Policy Statements, 2007

ECONOMIC CLUSTER MEDIA BRIEFING
Minister Alec Erwin

• Cape Town
• February 2007
• Embargo: 13h00

Introduction

The work of the Cluster covers five key areas: macro-economic alignment, building a competitive and labour-absorbing economy, increasing public investment, equity and development and skills development.

The earlier Cluster briefing spoke to much of these issues. I will concentrate on the area of public investment, particularly infrastructure.

Competitive National SOE Supplier Development Procurement Policy

SOE, particularly Eskom, Pebble Bed Modular Reactor (PBMR) and Transnet, are dramatically increasing capital and associated operational expenditures over the next ten to twenty years. The success of this investment programme is intrinsically bound to the responsiveness and competitiveness of local supplier industries.

Low expenditures over the past 30 years have compromised supplier industries in South Africa. In addition, global growth in the demand for infrastructure related capital goods, particularly in South and East Asia, is creating an increasing threat to the sustainability of the SOE capital expenditure programmes.

Relatively speaking, this means that the South African programme is very small and our needs are crowded out by the demands of bigger customers. The net effect of this challenge is that the programme will be import intensive. Current forecasts indicate over a 40% import requirement at Eskom and Transnet.

It is thus critical to leverage SOE expenditures to optimise the development of national supplier industries and, where possible, build export capabilities. The supplier development policy will focus on enhancing competitiveness of national industries rather than providing price premiums for local content. The crux of the approach is to ensure that the SOE are adequately mandated, internally capacitated and provided with appropriate institutional support to achieve this objective.

The programme will serve to:

• To create a supplier base for SOE
• Develop globally competitive supplier industries to sustain the investment programme
• Enhance local enterprise and BBEE

Eskom Expansion Programme

Eskom has made significant progress with its build programme. Spending to date is about R11-bn. The various projects are progressing according to schedule. The return to service of the 3-mothballed stations – Camden, Grootvlei, Komati – are expected to meet their respective deadlines.

Camden should be in operation at the end of March, Grootvlei will be up and running by May, ahead of its original date and Komati is also expected to be ahead of target, by September 2007. Commercial operation of four units (2 Atlantis and 2 Mosselbay) is achievable by the end of March and all units should be operating by May 2007.

Other notable progress is around Projects Alpha and Charlie, which are being executed simultaneously. The procurement phases have been launched and tenders for the evaluation of Alpha are underway.

Transnet Capital Investment Programme

There has also been significant progress with the implementation of Transnet’s investment plan. To date a total of about R4, 260bn has been spent on Capital Projects up to end September 2006, R2, 575bn of this spend was on rail and another R1, 057bn in port.

Some of the challenges faced by Transnet include:

• Delay in the approvals of EIAs (mainly NPA)
• Delivery of imported supplies
• Claims and other legal challenges

Security of Supply

Ensuring security of energy supply in South Africa is also a key priority, especially in light of the significant economic growth that the country has experienced. It is important to look at alternative energy sources such as biofuels, massive ramping up of infrastructure creation, and construction of liquid fuels infrastructure.

As part of our clean energy strategy and ensuring security of supply were are looking at the exploration of coal bed methane, which will be utilised for power generation.

In addition the final Biofuels strategy document will be taken to Cabinet for approval in May. We will also continue to develop the local nuclear industry as an affordable and environmentally sound alternative. To that end we are finalising a national nuclear energy strategy which will be a comprehensive policy that will look at the utilization of nuclear energy. Given these developments around nuclear energy, we have decided to identify uranium as a strategic mineral. In this regard we are developing a uranium mining and beneficiation strategy.

The Integrated Security of Supply Strategy, that brings together liquid fuels and electricity plans, will be tabled in Cabinet Lekgotla in July.

While establishing the REDS, we will ensure affordable prices to businesses and households (especially rural areas). We are also finalising the EDI Restructuring legislation that will deal with all the concerns raised by stakeholders.

Mining

On the mining front, the legal framework to promote local beneficiation of minerals has been finalised. The announcement that was made on Friday (De Beers and DME) demonstrates South Africa’s commitment to ensuring that South African diamonds remain largely in South Africa and benefits the country’s peoples. In addition, the role of the State Diamond Trader was also established to ensure that this happens.

The DME has amended parts of the legislation around licensing to ensure that the sector is more investor-friendly. More information around this issue can be found on www.dme.gov.za

Implementation of the Road Infrastructure Strategic Framework for South Africa

The transfer of over 3000km of roads from provinces to SANRAL is in accordance with the Horizon 2010 vision for road network development.

