Prepared at the Mineral & Energy Policy Workshop, NUM Training Centre, Johannesburg, 12/13 November 1994
NOTE: This is a discussion document and not official ANC or Alliance Policy!
This Discussion Document was generated at the Minerals & Energy Policy Workshop held in Johannesburg in November 1994 and attended by ANC delegates from HQ and all regions, ANC Parliamentarians, the Minerals and Energy Group, the National Union of Mineworkers, the Chemical Workers Industrial Union, the Women Energy Group, the Land & Agriculture Policy Centre and the Minerals & Energy Policy Centre.
MINERALS
Introduction to Minerals Policy in South Africa
GOVERNANCE OF THE MINERALS SECTOR.
MINERALS DEVELOPMENT
HUMAN RESOURCES
ENERGY
Introduction to Energy Policy in South Africa
Mining has been important to the peoples of southern Africa for a long time. One of the oldest mines in the world is in this region at Ngwenya (Swaziland) where haemetite and specularite were mined for paint. This ancient working has been dated at more than 40,000 years old. Iron mining and smelting sites are common across the subcontinent dating from 2,000 years ago and over 4,000 gold workings have been identified dating from as far back as 1,400 years ago. There are over 500 base metal workings, particularly copper, in the region and copper mining at Phalaborwa started about 1,300 years ago and on the Copperbelt of Zambia and Zaire about 1,200 years ago. It is estimated that southern Africa was the world's largest gold producer in the 13th Century, a position it only regained this Century.
Today South Africa can broadly be defined as a minerals economy with low levels of mineral fabrication in that most minerals are exported as ores, alloys or metals rather than high value intermediate or finished products. South Africa is exceptionally well-endowed with mineral resources and possesses almost all the minerals necessary for a mineral-based industrialisation strategy. Moreover the subcontinent (southern Africa) has complete mineral resource integrity. These vast mineral resources could provide the basis for sustainable industrial development by being further beneficiated into intermediate and finished products for the local, regional and overseas markets. Such a value-added policy would have a significant impact on forex earnings, employment, state revenue and service industries.
Although South Africa is exceptionally rich in mineral resources, the vast majority of its people live in poverty. The impressive mineral wealth has not increased the life chances of the people, instead, under the racist, colonial and settler regimes the fruits of mineral exploitation have gone almost exclusively to the small white sector of the population.
Since the discovery of diamonds in the Cape and the Witwatersrand gold in the Transvaal the mining industry's role changed from being the source of raw materials for the local economy to being the source of raw materials for the colonial metropolitan economies and this situation continues much the same today. This export oriented mining sector has become the cornerstone of the modern South African economy and makes a major contribution in the following crucial areas:
In 1993, the mining industry contributed 9% of GDP (R30 billion) and during the eighties averaged 15%. In the same year mining contributed about 10% to gross national fixed investment (average 12.1% from 1980-91) and in total mineral production was about R47 billion (about 15 bn USD), about two-thirds from gold output. Unfortunately, the smelting and refining (beneficiation) of some minerals comes under mining (eg copper, nickel and tin) while for others it is grouped under manufacturing, thus it is difficult to separate mining from beneficiation and beneficiation from manufacturing. However, if beneficiated mineral-based products such as ferroalloys and steel are included, the mining industry's share of GDP and GNFI would be significantly higher (15-20% of GDP).
In 1993 mineral exports were valued at R38 billion, half of total exports of R78 billion, and 80% of mineral sales of R47 billion. On average, minerals contributed 60% of national exports in the eighties, 69% of which was gold and if certain processed mineral-based products such as ferroalloys (but not steel) are included, the mining industry's share of exports averaged two-thirds. Direct government revenue from mining was only 1.1 billion Rand in 1993, a mere 1.5% of total revenue, down from 13% in 1987 due to the crisis in gold mining.
From 1980 to 1991 mining directly contributed on average 11.5% to State receipts, 80% from gold mining. From 1913 to 1990 gold mining alone contributed on average 8.3% of total government revenue, but this has recently fallen off drastically due weak mineral prices, particularly gold. However, if all the indirect taxes paid by the industry were included, such as regional taxes, employees tax, sales tax, excise, duties, mining supplier and contractors company tax and foreign shareholders dividends tax, the contribution to the fiscus would be substantially higher.
The South African economy is vertically integrated into the economies of the developed nations and almost all mineral production is exported, either in a crude form (77% of mineral sales) or in a beneficiated form (mainly ferroalloys and steel) and is not used by local industry for further transformation into finished products. Mining profits have historically provided the capital for the development of the other sectors of the economy, particularly the manufacturing sector. The mining sector is the largest earner of foreign exchange and other sectors, such as manufacturing, rely heavily on the mining industry to supply forex for their essential imported inputs, particularly capital goods. The manufacturing sector is a net forex consumer, although there are some exports of capital goods, particularly mining equipment.
Although the manufacturing sector is dependent on the minerals and agricultural sector for forex, it is also limited by the primary commodity sectors as these sectors, due to their economic integration into the industrialised economies with declining terms of trade, pay relatively low wages (determined to a large degree by international commodity prices) and thus limit the domestic market for manufactured goods.
South Africa has been blessed with an exceptional mineral resource endowment and has been aptly described as a country of "geological superlatives" and is arguably the richest geological terrain in the world, excluding hydrocarbons. These resources are mainly concentrated in only six geological units, namely:
The following table gives South Africa's position in world mineral reserves. For six major minerals South Africa has the world's largest reserves, namely, manganese, the platinum group metals (PGMs), chromium, vanadium, gold and alumino-silicates. For another six minerals, South African reserves rank in the top four. In addition, South Africa has vast reserves for many other minerals such as iron ore, coal and base metals.
| Mineral Reserves | % | West | % | World Rank* |
| Manganese(metal) | 4.0 | Gt90 | 82 | 1 |
| Platinum Group Metals | 30.2 | kt 85 | 78 | 1 |
| Chromium (ore) | 2.4 | Gt 58 | 56 | 1 |
| Vanadium (metal) | 7.8 | Mt 64 | 47 | 1 |
| Gold (metal) | 20.0 | kt 53 | 44 | 1 |
| Alumino-silicates(ore) | 51.6 | Mt 47 | 37 | 1 |
| Diamonds | 360.0 | Mcts 27 | 24 | 2 |
| Zirconium (metal) | 6.9 | Mt 16 | 14 | 2 |
| Uranium (metal) | 317.0 | kt 13 | N/A | 3 or 4 |
| Fluorspar (CaF2) | 32.0 | Mt 30 | 11 | 3 |
| Titanium (metal) | 31.1 | Mt 12 | 11 | 4 |
| Coal (recoverable) | 58.4 | Gt 20 | 10 | 4 |
| Nickel (metal) | 11.4 | Mt 12 | 10 | 6 |
In general the mineral potential has been realised and mineral production reflects mineral reserves. By far the most important mineral in terms of value is gold. This is followed by coal, platinum, diamonds, iron ore and copper. However many of these minerals are beneficiated before export in which case the order would be gold, iron and steel, PGMs (and byproducts), coal and ferro-alloys. In terms of global output the minerals for which South Africa's share is greater than one-fifth are: platinum (67%), rhodium (63%), vanadium (50%), chromium (38%), palladium (31%), gold (28%) and titanium (22%).
In the past, the exploitation of South Africa's vast mineral resources predominantly went to the betterment of the small white minority. Within the mining industry, black South Africans were limited by a plethora of racist legislation (job reservation). A black South African could not even become a miner until a few years ago. In addition, the surplus generated from mining went to the whites-only mining companies as black entrepreneurs had been excluded from mining since the discovery diamonds in Kimberly in the 1860's. Today there is not a single black mining company and the industry is dominated by four large mining houses that account for well over three-quarters of mineral production. These are Anglo-American, Gencor, Gold Fields and Anglovaal. Other mining companies are Sasol, the oil-from-coal corporation, Iscor (iron and steel) and two international mining companies, RTZ and Lonrho. Government revenue accruing from mining went predominantly to improve the life chances of the small white minority via racially biased social spending in areas such as health, education and social welfare.
With the attainment of democracy in South Africa the mining industry will finally come to benefit all of its people. Government revenue will now be spent on the basis of need rather than colour, all racist legislation restricting the mobility of workers in the industry has been removed and the industry together with government and the unions are embarking on a programme of training and re-training of workers and reassessing the system of job categorisation.
However, changing the racially-skewed ownership patterns of the industry will be a slow process. There are major limitations to new entrants in the industry other than via the purchase of an existing mining company. This is due to the fact that, unlike most of the rest of the world, in South Africa mineral rights are predominantly privately owned over the most prospective mineral terrains, generally by the large white mining houses. The new democratic government of national unity is committed to exploring ways of easing up access to mineral rights for both new domestic investors and foreign investors.
Direct employment in mining peaked in 1986 at 833,000 workers. Since then it has steadily fallen to about 600,000 in 1994. Most of the losses were in the gold mining industry which employed 390,000 workers in 1993. However, in the face of these huge retrenchments the principal union, the National Union of Mineworkers (NUM), was able to steadily increase its influence and membership by unionising a greater proportion of the workforce from about 200,000 in 1986 to 311,000 in 1994.
The general tendency in the formal mining sector will be towards an increase in mineral production per worker across the industry due to greater mechanisation and improved work practices, particularly in a post-apartheid situation. This will cause a shrinkage of the labour force which will be aggravated by the downscaling of the gold mining industry which could shed a further 100 to 250 thousand workers over the next three decades (rapidly or slowly).
However, there could be some employment growth over the same period if predictions for world platinum demand are fulfilled. Employment for other minerals is likely to remain constant with growth in volumes being offset by increases in productivity. The only other area with significant employment potential, would be the micro, small and medium scale mining sector, but this would require a change in the mineral rights system and a major commitment on the part of the state to supporting such a programme. Thus, a combination of PGM employment expansion and a vigorous small scale mining promotion could conceivably compensate for some of the labour shedding in gold mining.
ANC mineral policy is centered on the Freedom Charter of 1955 which states that:
"The People shall share in the country's wealth", and that
"The mineral wealth beneath the soil ... shall be transferred to the people as a whole."
