Performance of the Integrated National Electrification Programme

Presented by: Chris van Zyl Senior Manager: Capital Programme Performance of the Integrated National Electrification Programme Presentation to the Select Committee on Finance 8 August 2006

CONTENTS • Quarterly Report Municipal Programme 2006/07 • Allocations (Capital expenditure 2006/07) • Allocations (Capital expenditure 2005/06) • Connections – 2006/07 • Connections 2005/06 • Quarterly Report Eskom 2006/07 • Allocations 2006/07 • Allocations 2005/06 • Connections 2006/07 • Connections 2005/06 • The way forward • Conclusion and questions

Quarterly Report of Electrification funding for the period 1 April 2006 to 30 June 2006 to Licensed Municipal Distributors. The quarterly report for the period 1 April to 30 June 2006 is based on the gazetted programme for 2006/7 financial year.

CAPITAL EXPENDITURE 2006/07 CAPITAL EXPENDITURE Government Financial Year

CAPITAL EXPENDITURE Continue…. • An amount of R 21,498 million was scheduled to be transferred during the first quarter. • However no funds were transferred to municipalities due to the following reasons: • Implementation contracts are not yet returned by Municipalities. The municipalities indicated that they are awaiting their Council Resolutions on contracts before signing, hence the delay. • The contracts were received late to effect the transfers in June 2006. • A number of Municipalities are currently busy with 2005/6 projects hence unable to start with 2006/7 projects.

CAPITAL EXPENDITURE Continue…. Action plan • The transfers for July 2006 were effected. • Follow ups are being made with municipalities to ensure implementation contracts are signed. • The site visits and technical audits are currently being conducted to monitor and verify the 2005/6 projects .

Summary of Capital Expenditure 2005/06

CAPITAL EXPENDITURE Continue…. • Progress for the 1st quarter (1 April – 30 June 2006) • The 1st quarter actual expenditure excluding top up funding equalled to R 32,988 million. The year to date actual expenditure is standing at 79%of the total transfers. • For the 1st quarter municipalities utilised own funding (top-up) to the amount of R 9,249 million , which is 36% of year to date top-up funding. • Reason for the variance per Province: • Municipalities in some of the Provinces did not submit their monthly reports.

CONNECTIONS 2007/06 • No connections has been reported as contracts with municipalities have not been finalised

CONNECTIONS Summary of Household Connections 2005/06

For the quarter under review the Municipalities reported 13,760 actual connections. While the year to date actual connections equalled 58 124 connections. To date 75% of the revised household connections has been achieved. 7 school connections were reported during the 1st quarter of 2006. Year to date actual connections equalled to 56 (these includes additional 10 schools electrified from savings) against the year to date budget of 55 schools. To date 84% of planned schools have been electrified.

Eskom Programme

Eskom programme Allocations 2006/07 Quaterly

Eskom Allocation per province 2006/07 according to Gazette

Eskom Allocation and Expenditure 2005/06

Eskom Expenditure Per Province 2005/06

Eskom Allocation 2005/06 Explanation for overspending and roll overs • R 95 million overspending due to : • Other Projects committed during 2005/06 • Projects substituted from Annexure A (Eskom Contract) without following change process • Uncertainty of migration to the MIG – Projects of R300 million was committed of which R103 was contracted with DME. Actual expenditure incurred on all commitments R95 million • Pressure from communities and Municipalities to accelerate electrification in preparation for the elections • Infill Projects substituted by other projects

Eskom Allocation 2005/06 Explanation for overspending and roll overs, continue • R 70 million Roll overs were due to: • Projects not done due to the other committed projects • Projects not completed in the 2005/06 • Projects that could not be executed due to no houses being available

Eskom Connections 2006/07 Households

Eskom Connections 2006/07 Schools and Clinics

Eskom Connections 2005/06 Households, Schools and Clinics

Eskom Connections 2005/06 cont. • Performance according to connections achieved • Households 104% • Schools and Clinics 106% • Special Projects 85% • Total Programme 100,09%

Eskom Connections 2005/06 cont. Explanation for differences • During initial contracting more than 50% of the Eskom projects were still in the early phase of planning with accuracy levels varying between 65% and 85%. • Many of the estimates are provided by municipalities and can only be verified and confirmed once Eskom has completed their pre-engineering process. • Due to Eskom’s blanket connection policy were all households in an electrification project is provided with a connection before the project is deemed completed which has resulted in volume differences.

The way forward • Eskom engage in pre-engineering work within 2006/07 financial year to prepare projects for contracting for 2007/08. • Change Control process to be strictly followed for any changes. • Eskom not overspend without DME pre- approval • Monthly meeting between DME and Eskom to ensure compliance. • Addition controls put in place at Eskom Regions to ensure compliance.

Questions Thank you

Performance of the Integrated National Electrification Programme