Over the next few months the DoT will ensure:

• The enlargement of the GIS system at the Department of Transport to enable informed strategic management of the road network.
• Consultation of the findings of the Municipal Road Network Assessment Study with provinces and affected municipalities in order to reach agreement on necessary actions.
• Continuation of the transfer of remaining primary roads from provinces to SANRAL to achieve the20 000km of strategic national road network and the intensification on interventions to improve this network.
• Completion of the identification of the Secondary Strategic Road Network and the intensification of interventions to improve this network.
• Roll-out a programme to scale-up the EPWP in the roads sector, with particular focus on access to roads.
• Completion of the development of guidelines for the reclassification of the road network.

Airports Company South Africa

ACSA has begun its five-year investment programme in all the major airports in the country. A total amount of R5.2bn will be spent over 5 years to accommodate the 2010 Soccer World Cup, R492 million was spent at three international airports – Johannesburg, Cape Town and Durban and R46 million was invested at the Port Elizabeth, East London, George, Bloemfontein, Kimberley, Upington and Pilanesberg national airports. It is projected that ACSA would handle more than 22-million passengers by 2012.

Public Transport

Construction is underway for the Gautrain.

The Consolidated Regional Rail Plan has been approved, which entails among other things:

• focuses on priority corridors where rail operates at its strength,
• sets out the regional rail plans and business plans in areas where Metrorail
• quantifies the actual needs for each corridor, while at the same time giving an indication of the investment and improvements required.

Metrorail has merged with SARCC and the second phase of the consolidation of which will include Shsosholoza Meyl is now being addressed.

The Taxi Recapitalisation Project is on track. Many manufacturers have responded by making their vehicles compliant with the safety specifications. Taxi operators are purchasing the New Taxi Vehicles as a positive response to the Taxi recapitalisation Project.

The conversion of permits to operating licences is 99% completed and the moratorium on new operating licences will be lifted and will proceed on the basis of supporting the Public Transport Strategy. Scrapping of Old Taxi Vehicles is on course in the Free State, KwaZulu-Natal, Northern Cape and Western Cape and the Eastern Cape.

The tranformation of the bus subsidy regime to a road based public transport subsidy will start with the rollout of the holding strategy after April 2007.

Information and Communication Technology

ICTs are increasingly changing the way that government, business and individuals interact with each other. Most developed economies have recognised the importance of these technologies to all aspects of life and are now in the process of developing policies that move from universal to ubiquitous access to ICTs.

The ICT Policy landscape has transformed significantly following the enactment and coming into force of the Electronic Communications Act. The NEPAD ICT Broadband Network Protocol was signed and is due for ratification, the Second Operator (Neotel) was introduced to the market.

Broadband is viewed as a key driver of economic growth and wealth generation and therefore it is essential for South Africa to gain access to universally available, reliable and affordable broadband.

Studies have shown that affordable national long distance and international connectivity would have a favourable impact on pricing and availability of broadband in South Africa.

To this effect, government is pleased to announce that InfraCo will be launching in March 2007 to provide long distance connectivity on a cost basis to the market through an initial arrangement with Neotel based on the telecommunications infrastructure originally built by Eskom and Transnet.

In addition, Sentech will provide the core access to wireless broadband connectivity for government service delivery prioritizing education and health centers.

International studies have also shown that there is a direct co-relation between increase in national ICT usage with the uptake and usage of ICTs by government. To this effect a Ministerial ISAD Committee (Information Society and Development) has been established to address the uptake and usage of ICTs by government and its FOSAD Cluster will be operational by the end of April this year.

Sentech will begin its roll-out of digital-ready transmitters by the end of the year, marking the second phase of the broadcasting digital migration programme.

2010 FIFA World Cup

Priority statements have been submitted and evaluated and over 250 projects have been approved. The amounts of R241m, R700m and R1bn have already been allocated for the 2005 to 2008 financial years respectively for infrastructure and the 2010 Transport Action Agenda has been finalised. A sum of R400m has been allocated for 2010 World Cup infrastructure development.

Government has committed over R150 billion for investment in infrastructure primarily for the investments in rail, ports, energy and telecommunications.

Conclusion

Although we are pleased with the progress made to date, as a Cluster we realise there is a tremendous amount of work ahead of us. We under-estimated the complexity of interventions and the extent of co-ordination and implementation capacity required.

Going forward we realise that most of the projects require a multi-year POA focus. In order for the cluster to strengthen its capacity we will also develop a dedicated capacity for cluster co-ordination.

You are here: