get a bonus. But in the period we’re looking at - backwards - they could get that; they earned it in terms of their contracts. If you have a contract with your employees which says you can get a bonus for work done, and now in future periods suddenly something happens, you say, “Sorry, we are not paying bonuses,” I am not sure if you are going to have many employees around, because that is just capricious; you can’t do that.

Whether they will earn a bonus in this year, is most unlikely, because what are called the gatekeeper provisions have already been triggered. So, I think, we have to treat employees fairly, no matter who they are. It might satisfy our anger and our desire to punish somebody, but you can’t do that. You can’t allow people to work hard and perform as per their contracts, and then suddenly later on, you say, “Sorry, we are not giving you that.”

We are not going to do that. We can’t conduct ourselves in that manner. You can’t expect to have senior executives ever wanting to join a company where they do their work, they perform their contractual obligations and then suddenly, because someone gets angry with them, they take it away. You can’t run a business like that.

Mr S SHICEKA: Thank you very much, Acting Chairperson. Well, the Minister will agree that energy is a strategic sector of our economy. Of course, now, it is always on our minds. Are there any plans, other than for stabilisation, for ensuring that in this sector, Eskom is able to be self- sufficient not only in getting the resources from government, as is happening now, but also for it to be able to ensure that it funds itself going forward after you have gone over the hump that we are currently experiencing in our economy? That is what I wanted to check, Minister. Thank you very much.

The MINISTER FOR PUBLIC ENTERPRISES: Chairperson, for any company that is about to double the size of its assets, that would very seldom be done only on the profitability of the company. Normally, for a company that is going to do that, its shareholders will put capital in. As I explained a moment ago, this is what is happening now. Because of the size of the build and because of the speed with which we need to do it, government as shareholder says “We are prepared to put in R60 billion in capital.”

But, in doing that, we do it in the knowledge that Eskom can, within a pretty short period of time, get back to its previous position which was self-sufficient, ie it can produce enough of its own retained earnings and borrow in the capital market. So we would see this position as being a very short-term position, not longer than three to four years, in which event Eskom then returns to a pretty stable position from the point of view of its balance sheet.

Reasons for government’s decision to sell Komatiland Forest and wind up SAFCOL

Mr D D Gamede (ANC) asked the Minister for Public Enterprises:

What is the reason for the Government’s decision to sell the Komatiland Forest and wind up the SA Forestry Company Ltd (Safcol)? CO1044E

The MINISTER FOR PUBLIC ENTERPRISES: Chairperson, as members would recall, a decision was taken some time ago that the state would exit its forestry holdings. A number of sales and transactions have taken place here in the Western Cape, in the Eastern Cape and in KwaZulu-Natal.

The remaining forest was Komatiland Forests which stretches across Limpopo and Mpumalanga and some small holdings in KwaZulu-Natal. This transaction has proven to be a very complex and difficult one, because it has not been able to get through the competition authorities. This is, in the main, because Komatiland Forests is an important supplier, as I’ll explain in a moment, of what is called saw logs - logs for timber, building material, etc, as opposed to pulping wood that is used for paper.

When we failed to go through the competition authorities, you may recall that we took a year to assess the position again. So we looked at all the options regarding what we needed to do and we came to the conclusion that although Komatiland Forests was relatively important in terms of what’s called saw logs – it’s about 30% of the supply in South Africa – in terms of its significance in the forestry industry, it’s relatively small. It’s roughly 3% of the turnover of the total forestry industry in South Africa.

So, we went back to Cabinet and said, our view is that we should do two things: Firstly, we should dispose of Komatiland but that we would have to redesign the deal and do it in a different manner; and, secondly, whatever we then do, we should strengthen the capacity in the Department of Water Affairs and Forestry and basically establish a development agency for forestry in Water Affairs and Forestry.

In addition, with forestry, unlike other industries, you have to get a lease agreement because we would not sell the land - the land would remain state land – and you have to get a licence from Water Affairs and Forestry.

So control over the type of forestry that would be done in Komatiland Forests can be achieved through the lease agreement and through the licensing agreement, because it is important to keep Komatiland Forests largely in the saw-log industry. On that basis we decided that we should, once again, proceed with the transaction of selling Komatiland Forests and then, after we had done that, consider exactly what role the remaining SA Forestry Company Limited, Safcol, should play.

