PUBLIC ENTERPRISES PORTFOLIO COMMITTEE

1. PUBLIC ENTERPRISES PORTFOLIO COMMITTEE BRIEFING ON SOE INFRASTRUCTURE INVESTMENT 25 JUNE 2003

2. Restructuring Proceeds and SOE Debt Trend (cont.) SOE Foreign Borrowings 1992 to 2002 Ministry of Public Enterprises Date - 25 September, 2014Page 2

3. Restructuring Proceeds and SOE Debt Trend (cont.) Surplus of Public Enterprises as % of GDP Ministry of Public Enterprises Date - 25 September, 2014Page 3

4. Consolidated SOE capital expenditure programmes SOE Capital Budgets to 2005 (R millions) Ministry of Public Enterprises Date - 25 September, 2014Page 4

5. Selected examples of infrastructure projects in the Defence, Energy, and Transport sectors. Ministry of Public Enterprises Date - 25 September, 2014Page 5

6. Energy Sector – Eskom (cont.) Generation Capital Expenditure Budges 2003 to 2007 R’m Ministry of Public Enterprises Date - 25 September, 2014Page 6

7. Defence Sector – Denel Capital Expenditure for 2003/04 Of the total amount spent on business infrastructure 47% is for maintaining existingcapacity whilst 43% is investment to increase capacity Ministry of Public Enterprises Date - 25 September, 2014Page 7

8. Energy Sector – Eskom (cont.) Latest Transmission Supply Plan (2003-07) Dec.2002 Ministry of Public Enterprises Date - 25 September, 2014Page 8

9. Energy Sector – Eskom (cont.) Eskom Distribution Capital Rolling Plan Project Categories R’000Direct Customer Projects 575,190 Strengthening Projects 449,911 Refurbishment Projects 730,863 Electrification Projects 560,371 Land and Rights acquisitions 8,978 Rural Development 33,800 EBSST 74,200 Various other 257,334ASSET UNDER CONSTRUCTION 2,690,648 Ministry of Public Enterprises Date - 25 September, 2014Page 9

10. Energy Sector – Eskom (cont.) Electrification (Cumulative Number Of Homes Electrified) 211 628 2.8 million homes electrified Ministry of Public Enterprises Date - 25 September, 2014Page 10

11. Energy Sector – Eskom (cont.) Major Schemes in plan • North & North East Grid schemes • Simunye RTS: Camden • Polokwane Network Strengthening Scheme • Steelpoort Strengthening • Adis Substation Integration • Rustenburg Network Strengthening Scheme • Central Grid Schemes • Vaal Triangle Strengthening • Johannesburg North Strengthening • Atlas Bypass and Decommission Project • East Grid Schemes • Bayside Aluminium Potline Upgrade • Hillside Aluminium 3rd Potline Integration • Southern & Western Grid Schemes • Cape Strengthening: North of Hydra Scheme • Cape Strengthening: South of Hydra Scheme • Aluminium Smelter at Coega Ministry of Public Enterprises Date - 25 September, 2014Page 11

12. Energy Sector – Eskom (cont.) Major capital projects within next 5 to 10 years • Platinum and ferrochrome mining expansions within northern region • Vaalwater 132kV Overlay - R23m • UG2 Smelter Line and Substation - R30m • Overyssel Line and Substation - R129m • Tailings Platinum Mine Expansion - R30m • Polokwane Smelter - R38m • Styldrift Platinum Mine Expansion - R36m • Waterval Platinum Project - R27m • Transvaal Ferrochrome Mining - R42m • Waterval Smelter Upgrade - R21m 5 year plan incorporates all reasonably foreseen growth prospects, including platinum basin etc. Potential projects may materialise in excess of plan, no feel of the risk at this stage Ministry of Public Enterprises Date - 25 September, 2014Page 12

