Archive | Enviro,Water

FFC: budget cuts may worsen service delivery

….article dated 20 July 2020…. 

Balance between needs and cuts required…. 

The Financial and Fiscal Commission (FFC), the independent body which reports to Parliament on intergovernmental financial relations (IGFR) in terms of the Constitution, has told MPs of its deep concern that Minister Mboweni’s budget cuts, announced in the Supplementary Budget Bill, may adversely affect the ability of local government to manage service delivery commitments in the coming year.

FFC manager for fiscal policy, Eddie Rakabe, is also concerned that National Government has not given guidance to provinces and local municipalities on IGFR matters and how they should reprioritise their budgets after having chopped them.

Help down the line

Whilst acknowledging the reasons for the cuts because of the unforeseen pandemic, he called for government to recognise that a delicate balance has to be struck between expenditure reduction and the meeting of basic needs. On top of this, the Minister had asked all parties to switch to zero-budgeting  which may not be understood or implemented properly.

FFC Chairperson, Prof Daniel Plaatjies, acknowledged that an adjustment Budget by Minister Mboweni was necessary to mitigate the downsides of responding to the COVID-19 crisis but FFC’s main point was that in making Budgetary adjustments in such a short period of time, it was going to be extraordinarily difficult for all to produce new frameworks that were growth enhancing.

Not how much but how

Eddie Rakabe told parliamentarians that their comments were somewhat critical in the light of the Minister indicating that about R230bn in expenditure will have to be cut over the next two years which appeared drastic and care had to be exercised.

The FFC advises, he said, that a delicate balance must be struck between expenditure reduction and the meeting of basic needs. He was insistent that as expenditure is reduced, there had to be a plan to ensure that critical social services are not compromised.

The constitutional criteria in any Budget consideration had to be on the basis of spending where the basic rights of people are protected, Rakabe noted.  In this respect, the reprioritisation proposed by the supplementary Budget in the view of FFC complied with this criterion, he said.  However, the FFC was deeply concerned about the absence of a framework to guide provincial reprioritisation as a process — provinces having to do the reprioritisation on their own.

A little left and a little right

FFC agreed with the Parliamentary Budget Office, who had reported in the same meeting beforehand, that it was going to take a lot to get South Africa back to its pre COVID-19 position, which was not very strong in any case and the situation was fraught with the threat of collapse of social security plans.

Eddie Rakabe said, “We agree with the Minister that SA’s sovereign credit rating is a major concern since credit rating downgrades affect government’s ability to meet borrowing requirements and that to raise revenue from tax to meet social needs just because of the overwhelming need to meet debt servicing costs is not correct.

All the same, he said, the proposals needed much more care in application. Conditional grants had to be the main focus and whether there was a complete necessity for each.

 All too fast

FFC recommended that government reconsider the sequencing of the phases for managing the Covid 19 pandemic.    It was essential that capacity of provincial and local government treasuries be strengthened to ensure that they promote spending control and enhance spending effectiveness, they considered.

The FFC acknowledged the zero-based budgeting announcement but Rakabe said that he still remained most concerned about the effectiveness of changing the budget structure and the way things had been done for years so suddenly.  He said time and resources were necessary to “ operationalise zero-based budgeting” properly.

Hamba gahle

He warned that there are “a whole lot of issues that need sorting out before  moving full steam ahead with such a complicated financial concept being endorsed for all levels.

He told MPs of the Finance Standing Committee that in the FFC view, there was a great need to outline more clearly on how the un-allocated R19.6bn for job creation allocation is to work and who gets it needs to be  a lot more explicit.  On the President’s Covid-19 relief package, the divisions between national and provincial allocations were unclear, he commented.

Summation

Managing the fiscus through and beyond the Covid-19 pandemic had to be fleshed out in a lot more detail, Eddie Rakabe concluded.

From the meeting it became clear that whilst the FFC believes that  an increase in tax revenues  immediately was not a feasible policy option to assist local government through the COVID 19 period, the Minister’s announcement that future tax increases of R5bn in 2021/2022 year, R10bn in 2022/2023, R10bn in 2023/2024 and R15bn in 2024/2025 were considered as an acceptable necessary alternative.

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NECSA says nuclear will come to SA

……may 15 2020……

A damaged NECSA plans its energy future

….. The South African Nuclear Corporation (NECSA), with an employee role beyond its capacity as a result of waiting  for a R750bn nuclear programme which never arrived, might be getting back on track with the possibility of nuclear down the track.  Having lost some extremely valuable and experienced, government is attempting, it seems, to be breathing life into this once highly successful operation nearly destroyed by political interference.

NECSA is a valuable but largely ignored nuclear component in the stable of the now combined  Department of Mineral Resources and Energy (DMRE), an entity which for the last ten years has been subjected to mismanagement, patronage, lack of management appointments and a considerable number of ministerial financial scandals.

After the years of waiting during the Zuma era, NECSA then lost and additional two years with the integration of the departments of mineral resources into energy but appears that DMRE , its parental department, has appointed a new board with new ideas on a NECSA future.

Bigger picture

The DMRE this year presented a plan to Parliament for an estimated budget of R9.3bn for the current financial year, 95% of which will be transferred as usual to its entities.

These will be Council for Geoscience National Energy; the Regulator of South Africa (NERSA), Central Energy Fund (CEF) (including PetroSA and the Strategic Fuel Fund or SFF):  the National Nuclear Regulator’s office(NERSA); NECSA itself; the National Radio-Active Waste Disposal Institute; Mintek and other smaller entities such as the Mine Health and Safety Council, the State Diamond Trader and the Diamond and Precious Metal Regulator.

Parliament therefore had to consider recently the period ahead covering 2020-2024 in the form of the Medium-Term Strategic Frameworks, or projections, for all these DMRE bodies.   This is no mean task in the light that may have suffered from the perambulations, thievery and in some cases, sheer ignorance resulting from the switchback ride of ten successive ANC ministers of energy and and ministers of mining.