However, it’s now become very clear that no transaction can proceed easily until we resolve the land claims issues. The land claims are very extensive over Komatiland Forests. The Department of Land Affairs has not yet verified all the claims, so it is fairly clear that it won’t be possible to proceed quickly with this deal until we have resolved the land claims issues. And we will be in discussion and are in discussion with the Department of Water Affairs and Forestry and the Department of Land Affairs to deal with this matter.

Our view is that, strategically, the state does not need to own Komatiland Forests, but there is a proviso: That that would only be a correct statement if a capacity is developed in the Department of Water Affairs and Forestry to carry out developmental work in forestry, because it can play a very important role in rural areas and other areas.

Mr A WATSON: Thank you, Chair. Hon Minister, one of the negative spin-offs, as you well know, of this whole pending transaction between Safcol and Komatiland Forests has been the detrimental effect it has had on the very people who actually inherently own the land the forests are on – and you referred to the land claims that are in process. If I read government’s intentions correctly, the ultimate intention would be for those people who are living in the area, who are currently working in the forests and in the sawmills in particular, to ultimately become the owners of the land that the forests are on.

But the negative spin-off I am talking about is the fact that Komatiland became a little bit of a hoarder in the sense that the smaller sawmills that were the lifeblood of Komatiland, because they gave work to those people living from the forests, were denied equal access to the saw logs, and the tender process was eliminating a lot of them. And, to the best of my knowledge as I stand here, a number of the smaller sawmills in KwaZulu- Natal, Mpumalanga and the lower parts of Limpopo have actually closed business and those people have lost their work.

Is government in this whole negotiating exercise – and I’m glad that it has been stalled a bit – looking at the implications of this sell-off of Komatiland in terms of protecting the work of the people on those forestry lands?

The MINISTER FOR PUBLIC ENTERPRISES: Well, let me say that our first problem is identifying and verifying the land claimants. So, yes, it is true that government’s intention, as we have done with the Richtersveld and elsewhere, is to have the local community benefit from this very important industry. But I’m afraid we have to go through that process first. It’s very, very important. One of the difficulties we face with capitalising Komatiland, which we have to do as it goes along to keep it as a viable entity, is that we are doing so without a clear knowledge who the final landowners will be. So this does create some commercial uncertainty.

I would not entirely agree with you that it is that that causes the problem for the small sawmills. A number of factors come together concerning the small sawmills. The first is that in South Africa we have a shortage of timber. We just don’t have enough timber to supply everybody.

I’m afraid we went through what would normally be called a bubble: There were some pretty large fires in the late nineties in that area; a lot of logs became available because you had to do a big harvest, which is what we have to do now again after the very big fires of last year. This brought a lot of new players into the business who probably could not survive the basic underlying market condition in South Africa, which is a shortage of timber. South Africa will have a shortage of timber for a long time to come. One of Safcol’s investments is in Ifloma, the Industrias Florestais de Manica, which is a project in Mozambique. This is because the timber potential of Mozambique is very large if we can expand it.

So, yes, we are conscious of the problems with the small loggers and sawmillers. It is a pretty difficult situation. We have contractual obligations with the larger producers - long-term contracts - and this is a process of trying to extract from one to give to the other. We have been working with the Department of Water Affairs and Forestry to try to alleviate that. I would say that what we can’t do is provide enough logs for everybody that would like to be in this industry. We just don’t have enough timber to do that.

Identification of persons responsible for purchasing small quantities of poor quality coal and for poor scheduling of maintenance of energy infrastructure

Mr A Watson (DA) asked the Minister for Public Enterprises:

(1) Whether her department has identified the persons responsible for the (a) purchasing of coal that was of poor quality, (b) small quantities of coal purchased and (c) poor scheduling of maintenance of energy infrastructure; if not, why not; if so, what are the relevant details;

(2) whether any action has been taken against them; if not, why not; if so, what action? CO1049E

The MINISTER FOR PUBLIC ENTERPRISES: Well, I’m a little confused by this question, because the question reads “(1) Whether her department”, so I’m not sure whether that was for me, or… [Interjections.] [Laughter.] I take it that, in the world of - what’s it called? - “customary union”, I can speak for men and women.

As to the issue of coal: I know we always have a natural human instinct to want to find someone whom we can string up. It’s a nice thought. It sometimes works like that, but most times it doesn’t. The problem we have with coal has been pretty well described, but let me go through it again.

Essentially, we have contractual arrangements with our coal suppliers. The Eskom power stations, in terms of the quality of coal they can use, are some of the most advanced in the world. We can use lower quality coal than most countries. A few things have happened.

Firstly, as I explained earlier, we are using our plants at 75% utilisation, not 65%. So this eats into your coal stocks very, very rapidly, and that’s what has happened. We then have to go into the market to find new stocks, over and above your supply commitments that were there contractually, which were based not on 75% utilisation, but on 65%. And, as we go into the market, you find a highly competitive coal market.

So, basically, the coal exporters are now exporting more coal because the world market prices are very, very high, and we had more difficulty getting access to additional coal. On top of that, as big economies like that of China needed more and more coal, they were also prepared to take lower and lower quality coal. What we’ve found was that what was coming to Eskom was, in many cases, the lowest of the low quality, reducing the energy outputs of our generators.

So, this was a pretty complex problem. It was not due to some incompetence where people forgot to buy; it was not because we switched wholesale to black companies. Virtually all our coal still comes from our main suppliers

the giant mining companies. We will always do this and continue to do so and have tried to encourage small and medium miners to supply us with coal. But in terms of the quantities of coal we use and how much we use, this is not a factor.

So, it has been a combination of rising prices and rising utilisation. In some stations, like Majuba, we had transport problems. Those of you from Mpumalanga are very familiar with the problem we’ve got there: We have to build a new railway line to put more coal into the area. So it has been a complex set of problems. We have made some managerial changes. You would have seen that if you had been watching the media. But this is not a question of someone having made some gross error; it’s a combination of factors that have come together to give us a major problem with coal supply.

Again, although it doesn’t help to pacify people, the fact of the matter is that there are power stations in the world that are reliant on coal that are not in a coal crisis right at the moment. Virtually every station is having difficulty keeping its stockpiles up and getting the correct supplies. Exactly as we did in South Africa when rain hit us and added to the problems, China too experienced this when snow hit them and added to their problems.

You can get the kind of short-term problem we had. We are busy correcting it quite quickly but, to correct it, we have to pay much higher prices and that takes us back to the price increase I discussed earlier.

Mr A WATSON: Madam, I actually have two questions but I’ll take my chances on the next one if I do get a chance. Let me try to concentrate on the one that I think hurts the most.

In light of what you’ve just said and readily admitted in terms of the damage our economy is suffering for whatever reasons – we can debate whether people should be strung up or not – you made a statement that the shortage of coal and the resultant energy crisis won’t actually have an effect on business, or something to that effect.

Now, to me, that flies in the face of the fact that businesses in Cape Town have admitted that, in the past few months, they’ve lost half a billion rand because of the energy crisis. And in Johannesburg and on the coal mines, it’s even worse. Would you retract that statement, or is there an explanation for the statement that you made on the question of there having been no ill effect on business?

The MINISTER FOR PUBLIC ENTERPRISES: If you find the statement, I’ll retract it, but you won’t. It’s obvious that it has had an effect and I said that very clearly in the House and elsewhere. It’s quite obvious it has had an effect.

What we were asked was whether it would have an impact on the growth rate. The answer I gave was that we would do everything we could to try to minimise that impact on the growth rate. However, it will have an impact. And this was prior to the Budget. We said that we would not comment until the Minister of Finance had commented, which he has. If you recall, his estimate was that both the global crisis and the electricity problem we’ve had will have – if I recall – an estimated 0,5% effect, I think, on the growth rate. That was a calculation done by Treasury on behalf of government.

So we know what we estimate the growth impact will be of approximately 5%. It is a result of the combination of energy and the global crisis. So, there’s nothing for me to retract. I mean, it was quite common-sensical. Of course it will have.

What we disputed, as did the Minister of Finance and the President, was this notion that there would be some catastrophic effect on growth and that we would go into recession. We have all disputed that and said that there was no evidence of our going into a recession as a result of the energy situation.

To save 10% on energy and become more efficient certainly may have an impact on growth, as we’ve indicated, but it could also be a stimulus to other industries to produce more efficient equipment. One industry it will certainly have an impact on – a very positive impact – is solar geysers. It’s going to have a very big impact. It’s going to double, triple, quadruple the production of these geysers in South Africa.

So, it has complex effects. If you find the statement, I will retract it, but I think you are going to have as much luck as looking for the proverbial needle in the haystack.

Mr S SHICEKA: Thank you, House Chair. Minister, there is a call for small businesses to contribute in supplying coal. Of course … [Inaudible.] … I mean, you were just interrupting, you see. … to supply coal. What is the procedure? Because when you talk to people out there, they say that it is difficult to reach Eskom and supply Eskom with coal. Can you outline that so that we can communicate it to small businesses out there that were not part of Eskom’s suppliers? Thank you.