This was amplified at the Ready to Govern Conference in 1992 which stated:
"The mineral wealth beneath the soil is the national heritage of all South Africans, including future generations. As a diminishing resource it should be used with due regard to socio-economic needs and environmental conservation. The ANC will, in consultation with unions and employers, introduce a mining strategy which will involve the introduction of a new system of taxation, financing, mineral rights and leasing. The strategy will require the normalisation of miners' living and working conditions, with full trade union rights and an end to private security forces on the mines. In addition, the strategy will, where appropriate, involve public ownership and joint ventures.
Policies will be developed to integrate the mining industry with other sectors of the economy by encouraging mineral beneficiation and the creation of a world class mining and mineral processing capital goods industry."
The key policy themes are firstly that minerals in the ground are part of the nation's wealth, that workers and the nation should get their fair share of the wealth generated and that minerals mined are integrated into the rest of the economy through further processing (beneficiation) before export.
The ANC's minerals policy was significantly further developed at the Reconstruction and Development Programme Conference in February 1994, together with the Alliance Partners, which adopted the following 14 policy points:
This document constituted the the basis for the formulation of the following 19 discussion points developed at the ANC and alliance partners Minerals & Energy Policy Workshop.
The key themes are:
In order to promote, support and regulate minerals and mining it is essential that government institutions are competent and efficient. Exploration and mining are high risk businesses and consequently it is important that individuals and companies are confident in their dealings with state institutions and that decisions are made timeosly and efficiently. If contracts are to be negotiated and investment mobilised it will be important that institutions respond rapidly and professionally.
In South Africa there has been significant white private sector involvement in the minerals and mining sector. Consequently the mining ministry has tended to take a back seat to the much more influential industries represented for example by finance and trade. Equally the functions of this ministry have become one of policing and regulating the industry and there has been little emphasis on promotion of minerals and mining. As a result government departments, and statutory bodies have tended to be looked upon as unhelpful bureaucrats who frequently became obstacles to ongoing and effective policy reform and new commercial endeavour. The private mining companies also played the role of promoters and salesmen for the industry, and although much good was done and South Africa has a highly developed large scale mining industry, very often the needs of individuals and communities, and the state were overlooked or ignored.
A major problem of the present South African institutional system is that a considerable amount of geological data and information is locked up in company files and there is no adequate state repository of all the geological work and allied data and information, done and compiled over many years in South Africa. Equally South Africa has a series of fragmented and unrelated institutions all providing some form of minerals and mining services, in some cases with duplication of effort.
A healthy balance is required between state controlled functions carried out by appropriate institutions and private sector activities. In this respect, the Mining Summit could be revived as a National Forum to give new life to the process of developing the industry with the invovlement of all sectors of the community. This would faciltate the balance of interests of all stakeholders, not only the State and the private sector. However, the Summit should be broadened to include all stakeholders including communities affected by mining.
There should be a small number of adequately funded and equipped institutions with well defined roles, professional staff, and well defined decision making processes.
In addition to the Department of Mineral and Energy Affairs, and the exisiting sicence councils, viz Mintek, Geosciences Council and the CSIR, state agencies should be introduced. While the DMEA has primarily a regulatory function, the role of the Agencies would be primarily promotional. Proposed promotional agencies are:
- Research and Development Agency
- Small Mines Bureau
- Envuironmental Management Agency
- Human Resources Development Agency
The Governance of the mining industry involves a number of players apart from the Department of Mineral and Energy Affairs (DMEA). Other State Departments that have a primary influence on the industry are Environment, Water Affairs, Finance, Labour and many others. However, it is the DMEA which has the central role in governance. It is stated ANC policy to stimulate the mining industry through reviewing the ownership of mineral rights, encouraging foreign and local investment, and encouraging minerals beneficiation.
The DMEA has traditionally served the large scale mining industry over the last century, in which the laws have in essence not changed significantly. A revitalised mining industry will need creative new government policies, which will require a re-orientated DMEA to initiate progressive policies and catalyse change.
The issues that arise with the DMEA are both structural and functional. The issues are:
The span of control of the department is stretched in some areas, and the reintroduction of sub-offices or commissioners offices needs to be considered in order to provide support to RDP projects.
The redefinition of the DMEA regions according to geological rather than political boundaries.
Affirmative action and alternative influences in the department need to be facilitated as a matter of urgency;
A development branch for the department needs to be investigated and specified. This should include a capacity to promote investment.
One-stop interdepartmental planning for health and safety and environmental regulation needs to be introduced. In addition the advisability of removing responsibility for these areas from the DMEA needs to be investigated as there could be tensions between the role of minerals development and that of maintaining health, safety and environmental standards.
Union representation on SIMRAC should be established as a matter of urgency.
A programme for upgrading the health & safety inspectorate needs to be introduced as soon as possible. In this respect conditions of employment and remuneration of the inspectorate needs to be revised.
The inspectorate needs to be opened up to experienced miners with significant experience but lacking the pre-requisite qualifications. This could be achieved by having different grades of inspectors for different sectors and size of mine, and by introducing a development programme for inspectors not having the necessary qualifications.
Mineral-specific inspectorates should be introduced in order that they specialise in their sectors, eg coal, deep-level gold, marine diamonds, etc.
The current budget of the department would be adequate if the allocation to the AEC were to be radically reduced. This would allow the department to increase its effectiveness in terms of both regulation and as an agent for development of the industry.
Mining has been important to the economies of southern Africa for the past two millenia and the minerals industry has supported South Africa's economy since its creation as a state in 1910. The focus of the minerals industry has been very much on large scale mining, primarily gold, diamonds, platinum, coal, iron ore, manganese and an assortment of other base minerals.
However, it should always be borne in mind that minerals are a non-renewable resource (or a wasting asset) that must be carefully husbanded to give maximum service to the nation, including future generations.
The country is relatively well explored and it is unlikely that new major deposits will be found. While iron ore, coal, the platinum group metals and chromite have a long term future, the gold mining and diamond mining industries are mature and will decline in the longer term. As these two minerals represent about two-thirds of total value, employment and contribution to the balance of payments and other aspects of the economy, this presents a major economic and political problem for the future. Awareness of this problem and farsighted planning around the downscaling of the industry is essential. The priorities facing the industry include:
- management of the downscaling of the industry in terms of employment;
- the extension of the life of what mineral resources remain;
- the discovery of new resources through investment in exploration;
- the exploitation of known, but unexploited, mineral deposits;
- increased focus on the optimisation of mineral exploitation;
- increased incentives to add value to minerals prior to export, and disincentives for exporting unbeneficiated ores.
Measures to enhance the optimal exploration and exploitation of all mineral resources need to be devised. The current legislation neither defines what is meant by optimal mining, nor has sufficient powers to enforce optimal mining practices. Incentives and disincentives need to be built into the tax and royalties regime to encourage optimal mining (at the lowest possible cut-off grades) and the optimal use of South Africa's minerals (through beneficiation before exports). In this regard consideration should be given to the extension of the gold formula tax to other mining and the imposition of a small royalty that decreased depending on the stage of beneficiation before export.
A national plan to address all aspects of downscaling of the industry, including the question of sustainable development to replace the declining contribution of mining to the economy and the use of infrastructure created around mining operations after cessation of mining. Such a plan should also include measures to promote the reskilling of redundant mine labour.
Closure planning incorporating sustainable development around mining infrastructure; redeployment of the work force; reskilling and social reconstrcution should be a pre-requisite for mining authorisation in much the same manner as the EMPR is in terms of environmental planning and management.
In respect of closure planning, a closure fund for displaced workers should also be introduced in the same fashion as mine-specific rehabilitation funds are required to be in place for mining authorisation to be granted.
Minerals are one part of a country's natural wealth or patrimony for which users must pay rent to the `people' or state to deplete (mine). The State derives its share of rent from the industry through both the taxation levied on the industry, as well as income from rentals on State-owned mineral rights. Such rentals are in effect what are termed royalties elsewhere in the world where the mineral rights belong to the state. Royaties to compensate the state for the depletion of its mineral wealth are generally calculated on the volume or value (sales) of the mineral mined. In the past South Africa had a lease tax that was imposed to this end but which was scrapped in the new Minerals Act of 1991.
Funding the RDP and other government programmes requires collecting more tax. This can be done by raising tax rates or, preferably, increasing the tax base in the following ways. First, by providing incentives that will stimulate the industry and bring new mines into production. Secondly, by encouraging the return of mineral rights to the State, revenues from rentals for access to these rights will be increased. Thirdly, by introducing a Minerals Rights Tax which would serve both to increase revenues to the fiscus, as well as encouraging exploration activity and the possibility of new mines.
With the exception of gold mines, mines are subject to the same tax regime as other industries. Gold mines are not taxed on a flat rate, as are other mines, but are taxed by means on a tax formula. The tax formula for gold mines was first introduced in 1936 with a view to encouraging the mining of marginal ores at deeper levels by easing the tax burden on the less profitable mines in order to increase the profit to revenue ratios, and hence the return on investment. In doing this it introduced an element of cross-subsidisation from the more profitable mines by increasing the State's share of profits from these mines, while reducing its share from the less profitable mines.
The system of variable taxation linked to profitability has allowed the gold mines to successfully negotiate difficult periods and has given the state a reasonable share of winfall rent and differential rent. In this respect, the formula has been very successful. It is desirable that the extension of formula tax to non-gold mines be investigated as a means for stimulating the industry as well as ensuring its long term survival and for giving the state a fair share of mining rents. The taxation level must be reasonable both to promote international and domestic investments and to ensure that a proper share of the rent goes back to the State.
Mines tend to be capital intensive with very long lead times. Thus the cost of capital is a crucial element in the viability of new projects and should continue to be ameliorated through the current system of immediate write-off in the first year of operation with the balance carried over to the next year, but the effect of inflation on the size of the write-offs needs to be taken into account. As mineral refining and beneficiation projects also have long lead times, this system should be extended to cover their capital expenditure, rather than the old system of giving immediate negotiable tax write-offs (37E) which could severely compromise the fiscus and the RDP.
To consider a Mineral Rights Tax on privately held mineral rights that could be offset against any exploration expenditure.
To consider the imposition of a small levy on all minerals extracted, based on the tonnage removed (depleted). Such levies should be low so as not to inordinantly raise the investment threshold and should be mineral specific.
To consider the application of a small beneficiation related levy on all minerals exported, at a declining rate depending on the degree of beneficiation (zero for the export of metals).
To consider the extension formula taxation all mining (not just gold and uranium), but with mineral specific formulas.
To reassess ring fencing in order to encourage development of otherwise uneconomic mineral deposits. However, the removal of ring fencing should be qualified and discretionary.
