Economic Impact Assessment Results of five of Eskom s coal power stations Hendrina Grootvlei Kriel Komati Camden Eskom Holdings SOC Ltd. July 2017
Disclaimer This report has been prepared by KPMG Services (Pty) Ltd ( KPMG ) exclusively for the benefit, information use of ESKOM for the exclusive purposes of/in order to assist ESKOM to estimate the socio-economic impact of Hendrina, Grootvlei, Kriel, Komati and Camden Power Stations capital and operational expenditure between 2014/15 to 2016/17. KPMG has been informed and requested by ESKOM that this report may be published, as well as shared individually with third parties. Notwithstanding the provisions of the Engagement Letter and Terms and Conditions, KPMG is willing to give its consent for ESKOM to do so on the following basis: KPMG accepts no liability to any third party in connection with the Services; and KPMG does not have a duty of care or any legal obligation to any third party in connection with the Services. 2
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Five selected Eskom coal power stations Hendrina Grootvlei Kriel Komati Camden HENDRINA 802 Permanent & temporary employees 548 Permanent & temporary employees KRIEL 808 Permanent & temporary employees 532 Permanent & temporary employees CAMDEN 323 Permanent & temporary employees Source: Eskom data Primarily from Middelburg 52% Pullenshope 13% Hendrina 10% Primarily from Rest of SA 67% Balfour 12% Grootvlei 11% Primarily from Kriel 55% Witbank 20% Rest of MP 18% Primarily from Rest of MP 55% Middelburg 40% Komati 5% Primarily from Ermelo 96% Breyten 2% Lothair 0.8% Installed capacity of 1 893 MW Installed capacity of 1 180 MW Installed capacity of 3 000 MW Installed capacity of 1 000 MW Installed capacity of 1 561 MW Potentially contributes 4.1% to the national energy grid GROOTVLEI Potentially contributes 2.5% to the national energy grid Potentially contributes 6.5% to the national energy grid KOMATI Potentially contributes 2.2% to the national energy grid Potentially contributes 3.4% to the national energy grid 4
Methodology used to estimate economic impacts We measured the broader economic impact that each power station makes to South Africa, Mpumalanga (MP) and local, as well as their combined impact We used the Social Accounting Matrix (SAM) methodology to estimate how the activities of five of Eskom s coal-fired power stations (Hendrina, Grootvlei, Kriel, Komati, Camden) in one or more parts of the economy, could affect the economy We report on the economic impact through GDP, employment, tax revenue and household income of the 5 power stations capital expenditure and operational cost from FY2014/15 to FY2016/17. 5
Combined Economic Hendrina Grootvlei Impact on GDP Average* estimated economic activity created per year due the total capital and operational expenditure by five of Eskom's coal power stations between 2014/15 and 2016/17 was in the order of R32.8 billion (0.8%** of South African GDP) Impact on employment Sustained on average, an estimated 92 961 jobs per year (0.6%*** of total number of jobs in South Africa) Potential long-term economic benefits to South Africa from future capital expenditure Every R1 investment potentially adds an additional R1.05 to the national economy Additional R1 million investment implies an additional 3 jobs sustained CAPEX Every R1 investment potentially adds 18 cents to the national government revenue Every R1 investment potentially adds 43 cents to total household income; out of this 43 cents, 1.3 cents or 3% is distributed to lower income households * The average per year is the total impact over the period, divided by number of years ** Average annual GDP of South Africa from 2014 to 2016 = R4 063 808 million (Source: South African Reserve Bank). *** Average annual number of jobs in South Africa from 2014 to 2016 was 15 802 333 (Source: StatsSA Statistical release P0211, Quarterly Labour Force Survey (QLFS), Quarter 4, 2016). 6
