Tuesday, February 19, 2008

Guateng Premiere Mbhazima Shilowa Speaks on the South African Energy Crisis During the "State of the Province" Address

Power is a priority in Gauteng

Mail & Guardian Online reporter and Sapa
Johannesburg, South Africa
18 February 2008 03:28

Saving electricity and promoting energy efficiency must be a top priority in 2008, Gauteng Premier Mbhazima Shilowa said in his State of the Province address on Monday.

"We are aware our economy is facing major challenges ... The future was rosy on December 31 2007, but suddenly everyone is buying candles and researching property in Perth," Shilowa said at the Gauteng provincial legislature in Johannesburg.

"Don't panic ... I think 2008 will be a tough year, but I also see it as a great opportunity to seize the day while everyone else is whingeing and get a front seat on the inevitable boom that we'll experience in 2009, 2010 and beyond."

Referring to Eskom's energy shortages being experienced countrywide, he said individuals, families, organisations, communities, the government and business should all respond to the national call to save electricity. "Together with municipalities and Eskom, and in line with the national electricity emergency plan, we have agreed on a range of measures to manage the crisis in the short, medium and long term."

The first and most important step is to reduce consumption of electricity by at least 10%. All provincial government offices that have not already done so will change to energy-efficient globes and switch off lights and appliances at night and when not in use.

"In line with the president's call we call on the public to name and shame those who fail to comply. Departments who were named by [Talk] Radio 702 as failing to comply, such as the departments of public transport, roads and works, the Gauteng legislature building and the Johannesburg Roads Agency, will have to take immediate corrective measures."

Municipalities will install geyser ripple-control switches in households and supply geyser blankets and energy-efficient light bulbs. Businesses will be encouraged to install generators, Shilowa said.


A programme of action for 2008 under the theme Completing the Five-Year Mandate: Laying the Foundation for 2014 formed the basis for Shilowa's address.

"We make bold to state that the Gauteng provincial government will fulfil all the commitments made in 2004 to improve the lives of our people -- especially the poor, the unemployed, women, youth, children, the elderly and people with disabilities," the premier said.

Looking back at what has been achieved, the 2007 Community Survey conducted by Statistics South Africa shows that the percentage of informal settlements in Gauteng has dropped to 22,6%. The percentage of households using electricity remains the highest in the country at 83,5%, and the percentage of households with piped water now stands at 97,9%.

"The unemployment rate in our province shrunk from 30,8% in 2003 to 22,6% last year. The labour absorption rate improved from 47,3% to 52,1% in the same period," said Shilowa. "Our economy continues to create new jobs. In just one year, between March 2006 and March 2007, an additional 146 000 new jobs were created in Gauteng, according to Stats SA. This brought the total jobs as at March 2007 to 3,4-million."

Also, the percentage of persons aged between five and 24 years attending educational institutions in the province has increased from 66,9% in 2001 to 68,8% in 2007.

On crime, Shilowa said: "While we should acknowledge that crime is steadily declining in the areas of common assault, rape, assault and robbery, we should equally confirm that violent crime, the abuse of women and children and house robberies in certain areas remain unacceptably high."

Tourist arrivals to Gauteng continue to grow, creating jobs and other economic opportunities for its people. According to the latest annual report of South African Tourism, foreign tourists visiting Gauteng increased by more than 400 000. One in every two foreign visitors in South Africa visit Gauteng, making the province the country's highest earner of tourism income.

Other priority areas for 2008 include stepping up efforts to build Gauteng as a competitive city region; implementing the Gauteng social development strategy, which provides a comprehensive response to poverty eradication; the continued implementation of the Gauteng growth and development strategy, particularly in growth sectors that create jobs; and investment in strategic economic infrastructure.

The premier highlighted planned expansion of the Cradle of Humankind site, the launch of the Gauteng Craft and Design Centre (to benefit about 1 800 crafters and 200 small enterprises in the sector), marketing Gauteng as a film-production hub of choice, and the province's preparations for the 2010 World Cup.