To consider the increase of the tax deductable capital at the rate of inflation from the year of expenditure to the year of write-off, to compensate for the effects of inflation on the cost of capital.
To extend the gold mining inflated capital write-off system to other mining as well as mineral beneficiation projects (rather tha a re-introduction of 37E).
To expand the industry tax base by promoting minerals development through encouraging foreign and local investment in exploration and mining by introducing creative minerals tax incentives that could include greater than 100% write-offs and, possibly, flow-through share schemes.
The economic and social impact of the above policies should be investigated to ensure that the overall goals of growing the industry's contribution to national well-being are achieved.
In the significant control exercised by a small group of shareholders, often families, who control the major mining houses that dominate the South African economy there is nothing that better represents the inequalities in personal wealth and economic power that is South Africa. This central feature of the modern economy originated in the racist ownership patterns that grew in the diamond and later gold mining industries founded over a century ago.
The major mining houses: Anglo American, Gencor, Gold Fields and Anglovaal dominate the South African economy. In the mining houses are found a unique form of corporate structure that is tightly bound up with a sophisticated financial service sector. Each of the major mining houses holds an extensive portfolio of industrial interests in an industrial holding company with its own group of financial institutions. Control is exercised by pyramid structures of strategic holdings in subsidiary companies, cross holdings and interlocking directorships that tie together the majors and extend their control to all aspects of the economy.
It is unconscionable that racially exclusive ownership of the mining industry shall continue in a political democracy. Black ownership and participation in so central a part of the economy as the mining industry is essential for this country's development as a democracy.
Conglomerate size in itself is not important, large well-resourced groups are necessary for South African firms to compete internationally, so size is not grounds for criticism.
Market structures arising from conglomerate domination contain some critical problems as they result in oligopolistic markets, and contrary to examples of vigorous competition between large conglomerates in their own domestic markets such as in Korea and Japan, key product markets have become in effect dominated by single firms. What has happened in South Africa is that the conglomerates have turned to market sharing agreements through a range of collusive practices that carves up markets between themselves and results in collusion to refrain from competing in some markets in return for undisturbed operations on other, unrelated markets.
Measures to increase black participation and ownership in the mining industry will require a long term approach to mobilise the necessary capital and to acquire attractive operations.
Nationalisation is not necessarily an effective method to achieve equity and efficiency changes to the conglomerates and would divert scarce resources to compensate existing owners' constitutionally protected property rights.
1. Measures to promote the unbundling of the conglomerates, such as a prohibition on pyramid companies, should be investigated as a matter of urgency. Three objectives shall inform the investigation on unbundling:
2. Investigate measures to increase black ownership and participation in the mining industry.
3. Investigate measures to dilute control of the mining industry by a minority of shareholders and increase participation of a wider spread of citizens through measures such as effective employee share ownership schemes and management and worker buy-outs.
4. As change of ownership materially affects the conditions of employment of the workers, workers should be consulted on change of ownership developments.
5. Foreign as well as domestic ownership patterns should be transparent to all stakeholders.
6. The State should take a constructive interventionist role in altering the patterns of ownership in the industry, and promoting Black ownersip at all levels.
7. In this respect measures that could be taken could be:
Developing a research and development policy aimed at stimulating the minerals industry forms part of the bigger debate on Science and Technology Policy in South Africa. It is important that the economic importance of the minerals industry be recognised in this regard without allowing it to dominate the other areas of research. These issues need to be examined against the backdrop of the ongoing debate on the balance between applied and fundamental research.
A number of issues exist of which the most important include:
- the relatively large number of stakeholders representing a variety of disciplines;
- the relatively large number of mineral related R & D organisations resulting in a distinct lack of coordination.
- the present approach is of an extremely fragmented nature;
- the role of the State under the system of framework autonomy is perceived as unilateral restructuring of State funding and needs revisting;
- the role and responsibilities of University and Technikon Departments are indistinct.
R & D efforts should in the short term be focused on the needs of the present main stream industry's needs, particularly health and safety. More resources should be given to the new fields such as mineral beneficiation and small scale mining.
State influence over state funds spent on joint R&D projects with industry should be guaranteed.
The system of matching grants should be considered for funding R & D projects.
The present structure with many uncoordinated institutes and research organisations results in a sub-optimal use of scarce resources. A mining and mineral processing R & D commission, linked to the DMEA, consisting of all stakeholders, including the unions, needs to be created to coordinate the national effort and to ensure that the R & D carried out is compatible with the overall national objectives for the industry.
The issue of environmental management in the industry is at present largely neglected. Mines are by nature damaging to the environment, and until recently there has been little effective control over environmental management on mines. The Minerals Act of 1991 introduced, for the first time, law on environmental regulation and rehabilitation. The problems faced by the State in the management of mines which closed down prior to the promulgation of this Act, primarily the old coal and deep level gold mines, is sufficient motivation in itself to ensure that mines take responsibility for their own environmental management during the operation of the mine, and ensure that the property has been rehabilitated to the extent that it does not pose a threat to the physical environment and the community on closure.
The ANC's policy on environmental management, as expressed in it's document "An introduction to ANC Environmental Policy", states that the ANC believes that all citizens, present and future, have the right to a life of well being. Any environmental policy for the minerals industry must incorporate this fundamental philosophy.
The perceived geological potential of a country or region is the fundamental factor which may lead to minerals exploration, mining and investment. Given favourable geology and market demands, exploration and subsequent mining and associated developments will be determined and controlled by state policies and by the quality of the state infrastructures. If the policies and practices are poor, exploration and mining will suffer and not reach its potential in terms wealth and infrastructure generation.
Exploration is a critical phase in the location and mining of minerals. The first requirement is that the investor has access to mineral terrains to carry out exploration. It is also important that state institutions are able to provide potential investors and small operators with reliable and up to date geological and mineralogical information relating to areas of potential interest.
Similarly there should be easy access to other information such as legal, fiscal, environmental, health and safety requirements. All relevant information pertaining to earlier prospecting should be made readily accessible to new exploration companies and potential investors from a centralised facility, similar to the `One Window Approach' which has been successfully adopted by many states and countries that consider exploration and mining as key parts of their economies. In doing this, however, it is also relevant to consider the role of related institutions, primarily to ensure that their activities are all clearly defined, that duplication is minimal and that each one can function as efficiently as possible. The stock of exploration data available to new investors is a key aspect in the reduction of risk in an inherently risky sector.
Mining and mineral processing are, on the whole, high risk and capital intensive industries which require the mobilisation of large amounts of risk capital to get projects going. South Africa can benefit from foreign investment into mineral prospects, into energy projects and into mineral processing and beneficiation projects in several important ways. Foreign investment will reduce domestic capital shortages and spread risk. Foreign direct investment (FDI) is particularly important for three reasons: mining is a global industry and specialist expertise can be brought to bear upon a prospect by international corporations; organisational and production methods and management is introduced into the local industry with potentially invigorating effects; foreign companies bring with them links to other markets and new technology. In either form, new investment into South Africa will contribute to strengthening the capital account and will contribute much needed foreign exchange arising from sales and allow for imported inputs and the repatriation of profits.
In a world of competitive investment options, attracting investors into South Africa's mining and mineral processing industries requires addressing investor perceptions of mineral potential, risk and return. Three factors are important. First, account needs to be taken of the characteristics of mining finance in that risk levels are high, lead times to a return are frequently long and high and ongoing levels of capital investment required. Secondly, prospective investors need certainty in their ability to do business, and this can be largely assured by a well developed regulatory framework, usually referred to as a mining code. Thirdly, a country's economic and fiscal polices are critical issues upon which its relative attractiveness will be judged. Potential investors place a high premium on the maintenance of macro-economic stability, well developed infrastructure and in a consistent fiscal regime that compares favourably with other prospective investment sites.
Measures are required to attract investors through improving the investment climate of South Africa. Such measures include access to information, finance, the freeing up of mineral terrains for exploration, the creation of a suitable tax system and many others.
The state's role is to gather, collate and disseminate geological and mineral information to prospective investors. The practice of withholding of exploration information on land that is not currently being explored should be prohibited and replaced by a system that requires the submission of all exploration data to the relevant state authority.
Mining operations should be taxed as a special category. The taxation system developed for gold mining which takes account of varying profitability and promotes optimal mining, should be extended to cover non-gold mining as well.
The institutional framework for the mineral sector should include the establishment of a minerals promotion body, independent from the states regulatory bodies, charged with the task of disseminating information to potential investors and facilitating exploration and investment . The deployment of mineral attaches (councillors) should be considered for key countries.
South Africa's well established infrastructure with regard to research and development, mining equipment and services, finance and technical skills base should be marketed to promote investment in the sector.
Measures to attract foreign junior resource companies (JRCs) and to stimulate the development of local flexible medium sized mining companies are required. This can in part be addressed by widening access to prospective mineral terrains.
South Africa is amongst the worlds richest countries in terms of mineral wealth. This wealth is a key national heritage and the property of all South Africans. Current mineral rights laws have limited the optimal development of mining and appropriate use of urban land. It is the stated view of the ANC that private mineral rights should be returned to the democratic government, as is the case in the rest of the world, including those countries which have successful mining industries and in which small and large scale mining takes place side by side. Revision of mineral rights laws, and related statutes and institutional support mechanisms, must be done in full consultation with all stakeholders. Prospectors, miners and investors must be confident that their risk finance will not be jeopardised by changes in policy, and equally that the allocation and tenure of mineral rights will be properly managed.
Aside from the USA, South Africa and a few exceptions elsewhere for specific minerals, most countries assume public ownership of minerals. The United Nations passed various resolutions on these issues in the 1960's and most African States have adopted the approach of "Permanent Sovereignty" over their mineral resources. Importantly this does not prevent the allocation of secure title to mining rights to private parties, nor does it imply that rights cannot be tradable. It does however establish that the State can charge for access to the resource and that it has a legitimate interest in the manner of its exploration and expoitation.
The international trend over the last forty years has been towards public ownership of mineral rights. This has variously been achieved through the introduction of mineral rights taxes as well as several forms of expropriation.
Security and continuity of tenure for mineral exploration and mining is essential to encourage high-risk exploration and to ensure that companies marshal large sums of money to undertake mining.
Investors need to be assured of the right to proceed from exploration to mining provided pre-defined criteria are met.
Mining licenses must be of sufficient duration to make exploration and development commitments worthwhile.
The practice of freezing potential mineral wealth in areas of privately owned mineral rights should be discouraged. The imposition of a mineral rights tax, that would be deductable against any exploration expenditure, should be considered. If the private owner of mineral rights abandoned them to the state he/she should have first option on an exploration license over the same area, in exchange for submitting all past exploration data on the property.
Where the state is the holder of mineral rights, a system of licenses or rights should be introduced consisting of exploration and mining licenses with defined periods and work commitments, which will ensure a turnover of exploration properties and encourage new investors. The minimum work requirements should be substantially less than the mineral rights tax to encourage the return of privately held rights to the public domain.
The power to grant mineral licenses should reside with one authority and not be subject to overlapping or concurrent jurisdictions (the lack of clear rules will hinder the orderly development of mining).
To prevent monopolization of territory it may be necessary to limit the number of licenses that can be granted to any one company or group of related companies.
South Africa has a noticeably inactive micro and small scale mining sector principally due to the following factors:
The introduction of small scale mining in South Africa would achieve both political and economic objectives of the ANC. The political objective is to address the imbalances of ownership in the mining industry (empowerment of the historically disadvantaged South Africans, hence availing opportunities to own and run mining ventures to all, regardless of race or educational standard), provision of skills and the revitalisation of the entrepreneurial spirit in South Africa in particular and the southern African region in general. The economic objective is to ensure better utilisation of the mineral deposits in SA, by the exploitation of scattered, numerous, otherwise uneconomic mineral resources.
The small scale mining support system should include financial schemes, technical advice, exploration support, marketing research, R & D aid, technical, financial and managerial training, mineral processing support, organisational structures and the recommendations and monitoring of environmental issues, health and safety systems.
The current mineral rights dispensation in South Africa will have to be changed if small scale mining is to be promoted. The problem of access to mineral rights could be addressed in the short term by direct negotiations with the current holders, and in the medium term by the introduction of a system which will ensure that the mineral rights revert back to the state, such as a tax.
A system of licences or rights with a specified time period could be immediately introduced over state held mineral rights to avoid sterilisation of our mineral resources. In addition, the creation of special mining zones, with exploration and mining regimes that are friendly to the small operator, over terrains with high small scale mining potential should be considered.
Further investigation could be carried out into the utilisation of old currently uneconomic mines and mine dumps by small operators who might have lower overhead costs.
A proper institutional framework is a prerequisite to the establishment of a viable and sustainable small scale mining sector in South Africa. The current proposal of the ANC is the establishment of the Small Mines Bureau (SMB). The SMB will play a facilitating , co-ordinating, and supporting role to the small mining enterprises, by networking with and mobilising funds from the existing government structures (DMEA, Geoscience Council, Mintek, CSIR, IDC, etc.) and the private sector. The SMB would categorise small mining ventures and recommend the appropriate level and type of support that is required. The policy on small scale mining goes beyond the narrow focus of mining as end itself and recommend that small scale mining should be used as a vehicle and nucleus around which other small manufacturing enterprises could be established. The SMB would be a structure well positioned to facilitate the establishment of these SME complexes.
The small scale mining support system should include financial schemes, technical advice, exploration support, marketing research, R & D aid, technical, financial and managerial training, mineral processing support, organisational structures and the recommendations and monitoring of environmental issues, health and safety systems.
A comprehensive support system will go a long way towards encouraging small scale operators to cooperate with the state, thereby resolving to some degree the common problem of "illegality" of mining SMEs.
Special attention should be given to the well-known problems of environmental degradation associated with small and micro scale mining. In this regard special rehabilitation funds covering small scale mining zones with a small levy on sales could be considered.
South Africa is blessed with abundant minerals resources, to an extent that its economy is commonly termed a minerals based economy. The minerals contribution to the GDP and exports reflects this dominant role. Minerals and mineral products are South Africa's largest earner of foreign exchange. The overall policy objectives are to extend the international competitiveness of this industry, to improve transport facilities and to lower transport costs, to do away with unnecessary protectionist measures, to encourage minerals beneficiation as a drive to industrialisation and to reduce transfer pricing practices.
Mining involves exploitation of a wasting resource and therefore bears the implications of a limited life span. Investment in exploration and mining beneficiation is required to sustain and expand South Africa's mineral exports. Minerals exporters will need to avoid retaliatory measures from ore importers when they engage in exporting more beneficiated products.
The export marketing efforts of certain companies may result in lower prices being realised due to competition among South Africa producers. Larger market shares may be realised through increased marketing co-operation between producers of similar products. Counteracting this tendency there is the security of supply from the consumer point of view which can be perceived to decrease when marketing co-ordination is introduced.
The South African minerals industry will have to measure up to international competitiveness in term of productivity and quality standards for it to expand its exports in the long term.
The promotion of SA mineral products internationally will need to be strengthened through review of barriers to mineral exports including inefficiently operated and high cost rail transport and ports. All measures still in place which prevented the opening up of trade should be reviewed, and foreign governments be requested to review and remove legislative and administrative restrictions imposed during the sanctions era.
The extent to which all types of capital transfer may take place, which results in lower state revenue and reduced export earnings, should be researched and, if necessary, policy developed to address problems that may be identified.
The RDP calls for a Minerals Marketing Audit Office to limit transfer pricing in the export of minerals. The optimal location of such an office should be investigated.
A review of current pricing policies and practices within Spoornet and Portnet should be undertaken with a view to facilitate mineral exports.
As a means to increase foreign exchange earnings, the issue of co-ordinated marketing of certain commodities should be carefully researched.
The opportunities to increase the global consumption of certain minerals and metals produced in South Africa by joint marketing and promotion efforts (e.g. The World Gold Council), and R&D should be encouraged. In this regard the funding of such efforts via a small levy on sales should be considered.
Mining is a primary industry that exploits a national asset, part of the wealth of present and future generations. Through adding value or beneficiating mineral resources a country can maximise the economic rent it derives from the asset, develop its economy and stimulate economic growth from its mineral sectors. The export of unbeneficiated ores is often sub-optimal use of a wasting national asset.
A considerable amount of South Africa's mineral resources are exported as raw ores or only partially processed. South Africa has steadily improved its ratio of beneficiated to primary products exported since the 1970s, but these ratios are still well below the potential suggested by the quality and quantity of its mineral resources.
South Africa has the potential to raise the proportion of mineral output that becomes beneficiated by virtue of its large reserves, major transport advantage accruing to beneficicating close to the resource source, local skills base in engineering and related areas and most crucially, low energy costs. A number of constraints on further beneficiation efforts do exist in the form of the large scale capital requirements needed by most projects, distance to final markets for much of the output from local plants, the high cost of intermediate inputs and skills shortages in certain technical and managerial categories. The countries experience of large scale beneficiation projects has tended to be export oriented. While this has had a positive impact on export earnings, down stream value adding fabrication industries have been neglected.
Beneficiation involves processing a natural resource to transform it into a higher value product, usually an intermediate product used as an input by fabricators. Fabrication involves the production of final goods by tranforming intermediate inputs, i.e. beneficiators supply inputs to fabricators to make final goods.
The local fabricator should, as far as possible, not be disadvantaged through oligopolistic pricing of inputs and South Africa's distance from alternative suppliers. They should charged the export parity price or profit parity price (profit parity between export and domestic markets) or, even cost plus reasonable return. Beneficiation projects should be required to provide pricing structures that will at best favour the local fabricator, or are at least neutral with regard to export price structures, to qualify for capital expenditure write-off schemes or any other state incentives or support.
Qualification for tax concessions and finance for beneficiation projects should require advantageous domestic pricing such as export parity prices for local fabricators.
A small levy, payable on unbeneficiated ores which are exported, could be considered to encourage their local beneficiation. The levy levels could reduce depending on the level of beneficiation.
Tax breaks are often necessary to make large beneficiation projects viable due to the long lead times to earnings in the context of high inflation. Features of the current tax regime applicable to capital expenditure for gold mines in which capex tax credits may be brought forward in their entirety with a consideration for annual inflation, should be extended to cover mineral beneficiation projects, but carried forward at actual inflation rather than an arbitary consideration. The application of these provisions to cover all ex-mine value adding processes that terminate with the production of dimensional products should be investigated.
The state through the Department of Trade and Industry and development finance institutions, in particular the Industrial Development Corporation, should give emphasis to supporting downstream industries able to exploit the opportunities created by the availability of competitively priced inputs from beneficication projects.
The objectives of the policy on co-operation in the minerals and mining sectors of SADC countries is to achieve an equitable, balanced and mutually beneficial regional order in the post-apartheid southern Africa.
Southern Africa has immense mineral wealth producing over 30 percent of the world's diamond, gold, platinum group minerals, vanadium, chrome, vermiculite, and cobalt and over 10 percent of the world's production of copper, manganese, asbestos, granite, uranium, and zircon.
The apartheid regime played a very destructive role in the region. The Government of National Unity, under the leadership of the ANC, has the potential to try to correct this by enhancing South Africa's capacity to contribute to the development of the region. South Africa's capacity should not be taken for granted . There are fears that a free and democratic South Africa integrated into the region's economy could, dominate the region as well as attract resources from her relatively smaller neighbours. These fears can be partially addressed by formulating policies that will create conditions for a mutually beneficial, balanced and equitable regional growth.
South Africa has enormous capacity in mineral exploration and mining. It's mining companies have historically been dominant in the region and are in the process of repenetration since the demise of apartheid and the normalisation of relations with our neighbours.
A regional framework for the mining sector will
a) make it easier for mining companies to assess and exploit the regional mining
potential,
b) reduce destructive competitiveness between regional governments in their
search for investment capital and foreign exchange, to the detriment of the
region as a whole, and
c) serve as a medium for intra-regional technology transfer.
The accession of South Africa into SADC, could give a major boost to efforts already underway to promote co-operation and integration in southern Africa. It should be stressed, however, that this will not of itself automatically resolve the problems created by the acute imbalance, inequities and domination and dependency that characterises existing regional relations. Therefore, it is imperative that South Africa's neighbours also be urged to contribute to co-operation programmes so that the region can be developed to the benefit of all concerned.
The ANC policy on energy use in industry must be approached from the perspective of how effectively energy resources can be used to meet national development goals. It should be implemented within an integrated energy plan, balancing the goals of economic efficiency, environmental sustainability and social equity. Policy should be aimed at the more efficient use of energy and the substitution of more appropriate fuels.