The MINISTER FOR PUBLIC ENTERPRISES: Let me immediately say that for a giant power station, you have to supply massive quantities of coal continuously. It’s an expensive exercise. So I would say that it is not automatically the best place for a small supplier to be. What we have tried to do, and what Eskom has tried to do, is to create a purchasing arrangement which helps the small supplier.

The big suppliers have to meet their requirements; they have to move that coal all the time to get there. So, we are trying to create a situation in which we give the benefits of a stable contract to the small supplier, but not necessarily burden them with some of the supply conditions that a big supplier would have to meet.

So, there’s a limited number of medium to small suppliers of coal – I can’t remember offhand - and we have a specific programme that tries to source from those suppliers.

Now, for a very small coal mine to supply a big power station frankly makes no economic sense. It’s a small amount you are supplying - it’s just a little package – and it’s not throughout the year that you can supply it. So, this is a balance. The supplier can’t be too small; there are some very big ones; there are medium ones; and the process of bidding and tendering within that framework is reasonably well known and understood, I believe. We are working hard to make it well known. I think we must remove any idea that every small supplier of coal can supply Eskom. It doesn’t make sense. We have to be commercially realistic about that.

Mr A WATSON: Thank you, Madam. I hoped I would get my other bite. Minister, you said “those who are from Mpumalanga”. I am. I’m as aware of the problems with coal and transport and the effect of those as you probably are. But this past week, in interacting with the communities that I serve, I was told – and maybe I am making a statement that is not true - that the recently revamped or unmothballed Camden Power Station, which is actually on the same grounds as the Usutu mine that has various shafts, historically got coal from the Usutu coal mine, but now gets its coal from something like 200 kilometres away. This is because the Usutu coal mine has not been put back into operation at the same time as the Camden Power Station.

I find that very, very difficult to understand. In fact, I find it difficult to believe. Could you shed some light on that? If, as was claimed to me, is true, namely that the conveyer belting is not in a position to bring coal to the power station and that, at the same time, coal is being brought in by road from 200 kilometres away, roads which are being damaged by the minute, then something terrible is wrong. I hope you can shed some light on that.

The MINISTER FOR PUBLIC ENTERPRISES: Well, I hope something terrible is not wrong. I can’t give you … I mean, I’m not aware of any major coal supply problems to Camden. By the end of this year we would have refurbished the final generating unit and that takes us to 3 400 megawatts. It’s a big station. I’m not aware of any coal supply problems. I can check that, but I can tell you now that I can’t believe it. No one is going to transport coal 200 kilometres to Camden when you are so close to coal. So I really don’t believe it.

Identification of persons responsible for current energy crisis, and action taken against them

Mr J W le Roux (DA) asked the Minister of Minerals and Energy:

(1) Whether her department has identified the persons responsible for the current energy crisis; if not, why not; if so, what are the relevant details;

(2) whether any action has been taken against them; if not, why not; if so, what action? CO1050E

The MINISTER OF MINERALS AND ENERGY: Thank you very much, Deputy Chair. The answer to the question is short and sweet. Government has taken collective responsibility for the energy crisis. The President, on many occasions, admitted this and that would include the state of the nation address.

Inasmuch as officials are concerned, I do want to remind members that the President is on record admitting that officials did advise Cabinet that there would be a shortage in the supply of electricity. It is then in that context that government took this collective responsibility, and not only took the responsibility but also apologised to the nation. Thank you, Chairperson.

Meeting of performance targets by Setas with respect to the enrolment in and completion of programmes, and the provision of workplace experience

Ms J F Terblanche (DA) asked the Minister of Labour:

(1) Whether the Sector Education and Training Authorities ‘Setas’ are meeting their performance targets with respect to the (a) enrolment in and (b) successful completion of programmes; if not, why not; if so, what are the relevant details;

(2) whether the degree to which the Setas are meeting their performance targets in the provision of workplace experience is satisfactory; if not, why not; if so, what are the relevant details? CO1051E

The MINISTER OF LABOUR: Chairperson, Setas are meeting their targets with respect to the enrolment of learners. Now that the hon member also wants the details of that, I can tell her that during 2006 and 2007, the target set for Setas was that 32 479 workers should be assisted to enter skills programmes, of which 17 672 must complete those programmes, including learnership and apprenticeship programmes. By the end of March 2007, Setas enrolled a total of 57 577 workers, of which 21 423 successfully completed those learning programmes.

