President Cyril Ramaphosa: Reply to questions in National Assembly

7 March 2018

QUESTION 1

1. Ms J L Fubbs (ANC) to ask the President of the Republic:

With reference to the 2019 World Economic Forum (WEF) meeting held in Davos, Switzerland, from 22 to 25 January 2019,

(a) what was the central message including the implications for the country that emerged from the meeting and,
(b) what was the sense of cohesiveness and the reception of the messages from Team South Africa at the WEF?

NO309E

REPLY:

Honourable Members,

A central focus of the annual meeting of the World Economic Forum held in Davos in January this year was on shaping the global political and economic architecture in the context of the 4th industrial revolution.

The meeting posed the question of how, in a time of rapid technological change, it is possible to ensure that the benefits of globalisation are more equitably shared between and within countries.

The meeting was held against the backdrop of growing trade tensions between the United States and China, the revival of narrow nationalism and a challenge to multilateralism as the best way to manage global relations.

These developments present great challenges particularly to developing countries, including South Africa, which are disproportionately affected by instability in the global economy.

One of the clear messages from this meeting that we held in January in Davos is that South Africa needs to work with other countries - in both the developing and developed world - to promote a rules-based world order that is representative and more equitable.

This is necessary to ensure that in the end, globalisation promotes inclusive growth and development and not create greater inequality.

This is particularly important as the fourth industrial revolution begins to reshape industries and economies, creating new patterns of employment, production and investment.

The fourth Industrial Revolution is the greatest change process human civilization has ever known.

Previous industrial revolutions were able to unleash enormous forces that had a huge impact on industrial production but the fourth Industrial Revolution which is based on artificial intelligence, digitisation and processes such as block chain has a far greater transformative effect. Its transformative power is much greater.

The Fourth Industrial Revolution is changing and reshaping practically everything that human beings do: the way we live, the way we interface with other human beings, the way we make things; the way we use the resources in the world; the way we communicate; the way we learn; the way we work; the way we govern; and the way we do business.

Its scope, speed and reach are unprecedented.

Countries that do not anticipate and effectively adapt to these changes will be less competitive and have greater difficulty in achieving sustained growth and employment.

The clear implication for South Africa is that we need to move with greater focus and urgency to develop the skills, human capital, institutions and strategies required to seize the opportunities of technological change.

It is for this reason that we have established the Presidential Commission on the 4th Industrial Revolution, which will soon begin its work to develop a national action plan to position South Africa as a competitive global player.

It is also for this reason that we announced in the State of the Nation Address a series of initiatives to equip young South Africans with the skills they will need to thrive in the workplace of tomorrow.

For its part, Team South Africa went to Davos with a clear message that our country is on a path of growth and renewal.

Whether from government, business or other sectors, we conveyed the message that South Africa's focus is on securing massive new investment, to ensure that we have growth and job creation.

We reported on the intensive engagement with business to promote investment opportunities, identify obstacles and address them.

We outlined the agreements reached with business and labour on measures to accelerate job creation, and the economic reform measures we have undertaken to promote growth and restore investor confidence.

We also spoke about the measures we have taken to end state capture and tackle corruption in public entities and corporates, and restore good governance and financial stability at state-owned companies.

This message was well received by everyone with whom we interacted.

Several members of Team SA observed that there was a new confidence and heightened interest in South Africa in Davos this year.

Working together as a united and cohesive team, we were able - without ignoring the substantial challenges we face - to present a credible vision of a growing, inclusive South African economy.

I thank you.

QUESTION 2

2. The Leader of the Opposition (DA) to ask the President of the Republic:

Whether, in light of the revelations relating to incidents of alleged corruption and bribery between Bosasa, now known as African Global Operations, and numerous government departments and entities emanating from the Judicial Commission of Inquiry into Allegations of State Capture, Corruption and Fraud in the Public Sector including Organs of State, chaired by the Deputy Chief Justice Raymond Zondo, he will instruct his Cabinet to conduct an audit of all contracts concluded between national departments and the specified company; if not, what is the position in this regard; if so, what are the relevant details?

NO323E

REPLY:

Honourable Members,

The Zondo Commission of Inquiry has a mandate to investigate and make findings on the nature and extent of corruption, if any, in the awarding of tenders and contracts by government entities.