The mines and mineral processing sectors are important to the economy as foreign exchange earners and are the major consumer of energy, particularly electricity. Energy pricing is a vital component of policy on energy in industry. Changes in the energy price will affect the competitivitness of mineral products on the international market. In the long run South Africa cannot afford to substantially increase the price of energy. We have to guarantee a secure supply of energy at present prices, if we wish to maintain our level of exports and increase beneficiation.
Activities which will increase the efficient use of energy include:
The provision of housing and related infrastructure is one objective of the RDP. To meet this objective, aggregate and sand will be required in sufficient quantity and at acceptable costs. Specific policy issues or questions for this sector are set out below:
A paradigm shift is needed for the industry to deliver materials for the projected RDP demand of 300,000 houses per annum. The quarrying industry has become more concentrated as more firms have closed down due to economic instabilities. This will require new and old quarries to be opened at the potential construction areas. Cost effective transport for construction materials is important. This can be achieved by the optimal combination of the competitive advantages of rail and road respectively. For rail this will largely lie on its ability to transport over a longer distance quickly and effectively, especially where loading and off-loading points have rail sidings, while the flexibility of short haul road delivery lends itself to efficient distribution between depots and building areas. While research has been done in a number of construction materials sectors, e.g. cement, policy research on aggregate and sand as leading materials for housing and infrastructural development has often been ignored and remains undeveloped. Research in the future should also include aggregate and sand.
The mining sector of South Africa is one of the largest employers of the nation. Because of that pivotal economic role it entrenched deep-seated apartheid practices such as job reservation and scheduled persons provisions to uphold the supremacy of the Whites. To redress the glaring anomalies a vigorous human resource development programme is imperative.
The present state of affairs in mining human resource development is characterised by:
Progress in human resource development requires, comprehensive national approach based on a completely reformed political and institutional dispensation. This necessitates re-ordering of training priorities with the involvement of all stakeholders. A Presidential statement could be considered on this issue to be disseminated through the media and government machinery to give direction and time frame prescriptions on affirmative action.
The migrant mine labour system was created by the Chamber of Mines to drastically reduce wages through an employers cartel that prohibited the free sale of a worker's labour. This system later provided the theoretical basis for Grand Apartheid and the creation of the "bantustans". The migrants were recruited via a system of labour offices on contracts that guaranteed they return, repatriated their wages and blocked their movement. Once on the mines, foreign and local workers were forced to live in austere, regimented single-sex hostels, subject to strict legal and extra-legal controls. Gold mining in South Africa has been made possible by securing a supply of low-wage unskilled migrant workers drawn from all over southern Africa. In 1993, 48 percent of the mine workforce was foreign.
The deeply entrenched migrant labour system operating on the mines has been preserved into South Africa's democratic era. The situation whereby migrant workers are subject to controls that deprive them of basic worker rights is untenable. The housing of miners in single-sex hostels violate workers basic rights to choice, privacy and family life.
The ANC should become part of the debate seeking solutions to the Health and Safety problems outlined by the Leon Commission of Inquiry into Mining Health and Safety. The ANC should actively promote the implementation of the recommendations of the Leon Commission and promote tripartite co-operation and consultation.
Energy policy under apartheid was governed primarily by the desire for greater energy security. A white minority government, facing the opprobrium of the world and a United Nations led oil embargo, spent many billions of rand on the Sasol and Mossgas synthetic petroleum fuel plants and building up a local nuclear capability through the Atomic Energy Corporation. Although these investments resulted in foreign exchange savings, South Africa still pays a premium for locally produced petroleum and nuclear fuels. The cost to the economy has been enormous and the opportunity for investment in more productive social infrastructure has been squandered.
South Africa has never become fully self-sufficient in either petroleum or nuclear fuels and in spite of international sanctions continued to import these fuels. Energy policy under apartheid government was a costly failure, if evaluated against the objective of energy self-sufficiency.
The energy sector during this period was also governed by excessive secrecy which made rational and public debate on energy policy impossible. The Petroleum Products Act (no 120 of 1977) prohibited the "publication, releasing, announcement, disclosure or conveyance to any person of information or the making of comment regarding the source, manufacture, transportation, destination, storage, consumption, quantity or stock-level of any petroleum product acquired or manufactured or being acquired or manufactured for or in the Republic."
The penalties were severe, and secrecy was effectively maintained. The corollary of these secrecy provisions was an absence of state commitment to collect and publish data on the energy sector which would allow the development of rational and balanced energy policies.
These restrictions were finally repealed in December 1993 and a more rational debate on energy policy is now possible.
The state is deeply involved in particular energy sub-sectors. In some respects, this is un-surprising. Energy projects typically involve huge investments. Traditionally the state has paid a crucial role in developing the infrastructure which is essential to the successful functioning of a developed economy. The scale of these investments and the period over which a reasonable return could be expected were such that private capital was generally unable or unwilling to participate. However the state has effectively controlled all aspects of the commercial energy system. The electricity industry is an effective state monopoly, as is the nuclear industry and along with the petroleum industry they are tightly regulated. It is only recently that coal prices and distribution were finally deregulated. Woodfuel is possibly the only un-regulated energy sector, although even here, a modicum of regulation exists in certain traditional tribal authorities. The effectiveness of the energy regulatory system is a legitimate area for policy investigation.
South African energy prices (for industry and mining) are low by international comparison (and could have been lower if more economically efficient investments had been made). South Africa has an above average energy intensity; i.e. more energy is used per unit of economic output than in many other countries. Only 10 countries have higher commercial primary energy intensities. This high energy intensity is largely a result of the structure of the economy and its reliance on coal for production of electricity and liquid fuels. Both of these energy transformation processes are relatively inefficient in their conversion of energy. The country also does not employ latest developments in energy efficient technology, and government energy policy has favoured supply-side actions rather than encouraging more efficient use of energy.
Energy production and utilisation has resulted in significant environmental costs, which have also arisen because of inequitable access to fuels of choice for the majority of South Africans. Air pollution as a result of the combustion of wood and coal is of increasing concern. Recent studies have indicated serious health risks associated with poor indoor and outdoor air quality resulting primarily from coal and fuelwood combustion. Peoples' exposures to certain air pollutants have been found to be many times higher than local and international health guidelines, and epidemiological studies have observed higher incidences of respiratory and other illnesses in inhabitants of unelectrified houses. Respiratory diseases are the second highest cause of South Africa's unacceptably high infant mortality rate. Yet two thirds of South Africans remain without access to electricity in spite of large excess electricity generation capacity.
Similarly, the social costs of current energy usage patterns are enormous. The additional time spent collecting and purchasing fuels where electricity is not available or affordable, is significant, and represents the loss of time for potentially more productive activities such as farming, child-minding, education and entertainment. Women generally have the responsibility in rural areas to collect fuelwood and often spend upwards of 2 to 3 hours per trip with 2 to 4 trips per week. This represents a huge social burden. Further, the lack of high-quality lighting in the home, which is delivered most effectively by electricity, severely impedes the education process and at street-level does nothing to increase security and combat crime. Moreover, the lack of access to electricity means that millions of people are denied the convenience and improved quality of life which comes with electric appliances.
The pattern of energy investment in the apartheid era has mirrored the disparities in provision of social infrastructure with the consequence that South Africa has a highly unequal distribution of income and access to basic services. The unprecedented representation in government of the majority of South Africans will inevitably lead to greater redistributive investment and government expenditure directed more at the basic needs of the poor. Indeed this has already begun. Growing international environmental concerns and the likelihood of environmental conditionality related to foreign investment and exports, and growing local health costs associated with pollution, will mean that energy policy will also have to promote environmental sustainability. And to grow a successful economy, South Africa has to become more competitive in manufactured exports. Low energy prices will assist that objective.
The context for energy policy and planning in South Africa is shifting radically. Gone are the exclusive concerns of fuel security and self sufficiency held by an apartheid government beleaguered with international sanctions. As the country moves towards widened democracy and is accepted back into the international community, energy policy will align itself with new social and economic policies aimed at reconstruction and development. Energy policy specifically will seek to:
In the South African context, these three principles encapsulate the desirable features of post-apartheid energy policy. The primary goal of democratic government will be to address the high levels of inequality which characterise both the energy sector, and the economy as a whole. At the same time, inefficiencies in the energy sector will have to be eliminated, particularly those which were shielded by the state's energy security policies, so as to maintain and enhance the comparative advantage inherent in the country's relatively cheap supplies of energy. On the other hand, the low cost of South African coal and electricity is attributable, at least in part, to the lenience of environmental controls over the various stages of the electricity generation cycle, and energy policy will therefore have to include adequate management of environmental impacts arising from energy production and use. It is likely that some of South Africa's major trading partners will increasingly impose environmental conditionality on its exports and, as a disproportionate contributor to global warming, the energy sector will come under pressure to lower emissions. In the longer-term, policy will have to address the essentially finite resource base on which the energy sector, and indeed, the whole economy, is based.
Clearly, equity, efficiency and sustainability are three goals which may necessitate direct trade-offs, but in many cases these goals tend to converge around specific policy options.
Energy policy making, governance and regulatory arrangements for South Africa's energy industries will meet the following objectives:
The roles of policy making, supervision and regulation will be achieved by clearly identifiable and separate institutions.
Whilst policy making remains the prerogative of the elected government of the day the process of policy formulation will be facilitated by a National Energy policy Forum which will advise the Minister responsible for national energy policy on appropriate energy policies.
The NEPF will consist of key stakeholders in the energy sector including:
The NEPF will be lead by a full time chair at the level of deputy director general selected for his or her abilities and integrity and will be supported by a professional staff in the DMEA.
Existing and future industry fora such as NELF and the Liquid Fuels Task Force could become sub-fora of the NEPF. Macro-economic co-ordination could be achieved through linkages with the National Economic Forum and its successors.
The NEPF will be adequately resourced to perform its role, including data gathering, analysis and the commissioning of policy research. These outputs will be available to all parties to facilitate policy debate.
The NEPF shall have a professional secretariat which supports the forum and commissions policy research. This function could be carried out by a section of the DMEA.
The DMEA will be strengthened in order to assist the Minister in the formulation of energy policy and its implementation and administration.
The regulation of energy industries (particularly electricity , petroleum and nuclear) will be achieved by independent bodies, supported by professional staff, separate from the government and accountable to parliament. Regulators will monitor the implementation of government policy.
The Parliamentary Standing Committee, apart from screening legislation and reviewing the budget, will play a role in the development of energy policy through regular interaction with the DMEA, the NEPF and the regulators.