As far as the enrolment of unemployed learners into programmes is concerned, Setas have met their targets. The targets set for 2006 to 2007 were that 30 258 unemployed people should be assisted to enter learning programmes and that at least 15 129, that is almost 50%, should successfully complete those learning programmes, including learnerships and apprenticeships. By the end of March 2007, a total of 41 011 unemployed learners had been assisted to enter learnerships programmes.

Programmes such as learnerships and apprenticeships are longer than a year and completion is inclusive of learners enrolled in previous years.

I just want to correct the hon member regarding her question. Unfortunately, Setas do not provide workplace experience. It is workplaces that provide workplace experience. Setas assist workplaces to provide that work experience. Thank you.

Ms J F TERBLANCHE: Chairperson, for 2006-07, there was an underspending by 13 of the country’s 23 Setas of at least R600 million, and the Minister then said that some of the underperforming Setas would be put under administration. What I would like to know is: Will the Minister put pressure on the National Skills Authority to expedite the process of putting underperforming Setas under administration?

The MINISTER OF LABOUR: Chairperson, the question is quite clear: Whether the Setas are meeting their performance targets with respect to enrolment and successful completion of programmes. My answer is yes. Democracy does not allow anybody to pressurise anyone. So I cannot go to the National Skills Authority and pressurise it, because the National Skills Authority is made up of trade union leaders and business leaders. For your information, very junior officials of government are represented there.

Therefore, I cannot go to Zwelinzima Vavi and pressurise him to take action. I cannot go to Vic van Vuuren and pressurise him to take action. Unfortunately, democracy is democracy. You may be impatient; it takes long; and all of us must just relax a bit until they take a decision to advise the Minister. I am sure that at the appropriate time they will advise me accordingly.

Ms J F TERBLANCHE: Minister, I hear what you are saying. So, you are waiting to be advised from them on further steps to be taken. Is there a specific timeframe? How long are you willing to wait before you are advised on what steps are going to be taken? The MINISTER OF LABOUR: Unfortunately, the hon member passed the law that says the power lies in the National Skills Authority. I do not know whether there is any section in the law that says I must give them some or other timeframe. I will wait, because these are legal issues, hon member. You can be litigated for taking a wrong decision. It is better to be patient than to regret later.

Assessment of effects of artisanal and small-scale mining on environment

Ms J F Terblanche (DA) asked the Minister of Minerals and Energy:

Whether his department has conducted an environmental impact assessment of the effects of artisanal and small-scale mining on the environment; if not, why not; if so, what are the findings? CO1052E

The MINISTER OF MINERALS AND ENERGY: Thank you very much, Chairperson. Yes, environmental impact assessments regarding the effects of artisanal and small-scale mining are conducted. In South African environmental policy and legislation, the polluter-pays principle is applied in the regulation and enforcement of environmental management.

In terms of the Minerals and Petroleum Resources Development Act MPRDA, artisanal and small-scale mining entrepreneurs applying for a mining permit in terms of section 27 of the Act are responsible for all costs pertaining to the impact of their operations on the environment. Section 39(2) of the MPRDA requires that such entrepreneurs submit an environmental management plan for approval prior to the issuing of a mining permit by the Minister of Minerals and Energy.

Regulation 52 of the MPRDA prescribes the standard format and contents for this environmental management plan, which includes the following: A description of the environment to be affected by the proposed mining operation; an assessment of the potential impact of the mining operation on the environment; a summary of the significance of the potential impact and proposed mitigation and management measures to minimise a negative impact; financial provision; details of the method and the quantum; planned monitoring and performance assessment of the environmental management plan; closure objectives to be achieved; a record of public participation undertaken and the results thereof; and an undertaking by the applicant regarding the execution of the environmental management plan.

It should be mentioned that the artisanal and small-scale mining sector is the only informal sector in South Africa to be regulated on environmental impact management. Other informal sectors such as small-scale agriculture or farming are not required to conduct any environmental impact assessments, EIAs or to manage or mitigate the effects of their activities or operations on the environment. So, if anything, the Department of Minerals and Energy respects this law. Thank you very much.

Ms J F TERBLANCHE: Thank you, Minister. I would really like to congratulate you on informing us that this is the only informal sector to be regulated with regard to environmental impact assessments. I think that is really something that other departments can also look into.

It is, however, true that environmental degradation is very common with artisanal miners who seldom rehabilitate the area that they have mined. In the environmental plan and in the assessment, what can be done, because I’m sure that the problem could sometimes be related to the fact that they are not as big as other companies and that money could be a problem when it comes to rehabilitation? What does your department do if those small companies cannot rehabilitate the area as per the environmental plan which was set out before they started?

