T.O.-29a

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REPORTS DESKWITHIN |IL COPY

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This report is restricted to use within the Bank.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPME-4T

TECHNICAL REPORT

on the

SOUTH AFRICAN ELECTRICITY SUPPLY COMMISSION PROJECT

(ESCOM)

August 20, 1953

Technical Operations Department

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CURRENCY EQUIVALENTS

1 South African Pound = 1 Pound Sterling

S.A. £1 a U.S. $ 2.80S.A. £ 1 million a U.S. $ 2.8 million

TECHNICAL REPORT

ON THE

SOUIH AFRTCAN ELERTCI¶IY SUPPLY COIRIISSION PROJECT

(ESCOMvI)

Table of Contents

Page

Introduction 1

The Electricity Supply Commission 1

Organization and Management of ESCON 2

Description of System 2

Present Financial Position of ,,SCOIJ I

Past Growth of Powjer Load 5

Future Load Estimates 6

The Previous Loan 7

The Expansion Program 8

Cost and Schedule of Expenditures 9

Adequacy of Estimates 9

Construction Schedule 10

Appraisal of the Program 10

Plans for Financing the Program 11

Fin=ncial Results of Operation 11

Rates 12

Quality of 1Tanagemnent 13

Conclusions 13

Finding 1

TECHNICAL RiPOR?T

ON THE

SOUTH AFRICAN ELECThICITY SUPPLY COVAISSION PROJECT

(Escom)

Introduction

1. This report covers the technical features of the developmentprogram of the Electricity Supply Commission of South Africa for theyears 1953-1958, both inclusive. The estimated cost of the program forthe period mentioned is approximately iSA 74 million. The ElectricitySupply Commission (hereinafter referred to as ESCOMVI) expects to raisethe greater part of this total sum by loans in the South African market,but has requested the Bank to consider a loan of &SA 10.7 million ($30million) to assist in meeting the foreign exchange requirements of theprogram which are estimated to amount to roughly ;SA 31 million.

The Electricity Supply Commission

2. The proposed borrower, the Electricity Supply Commission (commonlyreferred to as 3LSCOTl) is a statutory commission established under authorityof the Electricity Act of the South African Parliament in 1922. Itconsists of three to five members (presently five) appointed by theGovernor General. Its principal function is "the establishment, maintenanceand working of undertakings for the efficient supply of electricity, toGovernment departments, the South African Railways and Harbours Adminis-tration, local authorities, companies and other persons carrying onindustrial undertakings or to any persons whatever in the Union." It iscapable of suing and being sued, of expropriating by compulsory purchasesuch lands as are necessary for generating stations and transmission lines,and of doing generally such other things as bodies corporate may by law do.

3. ESCOMi has legal authority under its basic Act to borrow money forcarrying out its functions, by the issue of securities either in theUnion or elsewhere, after obtaining the approval of the Governor General.An amending Act to the basic Act, passed in 1952, gives ESCOMi authority toborrow from the IBRI and authorizes the Minister of Finance to guaranteeon behalf of the Government any loan obtained from the IBPD.

4. ESCOM must obtain a license for supplying electricity to any areafrom the Electricity Control Board, composed of five members appointed bythe MKinister of ilines and Industry. A schedule of standard Priceschargeable for electricity sold to different classes of consumers isincorporated in each license, and any revision of this schedule changingthe relationships of the various prices to each other must be approved bythe Control Board. However, the Electricity Act confers authority onESCOM to increase or decrease charges, in equal proportion for allconsumers, in order to carry out the general principle set forth in the

Act that ESCOM's undertakings shall, as far as practicable, be operatedneither at a profit nor at a loss.

Organization and Mtanagement of ESCOM

5. The activities of ESCOM are directed by the Commissions whosechairman, now a professional electrical engineer, is a full-time member.The principal executive officer is the General Manager, who is assistedby an adequate technical, administrative and financial staff in thesupervision of the undertakings and the control of all major constructionwork. The generation and distribution of electricity are carried on byeight undertaidngs: Rand, Witbanks Cape Western, Natal Central, Durban,Border, Cape Northern and Sabie, each with its manager and staff, exceptthat the Natal Central and Durban are under the same management. A ninthundertaking, called the Swartkops River undertaking, will be establishedfor operating the new Swartkops power station when it g-oes into service.Each undertaking is treated as a separate commercial entitry being chargedwith its operating expenses, the interest and redemption fund chargesapplicable to loans expended for its benefit and its proportion of head-office and general expenses, and being credited with all its revenues.The aim is to make each undertaking self-supporting, so that no sectionof the country will have to be subsidized at the expense of othersections.