Looking at transport, Shilowa said: "Immense progress has been achieved since construction started on the Gautrain's 80km route featuring 10 new stations. The project is helping to stimulate our province's economy, to promote empowerment and small-business development.

"The Gautrain's contribution to black empowerment amounted to R590-million in the current financial year, while small, medium and micro enterprises [SMME] received a total of R70-million for services provided to the project. In 2008/09, the project will contribute R710-million to black empowerment and R70-million to SMME development."

He added: "The project has also helped to bring back skills to the country. A number of construction professionals who left South Africa to work in the United Kingdom have returned home to work on the Gautrain."

Residents can also expect an upgrade in roads and public transport. By July this year, the Gauteng Transport Management Authority (GTMA) will be up and running. It will establish operating standards for all public-transport operators and work to realise a single ticketing system for all modes of public transport across the province.

This initiative will be piloted in 2009 and will include all subsidised public-transport services -- municipal bus operators; the proposed new bus rapid transit systems (BRT) for Johannesburg and Tshwane; the Gautrain and its bus feeder systems; and the Wits and Tshwane Metrorail services.

"It is essential that we get this system right. It should make public transport more accessible, convenient and affordable and reduce travelling times as well as provide spin-offs that will lead to further investment in public transport," the premier said.

In partnership with Sanral, this year, the Gauteng highway improvement plan will be initiated to upgrade provincial and township roads.

The following roads will be upgraded: Leratong Road between Protea township and Leratong Hospital, the K15 between Protea and Dobsonville in Soweto, the K29 from Cosmo City to the R28, Beyers Naude Drive from Honeydew police station to the Sasol garage in Zandspruit, and Main Road from Bryanston to Kyalami. The R55 from Kyalami to Laudium and Zambezi Road to Cullinan will also be improved.


The Gauteng government has formalised 66 informal settlements out of its 2009 target of 122, Shilowa said. "Based on the 2004 commitment, the target was to formalise 122 informal settlements by 2009. To date, 66 informal settlements have been formalised and a new target of 56 has been set to reach a target of 122.

"We said we would provide water and sanitation to every household in the province within five years. The people who previously lived without basic services in Zevenfontein and Riverbend informal settlement now have roads, water, electricity and proper toilets in Cosmo City where they were moved."

Through the programme to formalise and eradicate informal settlements, 103 948 dwellings have been upgraded and provided with basic services. These sites are now ready for the construction of proper houses. In the year ahead, ten additional informal settlements will be eradicated and 13 hostels will be upgraded. A total of 58 552 houses have been planned for delivery by March this year.

"Through the mixed housing development, alternative tenure and urban renewal programmes, we will fast-track housing delivery to ensure that we meet our target of 120 000 housing products delivered by 2009," Shilowa said.

Mixed housing developments include subsidised housing, social housing, bonded houses and community facilities.

Shilowa congratulated the Soweto Gospel Choir on winning their second Grammy, and paid tribute to late Isidingo star Ashley Callie, who died recently following injuries sustained in a car accident, and Emily Williams, the 12-year-old schoolgirl from Fairlands who was killed in the crossfire during a robbery last week.

Power crisis likely to wipe out surplus

Michael Hamlyn
Mail & Guardian
Cape Town, South Africa
18 February 2008 06:39

The goal posts for Finance Minister Trevor Manuel's spending plans in Wednesday's national budget were carefully placed last October when he revealed his medium-term expenditure framework (MTEF).

However, the posts may have been shifted by the policy decisions taken at the African National Congress's national conference in Polokwane -- and certainly started a merry progression when President Thabo Mbeki delivered his State of the Nation address in Parliament two weeks ago.

In addition, the dramatic change in economic outlook caused by the electricity crisis has set the posts whirling.

The MTEF set spending for 2008/09 at R618,5-billion and foresaw another little budget surplus of R22,6-billion, or about 1% of GDP.