The MINISTER OF MINERALS AND ENERGY: I think the challenge is there, not only for small-scale mining, but even for bigger mining operations. What we do as the Department of Minerals and Energy is make sure that there is a plan in place. In other words, we make companies commit to rehabilitation after mining, but that ends there when the commitment has been made. Thereafter the ball is in the court of the Department of Environmental Affairs and Tourism, to monitor compliance with the management plan that has been submitted to the Department of Minerals and Energy. I think it is a challenge, as we speak, that we need to be focusing on.

My assumption is that the Green Scorpions should be responsible for monitoring the implementation of this environmental management plan. Chairperson, thank you very much.

Ms J F TERBLANCHE: This is tongue in cheek, Minister. If the Scorpions go, will the Green Scorpions stay?

The MINISTER OF MINERALS AND ENERGY: Well, these ones are green. [Laughter.]

Scope and function of Black Economic Empowerment Advisory Council, and stakeholders therein

Mr O M Thetjeng (DA) asked the Minister of Trade and Industry:

What is the (a) scope of, (b) function of and (c) stakeholders involved in the recently proposed Black Economic Empowerment Advisory Council? CO1053

The DEPUTY MINISTER OF TRADE AND INDUSTRY (Dr R H Davies): Thanks, House Chairperson. The Broad-Based Black Economic Empowerment Act, Act 53 of 2003, provides for the establishment of a black economic empowerment advisory council.

The envisaged functions of the advisory council include giving general advice to government on black economic empowerment; reviewing progress in achieving black economic empowerment; providing specific advice on the draft codes of good practice which the Minister intends publishing for comment in terms of section 9(5); providing advice on the development, amendment or indeed replacement of a BEE strategy; providing advice on draft transformation charters on request; and facilitating partnerships between organs of state and the private sector that will advance the objectives of broad-based black economic empowerment.

In terms of the Act, the advisory council will consist of the President, who will chair it, four Cabinet Ministers and not more than 15 other members appointed by the President. The last category will consist of representatives from different constituencies including trade unions, big business, small business, civil society and academics.

Other important key principles that will be taken into consideration in composing the council include gender equity and balance in terms of racial profiles of the members, as well as balance in terms of provincial representation.

The process of establishing the advisory council has been and will continue to be a transparent and consultative one. It has and will involve consultations with key stakeholders. Members of the advisory council will be required to possess expertise and knowledge relating to broader economic development issues. The diverse skills and experience of the different members are expected to add value to the functionality and dynamism of the council.

Considerable work has been done on developing a constitution for the council as well as on identifying potential members. Some work still needs to be concluded, and we hope to be able to submit a proposal to the President by the end of June this year. Thank you.

Mr O M THETJENG: Thank you, Chair, and Deputy Minister for responding to the question and for also explaining the processes that have been followed in the consultation process and with the stakeholders that are involved.

I just want to check something, Deputy Minister. Won’t the establishment of the council create or result in the overregulation of the private sector, which by now is actually reeling from electricity rationing, the global slowdown and the inflation pressure that is there? We are just concerned. Can you shed some light on whether these will create overregulation of the system which, we believe, already has problems? Thank you.

The DEPUTY MINISTER OF TRADE AND INDUSTRY (Dr R H Davies): Thank you, hon member. The basic structure of the regulation will not, in fact, be impacted on by the establishment of the advisory council. The codes of good practice have already been formulated and published through a consultative process. A number of sector charters are also being reviewed and aligned to the codes. The advisory council will add nothing to that.

It will monitor the process. Indeed, if there are problems of the type you are mentioning, we will be able to advise government on any of that. So, the advisory council is, as its name implies, a council to advise and monitor the process. It will not add any further level of regulation at all.

Implementation of measures to deal with problems of financial misconduct identified by Public Service Commission in the 2005-06 financial year, and number of cases finalised in the 2006-07 financial year

Ms D Robinson (DA) asked the Minister of Labour:

(1) Whether his department has implemented any measures to deal with the problems of financial misconduct identified by the Public Service Commission in the 2005-06 financial year (details furnished); if not, why not; if so, (a) what measures and (b) what are the reasons for his department’s poor performance in the 2006-07 financial year;

(2) (a) how many (i) of the 23 cases that were reported in the 2006- 07 financial year have been finalised and (ii) departmental officials have been (aa) charged with and (bb) found guilty of financial misconduct and (b) what action was taken against those who had been found guilty? CO1054E

The MINISTER OF LABOUR: Thank you very much, Chairperson. I am going to attempt to answer parts (1) and 1(a) of the question because when I look at (b) it does not necessary deal with the issues that are raised by both parts (1) and (2) of the question. Maybe the hon member will resubmit a question so that I can check the criteria that has been used to have the statement that is in (b).

