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Address by KwaZulu-Natal MEC for Economic Development, Tourism & Environmental Affairs, Mr Sihle Zikalala during the International Gas Co-operation Summit held in Durban on 10th October 2017

10 OCTOBER 2017

Address by KwaZulu-Natal MEC for Economic Development, Tourism & Environmental Affairs, Mr Sihle Zikalala during the International Gas Co-operation Summit held in Durban on 10th October 2017
 
Programme Director;
Her Worship the Mayor of eThekwini Municipality, Cllr Zandile Gumede;
The Premier of KwaZulu-Natal, Mr Willies Mchunu;
Honourable National Minister of Energy; Ms Mmamoloko Kubayi;
Honourable Mozambique Deputy Minister of Mineral Resources & Energy, Mr Augusto de Sousa Fernando;
Premier of KwaZulu-Natal, Mr Willies Mchunu;
Chairperson of Portfolio Committee on Energy,
Director-General: Department of Energy,
Advisor on Energy in the Presidency;
Senior Government Officials
Members of the Business Community;
Technical & Research Practitioners in the Energy Industry;
Distinguished Guests;
Members of the Media Present;
Ladies and Gentlemen;
All Protocols Observed

As the Province of KwaZulu-Natal, we feel privileged to be part of this esteemed session that not only deliberates on the future of an alternative energy mix in the country, but also interrogates what role those who were previously excluded can play in the energy sector.

Around this time, last year, we were part of a similar session which was held in Cape Town. At that gathering, KwaZulu-Natal was humbled to be nominated to host the 2000 MW gas-to-power project to be located at the fast growing industrial node of Richards Bay on the north coast.

The announcement of this estimated multi- billion gas energy plant has helped draw the attention of potential investors in the power business which augurs well for the future of this coastal province. Importantly, we are encouraged by the fact that this initiative is expected to generate in excess of one million job opportunities in the value chain of allied business operations.

It is no surprise that the organisers of this august event opted for KwaZulu-Natal, probably to be able to give potential investors and interested practitioners in the energy industry the opportunity to sample first-hand experience of efforts made to position the province as the mainstay of the country and region’s industrial development. We are, therefore, delighted to host you as you deliberate on the state and future of the energy sector in the world.

Programme director, we are under no illusions that for any industrial advancement to be realised, access to natural gas would serve as a fulcrum in the short to long term to ensure diversified energy options as opposed to reliance on dwindling and environmentally sensitive fossil fuels such as coal. At the same time, the LNG supplies would further guarantee competitive pricing which would contribute to revenue stocks to enable more research and exploration into further indigenous gas prospects.
 
As the Provincial Government of KwaZulu-Natal, taking cue from the national government, we remain committed to ensuring that we become a sustainable energy generation site for high-potential exploration opportunities for the combination of oil and gas. Our main focus is fast-tracking the transition to alternative energy resources in the whole province. The declaration of Richards Bay Industrial Development Zone into a Special Economic Zone has heightened expectations for this part of our province to feature amongst leading industrial bulwarks in the world. However, this will depend on the provision of constant and uninterrupted energy to industries hence gas becomes an appropriate stringer to galvanise and connect our development to global markets.  

Programme director, it is undisputable that energy supply is experiencing challenges in the country and this may result in adverse effects due to the immense pressure on the current grid.
We therefore believe that the discourse and studies about the role of energy in transforming our economy is one that should preoccupy us all.
This, therefore, requires continuous exploration and investigation of the gas industry in the country. We are fully aware that the South African energy sector has been, and continues to be at the centre of the country’s developmental agenda having experienced sever outages as from 2008 which coincided with global financial crisis.

That unsound position thus demanded of us to come up with frugal ways to utilise electricity whilst pushing for alternate, reliable energy sources that were also environmentally friendly.
As signatories to regional and global protocols directed at reducing carbon footprints, we think that the establishment of gas energy base would send a clear message to the world that amid our desire to accelerate our industrialisation, we are equally mindful of our collective obligations to protecting our planet from reckless environmental degradation.

However, as we say this, we simultaneously advance the position that there must be fairness and equality in how we reduce greenhouse gas emissions. For more than two centuries now, the West has seen unprecedented economic advancement and growth at the back of harmful energy sources, including coal. We argue that the developing world, including the African continent, must be accorded a special dispensation to also meet its development needs and targets without being prejudiced by, for example, a blanket ban on fossil fuels. Equally, this posture means that we would have to accept and adhere to strict measures to ensure that our pursuit for economic growth and development as the developing world does not end up causing long-term and irreparable damage to our environment.