According to its terms of reference, the Commission is expected to establish, in particular:

"...whether any member of the National Executive (including the President), public official, functionary of any organ of state influenced the awarding of tenders to benefit themselves, their families or entities in which they held a personal interest."

It is important to note that the work of the Commission continues.

It should be allowed to fulfil its mandate and present a report on its findings on these and other matters.

This does not prevent the relevant authorities, where any instances or allegations of unlawfulness are revealed at the Commission, from taking any necessary steps in terms of the law.

Nor does it prevent any government department or agency from reviewing any contracts entered into with companies implicated in testimony before the Commission.

In doing so, public entities need to follow due process and act within the law, understanding that some of the testimony provided at the Commission has yet to be subjected to cross-examination and that the Commission has not yet made any findings on that testimony.

In the particular instance of African Global Operations, some departments - such as the Department of Correctional Services - have initiated a review of its contracts with the company.

Where there is evidence to suggest possible corruption in the award of tenders - to African Global Operations or any other company - public entities are urged to initiate a review of those contract and provide all necessary information to the relevant law enforcement authority.

This is part of the necessary work being undertaken to end state capture and corruption, hold those responsible to account but more importantly, to recover monies stolen from the state.

I thank you.

QUESTION 3

3. Mr J S Malema (EFF) to ask the President of the Republic:

With reference to his undertaking during the State of the Nation Address on 7 February 2019 that the Government must without delay take measures to stabilise Eskom's finances, ensure security of electricity supply and establish the basis for long-term sustainability,

(a) what is the total cost to Eskom of the independent power producers that signed the latest round of power purchasing agreements (PPAs) with Eskom and

(b) has he found that the costs of the PPAs will collapse the power utility if not cancelled immediately?

NO419E

REPLY

Honourable Members,

The severe financial and operational challenges currently being experienced by Eskom are not caused by the independent power producers programme, and in particular the renewable energy projects.

Eskom's challenges have been driven by massive cost and time overruns on the new build programme, the effects of state capture and corruption, collapse in governance, unsustainable debt levels and poor maintenance of plants.

The independent power producers - or IPPs - are investing their own debt and equity to construct these projects, including the cost of connecting these power projects to the grid.

The value of the 27 independent power producers agreements signed in April 2018, represented in terms of private sector investment, is R57 billion.

To date, the total value of private investment in South Africa's renewable energy generation capacity is R202 billion.

It is expected that a total of 372 MW will be connected to the grid between now and March 2020 and that Eskom will buy R170 millions of electricity in the 2019/2020 financial year.

These IPP costs are fully covered by Nersa, the regulator, through the cost recovery mechanism in the multi-year-price-determination process.

In other words, the costs that Eskom incurs in buying electricity from the IPPs are recovered in the tariff set by the regulator.

The costs of the most recent power purchase agreements will only be incurred when these plants are constructed and connected to the grid.

The costs will therefore certainly not collapse the power utility.

With each successive round of the renewable energy IPP programme, the cost of electricity has dropped substantially.

In the most recent round, for example, prices for wind were down to around 62c per kilowatt hour, which compares favourably with Eskom's average cost of supply.

It is estimated that the renewable energy IPPP round will likely deliver prices below 50c per kilowatt hour, which is below the cost of running many of Eskom's coal power stations.

This means that these and future IPPs are likely to contribute to lower electricity prices, which will benefit the poor in the main and encourage economic growth.

The renewable energy IPPs have assisted Eskom in improving security of supply without putting a drain on its balance sheet or cash flows.

These projects ensure that new generation capacity is brought online within a short time frame - at a time when it is much needed - without requiring capital investment by Eskom.

Therefore, the continuously decreasing prices of renewable energy will be invaluable in meeting our climate change commitments, in complementing coal-fired electricity and decreasing the average cost of electricity to consumers.

As the draft Integrated Resource Plan outlines, South Africa will continue to generate electricity from a mixture of energy sources.

I thank you.

QUESTION 4

4. Mr F Z Majola (ANC) to ask the President of the Republic:

With reference to his address to the Investing in African Mining Indaba on 5 February 2019, during which he referred to the operational, financial and structural challenges that Eskom is facing,

(a) what are the details of the proposed restructuring of Eskom and
(b) what is the intended restructuring likely to address in the current energy crisis in the country?

NO310E

REPLY:

Honourable Members,

As we have indicated before, Eskom faces serious financial, structural and operational challenges.