14. Transport Sector – Port Operations Project – Durban Terminals Upgrade • Overview • A key part of the port’s cargo handling infrastructure upgrade programme that aims to address capacity problems and to upgrade local facilities to global standards. Key features are: • Existing crane upgrades by conversion of crane power to 11KV • Fire protection equipment at container gantries • Socio-economic impact • Employment creation during construction phase and improved service to clients Ministry of Public Enterprises Date - 25 September, 2014Page 14

15. Transport Sector – Port Operations (concluded) Project – Iron Ore Terminal Expansion • Overview • Construction of expanded bulk handling faclities for the Saldanha Bay Iron Ore Terminal. The IOT is the dedicated export chanel for iron ore mined in the Northern Cape. The expansion is required to raise output from 18 million tpa to 29 million tpa. • Installation and erection of 4.5km new conveyor belts • Addition of 2 Shiploaders • 3 new stacker reclaimers • Purchase new tipper • Refurbishment of existing equipment • Upgrade of existing old equipment • Socio-economic impact • Support development of Northern Cape mineral fields and associated additional mining jobs. Increased iron ore exports will be worth R1.6 billion pa. Ministry of Public Enterprises Date - 25 September, 2014Page 15

16. Transport Sector – Port Authority Project – Richards Bay Coal Terminal Capacity Expansion • State Owned Enterprises • National Port Authority (Transnet) • Overview • Expansion of Terminal from 72 million tons per annum capacity to 82million tons pa capacity. • A further coal export facility is envisage at the Dry Bulk Terminal (DBT) in Richards Bay which will in its initial stage permit 800,000 tons of coal export. This will occur based on Environmental Impact Assessment completion • Project Initiated • N/A MOA close to finalisation • Project Finalized / Expected Date of Finalization • Estimated finalisation date 2005-06 • Policies / Legislation created / implemented • Compliance with Transnet Procurement Policy – emphasis of BEE component in the exporting of coal. • Date Cabinet Approval Received/Expected N/A • Proceeds received N/A • Proceeds expected • Advisors appointed • Private to be appointed by RBCT • Fees Paid (R/Donor Funded) • The project is done in conjunction between Transnet & RBCT for the tune of 2,4 billion rands • Transnet = R1,7 billion RBCT= R700 mil • Restructuring Model Chosen N/A • Jobs created / Jobs Lost • It is anticipated that job creation will arise as a result opportunities at mines • Project Manager Jointly between RBCT & Transnet Ministry of Public Enterprises Date - 25 September, 2014Page 16

18. Transport Sector – Port Operations Project – Durban 2005 • Overview • A key part of the port’s physical infrastructure upgrade programme that aims to address capacity problems and to upgrade local facilities to global standards. Key features are: • Upgrade of City Terminals in Durban and creation of expanded terminal • Infrastructure development for Durban Container Terminal • Coversion of pier 1 for container handling • Socio-economic impact • Employment creation during construction phase and improved service to clients Ministry of Public Enterprises Date - 25 September, 2014Page 18

19. Transport Sector – Port Authority (cont.) Project – Port of East London Deepening of West Quay • Overview • Dredging and deepening of 250m of West Quay berth R-Extension to 10.7m consistent depth and the stabilization of the quaywall by rock anchors and grouting • Socio-economic impact • Enabling car carriers of deeper draft to call at the Port of East London, average 2 vessels per month • Facilitating and enhancing growth of trade especially in the automotive industry, benefits realised in port and cargo dues, growth in economy as a result of cargo import/export plus the multiplier effect as a result of jobs created Ministry of Public Enterprises Date - 25 September, 2014Page 19

20. Transport Sector – Port Authority (concluded) Project – Construction of Port of Ngqura • Overview • The construction of the Ngqura Port is effectively the key to unlock the potential of the Coeg IDZ. Already over 3 million cubic metres of soil has been excavated from the future basin. Key parts of current work • Marine infrastructure (keywalls and excavation of turning basin) • Sand bypass system • Dredging is scheduled to start in June • Parallel developments on the land side are building the IDZ infrastructure and providing bulk infrastructure for the industrial land and access roads • Socio-economic impact • It is expected that during construction phase approximately 2000 jobs will be created, while the permanent jobs in the port will be fairly few, the potential of the IDZ is enormous (but cannot be quantified at this stage). Ministry of Public Enterprises Date - 25 September, 2014Page 20