Disjointed empire

Himself a  somewhat confusing and at times erratic Minster of Mineral Resources and Energy, Gwede Mantashe  is now trying to put back the combined pieces of the jigsaw representing DMRE into some sort order but until now he seems to have been dealing with the edges and corners pieces of the puzzle but not dealing with the centre section where the working parts are.

Nobody is ever quite sure, it seems, in the case of NECSA, what actually is going on in this somewhat secretive corner of government.    In this area, now that the Zuma myth of the “New Build Nuclear” has been dispelled thanks to a court order to this effect, the re-tasking and consolidation of Minerals Resources and Energy department has been mostly completed.

The magic word

However, the question of nuclear energy has once again arisen, mainly due to a passing comment from the Minister that nuclear was indeed to become at some time part of the energy mix.

Ears pricked up in the environmental lobby camp and energy experts said in aghast that the energy mix after years of debate was now fixed.  One must remember, of course, that the nuclear energy issue never really goes away in the light of Koeberg power station operations in Cape Town and and medical isotopes from Pelindaba, Pretoria.

Half a billion in the red

The NECSA subsidiaries are NTP Radio Isotopes, Pelchem, Pelindaba Enterprises and Safari-1. NECSA overall has suffered cumulative losses of R257.78m in the 2016/17 and 2017/18 financial years and is expected to announce an even larger loss of R294.27m for 2018/19, resulting in cumulative losses of R552.05m for the three-year period.

This was more than evident in NECSA recent presentation to Parliament which, as it turned out, was just an interim report and more of a wish list than anything else.   Nevertheless, the ‘plan’ does indicate a complete change of direction.

SOE problems

In the case of NECSA the return to  “normality” might be a little faster than the other problem child of Department of Mineral Resources and Energy (DMRE),  PetroSA.    Sadly, in NECSA’s case, many excellent scientific brains have gone elsewhere and an opportunity to establish SA excellence in the field of isotopes lost.

The frightful track record of losses came to a head in 2019 when it was stated in the NECSA annual report that “ the significant delay in any new nuclear power plant programme to be undertaken by NECSA had become irrelevant”.  This was established to be for experts hired but never deployed.  “Irregular and wasteful” as the Auditor General put it.

Turnaround plan

The NECSA board filed a report in 2018, signed by former chairperson Dr Rob Adam and former acting CEO Don Robertson, which attempted to return NECSA to its original mandate of to promoting radiation sciences and technology research which included a programme of the retrenchment of valuable staff as part of the process of slimming down.

Both Dr Adam and CEO Robertson then left NECSA having filed the report with new DMRE department but this gathered dust, it appears, since other priories in gas development and Eskom dramas must have occupied the mind of Minister Gwede Mantashe.  However, he subsequently and eventually appointed Ayanda Myoli as acting CEO of NECSA.

In his first attendance at Parliament, 19 May 2020, Myoli  told Parliament that NECSA that for the coming year, NECSA would have a turnover of more than R2bn in the 2020/21 but still carrying a projected net loss of R61m on its shoulders.

Possible profits

Myoli told MPs last week that the key financial objective in the short term was to reduce losses and to rehabilitate the balance sheet to enable it to fund its growth and expansion strategy.  Looking ahead he further told the Portfolio Committee that for year five of the plan ahead, NECSA expected to make R550m in net profit and by 2030, R1.4bn net profit.

Over the next 12 months, he said the group’s objectives included commercial subsidiary NTP Radioisotopes regaining its 20% share in the global market for Molybdenum-99 (Mo-99) medical radioisotopes, lost due a hibernation period when the station at Pelindaba was closed down in terms of UN requirements.   In the future NECSA is to increase its range of medical radioisotopes from three to four, Myoli added and continue support services include irradiating target plates from the SAFARI-1 research reactor.

 Competing with China

Another objective is to re-gear NECSA’s other subsidiary, chemical manufacturer Pelchem, who produce fluorochemicals in competition with China, and increase its revenues by R78m by building the necessary plant to enter the  commercial hydrogen fluoride industry, Myoli said.

With sister subsidiary Mintek, Pelchem would enter the antiretroviral drug market working with “international partners” Myoli then said, aiming to achieve a 35% share in the local ARV market and targeting to earn revenues in excess of  R721m per annum.

Re-entering nuclear

Ayanda Myoli stated that NECSA was not only to be responsible for the recreation of a nuclear fuel cycle in South Africa, protecting and maintaining the Koeberg installation but was proposing a new multi-purpose 2,500 GW nuclear reactor direction for the future.

In questioning NECSA, Kevin Mileham (DA) said he was particularly concerned that Ayanda Myoli had talked about a about 2 500 gigawatts nuclear reactor, small as that maybe compared with previous plans  of past president Jacob Zuma. This would fall, Mileham presumed, under the mysterious Pelindaba Enterprises, which according the, had hardly been mentioned in the framework plan at all for the next period. He asked for confirmation

Conflict on statements

DA’s Mileham said any nuclear reactor did not align with the IRP, which made no provision for 2 500 gigawatts from any new build projected. He said that NECSA must be working off the wrong version of the IRP and said CEO Ayanda Myoli had simply repeated what Minister Mantashe had announced a week ago when he spoke on this to the media. Mileham, as shadow minister of energy for the DA, wanted an official explanation in writing as this was the first time the issue had been raised in Parliament.

CEO Myoli responded that the IRP had delineated what plant ought to be commissioned up to 2030. He said the IRP does not list what goes beyond 2030. He added that even assuming DMRE, on behalf of NECSA, placed contracts in 2024 for any relatively small and supplementary new build nuclear programme, there would be nothing online before around 2030/32, after the current IRP period had expired.