Pricing policy for all energy carriers will accord with the broad national goals of:
The broad objectives of regulation will be to achieve the national pricing policy goals. The degree of price regulation will vary according to the degree of market functionality.
The pricing of energy carriers will move to include externalities, in particular environmental externalities which are not currently included in price build ups.
Taxation will be used as a policy instrument to achieve the national pricing policy objectives and the state will tax energy carriers where appropriate in line with national fiscal policies.
This complex matter has to be addressed within the context of the tri-partite petroleum negotiating forum.
Domestic tariffs, or user charges, will be determined on the basis of a reasonable trade-off between the principles of affordability; equity and fairness; sustainability; efficiency in the allocation of resources; transparency; price stability; and simplicity. Ultimately the principle of sustainability must be paramount, seen within the context of the overall financial situation of service providers.
Tariffs will be structured so as to promote access for poor households, in other words connection fees will be kept low.
A number of tariff structures will be offered to households including:
A common national tariff level should be applied for each of the tariff structures listed above, insofar as the structure of the electricity supply industry permits this.
An investigation into the Eskom transmission tariff will be performed with the objective of developing policy options for its restructuring.
Municipal electricity undertakings will move towards a system of separating the price of electricity from the taxation (or surplus) imposed on municipal tariffs.
Recognising that paraffin is the fuel of the poor in the short term the price of paraffin will be kept as low as possible through a variety of policy measures. In the medium term an integrated approach to pricing policy will be adopted to encourage a least cost fuel mix.
Electricity is a key factor in South Africa's prospects for economic growth and in the development of our people's capabilities and quality of life. Traditionally the electricity industry has served only the interests of industry and the elite. Changes to national priorities are resulting in tensions around this industry which require national policy guidance.
- on the basis of advice from the National Electricity Regulator;
- after consultation with key stakeholders via an appropriate electricity stakeholder forum.
Until a National Energy Policy Forum is established the National Electrification Forum (NELF) will advise government on appropriate policies for the ESI.
- electrify 2,500,000 homes by the year 2,000 as set out in the RDP;
- become more accountable through the involvement of communities in planning processes and through the involvement of stakeholders in policy making for the sector; and
- provide a reliable and secure supply while keeping electricity prices as low as possible for both households and productive activities.
The governance of the ESI is performed at a number of levels. Given the need to increase the accountability of the industry this area is the most critical to achieving the national goals for the industry.
All electricity distributors will participate in a national electrification planning process and will be accountable for their connection targets.
The Office of the Minister responsible for the RDP will take a lead in this process.
Eskom will establish on an annual basis a five year rolling performance compact with the government covering:
- electricity prices;
- electrification targets;
- key financial indicators (e.g. foreign debt);
- quality of service; and
- environmental indicators.
The nature of the relationship between local government and the electricity industry will be determined by the following three principles, irrespective of whether the local authority is the owner of the distributor or not:
The NER will implement government policy by issuing licences to utilities. The NER will receive adequate funding from government to perform its role.
The EDI will move towards achieving a national character as rapidly as possible. The preferred model is to consolidate all electricity distribution undertakings into either a single national distributor or a limited number of regional distributors, separate from local government but still under public ownership.
Electrification will be financed as far as possible from within the industry itself. Nonetheless, a national budget line item will be provided to ensure a level of ownership of the process. Concessionary finance will be necessary for the least viable connections.
(See the section on pricing.)
Over the last three years the policy debate in the electricity sector focused on distribution, but three important developments suggest that the policy focus will soon turn to the generation and transmission sectors of the industry.
It is further suggested that the policy objectives for the ESI will change, in line with the rest of national energy policy, away from self security concerns towards the three themes of equity, efficiency and environmental sustainability. Very little public policy development has been undertaken for the generation and transmission sectors. Some of the central issues that will have to be addressed are:
- Conservation and DSM
- Regional hydro-electricity
- Coal
- Nuclear
- Natural gas
- Renewables (solar thermal)
It will be difficult to determine a coherent policy framework for all these issues over the short-term but, an indication of basic principles on the rationale for dealing with the ownership issue and on issues such as the regional power pool, nuclear electricity and DSM will provide a sound basis for further policy development.
The central role that the ESI plays in the economy of South Africa and in the lives of the ANC's partners in the MDM, means that it should pursue an inclusive process with the unions and civics for policy formation on the future of the generation and transmission industry.
Generation planning should be undertaken within an integrated energy planning framework at the national level. The NEPF will play a key role in setting broad policy guidelines for the IEP process.
Good policy requires good data and a good understanding of the energy system and energy end-uses. Key policy questions need to be identified and then linked to information requirements. The implication is that if energy policy formulation is to be effective, it requires a strong national institutional base to co-ordinate research, information gathering and analysis.
Policy formulation needs a sustained programme of research which analyses the requisite data, develops an understanding of the linkages between energy use and social and economic needs, evaluates supply possibilities, analyses policy options in a systematic way, and investigates the potential impact of energy policies on the economy and society.
Successful integrated national energy planning thus requires an investment in research, to develop the capacity to advance knowledge which acts as a resource for policy making. There will be a need for both short-term policy analysis to answer immediate questions and longer term policy research which deepens knowledge and understanding. The latter is best achieved in multi-year, multi-person research programmes under experienced research leadership.
The Energy Research Group (ERG), a panel of international experts brought together by the International Development Research Centre in 1983 argues that competent policy research requires, in the first instance, the establishment of professional research institutions which are, preferably, independent but supported by the government.
What distinguishes university-based research institutions from research facilities in business or government is their potential to bring greater breadth and depth of knowledge to bear on problematic issues. The quality of research often depends on researchers' experience, which accumulates from sustained application to meticulous research in an environment of peer review. University researchers are usually supported by superior facilities such as libraries and computing facilities, and have established contact with international literature and researchers. They act as repositories of knowledge and the skills necessary for advancing knowledge. They should be capable of giving independent advice which widens policy options and reduces risks in making decisions.
Government departments often have a use-orientated and short-term approach to knowledge. If they fund research it is usually project-oriented and neglects the basic infrastructure and management support so essential for continuity of research experience and quality. Funding research only at its marginal cost orients researchers towards a series of unrelated short-term projects and inhibits the deepening of knowledge in a systematic way. Captive research institutions or consultants are often forced to forego quality because of the pressures of being responsive to immediate demands. There is less time for new research. Available knowledge is skimmed and the result is often repetitive or derivative work, perhaps best described as professional shallowness.
In its review of energy research needs in developing countries, the Energy Research Group advises against proliferation of small new research units. Rather, established multi-disciplinary institutes should be encouraged to grow by the accretion of new programmes designed to meet new demands. Institutions should be given basic infrastructural support and long-term programme funds, as an investment in physical and human resources which can manage and supervise additionally-funded, urgent, goal-directed projects. The direction and management of programmes and projects should be as decentralised and autonomous as possible. The Energy Research Group argues, however, that research will be effective only if there are informed buyers or users and if there is informed direction. The latter involves translating the demands of the external environment into well-defined research programmes. The former involves personnel in government and other user-groups who have been professionally trained in the field of energy, are familiar with energy research and are able to judge its quality and usefulness. Ideally there should be periodic exchanges between research and user organisations.
Unfortunately, policy research and analysis seldom goes beyond the publication of dense reports which are read only by research peers. Policy advocacy is the missing link between policy research or analysis and policy formulation and implementation. Locating responsibility for developing research, database development and integrated energy planning capacity within the Department of Mineral and Energy Affairs or a new National Energy Policy Council will assist in institutionalising these links in the future.
In transforming the petroleum industry's objectives from supporting a siege apartheid economy to the objectives of a petroleum industry in a democratic state with the special requirements for reconstruction and development the policies that are implemented should be measured against the following objectives:
- Maximising the benefits of the industry to the rest of the South African economy
- Contributing to the national imperative of maintaining and creating employment
- Optimising the contribution of the industry to the fiscus
- Maintaining and promoting small business opportunities
- Guaranteeing the delivery of low cost, quality petroleum products throughout the country
- Promoting constructive labour relations
Is the industry a strategic industry? If so, what are the implications?
Should South Africa have a national oil company? If so, how could this be achieved?
The activities of the Central Energy Fund, namely exploration, licensing, production, crude procurement, stockpiling and crude trading should be separated and financial flows between the different activities should be halted. The operation of each activity should be reviewed and the new separate operations should be transparent and accountable to the state. In addition there is an urgent need to review the membership of the CEF Board. In principle representatives from the organised business and labour sectors should be considered.
Crude procurement, refining, product wholesaling, retailing fuel transport and the synfuels industry are closely regulated and inter-linked. Before considering policies for each area general policy issues should be considered.
The petroleum sector has major impacts on the national economy. Adjustments to South Africa's regulatory framework cannot easily be made in a piecemeal manner because of the interconnectedness of the whole system. The changes to the system need to be very carefully considered and negotiated and should be subject to the following considerations:
- a more efficient industry;
- lower prices;
- no disruptions in supply, particularly to rural and poor areas;
- control of job losses and good labour relations: compensation for job losses;
- foreign exchange considerations.
The synfuels industry must eventually be exposed to the same commercial and competitive environment as the rest of the petroleum industry in South Africa. It is currently the case that the production of liquid fuels from South African coal and gas has significant foreign exchange saving benefits. However, it is not obvious that these savings will in the medium to long term future justify the cost of the tariff protection needed to support Sasol and Mossgas at times of low crude prices.
One option is for Sasol's synfuel production, crude oil refining, chemicals and mining activities to be unbundled and separated so that financial flows between the operations are transparent. An institutional and financial format for independence should be agreed upon. A phased introduction of the operations, in particular Sasol Oil to the retail market should then be negotiated. Another option would be for the more profitable parts of Sasol to subsidise the less profitable parts.
The level of tariff protection received by Sasol synfuel production and Mossgas should be reviewed. The current formula used in respect of Sasol has enabled Sasol shareholders to benefit unfairly. A commission should be established forthwith to determine an appropriate level of tariff protection for these two operations.
The restriction preventing synfuel producers from entering the wholesale and retail sectors needs to be reconsidered, in conjunction with the arrangements currently in place for the upliftment of synfuels by the oil companies.
The refusal of oil companies to pay Mossgas the IBLC for uplifting its product must be addressed as a matter of urgency.