Working closely with Eskom, we have embarked on a range of measures to respond decisively and with urgency to these challenges.

To support Eskom's financial turnaround plan, which focuses on driving efficiency and reducing costs, government has allocated R23 billion a year for the next three years to support Eskom during its reconfiguration.

In turning its operations around, Eskom has developed a plan that focuses on resolving unplanned breakdowns, addressing the performance and reliability challenges affecting the new units at Medupi and Kusile, improving coal stocks and strengthening human resource capacity.

Alongside these direct interventions, the plan is to restructure Eskom into separate state-owned entities responsible for generation, transmission and distribution.

This proposed restructuring is in line with the 1998 Energy Policy White Paper.

Contrary to what some have claimed restructuring will not result in the privatisation of Eskom.

The main benefit of separation will be to improve financial management and ability to raise funding as well as transparency, and being able to mitigate and distribute risks and strengthen incentives for efficiency.

The process will enable greater management attention to be focused on turning around the different parts of the business and enhance accountability.

In the longer term, the restructuring of Eskom will position the electricity sector to embrace new technologies, distributed generation and respond to other changes taking place in the electricity sector.

It will help to diversify the generation of electricity across a multitude of power producers, thereby reducing the country's reliance on a single supplier.

It will lead to greater competition in the electricity market that is expected to drive improvements in efficiency and put downward pressure on prices.

It will allow lenders to separately fund the different components of the business, allowing debt to be priced more tightly, as it more accurately reflects the unique risks of each individual business.

As we've indicated before, the restructuring of Eskom will not address the immediate financial and operational difficulties, but it will lay the foundation for the sustainable, reliable and efficient generation of electricity into the future.

The crisis at Eskom requires interventions on a range of fronts, including immediate measures to correct the structural weaknesses that have contributed much to the current situation.

I thank you.

QUESTION 5:

5. Inkosi E M Buthelezi (IFP) to ask the President of the Republic:

Since his reply to oral question 5 on 14 March 2018, on the Cabinet Committee's recommendation to amend Chapters 7 and 12 of the Constitution to protect the role, powers and functions of traditional leaders, what progress has been made by the Government, in consultation with traditional leaders, to develop a single piece of legislation within which to enshrine the role, powers and functions of traditional leaders in the absence of such an amendment to the Constitution?

NO322E

REPLY:

Honourable Members,

The Department of Traditional Affairs, together with representatives of the National House of Traditional Leaders, have established a task team, led by Nkosi Nonkonyana, to make proposals on the powers and functions of traditional leaders and any amendments to legislation.

To date, the Department of Traditional Affairs has developed a draft discussion document.

The Department, working together with the National House of Traditional Leaders, has also appointed a constitutional law expert to do further research on this matter and finalise the discussion document.

This research requires a study of all relevant legislation and an international comparison on how other countries have approached this issue.

Once the research and the discussion document are finalised, all stakeholders will be consulted on the proposals.

We look forward to the outcomes of this work, which will greatly assist in reaching agreement and finality on an issue that is important not only for traditional leaders and traditional communities, but for all South Africans

I thank you.

QUESTION 6:

6. Mr A M Shaik Emam (NFP) to ask the President of the Republic:

With reference to the reply of the Minister of International Relations and Cooperation on 14 November 2018, what progress has the Government made in downgrading the South African Embassy in Israel to a liaison office?

NO420E

REPLY:

Honourable Members,

Government is in the process of giving effect to a resolution of the governing party that South Africa should downgrade its embassy in Israel.

Our approach is informed by our concern at the ongoing violation of the right of the Palestinian people to self-determination and the refusal of the government of Israel to enter into meaningful negotiations to find a just and peaceful resolution to this conflict.

We are also concerned about the resurgence of confrontation and conflict in the region and about the grave humanitarian cost of further intransigence.

Our approach is also informed by an appreciation of the constructive role South Africa is being called upon to play in the quest for peace in the Middle East.

We are clear on our support for the achievement of the Palestinian state, alongside the right of the state of Israel to exist in peace and security with its neighbours.

In implementing this conference resolution, we are mindful of South Africa's responsibility to continue engaging with all parties to the conflict to see where we would be able to provide assistance.

As such, the South African government remains seized with the modalities of the downgrading process of the South African Embassy in Israel, and we will communicate once Cabinet has fully engaged on this matter.

I thank you.