Commenting as an individual, Myoli said that he felt that the current IRP had a weakness in this area  as it now considered inputs in process nine years from now, and for mega projects in energy nine years was absolutely nothing.

Further nuclear questions

Myoli said any ARV’s with Pelchem would be produced under licence from Macleod Pharmaceuticals Limited from India, currently the largest producer and supplier of ARVs and TB pharmaceutical products. Currently, they were awaiting the final concurrence from the Minister of Finance and the Minister of Health on this.

It seems Macleods  it is one of the ten largest pharmas in India owned by Dr Rajendra Agarwal & family producing generics for a range of diseases including asthma, osteoporosis and diabetes.  Agarwal’s older brothers Girdhari Lal Bawri and Banwari Lal Bawri are chairman and joint managing director respectively.

 Wrapping up 

In conclusion, the presentation said that the new strategy was intended to make NECSA “a world leader in nuclear radiation and related technologies and chemicals  by 2030”. The strategy set targets for the next 12 months, the next five years and the next ten years.

Although the meeting time was limited (the main problem with parliamentary virtual meetings) it was quite apparent that by no means had NECSA close to explaining its full programme for the future, nor in fact was it ready to disclose this in detail.

Posted in Energy, Enviro,Water, Finance, economic, Fuel,oil,renewables, Mining, beneficiation, Public utilities, Trade & Industry0 Comments

Hopes pinned on PetroSA comeback

…… may 15 2020…..

CEF outlines plan to save PetroSA

…… In a series of statements to Parliament’s Mining and Energy Portfolio Committee, acting CEO of Central Energy Fund (CEF), Lufuno Makhuba, surprised many with a promise of not only totally restructuring government’s stake in the energy sector but to save ailing oil and gas subsidiary PetroSA with major capital “re-vitalisation”.

He also hinted on plans to enter the fuel retailing industry as a major player, PetroSA currently owning only one fuel station in the Free State.

Pipe plans

Makhuba stated that it would be proposed that “the Transnet fuel pipeline” (which particular one was not named) should fall under the management of CEF with income re-routed accordingly.  The plan also was a request that PetroSA should move towards LNG developments and to execute liquid nitrogen gas (LNG) projects with “strategic partners”.  He also proposed that CEF should receive 25% of the national fuel levy.

In order to breathe new life into PetroSA, Lufuno Makhuba suggested that in addition a proportion of carbon tax funds should be re-directed by Treasury to assist in the “recapitalisation” programme as well as the previously mentioned pipeline income.  He said that CEF would acquire by transfer other state “energy assets” in order to build its portfolio income.

Makhuba told Parliament that the CEF was now “busy reducing operational costs and divesting in unnecessary  buildings” as a holding entity.   The liability on its books of an estimated figure of R8bn mainly arising from the PetroSA Mossel Bay gas to liquid operations would be “dealt with”.

The answer

“Until now”, he commented in his presentation, “CEF had had no operational plan, no strategic direction and has been subjected to a leadership vacuum.”    He said he and his colleagues were at the moment producing the final plan to solve the group’s two most pressing problems – that of restructuring the group so that activities were inter-connected and to provide for the principle that PetroSA becomes “a revenue producing National Oil Company as per its mandate”.

Lufuno said that the new plan would also involve integrating its subsidiaries Strategic Fuel Fund (SFF) and iGas with PetroSA.

Long time coming

Parliament has been demanding a plan during portfolio meetings for PetroSA for over two years, some attempts at doing this being attempted but always they had come before committee with neither Treasury approval or any form of accompanying financial plan. (ParlyReports in 2018/9 refer)  Parliament has rejected all over the months.

Lufuno said that the CEF group was still making an overall loss, and estimated R330m for 2018/9 which was an “improvement” on the R1.4bn net loss reported in the previous year, most of the loss attributable to  PetroSA. However, no actual numbers were  once again presented.

Right into the red

Makhuba, presumably speaking in his dual capacity as financial officer, his previous position at CEF, said the PetroSA deficit “weighs heavily on the group’s earnings and although PetroSA remains in the red, it had nevertheless improved on the losses reported in  previous years.   PetroSA recently suffered an “impairment” on its balance sheet of R14bn.

Matters to be dealt with in the next few weeks include deploying an external refinery team to optimise refinery operations at Mossel Bay. Other tasks include strengthening sales and business development and institute consequence management

Issues and problems at PetroSA are not being taken lightly,” he told his audience of MPs.  “We can’t have poor business performance, quarter on quarter, and not react as has been the case in the past.  The new plan deals with how to hold people to account and what to do with assets.”

Desperate stuff

In what sounded like a business rescue discussion, Monde Mnyande, acting chairman of CEF, (it appears on loan from SA Reserve Bank) said that CEF had established that in deciding what to do there were three options before them . The first was doing nothing at all, other than finding find R25m to finalise PetroSA accounts for the current year,  which option would probably collapse CEF in the process and lead to costing the taxpayer “billions in write offs” .

The second option was restructuring CEF but closing down PetroSA at a cost of some R15bn with the associated cost to the Mossel Bay and Eastern Cape economy.

Just money

The third option was to source R18bn from equity input and re-structure PetroSA with its new management developing a partnership strategy on the basis of new initiatives in the petroleum industry.

Monde Mnyande said that the third option was preferred but there was no intention of asking Treasury for this as a bailout for PetroSA.  What the new CEF board wanted would be the portfolio committee’s support for the restructuring process as described.

As far as PetroSA was concerned,  he said, such restructuring would involve inviting strategic partners to assist them with upgrading refinery operations, divesting from upstream blocks and investing in downstream activities.

Sasol story

Following this, a major case of misunderstanding by the media arose.  During questioning, Cheryl Phillips (DA,) said she knew that PetroSA only had downstream one filling petrol station in the Eastern Cape but asked if there was any plan for PetroSA was to build more petrol stations of its own or acquire such assets from others.  She reminded MPs of the aborted PetroSA deal with Petronas/Engen.