Following the release of the results of the Liquid Fuels Task Force's (LFTF) research project into the transportation system for petroleum products, Petronet's transport tariffs must redetermined on a fair basis. The issues surrounding Transnet's charges on the use of the SBM, SPM and Caltex pipeline must also be considered.
Previously the wholesale and refining assets were paid a return on assets jointly. Recently they were "deregulated" (separated). The present wholesale distribution system (MPAR) should be changed to the use of a return on assets approach based on replacement values of all assets (not just marketing assets) with a target rate of return based on the industry's weighted cost of capital. These returns could form part of a price cap mechanism at a later point.
The current regulatory regime for the retail sector should continue to be the subject of negotiations and investigations. Given the vulnerability of the retail sector in the face of any changes in the industry, a comprehensive social plan should be formulated to deal with adverse effects on service station workers. The oil companies retailing fuel through a service station outlet should take responsibility for the costs of such agreements, irrespective of the ownership of that station.
New policy for the retail sector should make effective objectives of the RDP for the promotion of new small black business. Franchise laws should be improved to give franchisees greater powers in their relationships with oil companies. Oil companies should be encouraged to apply the principle of affirmative action when appointing new franchisees.
Taxes on petroleum products are a vital source of government revenue. They are also easy to collect, cost effective, environmentally sound, and very progressive. Tax levels in South Africa are low by comparison to international averages. Increasing tax levels from petroleum should take the following into account:
- Exempting paraffin from further levies and taxes
- The widening of the petrol : diesel price differential through changes to the levels of their respective fuel levies.
- The use of differential tax levels to assist the market penetration of unleaded petrol.
- Incentives for commercial users to switch to diesel.
Regulations and incentives must be provided for all players in the petroleum industry to improve their environmental performance. Post Apartheid South Africa must now use the opportunity to join international organisations and become a signatory to many international conventions which will provide access to world trends, advice and levels of appropriate standards.
The DMEA should continue to fund studies into the social and environmental impacts of the liquid fuels industry in order to obtain an independent assessment of the extent of the problems that exist.
Environmental and health and safety audits should be undertaken at regular intervals. These should be overseen by the relevant employer and trade union bodies.
Given the position of the petroleum industry as a provider of a critical strategic commodity, and given the potential for of collusion and other uncompetitive practices, there is a clear need for a dedicated regulatory authority in the sector. This body would fall under the envisaged National Energy Policy Forum and would work closely with the DMEA. Its functions would include the regulation of prices, which might change to a wholesale price cap in the future, and the management of retail sector regulation. It would also play the role of dedicated competition authority for the industry, with statutory powers to subpoena, audit, scrutinise companies' books and conduct public enquiries.
There is a need to ensure that sufficient resources and research capacity is made available to the labour caucus of the LFTF to ensure that it is able to fully participate in the restructuring debate. There must also be close co-operation between the ANC and its alliance partners in pursuing common goals in this strategic industry.
Cognisance has to be taken of the fact that success in bidding rounds can only be achieved if terms and condition are in line with international standards.
Off shore gas is owned by the state and in general there are no current problems with offshore gas. However, under the 1991 Minerals Act ownership of on-shore oil and gas, along with all other minerals, was placed with the owner of the land under which the oil and gas is found. This is an untenable position for gas exploitation and development and ownership of this gas should revert to the state. Thus, the conditions for on and offshore gas exploration, development and production should be made the same as for current off-shore conditions. For development of Coal Bed Methane this is urgent.
Soekor currently carries out two logically separate functions: promotion of oil and gas resources exploration and development and actual oil and gas exploration. A conflict or confusion of interests arises with this institutional arrangement. In many countries it has been found that these are better separated. In terms of ownership of the exploration and development function a successful model internationally has been mixed ownership with private oil-companies providing capital and expertise and the state, often holding 51%, representing the interests of the people. The function for promotion of the optimum utilisation of resources should be a function of the state.
The main downstream issues are arrangements regarding gas pipelines and distribution and pricing of gas. Gas pipelines require large amounts of capital investment on a long term basis. The investment is justified in terms of gaining sufficient utilisation of the pipeline: this requires stable arrangements between gas producers, large users and the pipeline administration. In immature or small gas industries the pipeline is most often in a monopoly situation. Also, large users may depend entirely on one source of gas and one pipeline to conduct their operations. Because of the monopoly situation and the dependence of users there is a strong possibility that pipeline operators can over-exploit their position once it has become operational. Ownership does not affect this possibility: experience is that private or state-owned pipelines have an equal tendency to exploit this relationship and inflate tariffs to the maximum. This has the effects of extracting and inappropriate rent and denying both the producers a fair rent and the users the advantages that gas may offer. If these parties are in different countries the problems are exacerbated. An additional problem is that the pipeline may deny access to additional producers and thus prevent these resource being made available for explotation.
Thus, policy objectives for the pipeline should be to regulate the pipeline tariff so that a fair rent is apportioned between producers and the pipeline operators and that users may experience appropriate benefits that gas availability may have to offer. In the case of large users these benefits may have considerable potential for enhancing international competitiveness in export-orientated industries. An additional objective should be to ensure that necessary access to the monopoly pipeline is facilitated where appropriate. However, these objectives should be seen against the background of attracting the scale of investment necessary for construction of the pipeline.
In terms of distribution, it needs to be acknowledged that a very wide variety of users needs to be catered for. Some very large users may want, and need, to negotiate directly with the gas producers. Other may need high value-added services, best provided by small market responsive operators.
Uranium is produced as a by-product of gold and copper mining and is processed by the Nuclear Fuels Corporation (Nufcor owned by the Chamber), which earns about R140m per year from exports. Most is exported as marginally beneficiated uranium. The Atomic Energy Corporation (AEC) operates three uranium processing plants, all of them at a loss. Collectively, these plants cost about R230m to run each year, but they generate income of only about R90-100m from sales of nuclear fuel to ESKOM (for the Koeberg nuclear power station). Recently, the cabinet approved AEC plans for the shutdown of the most expensive of these plants, the "enrichment" plant.
In the long-term, the AEC is hoping to establish itself as a competitive nuclear fuel supplier on the global market. There are at least two reasons why this may not happen. First, the global market is very depressed due to global oversupply and will remain so for at least the next ten years. Second, it is not clear how the AEC will be able to produce nuclear fuel once the enrichment plant has been shut. It is hoping that a new enrichment technology - called MLIS - will enable it to open a viable new enrichment plant, but this would only happen in about 2005-2010.
The AEC is also involved in research and development of many other nuclear and non-nuclear technologies, some of which may have potential for becoming high-tech products. Sales of non-nuclear products are apparently producing profits.
At the ANC Nuclear Policy conference in February 1994, delegates proposed that no public funds should support uranium production, that all uranium processing must be profitable, and that the economics of the uranium export market should be discussed openly. It was also recommended that the AEC's R&D activities be reviewed, specifically the MLIS programme.
1. The AEC conversion plant should be commercialised without delay. If this cannot be achieved within one year, it should be shut.
2. The Nuclear Fuel Production division of the AEC should be shut forthwith.
3. The MLIS enrichment programme should be independently investigated for its viability. Resources allocated to this technology should not be out of proportion to this spent on other research and development programmes.
4. The inappropriate allocation of 70% of the DMEA budget to nuclear development needs to be reversed in order to reflect more accurately the RDP's development objectives.
5. The lack of transparency in the governance of the AEC, and the relations between it and the DMEA, need public exposure and discussion.
6. The production of non-nuclear technology products should be privatised and R&D in non-nuclear technologies should be transferred to the CSIR.
7. The human resource implications of restructuring the AEC need to be investigated. Appropriate plans need to be made to deal with redeployment, retrenchments or retraining that may be necessary. This should occur in consultation with organised labour.
The Koeberg nuclear power station was built during the apartheid era to hide the military applications of the country's nuclear industry, and to ensure electricity supplies to Cape Town in the event of guerrilla warfare. Koeberg produces about 4% of Eskom's electricity, and is more expensive to operate than any other station.
Nuclear power stations are very dangerous to operate, can lead to catastrophic accidents (such as Chernobyl), and they produce large amounts of radioactive wastes that need to be stored for many thousands of years. At present, no country has developed a programme for the proper disposal of this waste, nor has a station the size of Koeberg been dismantled (decommissioned) yet. This implies that the environmental, technical and financial implications of waste disposal and decommissioning are not known.
At the ANC Nuclear Policy conference in February 1994, delegates proposed that the GNU should initiate a public enquiry into environmental, social and economic costs of electricity from Koeberg and other power stations, enabling the public to make an informed choice on the matter. A call was also made for a comparison between the costs of Koeberg and those of alternative energy sources.
Energy is a basic need. We need to develop an Integrated Energy Planning approach within the context of Integrated Development Planning. These processes should happen within the National Energy Policy Forum (NEPF). There should be co-ordination at different government departments.
We should consider the development of a utility like structure for all energy types to implement the policies of the NEPF. This utility would operate at the national and local level.
We should have a co-ordinated approach to energy efficiency. Energy efficiency planning should occur at the national level.
We should develop financing mechanisms which will ensure access to energy and appliances for all. Appliance should be provided with energy provision. We should consider the following:
Discounts on energy tariffs for the poorest people (e.g. lifeline tariffs for electricity)
Access to laon finance including cheap credits for poor communities, group credit schemes and government guarantees for financing schemes in the poorest communities.
We should do research to develop standards and quality for basic energy needs. This would include calculating how much energy should be provided to households and the time period within which this should be done.
Mechanisms for information dissemination should include media such as radio and television. Local and distribution authorities should be responsible for education and information dissemination. Energy centres which will include communities, government, NGOs and utilities should be used for this purpose.
There should affirmative action in the energy idustry and government departments dealing with energy. Community empowerment should occur through capacity building, e.g., training electricians in newly electrified communities. Energy mangement skills should be developed within energy utilities and local government suppliers.
The immediate priority of a household energy policy is to ensure that the urban and rural poor gain wider access to adequate and affordable supplies of energy. A necessary step to achieving wider access and more efficient delivery of electricity to the black majority is the restructuring of the electricity supply industry.
