APPLICATION OF FARM WORKERS/DWELLERS ELECTRIFICATION POLICY POST LAND RESTITUTION [Draft Strategy] Background Since the dawn of the democratic dispensation, the Reconstruction and Development Program was the centerpiece of South Africa's land reform. The RDP focused on land restitution: a legal process whereby people who can prove they were dispossessed of their land after 1913 (when the colonial government formally restricted African land ownership in the Natives Land Act) could regain the land or receive financial compensation. The South African constitution, which Parliament approved in 1996, included the "property clause," which demanded fair, market-related compensation for land taken in the public interest, including through land restitution and land redistribution. Under these rules, anyone who lost land "due to racially discriminatory measures" since 1913 could take their claims to the Land Court. All claims had to be lodged by the end of 1998 and most cases were settled amicably through compensation. The current Farm Dweller Houses electrification policy does not encompass the post land restitution farming community. Due to an ever increasing number of emerging post land restitution farmers who require access to electrification. It has become necessary to consider the electrification of such areas through the Integrated National Electrification Programme (INEP), due to the fact that most of these farming communities are largely engaged in subsistence farming. Stakeholder Participation / Inputs & Comments The following inputs / views were presented by Mr. IS Sokopo: “The current policy on the electrification of farm dweller/worker households assumes the following regarding the funding of the electrification of farm workers/dwellers: -

• That farm dwellers/workers shall receive their supply from the transformer of the farmer; • The cost per connection of the farm dweller/worker houses is linked to the urban subsidy as revised from year to year; • The INEP shall subsidies the farmer to the tune of 80% of the urban subsidy allocation per connection if the farm owner’s claim per connection does not exceed the approved urban subsidy allocation; • If the farmers claim per connection exceeds the urban subsidy allocation, INEP shall pay a subsidy not exceeding the approved urban cost per connection allocation and the farmer shall pay the balance. The policy is silent regarding the funding of the electrification of farm dweller/worker houses post land restitution: Assumptions: After land restitution, the status of the farm dwellers/workers changes and they become the new owners of the farm and this can be achieved in the following manner: 1. That they form a close corporation or a section 21 company which assumes own personality and steps into the shoes of the farmer and continues with farming operations which means that: e) The new owner will take over the responsibility of the farmer i.e. service the electricity account from the licensed distributor and supply the farm dwellers/workers with electricity as before; f) If the farm dwellers/workers are not electrified, the new owner shall be responsible for the electrification of the farm dwellers/workers in line with the existing policy. (The above is based on the assumption that besides the change of the legal personality, the farm operations continue as before and this should be the preferred scenario). 2. That they cease the farming operations and continue with subsistence farming with little or no income as before: e) They negotiate with the licensed distributor to take over the main supply to the farm and supply them directly and integrates them as part of their customer base and links them

to the nearest project in the area so that they can buy electricity tokens; f) They negotiate with the local municipality to register them as indigents for both electricity and water supplies so that they benefit from free basic services available from that municipality; g) For unelectrified farm dwellers/workers the assumption is that the farm either has electricity supply or not: i. If the farm has electricity supply, the licensed distributor takes over the main supply and supplies the farm dwellers/workers directly in line with the licensed distributor’s electrification programme for that year; ii. If the farm has no electricity, the licensed distributor investigates the feasibility of providing electricity supply to the farm for the electrification of the farm dwellers/workers and submits such study for the DME’s consideration; iii. If the DME’s consideration is negative towards grid electrification, alternative energy supplies should be explored e.g. solar home systems. h) The local municipality must take an active role in the integration of the farm dwellers/workers with the municipal community”. Other Issues pertinent to the Farm Dweller Houses Policy that were raised during the Eastern and Western Cape Provincial and District Energy Sessions. 1) The 80% / 20% occupancy rule, whether it applies to Farmers? The 80% occupancy clause [Clause 6.15 -That houses are built and are 80% occupied before electrification project can commence] is not a DME policy position, but was incorporated in the implementing entity’s implementation contracts in order to curb vandalism of infrastructure. The issue needs to be tabled at the Macro Control Steering Committee / NEAC meeting to give direction on incorporating it as a policy directive. 2) The 20% portion that the farmer is required to pay by Eskom, raises affordability questions AND the expenses incurred due to sparsely populated farm houses The Capital Subsidy as per the current DME policy is R4600 for rural areas, the issue that still needs to be revisited is the question of the

incentive provided for this farmers in order to encourage them to vigorously undertake electrification projects. The INEP Capital program will have to give direction and guarantee on what level the incentive should be capped, based on the availability of Treasury mobilized funding. The Status Quo regarding this matter is explicitly dealt with in the policy as follows: “Government will pay through the local licensed entity an amount, up to the maximum subsidy payable for the electrification of rural households or the actual costs incurred if it’s lower than the applicable subsidy. The subsidy is based on the cost of the lowest supply size stated in the suit of supply options. This amount will be determined on an annual basis.