6. Close cooperation is maintained between ESCOI and certain of thelarger municipalities which have their own generating plants, such asCape Town, Pretoria and Johannesburg$ with a view to interchanging powerin such a manner as to avoid the need for excessive expansion by oneagency or the other. Many other municipalities buy power in bulk fromESCOM and distribute it themselves in their areas. Durban and PortElizabeth are examples of the larger cities which have adopted this plan.

Description of System

7. At December 31, 1952, ESCO1ii's system had a total effectivecapacity of 1$624.6 megawvatts, exclusive of compressed-air stations inthe Rand with a capacity equivalent to 74 megawatts. The followingtable gives Qhe breakdowAm of the total electric plant capacity by under-tahings and indivLdual electric power stations.

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Electric Power Capacity at December 31, 1952

Undertaking Station Station Capacity Total forUndertaking

Alice 5Border King IIilliamts Town .5

West Bank No. 1 32.0 37.0

Cape Northern Central, Kimberley 20.0 20.0

Cape WJestern Salt River No. 1 90.3Hex River 40.0 130.3

Durban Congella Nose 1 and 2 206,0Port Shepstone 3.4 209.4

Natal Central Colenso Nos. 1 and 2 110.0Volksrust 0.5 110.5

Brakpan 48.0Klip 424.0

Rand Rosherville 60.5Simmerpan 40.oVaal 278.0Vereeniging 157.5 1,008.0

Sabie Sabie Gorge 1.4 1.1

Witbank Witbank 108.0 108.0

GRAND TOTAL 1,624.6

8. At the same date transmission lines (overhead and cable) had atotal length of 7,692 miles, of Twrhich 267 miles were 132 kv, 2,519 miles88 kv, 182 miles 66 kv, and the remainder from 40 kv to 220 kv. The14itbank and Rand systems are interconnected, and the interconnectionbetwTeen the Durban and Natal Central systems is being strengthened.Othenrise the distances between undertakings are so great that inter-connections have not been considered economically feasible to date.

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Present Financial Position of ESCOM

9. The following suwmiarized balance sheet shows the financialposition of ESCOM at December 31, 1952, with the 1951 totals shown forcomparison.

Balance Sheet

Assets LiabilitieslSA 000 LSA 000

1295- 1952 191-952

Expenditure on Loan Capital 66,968 84,o65Capital Account 68,641 88,280 Interest Accrued on

Movable Plant and Loan Capital 315 490Equipment (Less Creditors and CreditDepreciation) 6S0 705 Balances 3,296 5,244Stores and Temporary AdvancesIMaterials 4,555 5,oo8 Amount due toDebtors and Debit Bankers Less CashBalances 1,453 1,488 on Hand AdvancesInvestments at Call L4,302 5,728(Housing Loans) 204 294 Redemption Fund 15,734 18,302Investment of Amouint AmortizedRedemption Fund 15,249 17,661 on Account ofInvestment of Deferred Lia-Reserve Fund 2,1421 2,407 bilities forBalance on Revenue Assets and RightsAccounts of Acquired 194 217Undertakings Deferred Liabilities(Deficit) 128 546 for Assets and

Rights Acquired 172 150Reserve Fund 2,271 2,192

Totals 93,251 116,389 93,251 116,389

l0.(a) The loan capital sholm above at December 31, 1952, consisted ofthe following:

;SA 000,000

Local registered stocks 76.82Amount drawn do-wn from IBRD loan 6.48Amount drawn down from E 7 million Exim-Bank loan .77

(b) The redemption fund is a fund created for the redemption ofESCOM's loans in not more than tlhirty years from their issue, ona sinking fund basis at 3-1/2% compound interest, as required bythe Electricity Act. ESCOMt s present practice is to provide for

redemption in twenty-five years. The fund is built up from thenet proceeds of the sale of any fixed property, receipts fromthe sale of rightsj easementsp etc., the income from the invest-ments of the fund, and such further appropriations from ESCOMI'srevenues as may be necessary to bring the fund to the amountrequired on the prescribed sinking-fund basis. Approximately 80%of the fund is invested in ESCOMfs own securitles.In view of theexistence and maintenance of the redemption fund at the requiredlevel, there is no depreciation accounting in respect of ESCOIIlsfixed assets.

