Economic and social impact of infrastructure roll-out programme: briefing by Eskom and Transnet

PMG | 28 May 2013.

Date of Meeting:28 May 2013
Chairperson:Mr P Maluleke (ANC)
Summary:

Eskom and Transnet briefed the Committee on progress made on the infrastructure roll-out program.

Eskom said that the funding for its build programme had been finalised. These infrastructure projects would lead to the creation of 40 000 jobs and an increase in the local supply of goods and services, as 50% of the budget would be spent locally. The Kriel and Duvha power stations had been refurbished. The delays in commissioning Medupi and Kusile power stations were because of logistics, the quality of boiler welds and the use of low grade steel in boiler manufacture.

Contractor performance was still maturing, resulting in Eskom taking on a greater supervisory role over contractor work. While a project labour agreement had been signed, poor adherence by all parties had resulted in a three-month strike at Medupi and a strike in 2011 at Kusile.  Medupi’s first unit was anticipated to be operational by the end of the year. Other challenges were that the software for the controller system had failed factory tests, the fact that some boiler welds had had to be heat treated, while others had issues around quality control. The target for completion of the first unit at Kusile was December 2014. The boiler design and welding issues and the steel quality issues were the same as for Medupi, as both were sourced from the same supplier. Other challenges at Kusile were getting a water use license and civil works delays.

Ingula was anticipated to be commissioned in 2014. The installation of transmission lines faced the challenge of getting water use licences, environmental impact assessment (EIA) studies and access to land. Management was paying increased attention to projects. There were tighter independent commercial reviews. Weekly monitoring had been initiated and a Medupi leadership initiative sought to negate the effects of demobilisation in the area.

Members asked whether welding inspections had not picked up on the faulty welding spots. What were the five areas that needed Eskom’s intervention? What did ‘generally achievable’ mean? Was the study on Medupi’s cost overruns completed?  What role would independent power producers play? Members said they were concerned that Medupi was behind schedule and that the country had at best a 3% buffer. What were the civil works delays? What action was being taken against the boiler manufacturing company? Could Eskom expand on what the geotechnical delays were? Had Eskom taken action on the labour problems at Medupi? Were coal supplies secure and was the coal, wet coal?

Transnet said it was implementing its market demand strategy and had spent R300bn over seven years. Capital investment by December 2012 had reached R14.4bn out of a total of R19bn. There had been underspending in the freight and container terminal divisions. The Class 19E and the Class 43 diesel locomotives had all been delivered and 1 236 of the jumbo rail wagons had been built. The stacking area for containers at Durban’s container terminal was being re-engineered to extend the stacking area.  R1.8bn had been spent acquiring the land of the old Durban airport and on feasibility studies to develop it into a container-handling port. The new 24-inch pipeline from Durban to Jamieson Park had been commissioned. The expansion of the manganese line was complete. The freight rail capacity to Richards Bay and Maputo had been developed. The line to the Waterberg area needed an extra line, which could possibly extend into Botswana. New loops were being instituted on the iron ore line to Saldanha and the berthing capacity at the port was being upgraded.  As Transnet was building railway lines, it was also putting in fibre optic lines. Cape Town’s container harbour was being deepened and new cranes had been added, while Nqura had received more cranes and equipment and Richards Bay harbour had received a new rail line loop.

Transnet employed 5 077 people, while 20 855 indirect jobs had been created. At Transnet the gender profile was 32% female and 68% male. Africans comprised 4 141 of the total people employed.  460 bursaries had been awarded under the skills development programme and the Broad-Based Black Economic Empowerment (B-BBEE) spending had increased to 43% of Eskom’s total measurable procurement.  Transnet was looking at diversifying its revenue streams and reducing its dependence on mining products.  A few branch lines held the potential for private public partnerships.

Members said that there had been an outcry in the media over Transnet monopolising engineering contracts. They were impressed with Transnet and its transparency, as well as its collaboration in laying down fibre optic cable. Members asked why Transnet was behind on its spending on the iron ore line expansion.  They said Transnet’s ultrasonic detection unit should be adopted by PRASA.  How did branch line privatisation fit in with the developmental objectives of government? If trains bypassed Ermelo, how would it impact on the economy of the town?  Why had there been underspending on Transnet pipeline projects?  What were the initial and the current estimated costs for the project?  Had EIAs been done on the Durban dig-out port development?  How did Transnet manage red dust in Saldanha and coal dust in Richard Bay?  Had Transnet approached the private sector for funding for the dig-out port project?  Members asked what role Transnet was playing in community participation regarding the dig-out port. What success was the road-to-rail initiative achieving?

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