Monde Mnyande replied that he knew such assets did exist on the market at this moment and in particular he was aware that Sasol was selling such assets.  This sort of thing might be an example of the way PetroSA had to go, he said.

Due to misreporting in minutes and the what perhaps was said somewhat indistinctly by Mnyande, a head line emerged in Business Day that PetroSA was already involved in a deal with Sasol.  Mnyande never said this, confirmed by ParlyReport, and a CEF spokesman denied that he did a week later in a statement.

Looking back

Mnyande continued with his time slot stating that one of CEF’s biggest mistakes in the past was to think it could operate alone without the government and DMRE, especially during turbulent times at Mossel Bay. A great number its executives without experience were in acting roles and failed to follow the basic rules, he said.

In answering questions by Kevin Mileham (DA) on the illegal sale of national strategic fuel stocks by the Strategic Fuel Fund four years ago to a large oil trader-consortium, Lufuno Makhuba  replied that the contested sale was the subject of a court case nearing completion, the oil still being retained in storage in South Africa.       Chair Monde Mnyande said a new CEO, who was a woman well known in the industry, would be appointed as CEO for SSF shortly.

Let’s hear more

In general questioning, which is difficult in virtual, Mileham threw cold water at any plans to save PetroSA in the manner suggested since any such idea at the moment could not be loaded on to the taxpayer’s shoulders. However, he said the DA would await developments and finalisation of the plan before responding in full

He asked if, in the process of restructuring, whether it was CEF’s  plan to move the regulatory authority, the Petroleum Agency of South Africa, out of CEF to a new domain. As the meeting timed-out, the chairperson asked Lufuno to respond to Mileham’s question in writing.

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Draft climate change strategy in Parliament

…….article June 2019…..

Plan to counter climate change underway…

The inevitability of climate change and the need to plan for its effects on the lives of South Africans is now to be tackled, according to the Department of Environmental Affairs (DEA).  A draft National Climate Change Adaptation Strategy (NCCAS) was published for general comment during parliamentary recess.

This was probably the last public act of past minister of environmental affairs, Nomvula Mokonyane, the baton now having passed to recently appointed Minister Barbara Creecy.  There is probably little room for major directional change as result of public submissions, since the road map to its creation is generally well understood.

Almost final 

Government’s NCCA Strategy, viewed by many as a professional and well written document which includes illustrated graphs and full-colour coded diagrams, is a ten-year plan to be reviewed every five years.  It is to be produced by DEA, the strategy being stated “providing a common vision of climate change adaptation and climate resilience for the country”.

The objective, of course, is the global requirement of achieving the stabilisation of greenhouse gas emissions and limiting temperature increases to 1.5 ° celsius.

The problems

Being a strategy to adapt to a situation and bring about change, the implications for and the effects of climate change upon South Africa are first listed.     Named are such matters as social and societal impact issues, the impact of climate change upon energy planning and economic development generally, and the need for co-ordination arrangements between all spheres of government, SOEs and the private sector.

DEA points out, “The NCCAS not only serves as an adaptation plan but also fulfills South Africa’s commitment to its international obligations as outlined in the Paris Agreement under the United Nations Framework Convention on Climate Change (UNFCCC).”

What it needs

The notice calling for comment says, “The NCCAS focuses on context, strategic focus, the need to reduce vulnerability and build adaptive capacity, early warning systems, adaptation planning, research, governance and legislation and both a finance and an implementation framework.”

The department’s experts have at the same time issued a supporting statement on climate change itself as a subject, which confirms that “worrying” weather patterns are seemingly not about to get any better, increases in annual-average near-surface temperatures are the order of the day and projected to occur over large parts of South Africa, particularly the western interior and northern parts of SA.

Facts evident

The statement adds in the briefing, “Climate zones across South Africa are already shifting and noticeable, ecosystems and landscapes are being degraded, veld fires are becoming more frequent and over-used natural terrestrial and marine systems are under stress.”

It was for these reasons, DEA’s statement concludes that South Africa must take immediate action by planning for climate change and intensifying response to forthcoming impacts, given the extreme weather events that are increasing in the country and which mirror similar changes elsewhere in the world.

No maybe

“Heat wave conditions will be much more likely, the dry spell duration will lengthen slightly, and rainfall intensity is increasing in SA”, says DEA.   The NCCAS warns throughout its presentation that the poor are the most vulnerable to any climate change impact.

Reading between the lines, the NCCAS is no coded message.  It indicates clearly that failure to tackle higher temperatures and unpredictable rainfall could lead to troublesome reactions from poorer sections of the community.  A clear warning is contained in the entire presentation that events being a threat to national security could be the price to pay if no serious counteractions are taken.

DEA says that the NCCAS as proposed will provide “a common reference point for climate change adaptation efforts in South Africa and promote coherence and coordination on climate change adaptation activities between different institutions and levels of government.”

Action will pay off

A positive note is also found in the proposals when it is stated, “The NCCAS is designed to give South Africa an advantage going forward in economic terms”.  It is pointed out that the flip side of adaption to climate change presents many investment opportunities, they claim.  Infrastructural changes are called for, DEA says.

“New funding flows to support adaptation will represent one of the biggest accelerations of development investment since the achievement of democracy in South Africa. The scenarios adopted will provide not only a unique opportunity to both ensure climate resilience but will achieve development aspirations.”

A little “over the top” perhaps, but a carrot that is provided.

The equation

The comment period is until 5 June at which point DEA will consider responses and submit their final strategy plan to Parliament for debate.  Clearly compliance is also seen by DEA as a priority in terms of UNFCCC undertakings made in the Paris Agreement to have such a strategy and plan.

 

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IEMO Bill proposes separated power purchasing

…. article June 2019….   