(c) The temporary advances shown on the balance sheet are short-termborrowings in anticipation of the raising of authorized loans,as permitted by the Electricity Act.

(d) The reserve fund is legally available for replacements of obsoleteplant and betterments, for exceptional repairs and for emergencies,but not for ordinary maintenance. The annual amount set aside forthe fund cannot exceed 3% of the total of unredeemed loans and theaggregate cannot exceed 15% of that total.

11. The financial structure of ESCOH cannot be viewed in the samelight as that of a conventional corporate enterprise, and its balancesheet is not susceptible to a conventional analysis. It pays no incometaxes; it is operated in accordance with a law which dictates that itsreserves be restricted and that it shall be operated neither at a profitnor a loss; consequently it cannot expand its facilities from earningsbut must resort entirely to further borrowing to meet its capital require-ments. It has legal authority to raise rates on its own motion to avoiddeficits, and its credit rating is high.

Past Growth of Power Load

12. Sales of power by ESCOi'I have increased from 6,911 milWion kwh in 1950 te7,459mil. in 1951 and to 8,081 mill. in 1952, an increase of about 17% intwo years and over 8% in the last year. To meet this increase it has beennecessary to keep virtually all equipment in the larger undertakings inoperation during peaks, with no reserve for emergencies and in many casesat the expense of fully adequate maintenance. Mloreover, the increasewould have been considerably larger if more generating capacity had beenavailable. This was particularly true in the Rand undertaking, where theexpansion of mining and industrial activities has been creating new andincreased demands, necessitating the reduction of peaks by 104, frequentpower cuts to mines for periods of several hours amounting at times to asmuch as 40% of the basic powJer allotment, and the refusal to supply powerto numerous new mines and industries. A number of mine owners havehurriedly purchased and installed used diesel electric units to minimizethe serious efeects of the power cuts on their operations, and theGoverrment has permitted certain mining work to be done on Sundays to makeup in part for the production lost as a result of the powqer cuts.

6

Future Load Estimates

13. ESCOM periodically revises the estimates of future electricpower demand in each undertaking, basing the revisions on the estimatessubmitted by specific industries, mining companies, South African Rail-ways, bulk consumers such as municipalities, etc., and on the generaltrend of grawth in the recent past. In assessing the value of estimatesfurnished by others, ESCOM endeavors to give proper weight to possibleduplications, the probable effect of the current shortage of labor asopposed to the greater mechanization of operations, and other factorstending to lower such estimates. New load curves are then drawn andprevious capacity curves adjusted as far as possible to meet the newdemand estimates.

14. The most recent general revision of future loads was made inNovember, 1952. The greatest increase was showJn by the combined Rand and'Jitbank estimate, which indicated peak demands in 1958 and 1960 of 1740and 1,900 megawatts, respectively, as compared with the estimates of 1,380and l,430 IrY prepared in August, 1950, The main causes of this largeincrease were the expansion of mining activities in the Transvaal, thedevelopment of an extensive new mining area in the northern Orange FreeState, and the construction of a substantial number of plants for therecovery of uranium from mine slimes. Simlarly, the estimated load ofthe Cape Western undertaking in 1958 wias about 4001tW in 1952 as comparedwith the 1950 estimate of 300 Mr, because of additional demand by theSouth African Railways and of general industrial development; and theestimated combined load of the Natal Central and Durban undertakings in1958 was about 34Q MI in 1952 as compared with the 1950 estimate of 300 N4,due largely to industrial development. The latest estimates for theother undertakinEs do not vary widely from the 1950 estimates.

15. The actual future growth of power demand will depend upon manypresently unknoomr factors, both internal and external, and it is notpossible to say with any assurance that demand estimates covering a periodof five years in the future will be fulfilled, However, considering thegreat importance of electric powTer to the development of the country andthe damaging effects of a shortage of power, ESCO0I4's estirmiate of futuredemand are regarded as forming a reasonable basis for the current expan-sion program.

16. The following table shows the sales of powrer to various types ofconsumc-rs in 1952. It is not e::ected that this general pattern of saleswill be changed materially in the future, although the proportion soldto mining and industrial consumners may increase somewhat.