Impact in South Africa Kriel Komati Camden Impact on government revenue Increased government revenue by an estimated R9 billion on average per year Impact on households Total income received by households was in the order of R21.1 billion on average per year, where 6.1% flows to low-income households Every R1 spend potentially adds an additional R1.22 to the national economy Additional R1 million spend implies an additional 3 jobs sustained Every R1 spend potentially adds 35 cents to the national government revenue OPEX Every R1 spend potentially adds 81 cents to total household income; out of this 81 cents, 5 cents or 6% is distributed to lower income households OPEX Potential long-term economic benefits to South Africa from associated with day-to-day operations Source: KPMG analysis from 2014 Social Accounting Matrix for South Africa 7
Economic impact* of the power Hendrina Grootvlei Total GDP impact (Rand billion) MP HENDRINA Rest of SA MP GROOTVLEI Rest of SA R 3.4 R 2.9 R 3.6 R 2.4** Direct impact R 1.2 R 0.5 R 1.1 R 0.5 Indirect impact R 1.7 R 0.6 R 2.0 R 0.3 Induced impact R 0.5 R 1.8 R 0.4 R 1.5 Every R1 investment adds R 0.27 R 1.29 R 0.25 R 1.12 Every R1 operational spend adds R 0.76 R 0.44 R 0.85 R 0.37 Total employment impact (numbers) 10 014 8 780 7 348 8 465** Direct impact 939 1 096 544 530 Indirect impact 6 324 1 251 4 304 2 163 Induced impact 2 751 6 433 2 500 5 772 Every R1mn investment sustains 1 job 4 jobs 1 job 3 jobs Every R1mn operational spend adds 2 jobs 1 job 2 jobs 2 jobs Total tax impact (Rand billion) R 0.90 R 0.80 R 0.80 R 0.80 Every R1 investment adds R 0.04 R 0.23 R 0.03 R 0.20 Every R1 operational spend adds R 0.04 R 0.14 R 0.03 R 0.16 * Average estimated impact of combined capital and operational expenditure between 2014/15 2016/17 **This includes impact in the Gauteng province: GDP impact of R347 million on average per year and Job impact of 620 jobs on average per year Source: KPMG analysis from 2014 Social Accounting Matrix for South Africa and Mpumalanga 8
stations on MP and the rest of SA Kriel Komati Camden MP KRIEL KOMATI CAMDEN Rest of SA MP Rest of SA MP Rest of SA CONSOLIDATED IMPACT Total MP Total RSA Total SA R 5.7 R 3.4 R 2.9 R 1.7 R 4.4 R 2.4 R 20.0 R 12.8 R 32.8 R 1.2 R 0.4 R 1.6 R 0.2 R 1.5 R 0.3 R 6.6 R 1.9 R 8.5 R 3.7 R 0.5 R 1.0 R 0.3 R 2.4 R 0.3 R 10.8 R 2.0 R 12.9 R 0.8 R 2.5 R 0.3 R 1.2 R 0.5 R 1.8 R 2.5 R 8.8 R 11.4 R 0.22 R 1.44 R 0.37 R 1.27 R 0.39 R 1.53 0.30 1.31 R 1.05 R 0.81 R 0.39 R 0.84 R 0.40 R 0.88 R 0.38 0.83 0.39 R 1.22 16 998 10 780 5 938 5 468 11 106 8 064 51 404 41 557 92 961 862 737 554 316 968 731 3 867 3 410 7 277 11 677 912 3 299 910 6 871 781 32 475 6 017 38 492 4 459 9 131 2 085 4 242 3 267 6 552 15 062 32 130 47 192 1 job 4 jobs 1 job 4 jobs 2 jobs 5 jobs 1 jobs 4 job 3 jobs 2 jobs 1 job 2 jobs 1 job 2 jobs 1 job 1 job 2 jobs 3 jobs R 1.40 R 1.20 R 0.70 R 0.50 R 1.00 R 0.90 R 4.8 R 4.2 R 9 R 0.03 R 0.26 R 0.05 R 0.23 R 0.05 R 0.29 0.04 0.23 R 0.18 R 0.03 R 0.16 R 0.05 R 0.14 R 0.05 R 0.17 0.20 0.15 R 0.35 9
impact on local municipalities Hendrina Grootvlei Kriel Komati Camden GDP impact R2 billion GDP impact R0.5 billion GDP impact R4.6 billion GDP impact R1.4 billion GDP impact R1.1 billion Hendrina - Steve Tshwete Local Municipality 4.3% GDP employment impact 6 085 Grootvlei Dipaleseng Local Municipality 1% GDP employment impact 1 102 Kriel Emalahleni Local Municipality 7.7% GDP employment impact 13 297 Komati Steve Tshwete Local Municipality 2.9% GDP employment impact 2 729 Camden Msukaligwa Local Municipality 9.3% GDP employment impact 3 315 6.5% labour 1.2% labour 8.9% labour 2.9% labour 8.2% labour Source: KPMG analysis from 2014 Social Accounting Matrix for Mpumalanga 10
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