   Eskom to become major energy supplier…

Now tabled is the DA’s plan to create an Independent Electricity Market Operator (IEMO) on a phased basis with the responsibility of centralised purchasing of electricity from both Eskom and independent power producers (IPPs).

The proposal is that the IEMO will carry out its operation duties by dispatching all generation plants into the national grid. In addition to operation, the IEMO Bill also confers ownership of the grid on the IEMO, with Eskom retaining ownership of the generation arm.

Starting grid

The responsibility  for consumer distribution will be under the care of this independent regulatory entity which will be responsible as a centralised agency for the purchase of energy and the registration of IPPs to feed the grid, the enormous system that conveys power across the width and breadth of South Africa.

The national grid is, apparently, like the rest of Eskom infrastructure in need of restorative maintenance and upgrading, funds intended for this purpose having been “diverted” by Eskom personalities now being named, one by one, in the Zondo Commission inquiry.

With Parliament closed at this time and the Portfolio Committee on Public Enterprises not formed, it is the Speaker that will gather comment on the DA Bill now circulated, this for later assimilation.

As far as the IPPs still sitting on the side-lines waiting for action, this is not before time.   All now await to hear how the concept of a Regulator’s office is unpacked and how this office is related to the grid.

 Top gun

The IEMO Bill comes under the name of MP Natasha Mazzone, the DA’s shadow minister of public enterprises.  Opposition Leader, Mmusi Maimane, has been indicating such a move for over six months and has been vocal on the fact that decisions must be made urgently in moving the energy distribution sphere forward since investors have been waiting for far too long.

The Bill was tabled quite soon after President Cyril Ramaphosa’s stated requirement that the concept of splitting up Eskom into three parts will be followed, namely power generation, power supply through the grid, and distribution to customers.

A line-up of six successive energy ministers and a recalcitrant president have reduced the Department of Energy to a shambles.  Maybe Mazzone’s Bill is a possible shaft of light after years of Eskom and Public Enterprises Department having done nothing about IPPs, nor encouraged any form energy diversification.

Motives not clear 

In the meanwhile, Ms Mazzone has always been a vociferous critic of Eskom management for a number of years, describing previous Minister of Public Enterprises, Lynne Brown, as public enemy number one.  She has called for Eskom to be unbundled in the public interest and has been untiring in her attacks on the failure of Eskom to provide continuity of power supply thus damaging SA’s investment potential, she says.

What is not clear is whether this tabling is a move from the DA to attempt to seize the initiative ahead of the Department of Energy (DOE), busy at the moment being absorbed back into the Mining portfolio under new Minister Gwede Mantashe, or whether the ANC might have some inkling of what it needs to progress on the issue of power generation and will accept what is tabled.

Whatever is behind closed doors, the DA have taken the initiative by starting the ball rolling and for IPPs sitting on the side-lines, it is not before time.

Badlands

The partnership of the portfolio of energy and mining, which was broken some ten years ago by Jacob Zuma for reasons never really explained, still sits like unallocated baggage that needs sorting out. The suspected reason is that Zuma wanted Eskom under Brian Molefe in DPE under acolyte past minister Lynne Brown.

What currently is confusing to the industry players is that a slow phased-in process designed to protect Eskom has been proposed by the DA.  Their original proposals called for an immediate break-up to reduce the pain and cost of a lengthy separation process.

It may be that reality has crept in and despite chastising past successive ministers of energy for not producing the  previous idea of an ISMO (Independent Supply Management Operator) Bill to meet the need of IPPs perhaps they are now tempered by the fact that Eskom, whilst a currently an over-indebted business failure, the ship should be righted first, and the system restored.

Better times

Previous chairperson of the Energy Portfolio Committee, Thembisile Fikile Majola – a tough critic of Energy Minister Radebe in the failure of Luthuli House to brief Parliament on energy policy matters – is now Deputy Minister of Mining and Energy.

This appointment by President Ramaphosa, presumably in the light of Majola’s union background, gives further credence to the belief that both he and Mantashe would be a good team to handle coal mining issues from the unions resulting from a breakup and re-sizing and also better equipped to handle the Eskom transformation in terms of integrated energy supplies.

Going ahead

It seems be therefore accepted by the way the Bill is tabled that new IEMO Bill may gain better traction under the aegis of the Portfolio Committee on Public Enterprises, rather than as before under the Portfolio Committee on Energy.   However, Minister Pravin Gordhan has stated on a number of occasions that the Public Enterprises portfolio is only managing SOEs in the interim until all are returned to their appropriate ministries.

The specifics

The Bill came with a notice of intention which states, “This Bill will eliminate Eskom’s effective monopoly on the production of electricity by splitting the entity into two parts. These are Eskom, which will continue to function as an electricity generator and ISMO, which will take ownership and control over the national electricity grid.

The notice states that a Regulator “will serve as the central buyer and distributor of electricity from all electricity generators. It will also seek to allow metropolitan municipalities to purchase electricity directly from IPPs in certain circumstances.”

This is, of course, brings into the frame the critical issue of adopting a business approach to energy distribution.

Business wholesalers

On the subject of independent purchasing of electricity from sources other than Eskom, the proposal further states, “ISMO will be required to purchase power from the generators, including IPPs through power purchase agreements.  IEMO will then sell this power to distributors and large customers at a wholesale tariff.”

The notice concludes, “The IEMO will be expected to include in the wholesale tariff its operational cost in accordance with the approval of the Regulator. The Regulator will regulate the wholesale tariff in terms of the Electricity Regulation Act, 2006 (Act No. 4 of 2006) (ERA).”

Rights to trade

An introduction to the Bill, looking at details of the new structure, states, “The issue of wholesale trading refers to the buying of power from generators at different prices and selling it to large customers and distributors at a wholesale tariff.    The IEMO will also be responsible for the system operation function through dispatch.”

It adds that the IEMO “will undertake dispatch from all generation plants into the national grid except for self-dispatched plants, including but not limited to wind and solar plants”.

