Address by the Minister of Public Enterprises Honourable Alec Erwin at Medupi Power Station sod turning ceremony, Lephalale

Thank you for the opportunity to speak at this event, which is, in my view, one of the defining moments in Eskom's history.

Today's sod turning ceremony, for the country's first new greenfield coal-fired power station in 20 years, signifies that the Build Programme is indeed going full steam ahead.

We need to ensure that we move quickly towards better security of electricity supply for South Africa, and this power station which will be built here contributes to our vision of ensuring that we secure long-term, environmentally sustainable electricity for the country.

Because of the needs of a growing economy, the country's power stations have taken some strain in recent years, and thus the need to build new ones, and to identify other methods of generating electricity, in order to reduce this burden on the existing infrastructure.

Reliable supply of electricity is important for any growing economy, which requires large quantities of energy to sustain increasing consumer demand. Recently we have seen unprecedented growth rates across the globe, in countries such as China and India, as well as on the African continent, with the Angolan economy growing at double-digits last year.

The South African economy has also been growing at a robust rate in recent years, with even higher growth levels expected in coming quarters. In order for this economic growth to be sustained, and propelled to even higher levels, the State must create sufficient capacity to meet increasing energy demand levels.

William Arthur Wood once said: "The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails." This current economic growth may have caught us on the back foot initially, but we have adjusted our sails, and are on course to achieving our objectives regarding the South African economy.

State-owned enterprises, and in particular Transnet and Eskom, are embarking on the biggest investment programmes this country has seen in over three decades. Lack of adequate investment in infrastructure over the years has become an obstacle to the goals of economic growth and development that we would like to achieve. Over the next five years these two enterprises will invest in infrastructure to the tune of over R200 billion.

The decision to invest in this infrastructure was borne not only out of necessity, following increased power outages as capacity became strained, but also out of the realisation that South Africa is playing in an increasingly globalised world, and is competing with some of the best countries in the world to attract investment opportunities. Infrastructure that is world-class and efficient is also a key if local companies are to have a fair chance at competing with other world-class companies in the global economy.

Our decisions must also be responsible, and we need to take note of what impact the infrastructure programme will have on the environment. We welcome the Department of Environmental Affairs and Tourism's decision to approve the project from an environmental perspective. Our respect for the environment must also extend to the methods we use to generate electricity, and we will continue to explore more environmentally-friendly ways of producing energy.

Diversifying our energy mix to include, among others, the use of nuclear will also ensure that we secure supply for the future. Conditions remain tight, and Eskom's reserve margin, which has declined from 25% in 2001, to between eight percent and 10% currently, remains a source of concern. However, measures are being taken to address this issue, and it is imperative that this power station is built, and that we continue to identify and explore other methods of increasing capacity.

Eskom's approved R150 billion capital expenditure programme, along with the participation of Independent Power Producers (IPPs), will meet 70% and 30% of the country's capacity needs respectively.

Through the Medupi project, Eskom has also managed to sign two if its largest contracts in its 83 year history, for the boiler and turbine, which will contribute to job creation, and supporting supplier industries which have been neglected over the past 30 years. Both Eskom and Transnet are in the process of developing their Supplier Development Plans, as part of the Competitive Supplier Development Programme (CSDP). Because South Africa's investment programme is fairly small on a global scale, there is a need to develop the local supply base and improve local suppliers' competitiveness. The SDPs will be ready early next year.

Our key objectives regarding Eskom over the next five years are on track, and we are pleased with the progress made thus far with the implementation of the Build Programme. My Department will continue to monitor the implementation and impact of the infrastructure programme roll-out.

Commitment of the leadership in both government and Eskom will ensure that the decisions that we make today will have a positive impact on generations to come. With a planned operational life of about 50 years, the Medupi Power Station will outlive most of us here today.

Power stations like the one to be built here, the Underground Coal Gasification Plant in Majuba, as well as the Open Cycle Gas Turbines in the Western Cape, as well as other plants that Eskom is investing in are intended to ensure that power outages become a thing of the past.

I therefore urge all of us here to, not only save electricity, but to be bolder and more visionary in our thinking and our objective for the South African economy. Only if we remain focused on our ultimate goal, that of creating more jobs and creating a more vibrant economy with equal opportunities for all, will we be fearless enough in our decision-making and actions.

I look forward to 2011 when the Medupi power station will begin delivering its first power. All the best to the team involved.

Thank you.

Enquiries:
Vimla Maistry
Chief Director: Communications
Tel: 012 431 1021

Issued by: Department of Public Enterprises
14 August 2007