Sales to Various Consumers, 1952

Consumers Electricity % of Total Oil and % of Total Total KrrH1000 BE! Electricity Steam Oil and 1000

1000 MMH SteamEquivalent

Traction 554,830 7.1 554,830Bulk 1,459h453 18.7 2.,674 1.0 l,)462,127Miining 4,332,852 55.4 252,482 95.4 43585,334Industrial 1,337,692 17.1 9,625 3.6 10347,317Domestic andStreetlights 130,953 1.7 - 130,953

Total 7,815,780 100.0 264,781 100.0 8,080,561

The previous loan

17. In January, 1951, the Bank made a loan to the Electricity SupplyCommission (ESCON) of $30 million equivalent to assist 7SCOM in financing1SA 29.9 million in foreign exchange payments committed on imports ofgenerating, transmission and distribution equipment for its expansionprogram estimated to cost a total of .SA 60,2 million over the seven yearperiod 1949-1955. The closing date of the loan was fixed at December 31,1953. As at July 14, 1953, the balance remaining in the loan account wasabout $4 million, but it is estimated that 4the loan vill be entirelywithdrawn by the end of September, 1953. The expansion program, partiallyfinanced under the previous loan, included the construction of seven newpower stations in which 700,000 kT woald be installed initially, theinstallation of 235,000 kJ of additional capacity in six existing powerstations and the construction of additional transmission lines and sub-stations. The cost of the total program was:

7 New power stations B5A 40.2 millionExtensions to existing stations 9.4 millionTransmission and distribution equipment 10.6 million

Total BSA 60.2 million

About 56% of the total was to be for additional parer facilities for theRand undertaking and the remainder was to be for expansion in the otherterritories served by the Commission. In the three years l150-1952, newgenerating capacity totaling 193,000 kw was commissioned under theprogram, although the corresponding new boilers for 106,000 kw of thiscapacity had not been completely installed by the end of 1952. In thesame period 2,350 circuit miles of high tension transmission line andunderground cable were constructed. Due to delays, principally in themanufacture and delivery of equipment but also to some shortage of skilledlabor and unusually heavy rainfall, the original schedules of completion

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of the various stations were extended from a few months to as much as ayear. All obstacles previously delaying work have been largely overcomeand progress is now satisfactory.

The Expansion Program

18, The expansion program ef ESCON for the period 1953 to 1958, bothinclusive, as revised following the revision of load estimates in 1952,provides for the completion of eight new power stations with a totalcapacity of 1,210,000 kw, the addition of approximately 202,000 low to sixexisting stations, and the construction of about 900 miles of high-tension transmission lines, with necessary substations. The followingtable shows the capacities to be installed in each of the new stationsand extensions.

Expansion Progran Added Capacities

Station Undertaking Location InstalledCapacity 1tT

New Stations

Hex River Cape IWestern 'Torcester 60,ocoSalt River No. 2 Cape Western Cape Town 120,000Swjartkops Swartkops River Port Elizabeth 40, 000West Bank Border East London 30,000Umgeni Durban Pinetown (Durban) 60,000Vierfontein Rand 0.F.S. 300,000Taaibos Rand 0.F.S. 420,000

rilge Rand Transvaal 180,000Total 1,200,000

Extensi(ns

Congella Durban Durban 40,C00Colenso Natal Central Natal 25,cooVaal Rand 0.F.S. 99,000Witbank W,Titbank Transvaal 20,000Vereeniging Rand Transvaal 7sooo 1/Central (Kimberley) Cape Northern Cape 11,000

Total 202,0C0

19. The transmission lines to be built include approximately 635circuit miles of 132 kv line, 62 miles of 88 Xv line, and 194 miles of66 kv and 33 kv lines, together with the necessary new substations andadditions to existing substations&.

/ No ne.w generator is to be installed, but an additional boiler willincrease capacity of present generators by approximately 7,000 kw.

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Cost and Schedule of Expenditures

20. The total estimated cost of the expansion program for the periodJanuary 1, 1953, to December 31, 1958, is MSA 74 million, divided amongthe principal elements of the program as follows:

Cost in iSA 000

New power stations 62,991Extensions to power stations 5,132Transmission systems 5,772

Total 73,895

21. The total cost broken down 'by years and by local and overseasexpenditure is shown in the table below. "Other overseas" costs arelargely UoS. dollars for tne purchase of such items as high-tensionswitchgear, etc.