Big bang or not

Whatever happens, “big bang” approach or not, a vigorous debate is about to happen.  Many critics, especially the IPPs, have expressed the view that the slow “phasing in” is just another ploy in a drawn-out process to mollify the unions on potential job loss issues by buying time.   Industry players who have dealt with the backlash of the last Eskom strike, say the unions are panicking and creating a problem to be solved in order to be seen by their members at work on their behalf.

But whatever happens, all know that coal will always be, by far, the major contributor to energy with Eskom hopefully learning how to reduce CO2 emissions. The entity will have to pay triple carbon tax rates in the future for failure.  Most industry players also predict that SA’s extensive coal reserves will be switched over in the long term to export led initiatives.

Comments on media also see the exit of Eskom as a distributor being a contribution to the task of reducing Eskom’s ballooning staff complement.

Bold steps required

The costs of a “big bang” separation would, of course, be bound to put irreconcilable pressure on state coffers, say financiers, but more serious energy investors and industry players say there will always be few short-term visitors waiting in the wings and these are the parties who get disappointed.

Energy investment, they say, is based upon long term results and is viewed as thus by big money companies since geology and resources are finite.  In global terms, the situation can always wait until the conditions suit exploitation. It can take fifteen or twenty years to build a gas field of note and build the appropriate infrastructure, they say.

However, the running of Eskom is the short-term issue right now and keep the lights on.  Its survival is the main critical item on South Africa’s balance sheet at the moment.

Posted in Cabinet,Presidential, Electricity, Energy, Enviro,Water, Finance, economic, Land,Agriculture, Public utilities, Trade & Industry0 Comments

Marine Spatial Bill targets ocean resources…

Bill to bring order to marine economy…

November 2017 ParlyReport…..

In the light of President Zuma’s emphasis in his recent speeches on oil and gas issues, it is important to couple this in terms of government policy with the tabling of the section 76 Marine Spatial Planning Bill (MSP Bill).  The proposals are targeted at business and industry  to establish “a marine spatial planning system” offshore over South African waters.

The Bill  also says it is aimed at “facilitating good ocean governance, giving effect to South Africa’s international obligations.”

A briefing by the Department of Environmental Affairs (DEA) on their proposals is now awaited in Parliament. The Bill until recently was undergoing controversial hearings in the provinces as is demanded by its section 76 nature.

Water kingdom

The MSP Bill applies to activities within South Africa’s territorial waters known as Exclusive Economic Zones, which are mapped out areas with co-ordinates within South Africa’s continental shelf claim and inclusive of all territorial waters extending the Prince Edward Islands.

The Bill flows, government says, from its Operation Phakisa plan to develop South Africa’s sea resources, notably oil and gas.   The subject has recently been subject to hearings in SA provinces that have coastal activities. This importantly applies to South African and international marine interests operating from ports in Kwa-Zulu Natal and the Eastern and Western Cape but also  involves coastal communities and their activities.

International liaison

Equally as important as maritime governance, is the wish to assist in job creation by letting in work creators.  Accounted for also are international oceanic environmental obligations to preserve nature and life supporting conditions which DEA state can in no way can be ignored if maritime operations and industrial seabed development are to be considered.

South Africa is listed as a UNESCO participant, together with a lengthy list of other oceanic countries, agreements which, whilst not demanding total compliance on who does what, are in place to establish a common approach to be respected by oceanic activity, all to be agreed in the 2016/7 year.  South Africa is running late.

Invasion protection

Whilst the UNESCO discipline covers environmental aspects and commercial exploitation of maritime resources, the MSP Bill now before Parliament states that in acknowledging these international obligations, such must be balanced with the specific needs of communities, many of whom have no voice in an organised sense.

As Operation Phakisa has its sights set on the creation of more jobs from oceanic resources therefore, the MSP Bill becomes a balancing act for the Department of Environmental Affairs (DEA) and the Bill is attracting considerable interest as a result.

The hearings in the Eastern Cape have already exposed the obvious conundrum that exists between protecting small-time fishing interests and community income in the preservation of fishing waters and development of undersea resources.  What has already emerged that the whole question of the creation of future job creation possibilities from seabed-mining, oil and gas exploration and coastal sand mining is not necessarily understood, as has been heard from small communities.

The ever present dwindling supply of fish stocks is not also accepted in many quarters, with fishing quotas accordingly reduced.

Tug of war

All views must be considered nevertheless but from statements made at the political top in Parliament it becomes evident that the potential of developing geological resources far outweigh the needs of a shrinking fishing industry.  At the same time, politicians usually wish to consider votes and at parliamentary committee level, the feedback protestfrom the many localised hearings is being heard quite loudly.

As one traditional fishing person said at the hearings in the Eastern Cape, “The sea is our land but we can only fish in our area to sustain life. The law is stopping us fishing for profit.”

Local calls

The attendees at many hearings have said that the MSP Bill and similar regulations in force restrict families from earning from small local operations such as mining sand; allow only limited fishing licences and call for homes to be far from the sea denying communities the right to benefit from the sea and coastal strips for a living.

Hearings last went to the West Coast and were held with Saldanha Bay communities.

Big opportunities

Conversely, insofar as Operation Phakisa is concerned, President Zuma, as has been stated, said clearly in his latest State of Nation AddressZuma that government has an eye for much more investment into oil and gas exploration.   He has since announced that there are plans afoot to drill at least 30 deep-water oil and gas exploration wells within the next 10 years as part of Operation Phakisa.

Coupled to this is the more recent comment in Parliament that once viable oil and gas reserves are found, the country could possibly extract up to 370 000 barrels of fossil fuels each day within 20 years – the equivalent of 80% of current oil and gas imports.

According to the deadline set by the Operation Phakisa framework, the MSP Bill should have been taken to Parliament at the beginning of December 2016 for promulgation as an Act by the end of June 2017, making it appear that things are running late.