21. SPOORNET

22. Transport Sector – Rail Project – Rolling Stock Capitalisation and Refurbishment Programme • Intro • Spoornet has a fleet of outdated locomotives and wagons. The average age of the existing locomotive fleet is 25 Years. The operating cost, reliability and service quality of running these old locomotives has caused the withdrawal of services and the pricing of services beyond the carrying capacity of the market. • Socio-economic impact • The recapitalisation programme will allow more efficient locomotives to be used in the rural areas(primarily diesel). • This will allow the re-vitalisation of the branch line network and act as an economic multiplier in rural economies. • The overall efficiency and quality of rail services will improve dramatically, thereby driving down real pricing of rail services, and also increasing the carrying capacity of the rail network. This will result in a shift from road to rail (in conjunction with Government policy initiatives) that will arrest the current level of road degradation and related costs. • It is envisaged that R 9 Bil of the forecast R 10 bil capex on wagons, will be spent in RSA. Less than 50% of the R 19 Bil total expenditure on locomotives will be spent abroad. The components sourced will be those that are not manufactured in RSA. The successful suppliers will be required to transfer skill over the period to ensure a reduced reliance on foreign expertise, and will be required to embed their technology in Spoornet and develop local support networks. Ministry of Public Enterprises Date - 25 September, 2014Page 22

23. Transport Sector – Rail (cont.) Project – Fixed Infrastructure Upgrade • Intro • The fixed infrastructure plays a significant role in the operational efficiencies and carrying capacity of the rail network. The spending on this item will be spread across all the provinces and will be procured locally wherever possible. • As can be seen by some of the examples to follow, the line by line assessment and the development of regional strategies for the Light and low density line system, that will be done in consultation with provincial and local government, business, labour and communities, will require that this investment be spent in areas all around the country and not merely in the big cities and their linkages. • Socio-economic impact • The procurement of goods and services in the upgrade localities will have a knock-on effect in those regional and local economies. • The raising of the carrying capacities and efficiencies of lines will have a downward pressure on real pricing in the medium term and therefore stimulate local economic development and reduce the real cost of logistics faced by rural and peri-urban production. • This will have the net effect of reducing the cost of exporting goods from marginal areas in the country, and therefore allow the expansion of the basket of goods currently exported. • This expenditure is further required to raise the safety levels in some areas, support the industrial, mining and development strategies of the Provincial and Local Governments, support the integrated transport strategies at local and provincial levels and also raise the levels of service delivery to surrounding communities. Ministry of Public Enterprises Date - 25 September, 2014Page 23

24. TRANSPORT SECTOR – RAIL INFRASTRUCTURE Three basic elements form the backbone of fixed rail infrastructure development: [1] leasing or outsourcing of selected unviable or LDL [2] new line development [3] upgrades of LDL’s, HDL’s or lines that were previously classified as unviable. NB: identify lines as part of IDZ, SDI, provincial authorities’ development plans, and link to Eskom projects, agricultural development and new mining and industrial activity.

