10 September 2007
On the 12th of September 2007, Earthlife Africa Jhb and various community orgainsations will be marching on Alcan headquarters to protest Alcan’s preferential tariff rates and to demand increased basic access to electricity. This action is in conjunction with actions against Alcan, Rio Tinto, and Alcoa across the globe.
The march will begin at 10:30am at the corner of West & Rivonia in Sandton, Johannesburg. The march will end at Alcan’s office (Fredman Towers, corner Fredman and Bute, Sandton).
For the past two years, Earthlife Africa Jhb has consistently called upon the Department of Trade and Industry (DTI), the Department of Public Enterprises, Eskom and Alcan to disclose the details of electricity sales to Alcan for its proposed smelter. Both the South African Government and Alcan have hidden behind a profoundly anti-democratic clause in the Developmental Electricity Pricing Programme (DEPP). Alcan is the first foreign company to benefit from the DEPP, and has signed a 25 year deal for 1350MW supply of electricity.
What is the DEPP? Essentially, the DEPP provides for uniquely discounted electricity tariffs for foreign industries that are heavy consumers of electricity (over 50MW) in South Africa. In return for investment in South Africa, the DEPP will ensure that electricity tariffs are internationally competitive (our nearest competitor is Australia, which sells electricity at US$0.053 per kwh and is 30% more expensive) and that the industry in question can achieve an profitable internal rate of return; i.e. if electricity is a major overhead (such as in aluminum smelting), it the tariff will be low enough to ensure profit.
This is a significant incentive for heavy industry to invest in South Africa and is supposed to provide significant jobs. However, what it really does is commit Eskom to tariffs for heavy industry at a rate lower (or, at most, on par with the next cheapest supplier of electricity) than anywhere else. It is, in effective, a subsidy for foreign industries, similar to a tax break or import duty waiver.
The most worrying factor about the DEPP is the “built-in” secrecy clause. Eskom is a public enterprise, ultimately owned by the citizenry at large. However, the DEPP guidelines ensure that any contracts signed under the DEPP are to remain secret. This is profoundly anti-democratic. The DEPP states (clause 12.1):
All officials, employees or members of the Department, the adjudication committee, NERSA, Eskom and non Eskom distributors shall regard as confidential all technical information, records, particularly any strategic commercial information and all knowledge that pertains to any project that applied for benefits in terms of DEPP, whether such information is recorded on paper or in an electronic manner.
The very next clause (12.2) in the guidelines bounds individuals with knowledge about the contracts to silence for the rest of their lives.
If the DEPP is a method for promoting growth and development in South Africa, why then the secrecy? Why shouldn’t this be in the public domain? This clause gives foreign corporations like Alcan the right to build electricity-intensive industrial plant in South Africa, get electricity on favourable terms in relation to their expected rate of return, and not to have to tell the country at large what rate they purchased electricity from the South African state. Further, this clause seems at odds with the spirit of the Promotion of Access to Information Act, through a pre-emptive strike against the releasing of information.
The DEPP deal with Alcan means that the citizens of this country won’t know the answers to the following questions
What is the price of electricity agreed upon by Alcan and Eskom?
What are the conditions of supply of electricity?
Will the price paid to Eskom cover the indirect costs of smelter? For example, the environmental group TWIG has calculated that the indirect costs of harm to the environment based on Eskom CO2 emissions to supply the smelter with electricity would be R6.4 billion.
Why doesn’t Eskom release its forward cost pricing curve, on a regular basis, as the anticipated costs of new plant escalate?
Are promised future measures to account for externalised costs of electricity generation compromised by the deal or the DEPP?
Earthlife Africa Jhb calls upon Eskom and Alcan to fully disclose all the details of their deal, including the actual price of electricity.
The fact that Alcan and the Government refuse to disclose these details is especially arrogant in light of the fact that 30% of South Africans are without electricity. Furthermore, the basic lifeline of 50kwh per month per household is entirely inadequate and downright miserly. If the South African Government can offer foreign corporations like Alcan electricity tariffs low enough to ensure profit, then surely it can provide the poorest of its citizens a meaningful allocation of electricity?
Therefore, Earthlife Africa Jhb calls upon Eskom and the Government to increase the basic allocation of electricity to 100kWh per person per month with a step-block tariff.
For more information, please contact:
Energy Policy Officer
Earthlife Africa-Johannesburg Branch
Tel: 011 339 3662
Fax: 011 339 3270
Cell: 084 250 2434
Earthlife Africa Jhb
Tel: 011 339 3662
Fax: 086 686 8434
Cell: 072 157 2155