Demand-side-management (DSM) interventions are a means to encourage households to use energy efficiently. DSM should accompany the present electrification drive planned for the urban and rural poor. The feasibility of implementing the following measures should be investigated:
The rural areas of South Africa, housing about 40 per cent of the population, bear the worst legacy of apartheid repression and neglect. Practically all poor people in rural areas depend on fuel wood for their cooking and heating energy needs. Candles, paraffin and gas are also used. With the exception of commercial farm houses and some farm worker houses, few rural dwellers have access to electricity. Although wood is often collected free of charge its use comes at a tremendous cost. The burden of collecting firewood falls mainly on woman, who have to make an average of 3 trips per week, each lasting about 2 to 3 hours. Recent research indicates that the air pollution caused by wood fires, exposes rural dwellers to risks of respiratory illness. A further problem is the alarmingly high rate of infant mortality and injury caused by paraffin ingestion and burns.
Energy is required for a wide range of household, communal and productive activities such as food preparation, space heating, lighting, the operation of electronic media, the provision of services (water, health care & education), and agricultural and other productive activities. The intimate involvement of energy in the provision of services and in productive activities implies that planning for energy provision cannot be undertaken on its own, but has to be co-ordinated with other development planning. The complexity of rural development needs, also requires that local communities be given a high level of control over the planning and implementation of their development.
The use of renewable energy should be encouraged by government because it is a sustainable form of energy which does not harm the environment. However, it is still highly priced and this limits its application.
At present renewable energy can best be used to meet many of the energy needs of remote or rural communities where the costs of extending the electricity grid are prohibitive. Photovoltaic, stand-alone systems seem best suited for South African conditions. These systems have been shown to be cheaper than other fuels such as diesel, paraffin, batteries and gas used in remote areas, when life cycle costs are taken into account. Renewable energy is also economically viable when used in demand side management programmes by electricity utilities.
The use of renewable energy for utility scale applications is not economically viable yet because the technology at present cannot economically compete with coal and other conventional generation systems. It is realistic to assume that in the very long run the price of these technologies will decrease. South Africa, through research and testing of different technologies in local conditions, should then be in a situation where it is ready to use these. Furthermore, in the very long run a policy of more realistically priced electricity and coal, i.e. a price that includes externalities like environmental degradation and health costs as a result of pollution, will make the use of renewable energy for small and large scale applications more economically attractive.
Regulations which would encourage the use of renewable energy are those that promote a cleaner environment. These would include limiting pollution and emissions and stipulating that a percentage of electricity generation should be from cleaner sources.
The most important fuel for South Africans is fuel wood. The majority of people meet the major part of their energy needs through the burning of wood. Cooking, space heating, water heating and even lighting are provided by this one energy carrier. A household can cook, and heat their home at the same time using wood. It has been found that in many newly electrified areas people continue to use wood (and coal) for cooking and heating. This is generally because of wood is usually collected free (coal is cheap). Also electrical appliances are expensive and it takes a long time before poor households invest in these. People, especially those in rural areas, will be remain dependent on fuelwood. Even if there is an electrification project that covers all rural people, electricity will not meet all the needs of rural communities. The need is thus for an integrated approach to energy planning which is done in conjunction with rural communities, that is part of specific rural development plans and processes in different areas.
The negative aspect of wood fuel is that people, usually women, have to walk for hours every week to collect wood. There is an increasing problem of deforestation and people end up spending more hours to find the same amount of wood. The environmental consequences of deforestation are well known. Added to this, there is a negative environmental impact when burning fire wood. The major environmental concern is the health problems (usually respiratory problems) of people exposed to emissions from these open fires.
The recommendations from the Biomass Initiative/Plant for Life conference could be considered as a basis for policy development.
Central government should be responsible for a national policy on biomass and control the budget. It is also imperative that different government departments co-operate and that the programmes not be hindered by departmental boundaries.
Should implement programmes to promote social forestry and develop stronger linkages between water and forestry. They would also commit parts of their budgets to training, extension staff for forestry and water and the setting up of nurseries and other infrastructural support.
Should be responsible for developing programmes and actions to ensure the integration of tree planting into farming activities. This will include plans for agroforestry, the planting of fruit trees and other multi-purpose trees by rural communities.
Should be responsible for sorting out issues related to the security of land tenure which will lead to more people planting trees on their land.
Should promote social forestry in relation to nutrition programmes and raise awareness of the need for improving air quality within dwellings.
Should have the responsibility to ensure the continued support of the fiscus for the Biomass initiative and the control of Biomass initiative related budgetary flows to implementing departments. They would be responsible for the continued integration of Biomass initiative activities and the funding of research (which should be needs driven).
The provincial governments should take charge of developing integrated rural development plans. They will prioritise areas of intervention and co-ordinate extension services.
Local governments should identify needs in specific localities and prioritise actions based on these needs. This would happen through participatory planning and implementation of projects.
Research should be informed by the SADC experience and include programmes on:
- Participatory planning methodologies.
- Indigenous farming practices
- Natural woodland management
- propagation of indigenous species
- Assessment of bush clearing as a potential resource
- The rational use and distribution of forestry wastes
Energy efficiency programmes should be implemented in South Africa for the environmental , economic, equity benefits that flow from them. It is necessary that the government takes a clear and committed lead in encouraging energy efficiency and conservation.
Least-cost planning methods should be used by energy authorities. Least-Cost planning refers to the consideration of both the demand-side and supply-side when planning. This is done so as to get to the optimum option to cost effectively meet the customer's energy services needs while keeping environmental impacts as low as possible. DSM is in essence a way of achieving a least-cost option.
Life-cycle cost analysis should be adopted when estimating the initial costs, maintenance and the running costs of appliances, equipment and buildings over their useful lifespan. This analysis is essential in appliance labelling. It is important that this analysis be used in South Africa.
Thermal performance upgrades need to be vigorously pursued. These should be applicable to the existing housing stock through retrofitting and also to the current low-cost housing programme of the RDP. There is a need to develop codes of practice and building standards and regulations.
Water heating forms the greater part of the energy load. There is a need to encourage the use of solar water heaters, efficient water heaters and geyser ripple controls.
South Africa needs to develop and set up minimum efficiency standards for different appliances and equipment. It is also necessary to develop a standardised testing procedures which have to be adhered to when rating appliances. The life-cycle cost analysis should be used in estimating costs, which will be provided as part of the information in labelling.
Considerable savings can be realised from the usage of efficient lights like fluorescent lighting rather that incandescent lights presently used in South Africa. Lighting also can deliver energy savings for the poor.
Energy audits are essential before an a large investment can be made into energy efficiency. These should be done in the industrial, mining and commercial sectors. Home rating schemes can also be carried out for households.
An investigation should be made into the capacity building requirements of the implementation of energy efficiency programmes, with specific reference to the provision of training, the financing of such training and the appropriate institution to provide such training.
Research is required into the feasibility of employing renewable energy technologies in energy efficient applications.
A wide variety of options for financial assistance to ensure access, affordability and the success of this programme should be investigated. Electricity tariffs could be used to allow the poor to gain access to hiring, purchasing and owning efficient appliances.
Responsibility for promoting energy efficiency shall rest with the government. Measures to promote energy efficiency involving government, the private sector, supply authorities, NGOs and end-users shall be investigated.
The energy sector has many unfavourable impacts on the natural and social environments in South Africa. Most public and policy attention on the energy-environment interface has been concerned with the macro-environmental impacts of coal-based electricity generation, acid precipitation, and, increasingly, global climate change. Less energy has been given to energy-related environmental problems occurring at the household level where environmental conditions have the greatest effect on the quality of life of the largest number of people. It should be amongst the top priorities in the national energy-environment policy arena.
A national programme should be established to identify the areas of major health risk resulting from energy usage by the urban and rural poor. The affected communities should be involved in these programmes. This should be a systematic programme to monitor the environmental effects associated with the full range of household fuel usage patterns, and should focus not only on the health effects of air pollution from domestic fuels, but also on other health risks, such as paraffin poisoning, burns and fires. Once this happens, a process lead by the communities, to identify policy options and prioritise activities dealing with the problems, in line with their development needs, can be implemented.
Electrification by itself may not result in coal-using households switching entirely from coal, because coal stoves are efficient for cooking and heating. Whilst low-smoke coals are not a solution to all environmental problems (such as emission of sulphur dioxide), they can significantly reduce emissions of particulates, which are the major health hazard. At the same time, some of the 40 million tons of coal waste produced annually can be utilised, and income-earning opportunities can be created using labour-intensive production methods. Thus, government should support be a national low-smoke coal programme to facilitate the development and production of low-smoke coals in order to substitute for conventional bituminous coal use in households. It is recommended that these efforts be stepped up with active support in at least the following areas:
Three options are:
A direct subsidy for low-smoke coal producers, which would be offset by reduced health care expenditure once air quality improvements are manifested in better health.
A levy, at wholesale level, on the price of conventional coal, to cross-subsidise low-smoke coal. This alternative is theoretically preferable, since it entails the internalisation of the health and environmental externalities associated with normal coal.
In the longer-term, if and when low-smoke coal is widely available at a price which is competitive with bituminous coal, it will be possible and desirable to move towards applying existing air pollution legislation in townships to enforce smoke-free zones.
Consider phased in legislation to prevent coal mines from selling coal directly to the household sector.
Paraffin poisoning is a relatively common incident in paraffin-using households with young children. It is one area where real improvements can be effected very rapidly. The main areas to be addressed:
Education and publicity programmes about keeping paraffin in safe containers and out of the reach of infants.
The development of child-resistant lids. In the long term, legislation may be introduced to enforce the use of safe containers at all stages of the production and consumption cycle.
The current regulatory and institutional arrangement in the area of air pollution monitoring and control operates in an unsatisfactory manner. A set of national air pollution standards should be established. These air quality standards may have two aspects: one which concerns the quantities emitted and another which is concerned with ambient air quality. Government should establish a single well-staffed and funded National Pollution Control Office, situated within the Department of Environment Affairs, rather than its present location in the Department of National Health and Population Development, which will establish policy guidelines and co-ordinate monitoring functions so as to ensure that those resources are allocated to specific areas or regions on the basis of priority for national health and safety. 18. Draft Policy On Human Resource Development
For The Energy Sector (To be re-written)
The past energy policy environment was predominated by the objectives of fuel security and self-sufficiency for the minority population in the face of international sanctions. This gave rise to the following human resource issues:
- realistic entry requirements must be set which recognise practical work experience to facilitate acceptance of large numbers of trainees;
- a system of graduated trade tests should be implemented to give opportunity to semi-skilled tradesmen to gain higher qualifications up to full artisan status.
10% of GDP and 40% of exports.
Ga: billions of years ago.
Page: 13 Page 60