25. MESSINA GROENBULT PIETERSBURG PHALABORWA HOEDSPRUIT WITBANK NELSPRUIT RUSTENBURG KOMATIPOORT KAAPMUIDEN PRETORIA JOHANNESBURG KRUGERSDORP ISO MAFEKING OGIES ERMELO KLERKSDORP POSTMASBURG GOLELA KROONSTAD BETHLEHEM VRYHEID NEWCASTLE VEERTIENSTROME GLENCOE LADYSMITH KIMBERLEY RICHARDS BAY BLOEMFONTEIN PMB DURBAN DE AAR NOUPOORT SALDANHA BELLEVILLE EAST LONDON WORCESTER CAPE TOWN PORT ELIZABETH MOSSEL BAY Spoornet Rail Network HDL LDL with noservice LDL that arenot viable LDL with repositioning potential Railway Network classification prior to regional development strategies being developed

26. Spoornet lines Northcor Capecor Southcor Natalcor R.Baycor N.Westcor Eastcor N.Eastcor Salkor Sentracor SouthEastCor Westcor Freestate Beit Bridge Messina Louis Trichardt Ellisras Soekmekaar Thabazimbi Pietersburg Drummondlea Vaalwater Chroomvallei Phalaborwa Zebediela Naboomspruit Hoedspruit Middelwit Nylstroom Steelpoort Northam Graskop Marble Hall Roossenekal Rustenburg Plaston Cullinan Komatipoort Rayton Belfast Witbank Mafikeng Machadodorp Pretoria Lichtenburg Ogies O/fontein Sentrarand Krugersdorp Baberton Welgedag B/plaas Coligny Hawerklip J’burg Vermaas Welverdiend Breyten Bethal Lothair Potchestroom Ottosdal Klerksdorp Orkney Wolwehoek Standerton Hotazel Schweizer-Reneke Vierfontein Makwassie Pudimoe Charlestown Erts Golela Vrede Ancona Westleigh Newcastle Kroonstad Utrecht Sishen Hlobane Warden Arlington Warrenton Vryheid Naroegas Nakop Manganore Whites Glen H Harrismith Virginia Bultfontein Upington Palingpan Postmasburg Glencoe Bethlehem Theunisen Ladysmith Kimberley Marquard Winburg Kakamas Bergville Empangeni Nkwalini Douglas Eshowe Bloemfontein Kranskop Richards Bay Moorleigh Ladybrand Sannaspos Greytown Koffiefontein Maseru Belmont Howick Prieska Stanger Hilton Copperton Underberg Richmond Donnybrook Mid Ilovo Springfontein Durban Mandonela Matatiele Bethulie Franklin Kelso De Aar Kokstad Aliwal North Harding Simuma Sakrivier Port Shepstone Bitterfontein Dreunberg Barkley East Jamestown Noupoort Maclear Kootjieskolk Calvinia Rosmead Schoombee Hutchinson Umtata Hofmeyer Queenstown Tarkastad Qamata Beaufort West Klawer Seymour Somerset East Amabele Cookhouse Blaney Klipplaat Fort Beaufort Porterville Saldanha East London Prins Alfred Hamlet Kirkwood Touwsrivier Ladysmith Calitzdorp Atlantis Alexandria Uitenhage Worcester Oudtshoorn Patensie Port Alfred George Avontuur Franschhoek Port Elizabeth Riversdale Cape Town Stellenbosch Knysna Mosselbaai Protem Simonstad Strand Bredasdorp

27. Transport Sector – Rail (cont.) – North West Province Project – Hercules - Magaliesberg Line Tourism Project • Intro • Spoornet is leasing the Hercules – Magaliesberg line to the North West Parks and Tourism Board for a nominal amount of R 1000,00 per month. This is to allow the NWPTB to run a tourist rail service that will ensure the ingress of tourism spending into the area. • Socio-economic impact • SMME opportunities for integrating their products or services into the rail service offering is in the process of being finalised. • The rail service itself will create certain jobs in its operation and maintenance. • This service constitutes an integral part of the economic development strategy in the province. Ministry of Public Enterprises Date - 25 September, 2014Page 27

28. Transport Sector – Rail (cont.) – North West Province Project – New Ferro-Chrome Line (Brits) • Intro • This is line is being built to allow the export of ferro-chrome from Brits to Richards Bay. • Socio-economic impact • The construction of this line will ensure that the mining output is moved on the railway line and thereby prevent the degradation of the road network in the area. The road maintenance savings are significant. • The construction of this line in support of the mining development and beneficiation will have significant multiplier effects in the region and locality. • The total value of product moved to export would be R 2.7 Bil per annum. • The total amount of inbound supplies and process elements would be plus or minus 135 Tons per annum. Ministry of Public Enterprises Date - 25 September, 2014Page 28