Local and Overseas Expenditures by Years(WSA 000)

1953 1954 1955 1956 1957 1958 Total

Local Expenditures 16,057 13,497 7,681 3,793 1,280 300 )42,608U.ii. Expenditures 11,468 8,350 6,457 2,742 856 80 29,953Other Overseas 498 225 411 200 1,334

28,023 22,'072 14,549 6,735 2,136 380 73,895

Equivalent inUS$ million 78.46 61.80 )40.74 18.86 5.98 1.06 206.90

Adequacy of Estimates

22. It is ESCOMts practice to malce its cost estimates on *he basis ofthe latest prices for contracts and for departmental work, with small ifany allowance for contingencies. During the past few years actual costshave considerably exceeded the estimates because of rising prices oflabor and materials. The estimated costs of the present programm havebeen recently revised to bring them into line with current costs, butthey may again be exceeded if prices should continue to rise. ESCOM isaware of this possibility but prefers to increase its loan progr'an laterif price increases should take place, rather than to provide nowT forincreases which cannot be predicted and may not occur. The presentestimated costs of the new stations vary from about iSA 446 per lct. installedto about WSA 100, but the higher costs are for the initial installationsat stations intended for furt]her expansion and will be very considerablyreduced when more capacity is added.

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Construction Schedule

23. All of the new stations and extensions included in the program hhave been under construction for some time. Largely because of delays inthe delivery of materials and equipment from the United Kingdom anddifficulties in obtaining structural steel either in South Africa or theUnited Kingdomt the work on practically all of the projects is behindschedule, tlhe delays to date varying from a few months to as much as ayear or more in the case of Taaibos, Swartkops and Umgeni. It appears,howevers that the conditions causing past delays have been largelyremedied and that better progress can be expected in the future. Thereis no present reason to fear, therefore, that the program cannot besubstantially completed within the period allowJed.

Appraisal of the Program

24. The expansion program is considered to be a realistic and well-planned effort to meet the growing demand for electric power, which hasincreased bb% since 19h8 and 17% since 1950, and is expected to continuegroving, with an accelerated growith in the Rand, Durban and Cape Jesternareas. The program for new stations and extensions, as approved in 1950when the previous IBERD loan was under consideration, called for additionsof 935,000 kw to the existing capacity, which was then thought to besufficient to meet the demands for the following six years. Since thattimes howeverv revised estimates have shovm the need for increasing thenew capacity to be provided by a further 500,000 kw. The total increaseof some 80% over the installed capacity at the end of 1952 is very large,but it appears to be justified by the prospective developments in themining and industrial areas during the period. In fact, ESCONi's mostrecent reviews of probable future loads indicate the possibility tllatstill further plant will] have to be ordered soon in order to meet theneeds in the Rand and Durban areas in 1956 or soon thereafter; andadditional capacity will probably be needed in the Cape To-m area by1958 although it has not yet been decided wihether ESCOIM or the munici-pality should provide it. However, these further increases have not yetbeen sanctioned and do not form a part of the expansion program discussedherein; they are mentioned to indicate that the present large programis not excessive and may in reality not entirely fulfill the needs of thenext six years.

25. ESCOMI is definitely committed to the projects included in thepresent expansion program. All major design work has been completed (byMerz and McClellan, British consulting engineers, for the new Taaibos,Umgeni and Salt River No. 2 stations, and by ESCOM for the remainingprojects) and all major items of equipment have been on order for a longtime. The sites of all new stations -were carefully chosen with relationto the load centers, water and coal requirementsp foundation conditions,etc. The new stations of the Rand undertaking have all been placed atthe coal mines which are to supply their fuel in order to minimizetransportation costs, and all new plants have been designed to permitfurther expansion. Extensions to existing stations have been preferred.where feasible, for supplying the additional capacity needed, but in

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many cases local limitations of water or coal supplies or of the sitehave made it necessary to construct new stations. Steam pressures andtemperatures for the new stations (generally 600 psi and 800-6500F) arenot as high as are frequently employed in the United States and someother countries, but were adopted after balancing the cheap cost ofcoal in South Africa against the greater capital cost of using higherpressures and temperatures to give higher thermal efficiencies. Ingeneral, therefore, it is fair to say that the technical planning of theprogram has been carried out on a high level.