Environmental focus

As the legislation is environmentally driven, with commercial interests coming to the surface in a limited manner at this stage, the matter is being handled by the Portfolio Committee on Environmental Affairs.    It is understood that later joint meetings will be held with the Trade and Industry Committee and with Energy Committee members.

Adding to the picture that is now beginning to emerge, is the fact that Minister of Science and Technology, Naledi Pandor, has signed a MOU with the Offshore Petroleum Association of South Africa.

Minister Pandor said at the time of signing, “The South African coastal and marine environment is one of our most important assets.   Currently South Africa is not really deriving much from the ocean’s economy. This is therefore why we want to build a viable gas industry and unlock the country’s vast marine resources.”

Moves afoot

OPASA is now to make more input with offshore oil and gas exploration facts and figures.   Energy publications are now bandying figures around that developments in this sphere will contribute “about R20bn to South Africa’s GDP over a five-year period.”   If this is the case, the Energy Minister might be compromised once again, as she was with renewables, on the future makeup of the planned energy mix.

Amongst the particularly worrying issues raised by opposition parliamentarians and various groupings in agricultural and fishing areas is that there is a proposal in the MSP Bill on circuit states that the Act will trump all other legislation when matters relate to marine spatial planning. DEA will have to answer this claim.

Opposition

Earthlife Africa have also stated at hearings in Richards Bay that in their opinion “Operation Phakisa has very little to do with poverty alleviation and everything to do with profits for corporates, most likely with the familiar kickbacks for well-connected ‘tenderpreneurs’ and their political allies.”

This is obviously no reasoned argument and just a statement but gives an indication of what is to be faced by DEA in the coming months.

Giants enter

With such diverse views being expressed on the Bill, President Zuma and past Minister  of Energy, Mmamaloko Kubayi cannot have missed the announcement that Italy’s Eni and US oil and gas giant, Anadarko, have signed agreements with the Mozambique government to develop gas fields and build two liquefied natural gas terminals on the coast to serve Southern African countries.

Eni says it is spending $8bn to develop the gas fields in Mozambique territorial waters and Anadarko is developing Mozambique’s first onshore LNG plant consisting of two initial LNG trains with a total capacity of 12-million tonnes per annum.  More than $30bn, it has been stated in a joint release by those companies, is expected to be invested in Mozambique’s natural gas sector in the near future.

Impetus gaining

In general, therefore, the importance of a MSP Bill is far greater than most have realized. The vast number of countries called upon to have their MSP legislation in place also indicates international pressure for the Portfolio Committee on Environmental Affairs to move at speed.

This follows a worldwide shift to exploiting maritime resources, an issue not supported by most enviro NGOs and green movements without serious restrictions.  Most parliamentary comments indicate that the trail for oil and gas revenues needs following up and the need to create jobs in this sector is even greater.

Ground rules

Whilst the oil and gas industry and the proponents of Operation Phakisa also recognize that any form of MSP Bill should be approved to provide gateway rules for their operations and framework planning, the weight would seem to be behind the need for clarity in legislation and urgency in implementation of not only eco-friendly but labour creating legislation.

Operation Phakisa, as presented to Parliament particularly specified that the development of MSP legislation was necessary and Sean Lunn, chairperson of OPASA has said that the Bill will “add tangible value to South Africa’s marine infrastructure, protection services and ocean governance.”  He said it will go a long way in mitigating differences between the environmentalists and developers.

Not so nice

On seabed mining, the position with the MSP Bill is not so clear, it seems.    Saul Roux for the Centre for Environmental Rights (CER) says that the Department of Mineral Resources granted a few years ago three rights to prospect for marine phosphates.

He also stated that the marine process “involves an extremely destructive form of mining where the top three metres of the seabed is dredged up and consequently destroys critical, delicate and insufficiently understood sea life in its wake.”   Phosphates are predominantly used for agricultural fertiliser.

“These three rights”, he said “extend over 150,000 km2 or 10% of South Africa’s exclusive economic zone.”

Something happening

One of CER’s objectives, Roux says, is to have in place a moratorium on bulk marine sediment mining in South Africa.   He complains that despite the three mining rights having been gazetted, he cannot get any response from Minister of Mineral Resources, Mosebenzi Zwane, or any access to any documents on the subject.

He stated there were two South African companies involved in mining sea phosphates and one international group, these being Green Flash Trading 251, Green Flash Trading 257 and Diamond Fields International, a Canadian mining company. All appeared to be interested in seabed exploration for phosphates although not necessarily mining itself.

Roux called for the implementation of an MSP Bill which specifically disallowed this activity as is the case in New Zealand, he said.

Coming your way

The MSP Bill was tabled in April 2017 and once provincial hearings are complete it will come to Parliament. The results of these hearings will be debated and briefings commenced when announced shortly.

Previous articles on category subject

Operation Phakisa to develop merchant shipping – ParlyReportSA

Hide and seek over R14.5bn Ikhwezi loss – ParlyReportSA

Green Paper on nautical limits to make SA oceanic nation – ParlyReportSA

Gas undoubtedly on energy back burner – ParlyReportSA

 

Posted in cabinet, Energy, Enviro,Water, Finance, economic, Labour, LinkedIn, Mining, beneficiation, Special Recent Posts, Trade & Industry0 Comments

Environmental legislation updates

Changes to environmental legislation….

dea logosent to clients 10 Oct….. The Department of Environmental Affairs (DEA) has published for comment a whole series of amendments to the cluster of laws generally referred to as the NEMA laws, or South Africa’s national environmental legislation.

The changes affect mining and quarrying, the industrial and manufacturing sectors and relationships of the many sectors with local authorities on licensing.

The draft Bill refers to the overarching National Environmental Management Act; the National Environmental Management: Protected Areas Act; National Environmental Management: Biodiversity Act; the National Environmental Management: Air Quality Act; the National Environmental Management: Integrated Coastal Management Act and the National Environmental Management: Waste Act.