The incentive paid will never be

more than the actual cost of connection incurred by the farmer. A certain amount of the incentive will be retained by the licensed entity to cover for the administration costs incurred during the electrification project of the farm dweller houses. This amount may not be more than 10% of the total incentive paid out.

The incentive will cover the costs of the following: • The low voltage reticulation costs, • The service connection, • The meter, including a three-point plug and a light. The incentive will not cover the following: • Any internal wiring, • Electrical appliances. The payment of the incentive is subject to a minimum supply size of 20A being installed and a network built in accordance with relevant industry standards. This incentive will not be given for the

electrification of holiday cottages, dairies, sheds, water pumps, churches, schools, etc”.

3) The consultative process in electrifying Farm Dweller Houses and the fact that some farmers rent these farms for commercial purposes. The policy is very clear in trying to address this matter in that it gives options which should be considered in electrifying farm dweller houses, viz,

The Indirect Supply Method The dwellers are not direct customers of the local licensed entity but are supplied by the licensed entity through the bulk meter of the farmer. An indirect supply is the preferred strategy to follow. The farmer extends an existing supply point, or takes a new supply point to supply electricity to the farm dweller houses. Government will assist financially by offering an incentive. The Direct Supply Method The dwellers are direct customers of the local licensed entity. The direct supply strategy should only be used as a last resort to facilitate electrification. Where more than 50 houses are supplied from one point of supply or in close proximity to one another, the normal electrification guidelines can apply. It can be treated as a standard electrification project and applications should be referred to the local licensed entity.

4) In case where the farmer changes the objective of the farm other that farming, Directive 1 should apply, viz, The indirect / direct supply method is applicable for any number of dweller houses on a farm that is used for bona fide farming. With regard to the consultative process that must happen, directive 5 should apply, viz, “The farmer must apply to the licensed entity to take part in the electrification of dweller houses project. The farmer can only commence with the electrification of the dweller houses once licensed entity has granted approval for subsidy in writing”.

5) The possibility of reimbursing farm dwellers for demolished houses due to new RDP developments. This matter does not fall within DME’s mandate and it is recommended that farmers / farm dwellers should direct queries in writing to the DoH. 6) Creation of Assets within privately owned land, who should take responsibility for maintaining this newly created assets? The current Creation of Assets Framework does not include the electrification of farm dwellers, it will be highly recommended to include them as a matter of urgency. Secondly, the question of ownership and maintenance will then be highly dependent on whether the area is supplied by the municipality or Eskom. This will give impetus to expedite the SLA’s between the relevant distributor and the Farm Owner. 7) There is a concern that some people within Eskom are charging farm dwellers ±R1, 500 for direct 60A supplies. This matter needs to be urgently investigated and verified as the current policy is very clear regarding the applicable Suite of Supply Options and Connection Fees for both Grid and Non-Grid electrification. For the basic level of service the NEAC ratified and recommended the 20A supply for INEP funded electrification projects.

Grid Current Supplies Supply Size

Typical Appliances

Proposed Connection Fee (Inclusive of Vat)

20A

Radio + lights + television + fridge and one of

RNIL

the following at any one time: (iron + double hotplate) or (kettle + single bar heater) or (iron + two bar heater) or small geyser. 40A

Radio + lights + television + fridge + iron +

R600

toaster + heater + stove +geyser + washing machine +microwave at any one time. 60A

Radio + lights + television + fridge + iron +

R1200

toaster + heater + stove +geyser + washing machine +microwave at any one time. (Basic handyman’s tools including welding machine, small business such as a Spaza shop)

Proposed Suite of Supply Options for Grid supplies (Applicable from April 2009 to March 2010) Supply Size

Typical Appliances

Proposed Connection Fee (Inclusive of Vat)

20A

Radio + lights + television + fridge and one of

RNIL

the following at any one time: (iron + double hotplate) or (kettle + single bar heater) or (iron + two bar heater) or small geyser. 40A

Radio + lights + television + fridge + iron +

R640

toaster + heater + stove +geyser + washing machine +microwave at any one time. 60A

Radio + lights + television + fridge + iron + toaster + heater + stove +geyser + washing machine +microwave at any one time. (Basic handyman’s tools including welding machine,

R1280

small business such as a Spaza shop)

Non-Grid Current supplies Supply Size

Typical Appliances

Proposed Connection Fee (Inclusive of Vat)

50Wp

4 lights for 4 hours per day + small monochrome

Capped at R120

TV for 2 hours per day + small radio 10 hours per day (Dc Loads) – suitable for small house >50Wp

Same as above but for a coloured TV and/or

Capped at R120

small refrigerator (Ac Loads) system designs are modular allowing easy upgrading Proposed Suite of Supply Options for Non-Grid supplies ((Applicable from April 2009 to March 2010) Supply Size

Typical Appliances

Proposed Connection Fee (Inclusive of Vat)

50Wp

4 lights for 4 hours per day + small monochrome

Capped at R130

TV for 2 hours per day + small radio 10 hours per day (Dc Loads) – suitable for small house >50Wp

Same as above but for a coloured TV and/or small refrigerator (Ac Loads) system designs are modular allowing easy upgrading

Capped at R130