26. All of the new stations and extensions in the present programare included in the program being financed under the previous IBRD loan,although the capacities have heen changed in a number of instances. TheWilge station, which was added to the program after the Bank loan wasmade, is also being financed in part by a loan from the EXport-ImportBank. It should be noted t'lat although the Swartkops station near PortaIizabeth has been eligible for participation in the previous loan, noBank funds have been requested for it because of the possibility thatthe municipality of Port 2izabeth will ask to purchase the plant, whichis being constructed to supply the needs of that city.

27. Based on information furnished by £SCO0I officials and others andobtained by numerous inspections, it is concluded that the presentexpansion program of ESCOM is technically sound and is needed to meet thepresent and prospective demands for power in the areas served.

Plans for Financing the Program

28. Since ESCOh¢ is required by law to conduct its operations atneither a profit nor a loss, it must depend upon borrowing for financingits capital requirements. At January 1, 1953, it had available theunexpended portions of the IBRD loan (approximately -1J.27 million) andan; Export-Import Bank loan (approximately i6.23 million), but had short-term borrowings pending the raising of loans amounting to some i5-7million, Further expenditures will be met by the proceeds of a new IBRDloan, if any, and by other borrowing.

29. Except for the two foreign loans just mentioned, all of ESCOM'scapital needs have been met by local borrowing and purchasing the necessaryforeign exchange from the Government. It is the practice of ESCOM to goto the local market from one to three times a year, as necessary, forloans, and none of its loan offerings has ever failed to be fully sub-scribed. An offering of E4,250,000 of 5% 18-year stock has just beenfully taken up by the market on the day after the opening of the lists.ESCOH¶'s credit is of the highest and there is no reason to doubt itsability to raise necessary loans in the future. An additional loan fromthe IBRD, if granted, will help to finance the overseas expendituresrequired for the program, amounting to some 1SA 31 million.

Financial Results of Operation

30. The following table shows the consolidated revenue accounts ofESCOM for the financial years ending December 31, 1951 and 1952.

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Ere ctricity Supply CommissionConsolidated Revenue Accounts

Dr. Gr.

1951 1952 1951 1952_SA E SA i SA i SA

To Generation By Sales ofOperation 3,898,505 5,035,459 ElectricityMaintenance 873,001 1,037,647 Traction 963,931 1,057,235Proportion - 559,636 620o288 Bulk 2,272,877 2,778,222

Pooled Costs iviining 4.,666,895 5,316,327Industrial 1,7420330 2,092,263

5,331,142 6,693,394 Domestic &Lighting 693,621 696,o35

To ElectricityPurchased 240,163 480,100 10,339,654 1, 940,082,ToDistribution 751,513 876,t514 By Sales ofTo General Air and Steam 5520818 645,788Expenses 969,340 1,109,177 By OtherTo, Revenue 63*093 69,902Interest 1,8430265 2,oo9,986To 10,955,565 12, 655,772Redemption 1,501,372 1,636,883 By Ele tricityTo InterchangedReserve 465,689 268,000 (Contra) 531,854 5629316

By Excess of11,102 ,484 13,074,054 Expenditure

To Electricity Over Revenue 146,919 418.,282Interchanged

(Contra) 531,854 56Z9,16

'l,634,338 13,636,370 11,634,338 13636,370

It wl1l be noted that there was a deficit of i SA346,919 in 1951 and another ofb SA418,282 in 1952. Since the law requires that ESCOM shall not operate at aloss, and since it is the fixed policy of both ESCOI:I and the Government thatthis requirement shall not be changed, ESCOGii intends in the Year future toadjust the rates in its various undertakings to the extent neczessary to erase theexisting deficits and to provide the funds to meet all costs, including debtservice and all other expenditures. Further rate adjustments will be made inthe Suture when needed.

Rates

31* The Electricity Act reqires that the prices to be charged by ESCOOI forelectricity shall be such as to cover: the cost of production, includingdistribution, maintenarne ard administration; debt service; and the amounts set

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aside-annually for the reserve fund. Each undertaking stands on its own feet,and its rates are computed originally, and adjusted from time to time there-after, so as to give effect to these provisions of the law and the provisionrequiring operation at neither a profit nor a loss. As has been stated pre-viously, the original schedule of rates for each undertaking must be approved

*by the Electricity Control Board, but thereafter ESCOII can on its ovm authoritymake equal percentage increases or decreases in all the rates of any undertaking.