Piggy bank for closures

In the case of National Environmental Management Act a number of changes are proposed, perhaps the most notable being ” to provide clarity to the definition of “financial provision” that an applicant or holder of an environmental authorisation relating to mining activities must set aside financial provision for progressive mitigation, mine closure and the management of post closure environmental impacts”.

NEMA generally provides that if environmental harm is authorised by law, such as a permit issued under any environmental law, the relevant operator is obliged to minimise and rectify such harm. Where a person fails to take reasonable measures to minimise or rectify effects of environmental pollution or degradation, the relevant authority may itself take such measures, and recover costs from the responsible operator. Failed mining operations apparently have presented government with little option but to use taxpayer’s money.

With the recent amendment to provide for liability for historical pollution any operator occupying land may also be liable in future for remediation costs under the NEMA: Waste Act equally and this is notwithstanding that the activity is authorised by permit. All five laws are designed to intertwine, the Management Act amendments say.

Mineral Resources only

Other changes under the National Environmental Management Act provide clarity that “the Minister responsible for mineral resources is also responsible for listed or specified activities that is or Is directly related to prospecting, exploration, extraction or primary processing of a mineral or petroleum resource.” Various other changes are proposed which should be read by parties affected.

The changes under the NEM: Protected Areas Act are relatively minor providing for the chief financial officer of the SANParks to be on the board; various new offences in marine protected areas and to clarify certain offences andenvironmental2 procedures.

Again under the NEM: Biodiversity Act changes are proposed on board representation to include technical experts; steps, actions or methods to be undertaken to either control or eradicate listed invasive species and, importantly, to ensure that MECs in the provinces “must follow a consultation process when exercising legal powers” under the Act.

Air quality ; Who licences what

Under the NEM: Air Quality Act the issue of who does what is clarified for municipalities on listed unlawful activities and the proposals provide clarity on the issue of a provincial department responsible for environmental affairs is the licensing authority where a listed activity falls within the boundaries of more than one metropolitan municipality or more than one district municipality and to deal with appeal processes.
Other articles in this category or as background
NEMA: Waste Bill passed – ParlyReportSA
Environmental pace hots up – ParlyReportSATougher rules ahead with new evironmental Bill – ParlyReportCoastal environment bill proposals clearer – ParlyReport

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SA to get coastal management underway

Coastal management includes cities and rural areas …

South Africa’s National Coastal Management Programme (NCMP) is now underway with the publication of working proposals by the department of environmental affairs (DEA) which was accompanied by a call for public comment.

The estimated contribution of coastal resources to the South African economy is in the order of some R5bn and coastal zones, the document says, are estimated to provide approximately 35% of the country’s GDP.   The major coastal cities of Cape Town, Port Elizabeth, East London, Durban, and Richards Bay are affected, all four having experienced the fastest economic growth of all cities in the country.

Preservation and good management of the national coastal areas, says DEAT, is therefore essential if South Africa is to continue to provide the roots for economic development, expansion of the tourism industry and the continued provision of recreational needs.   All these factors are created in areas with a very delicate balance of biodiversity, says DEAT.

Economic reasons

Maintaining this balance into future generations is seen by DEAT as one of its major challenges, not only for environmental reasons but for economic reasons as well. A further important objective of the NCMP is to maintain the coastal environment to the benefit of threatened poorer communities and to protect their livelihoods.
DEAT says in its forward to the NCMP that South Africa has chosen to embrace a holistic approach, known as integrated coastal management (ICM), which sets out objectives, management procedures and contains the kind of definitions, norms and standards that enable a basic environmental regulatory process to happen.

The purpose of the anchor ICM Act is to maximize on the eco-benefits provided by coastal zones and to minimize the conflicts and harmful effects of human activities upon each other, both in terms of resources that could be lost and any surrounding environmental damage.

Pointers only

The NCMP, DEAT says, is a working document to assist in implementing ICM objectives and lays out in its 106 pages a deliberate programme of national management actions. It is not regulatory but a working guide.

First, it contains a detailed situation analysis related to coastal management in South Africa across the full spectrum of zones within the country’s 3,000 kms of coastline. Then the document looks at the current threats to ecosystems followed by a study of existing localised and national environmental management programmes.

In providing a “national vision”, the NCMP provides a structured approach to engage with the stakeholders, DEAT says, and “a template for future cooperative governance”.   It also suggests ways to integrate ICM programmes with localised government, the NCMP therefore expanding with practical programmes based on the ICM Act.

However, DEAT makes it clear in a disclaimer that what is published is neither an amending Bill nor a legal or regulatory process but a guide to programmes which are seen by DEAT as the route to take and which can be necessary in the common interest.

Complimentary to NEMA

To emphasise the co-operative nature of what is put forward, DEAT says in the frontispiece to the NCMP, “This document does not in any way have legal authority or take precedence over the National Environmental Management: Integrated Coastal Management Act but rather serves as a guideline to the development of coastal management programmes, expanding on the provisions of the Act”.

Public input on this plan is therefore called for by DEAT. Comment can be made until the end of June.

Concurrently, DEAT has also published its White Paper on National Management of the Ocean, the acronym for which is appropriately NEMO.

This, DEAT says, aims to promote the protection and conservation of South Africa’s ocean environment, as well as promoting sustainable development for present and future generations. It refers in its pages to the extent of South Africa’s ocean environment and deals with issues concerning protection and conservation of the ocean environment and resources of the sea.

The White Paper says the department’s approach to the subject will promote and expand sustainable development and optimise investment in managing the large ocean space which is accessible to the country.
Other articles in this category or as background
//parlyreportsa.co.za//energy/fueloilrenewables/coastal-management-bill-stirs-waters/
//parlyreportsa.co.za//health/coastal-environment-proposals-getting-clearer/

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