Indeed, we have instituted disciplinary measures to deal with these financial misconduct cases, and I can inform the hon member that of the 23 cases that were reported in the year 2006-07, 22 were finalised, 18 officials were charged and 10 officials were found guilty of misconduct. The following action was also taken regarding the 10 officials that were found guilty: seven of them were dismissed; two received written warnings; and one received a final written warning. Thank you, Chairperson.

Outcomes of impact assessment of quota system implemented in textile
                              industry

Ms S S Chen (DA) asked the Minister of Trade and Industry:

Whether his department has conducted any impact assessment of the quota system implemented in the textile industry; if not, why not; if so, what were the outcomes? CO1055E

The DEPUTY MINISTER OF TRADE AND INDUSTRY (Dr R H Davies): Thank you, House Chair. On 1 January 2007 quotas on certain clothing and textile imports from China were introduced. The quotas arose from a voluntary arrangement between the South African and Chinese governments and cover 24 clothing and seven textile products imported from China.

The Department of Trade and Industry has, indeed, undertaken an initial assessment of the impact of the quotas on import levels of clothing and textile products.

During the period between 2000 and 2006, annual average growth in total imports of clothing products was 28% and of textiles was 10%, measured in terms of South African rand. However, there were large growth spurts in textile imports in particular years, for example by 29% in 2002 and 18% in 2006.

Annual average growth of imports from China over the period 2000 to 2006 far exceeded the average of total imports, being 42% for clothing and 35% for textiles. Between 2000 and 2006, China’s share of imports grew from 41% to 75% in the case of clothing and from 11% to 35% in the case of textiles.

After the introduction of the quotas on 1 January last year, 2007 year-on- year growth of total imports from China declined substantially. Chinese clothing import growth turned negative by 25%. Textile import growth slowed to 2%. This led to a decline in the share of Chinese imports between 2006 and 2007 from 75% to 61% in the case of clothing and from 35% to 33% in the case of textiles.

There was significant growth in clothing and textile imports from other countries during 2007, but often off a very low base. However, given China’s high share in imports of clothing and textile products, the moderation of Chinese imports more than offset by far any increase in imports from other markets. Therefore, the growth in total imports in 2007 fell by minus 8% and textile import growth slowed to 9% in 2007, half of the 2006 level.

Therefore, the quotas introduced on certain Chinese clothing and textile products in 2007 have been strongly associated with the substantial moderation of imports of clothing and textile products from China.

Given the high share of Chinese imports in total imports, this has led to much slower growth for total imports of clothing and textile products. Thank you.

The HOUSE CHAIRPERSON (Mrs M N Oliphant): Hon members, regarding Questions 42, 43 and 45 addressed to the Minister of Transport, the Acting Chairperson read the apology earlier on from the Minister of Transport. We have received the responses, and copies of these will be given to members. The copies will be put in their pigeonholes.

Cost to department as a result of torching of trains and findings of
      investigation into torching of trains on 18 January 2008

Mr A Watson (DA) asked the Minister of Transport:

(1) How much did the torching of trains cost his department over the past three years;

(2) whether the investigation into the torching of trains on 18 January 2008 (details furnished) has been concluded; if not, why not; if so, (a) what were the findings and (b) when will a new management team be appointed? CO1057E

REPLY:

The Minister of Transport:

 1) The damage to trains due to train burnings in the past three  years
    cost the South African Rail Commuter  Corporation  Limited  ‘SARCC’
    R265.7 million. Of this amount, R128.6  million  was  paid  by  the
    SARCC’s insurers, leaving a shortfall of R137.09 million, which was
    covered  by  the  self  insurance  fund  of   the   Rail   Commuter
    Corporation.

Financial	Number of	Total Damage	Amount Recovered	Actual Loss
Period	Incidents		from Insurers	(Self Insured Fund)
01 April	22	R121,824,715.1	R81,416,277.93	R40,408,437.24
2005 to		7
31 March
2006
01 April	16	R44,561,781.84	R7,214,270.00	R37,347,511.84
2006 to
31 March
2007
01 April	13	R99,343,219.05	R40,000,000.00	R59,343,219.05
2007 to
date
	TOTAL	R265,729,716.0	R128,630,547.93	R137,099,168.13
		6

(2) Yes, the investigation into the torching of trains on the 18th January 2008 has been completed.