32. The only important rate increases from 1946 to 1952 were in the TJ!itbank,Rand, Durban and Natal Central undertakings. They amounted to about 33% forJiitbank, perhaps 20% for Rand, and 10% for both Durban and Natal Central. Asthe result of further increases that have been or will be made in 1953, the1952 rates ill be raised as follows: for Uivitbank, Durban and Natal Central,10%; for Cape Iiestern, 30% upon approval by the Ccntrol Board of a revisedtariff now before it (replacing a temporary 20% surcharge already imposed thisyear); for Rand, about 6r4 and for Cape Northern, about 15% on the rates tothe two principal bulk consumers. The average price per Kilowatt-hour sold in1952 was 0.374d, or only about 1/2 U.S. cent; and after the proposed increasesbecome effective, the average price vill still be verJ low.

Quality of Lanagement

33* The management of ESCO.I appears to be of high quality. Every effortis made to keep abreast of electrical developments elsevwhere, and qualifiedengineers are sent to the United States and Europe from time to time to studyrecent theory and practice. There can be little doubt of the ability ofESCOI.i to carry the expansion program to com.pletion in a thoroughly satisfactorymanner.

Conclusions.

34. The general conclusions of this report can be summarized as follows:

(a) There has been a large increase in the electrical demand onESCOi"i during the last few years, and further large increasesseem assured, particularly in the Rand, Durban and Cape Townareas.

(b) ESCOL is not able to meet even the present demand without usingreserve equipment and, in the Rand area, shedding loads andrefusing legitimate new demands for power.

(c) A large increase in ESCO01's electrical capacity is necessaryto support the continuing economic development of the country,and EiSCOlt s expansion program for the years 195,- 958, at anestimated cost of about L SA 74 million, is cons .Arrd atechnically and economically sound program for the purpose.

(d) The funds required for the program, in addition to any newIBED loan, can in all probability be raised by borroving on thelocal market.

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(e) The rates charged for electricity by the various undertakingswill be adjusted from time to time by ESCOMI so as to meet allcosts vwithout deficits.

(f) The management is excellent and entirely capable of carryingthe program through to completion.

Finding

35, The provision of adequate electrical power for prospective demandsis essential to the continuing healthy development of South Africa's economy,and the expansion program of ESCOIM is regarded as a sound program, bothtechnically and economically, for accomp'lishing this purpose. The program isconsidered to be entirely suitable for bank financing in the amount of $30million.

J. C. Lkehaffey

S .R HO E S I A

/ ~~~~~~~~~PORTUGUESE

ELECTRICITY SUPPLY COMMISSIONS EAST

LICENSED AREAS OF SUPPLY IN r R A N S V A A L AFRICA

THE UNION OF SOUTH AFRICA ))RAND

BOUNDARIES - BECHUANALAND PROTECTORATE ,UNDERTAKING SABtETERRITORIAL - - . (BRITISH) /A-IE

WIT'BANK ULNDERTA KINGPROVINCIAL -- - IN .1 fEERUST UNDERTAKING SAIEN

LICENSED AREAS G \ J E i I..I MAFEKING WOST \POETOAIA WITBANE A5 OOB LoUR

OF SUPPLY I/\ \ 'MAROOE

I I9_<<4> /~ CIC A950} X F TENAU \% d\ t - I -\YOHTHAL\ ~ C~ * A PNG E O F S O OR P ISWAZILANDPy

MIL~~S UT EST AF I.B.R NE. D AlTN SETO VBRt195

SOUTH WEST AFRICA G~~APE NORTHERN GOLD BE THLEHEMNTLCETA

UNDERTAKING~~~~~~~~HUNERAKN-' ) ~~~~~~~~~(NEW AREA AS OF -w NDRTARN

~~- / U~~A/V /950) AIMBERLY S~~~~~LOEMFONTEINE AL

N BASU TOLANID

E R BAN

\ STATE ~ AR) DURBAN/ UNDERTA KING

A TL A NTI C GAPE WESTERNEE.TWUNDERTAKINGI N D I A N

0 C E A~~~ N7jA' OW

TOUWS R I VER

0 RTSON ~ ~ ~ ~ ~ BRDER UNDER TA KINGSCALE CAPE TOWN

0 50 100 150 200 R LZBT

MILES IBSR.D. DRAFTING SEGTION NOVEMBER 1950