Programme director, the South African economy stands to benefit exponentially from the gas development through increased energy security and availability of natural gas which will enable the country to be an active player in the energy mix.
In this regard, we have no doubt that a new era awaits and will be driven by domestic, regional and global demand for alternative energy supplies that would further impact on development and socio-economic transformation.

The demand for an energy alternative is again intensified by the types of industries that are active in the province and specifically in the Richards Bay area which houses aluminium smelters, mining, steel industry and many others that demand electricity as a source of energy.

We would like to stress that the country’s promotion of gas generation should not be viewed as government initiative, in isolation from the private sector participation. We might be taking the lead in creating suitable conditions for this energy avenue, but we would like to see more private investors coming into this space.

We are equally cognisant that national government will give details regarding actual expenditure on energy related infrastructure development, but we would not be out of turn if we register our appreciation on the strides made to raise our energy supplies. This is demonstrated in recent reports by Statistics South Africa confirming government inspired capital spend that had grown from R203 billion in 2012 to R284 billion in 2016 which was an annual increment of 8.7%.
This new venture in our energy mix promises long term benefits for entrepreneurs and investors; hence we would like to see our own business people seizing this opportunity to immerse themselves in the energy production value chain.

It is also important to note that while a great deal has been achieved in growing the economy over the past 23 years of our freedom and democracy, our immediate action as government working with stakeholders in the business, is to direct investment in strategic energy infrastructure. Our efforts are further guided by the President of the country, His Excellency J.G Zuma who last week, giving a progress report on the implementation of Operation Phakisa here in KZN, reminded us that the gas industry remained a critical pillar of the oceans economy.
 
Accordingly, the provincial government has taken advantage of Operation Phakisa and we are currently exploring strategies that will ensure that we use our coastline to generate energy. We have been inspired by new discoveries across the eastern sea-board coastline where oil and gas reserves have been identified in neighbouring Mozambique up to the coast of Mombasa in Kenya. This presents huge economic growth opportunities for the continent and South Africa.

But, as the continent of Africa, we are acutely-aware of the fact that we have an urgent task of drawing more and more of our people into this lucrative sector. For centuries, our mineral resources have done very little for our continent, while they have built and sustained first world economies elsewhere in the world. Even after independence, African countries have struggled to harness and exploit the opportunities that come with these mineral resources. Clearly, it is the task of the current generation of leaders to ensure that our wealth is used to grow and develop Africa.

In this regard, we must devise innovative approaches to dealing with the prohibitive barriers of entry in the energy sector, particularly for Africans.
African governments must assist those who want to explore for these minerals and provide the necessary support for them to enter the sector. As governments do this, they must also exercise vigilance to deal with the challenge of fronting which almost always accompany business transactions of this nature.
But we are also awake to the existence of other hindrances to our country’s ability to stimulate the introduction of diverse gas supply options. This, in part, stems from our historical association with coal as the primary source to derive energy.
Hence, whilst striving to empower our people to enter the energy sector, we need to simultaneously address the challenges that could be stalling the progress of bringing the gas option into play, and these could possibly include:

•    Exploring and strict regulations
•    Landscape
•    Obtaining licenses to operate
•    Connecting Pipelines

Of course, other impediments to our people entering this sector include issues such as expertise, not being up to speed with the latest technological advancements and the lack of access to funding.
On the latter point,  and while we appreciate that investors and potential funders might be mildly apprehensive about immersing themselves fully in a sector is still finding its footing around a yet to be developed gas market, we nonetheless maintain that we need not be so risk averse to the point of disregarding even the most brilliant entrepreneurial innovations in the gas to power sector.

Honourable guests, standing here today I still want to reiterate that ours is a province that is stable enough to attract any type of investment. We are aware that the place we occupy in the economic setup of our economic directly translates to the magnification of all political and economic developments that take place in our country. This stems from the fact that South Africa is a serious and strategic player in our continent’s economy.
For this reason, allow us to put you at ease about the state of politics in our country. South Africa is a constitutional democracy, founded on the tenets of respect for human rights and the rule of law.
As you all are aware, the leading party – the African National Congress – will be holding its elective conference within the next two months and, as a democratic organisation, there is an open contestation for leadership positions within the ANC. This entails intense campaign and a drive by contenders to try and sway the opinions of delegates. While this excitement might confuse some people, we want to assure our partners and prospective investors that South Africa remains a stable and democratic country which pays its allegiance to the Constitution and the rule of law.

I thank you,

Mr Sihle Zikalala, MPP
KZN MEC for Economic Development, Tourism & Environmental Affairs