  (a)   The Board of Inquiry found, amongst others, the following:-

  Inadequate work analysis

  Failure to implement lessons and experiences from the past.
  Insufficient commuter communication and interaction.
  Lack of decisive leadership by the Regional Executive.
  Inadequate execution of the contingency plan.

  (b)   An interim Regional Management Team is in place.  The  Board  of
        Inquiry found that several elements had created “organisational
        distance” between the Regional Management Team  and  functional
        bodies in the operation. Some of these elements are the hazards
        of the unknown; avoidance  of  commitment  and  responsibility;
        insecurity; and lack  of  confidence.  The  suspended  Regional
        Management team has been given an opportunity to respond to the
        findings of the Board of Inquiry.  Following  this,  the  SARCC
        will decide on a future course regarding this whole matter.

Findings of study on the introduction of roadworthiness tests for private vehicles and implementation of tests

Ms S S Chen (DA) asked the Minister of Transport:

(1) Whether his department has concluded its study on the introduction of roadworthiness tests for private vehicles; if not, (a) why not and (b) when will it be concluded; if so, what are the findings of the study;

(2) whether these tests will be implemented; if not, why not; if so, what are the relevant details? CO1058E

The Minister of Transport:

(1) No, the Department of Transport has not yet concluded the feasibility study for the periodic testing of private vehicles.

  (a)   Safe Drive Holdings (Pty) Ltd, the company that was awarded  the
       bid in December  2006  to  conduct  the  feasibility  study  for
       periodic vehicle testing for private vehicles, was placed  under
       liquidation on 20 March 2007 by Westrust (Proprietary)  Limited.
       At the time Safe Drive  Holdings  was  liquidated,  80%  of  the
       research had been completed. The Department had to  engage  with
       the liquidators for Safe Drive (Pty) Ltd to release the work  it
       had completed. Tender processes to acquire the services  of  new
       tenderers to conclude the feasibility study are in progress.

  (b)   The study will be completed as soon as a new  company  has  been
       appointed to finalise the feasibility study.   It  is  projected
       that  the  completion  of  the  study  will  take  a  period  of
       approximately nine months.

(2) The implementation of periodic vehicle testing will be guided by the feasibility study. With the study having been delayed due to the unfortunate liquidation of Safe Drive Holdings, it would be premature for the Department to give specific implementation details with regard to periodic testing.

Steps taken by department to speed up repairs to roads on the coal routes in Mpumalanga, in view of the energy crisis

Mr A Watson (DA) asked the Minister of Transport:

Whether, in view of the energy crisis, his department has taken any steps to speed up repairs to the badly damaged roads on the coal routes in Mpumalanga; if not, why not; if so, what steps? CO1060E

The Minister of Transport:

The South African National Roads Agency Limited (Sanral) and officials from the Department of Transport’s Branch: Integrated Planning and Inter-sphere Coordination have been involved, together with the Department of Roads and Transport of the Mpumalanga Province and Eskom, since 2003/04 in identifying the coal haulage road network/grid. The work required to upgrade/rehabilitate the coal haulage road network was identified and cost estimates were identified.

Further engagements with Eskom have led to Eskom making R330 million available to start the process of improving the coal network. Officials from the Department of Transport (DoT) and Sanral participated in the Coal Haulage Conference held in Mpumalanga at the end of October 2007. Emanating from the Coal Haulage Conference, an implementation plan is currently being developed, which will address the coal haulage network challenges.

DoT officials and Sanral are also part of a team that is working to ensure that the coal haulage grid is trafficable in order to meet Eskom’s short- term and long-term coal requirements.

Sanral has upgraded the N11 between Middelburg–Hendrina-Ermelo and is currently upgrading the N11 between Volksrust-Amersfoort-Ermelo. This has cost Sanral R800 million.

Currently the N2 from the Mpumalanga/KwaZulu- Natal border to Ermelo is being designed. Construction will start from June 2008 onwards for the rehabilitation/upgrading.

The R35 and R38 are routes that have been incorporated into the Sanral network in 2006. These are also part of the coal haulage grid. These roads are in a relatively good condition. However, designs for upgrades are scheduled to start in 2009/2010 and construction in 2010/2011.