Razia Khan, regional head of research at Standard Chartered Bank, reckons that given the centrality of the energy crisis, measures to mitigate the effect on growth as well as support for Eskom will be a key focus for the budget. Mbeki's State of the Nation address hinted at state provision of support for Eskom, which faces at least a R300-billion capex spend over the coming years.

The budget is likely to provide detail on how this will be done, Khan said, but noted that there will be potentially important fiscal implications.

"There is the size of any support package," he said. "In order to be meaningful, it would likely have to exceed [MTEF] projections for the fiscal surplus in FY 2008/09, or 0,7% of GDP."

One way of dealing with the problem would involve a direct cash injection into Eskom, but this would risk eroding the entire planned budget surplus (and then some) all on its own.

A second alternative would be to guarantee a portion of Eskom's debt, which would have the advantage of not requiring the authorities to put up any cash upfront. "This would help to safeguard the fiscal balance," Khan said, "but it might also have longer-term implications, if somewhat indirect, for South Africa's own credit rating."

Something may have to give in the short term, he said, and it is likely that the near-term desire for a fiscal surplus may have to give way to a more realistic assessment of the economy's immediate needs.

Polokwane effect

Johan Botha and Shireen Darmalingam from Standard Bank group's economic department tend to discount the Polokwane effect on the Budget, however. They said that the State of the Nation address made no particular mention of the possible effects of political and other events post-Polokwane.

"This is because it is believed that these events will have little impact on the budget and the budget process itself," they said.

"In other words, changes in direction and policies, if any, will follow the budgetary process rather than the other way around. Of course, there may be initial wish lists, but they normally tend to be vague and un-costed, and thus difficult to entertain and implement seriously. A single step from wish lists to policy implementation is one step too far."

The Standard Bank pair also said that Jacob Zuma, the new ANC leader, stated on more than one occasion that no major changes in the country's general policy framework were on the cards. He has also expressed satisfaction with the way in which the minister of finance is conducting fiscal affairs.

Also, Mbeki took stock of what still needs to be done in terms of his view of government plans, strategies and objectives and produced his list of 24 "apex priorities" in Parliament, but not all of them have budgetary implications or can immediately be executed, and some will require budgetary support over time.

Their conclusion is that this year's budget is likely to be an island of calm in a turbulent domestic and international environment. "A solid if somewhat more conservative budget is anticipated, with further emphasis on economic growth, infrastructure development and social spending."

Social spending

Khan also suggested that, as hinted at in the State of the Nation address, social expenditure is likely to be a big theme of the 2008 budget. But because of the spending needed to address the power crisis, the availability of additional budgetary resources to meet other needs may be somewhat constrained.

Nonetheless, South Africans are at least likely to see an increase in the recipients of social grants, alongside a decline in the pensionable age for men to 60 years. With social grants currently accounting for 3,4% of GDP, there is room for South Africa to increase spending on welfare over the medium term.

Nedbank's economic research group, Dennis Dykes, Nicky Weimar and Carmen Altenkirch, suggested that social services, which include spending on housing, education and health, should receive an additional R9-billion in order to help improve the quality of public services in rural areas.

They also reckon infrastructure spending on transport, communication, energy and water services will get at least an additional R4-billion over the next fiscal year. "Government acknowledges that improving the country's infrastructure is vital to future growth prospects. The MTBPS [Medium-Term Budget Policy Statement] talks about extensive improvements to hospitals and schools over the next three years," they said.

Under the MTEF, crime prevention and justice was due to receive an additional R2-billion but now, they said, this figure could be increased given the continued national debate.

More funds will also be made available to accommodate the higher-than-expected 2007 public-service salary agreement.

The Nedbank team said that the new industrial policy action plan is expected to benefit from R2,3-billion allocated for industrial policy initiatives and an additional R5-billion in tax incentives over the next three years.

Deloitte's experts echoed this, reckoning that a new incentive for strategic industrial projects will be announced either in the budget or in March. Deloitte's also noted that there is a task group looking at the industrial development zones, that the status of the motor-industry development policy will be maintained until 2012 when it will be replaced, and that incentives around alternative fuels are increasing.

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