29. Transport Sector – Rail (cont.) – Eastern Cape Province Project – Umtata – Amabele Line Upgrade • Intro • The area is suffering an economic decline. Several factories and facilities have closed. The Eastern Cape Government, in conjunction with Spoornet is upgrading the line to act as an anchor infrastructure corridor. This will raise the carrying capacity of the line and thereby raise the ability to move goods from the inland areas to export facilities in East London. • An IDZ has been approved at the port and rail facilities in East London. This line will be the prime connection between the IDZ and the inland areas. • This line is critical to preventing environmental and infrastructural degradation, as the impact of all the traffic on road would have major environmental and road maintenance cost implications. • This project has reversed the non-viable status of the line and represents the kind of outcome of the line by line analysis and regional consultative process that would be a net contributor to a regionally distributed economic value add infrastructure investment programme. • Socio-economic impact • The traffic on the railway line has decreased from 19 000 tons in 1997 to 7 000 tons. This traffic was mainly coal and wood poles. • The upgrading of the line will support the planned industrial, mining and agricultural development in the area and is planned to raise the maximum traffic to 1.5 Million tons a year once the standing timber has matured and the mining production has come on line. • The commodity profile on the line will change to mainly: timber to chipping facilities in KZN, agricultural and mining products. Ministry of Public Enterprises Date - 25 September, 2014Page 29

30. Transport Sector – Rail (cont.) – Eastern Cape Province Project – Coega Extension • Intro • This line is intended to link up the Coega development with the Port Elizabeth rail network. • Socio-economic impact • The operation of this line will raise the financial viability of the Coega Port and the throughput on the IDZ. • This will directly impact on the employment opportunities in the area. • This line will reduce the costs of manufacturing and export from the Coega IDZ. Ministry of Public Enterprises Date - 25 September, 2014Page 30

31. Transport Sector – Rail (cont.) – Northern Cape Province Project – OREX Upgrade • Intro • This line, that carries iron ore from Sishen to the Saldanha Iron Ore Terminal, is being upgraded from an annual capacity of 26 Million tons to 38 Million Tons. • Socio-economic impact • This raising in capacity will enable the mining industry in the province to raise production during favourable market periods and therefore extract maximum possible revenue from their operations. • This expansion in production will require that additional mining jobs be created. • The value of the additional iron ore that can be exported as a result of this expansion is R 1,6 Bil per annum Ministry of Public Enterprises Date - 25 September, 2014Page 31

32. Transport Sector – Rail (cont.) – Northern Cape Province Project – Northern Cape GFB Line Upgrade • Intro • This is a general upgrade of the rail network in the Northern Cape. • Socio-economic impact • The impact of this upgrade will primarily be felt by the mining industry and related industries. • This would raise the carrying capacity of the network in the province to provide for expansion in mineral production. • The upgrading of the line will support the planned mining and industrial beneficiation in the Northern Cape. • The line upgrades will be prioritised in the consultative regional process to ensure maximum possible support to Provincial and Local Government development and transport strategies, as well as support to private sector initiatives with job creation or job loss reversal possibilities. • The upgrade will also raise the rail safety standards. Ministry of Public Enterprises Date - 25 September, 2014Page 32

33. Transport Sector – Rail (cont.) – Northern Cape Province Project – Belmont – Douglas Upgrade • Intro • Upgrading the line to carry additional maize and industrial products resulting from economic development initiatives by the Province. • Socio-economic impact: • The upgrade of the line will enable the Northern Cape farmers to deliver maize to all corners of the country. • The line will open up tourism opportunities for SMME’s in the Northern Cape Province. • The impact of all the additional traffic on road that results from production expansion, would have major environmental and road maintenance cost implications • A Provincial irrigation scheme is established at the confluence of the Vaal and the Orange rivers. This scheme ensures a flattened traffic flow over all seasons. For the past few years, production in the area has been growing at the rate of 30 % per annum. Ministry of Public Enterprises Date - 25 September, 2014Page 33

34. Transport Sector – Rail (cont.) – KZN Province Project – CoalLink Upgrade • Intro • This project will raise the carrying capacity of the line from 64 Mil tons to 82 Mil tons per annum. • Socio-economic impact • The value of the additional traffic exported on this line is R 3bil per annum. • The expansion of the line capacity will ensure that the access of BEE Coal Miners to export facilities will be accommodated at similar operating and costing as that faced by RBCT owners. This is dependant on the upstream consolidation facilities currently under discussion, being in place. Ministry of Public Enterprises Date - 25 September, 2014Page 34

35. Transport Sector – Rail (cont.) – KZN Province Project – GFB Line and Facilities Upgrade • Intro • This project is the upgrading of all fixed facilities in KZN. • Socio-economic impact • The raised levels of efficiency resulting from the reduced downtime experienced with outdated fixed infrastructure will put downward pressure on real pricing of rail services and raise the carrying capacity of the network. • The lowered cost faced by manufacturers will raise their competitive positions in the province’s export industries. • The upgrade is also intended to add into the initiatives of the Province, such as the Dube Tradeport. Ministry of Public Enterprises Date - 25 September, 2014Page 35

36. Transport Sector – Rail (cont.) – Mpumalanga Province Project – Ressano Garcia Upgrade • Intro • This is the capex that is required to upgrade the line for the concession agreement that has been concluded between Spoornet and CFM(the Mozamambican Railway Utility). • Socio-economic impact • This upgrade will raise the traffic through the Province. • This upgrade will raise the access to the Port of Maputo by SMME’s and developing miners in the Province. Ministry of Public Enterprises Date - 25 September, 2014Page 36

37. Transport Sector – Rail (cont.) – Limpopo Province Project – Fixed Infrastructure Upgrade • Intro • This project is the upgrading of all fixed infrastructure in Limpopo Province. • Socio-economic impact • The high rate of rail accidents will be curtailed by the significant revamping of the signaling system, thereby reducing the number of temporary line closures and the resultant cost of post accident rehabilitation. • The raised levels of efficiency resulting from the reduced downtime experienced with the accidents, will put downward pressure on real pricing of rail services and raise the carrying capacity of the network. • The lowered cost faced by mining and industry will raise their competitive positions in the province’s export industries. Ministry of Public Enterprises Date - 25 September, 2014Page 37

38. Transport Sector – Rail (cont.) – Free State Province Project – Kroonstad – Ladysmith Line and Maseru Container Terminal Upgrade • Intro • This project is the upgrading of the line to ensure an export corridor for the Vereeniging/Van der Bijl/Sasolburg Industrial complex. • This project includes the upgrade of the Maseru Container Terminal. • Socio-economic impact • This line will ensure that the industrial manufacturers have ready access to the mainline to the Durban Harbour. • It will further raise the access of manufacturers in Maseru to export markets. • This line also provides an alternative route for the export of agricultural products from the Free State. Ministry of Public Enterprises Date - 25 September, 2014Page 38

39. Transport Sector – Rail (cont.) – Western Cape Project – GFB Line and Facilities Upgrade • Intro • This project is the upgrading of facilities in the Western Cape, with a special emphasis on the signaling upgrade to reduce the possibility of accidents, such as that which was recently experienced. • Socio-economic impact • This will raise the system efficiency in the Province and ensure that the level of incidents and accidents are reduced, thereby increasing the capacity on the line and raising the level of safety of the interlink between passenger and freight services. Ministry of Public Enterprises Date - 25 September, 2014Page 39