The Department Of Energy (DOE) briefed the Portfolio Committee on the re-organisation of the former Department of Minerals and Energy (DME) into the new Department of Energy and the Department of Mineral Resources. The new DOE had adopted a process approach in re-organising functions and organisational structures in line with its new mandate. The organisational structure of the DOE would be implemented in phases. Energy line-function components would continue to operate as under the old DME during an interim period, until funding became available. The main focus was the establishment of the Support Services components. There had been implementation of the Personnel Salary System (PERSAL) in the old DME, and the restructuring of Departments posed a challenge to that process. The Department advised that it had engaged with National Treasury about underfunding, but National Treasury ruled out the possibility of more funding, which meant that the budget needed to be reprioritised. In view of current financial constraints, a decision was taken to implement the approved organisational structure of the DOE in phases.
Members questioned how the DOE would be operating during the interim phase, and were particularly concerned about continuation of and security of electricity supply. The deficit for funding structures caused concern, especially in the light of energy challenges posed by the coming World Cup Soccer tournament. Members asked about the drop in funding for nuclear energy, during 2012/13. Members asked questions about whether the targets for electricity connection and installation of solar water heating systems would be met. They also questioned how the additional functions would be handled, and whether there was sufficient capacity to handle the change. The Department was asked to provide more clarity on what had changed from the old DME, and what had remained intact. They stressed the need for continuity, and the need to provide sufficient information about what the Energy function had achieved in the past, and what exactly its future funding needs would be, with an emphasis on the practicalities. They urged that this information be provided to the Committee two weeks before debate on the budget, to enable Members to engage more fully on the issues.
The Committee appointed a multi-party team to conduct 2010 readiness visits. The model countries for renewable energy were briefly discussed, as it was suggested that China should also be considered, and that Denmark was another possibility as it ranked among the world’s top five countries for progress made on emissions.
Department of Energy (DOE) Strategic Plan and budget 2010-2013
Mr George Mnguni, Chief Director, Department of Energy, took the Committee through an overview of the process that had led to the establishment of the new Department of Energy (DOE or the Department). Energy and Mineral Resources had been combined in the old Department of Minerals and Energy (DME). With the re-organisation of Cabinet and National Departments, two new portfolios of Energy and Mineral Resources were created, and the DME ceased to exist. The mandates and strategic objectives of both Departments were redefined.
A process approach had been adopted in re-organising functions and organisational structures in line with the new mandates. In view of current financial constraints, a decision was taken to implement the approved organisational structure of the DOE in phases.
The implication was that Energy line function components, as delineated from the old DME structure, would operate as they had been in the meantime, until such time as funding was made available.
The main focus was the establishment of the Support Services components, namely the Corporate Services Branch, Office of the Chief Financial Officer, Strategy, Risk and Monitoring Chief Directorate, Audit Services, the Office of the Director General, and Ministerial and Parliamentary Services.
Mr Mnguni compared the Approved Organisational Structure of the old DME, to that of the new DOE, using organograms to identify the changes. He then provided a detailed organogram analysis of the components of the new DOE structure.
Mr Mnguni identified challenges around the PERSAL system. It had been implemented in the DME as a trial run, but the process had been complicated by the separation of departments. The DOE was intent on revising its Human Resources planning.
Mr Edson Ragimana, Acting Chief Financial Officer, DME, briefed the Committee on funding for the DOE. There had been engagement with National Treasury about underfunding. Reprioritisation of funds became necessary, after National Treasury had ruled out the possibility of new funding. An amount of R150 million had been re-allocated from the Integrated National Electricity Programme (INEP) to Support Services. The benefit to DOE had been reversed, while the Department of Mineral Resources (DMR) retained about R62 million.
The amount was then ear-marked for transfer back to DOE as it had been reprioritised from the related programmes.
Ms N Mathibela (ANC) asked if the Department had sufficient funding to maintain electricity supply.
Mr Ragimana replied that funding for electricity and nuclear energy was less than for other sectors. The figures given in the briefing applied to interim structures.
Mr D Ross (DA) noted that the Department had set out a comprehensive plan for effective administration, and commended the transparency of the briefing. He pointed out that the deficit for funding structures was serious. There had to be adequate interim support services in place. He was particularly concerned about challenges that would face the Department in consequence of the forthcoming World Cup Soccer tournament. Adjustments to the budget would provide relief, but from a business perspective, the question remained if there would be sufficient funding to support the new administration. Electricity security posed huge challenges.
Mr S Motau (DA) asked if the costing of the interim structure allowed work to continue effectively during the interim period.
Mr S Radebe (ANC) asked if the new Department was fully operational.
Mr Ragimana answered that line functions still referred back to the old lines in the Department of Minerals and Energy (DME). The new structure was different, but ways had to be found to work within it. The funding shortfall had an impact on personnel functions. One way to save on personnel funding was to have people take on more functions. That was difficult, but the Department would use that option, and was convinced that it had people who could cope with additional functions. Capacity constraints would be accommodated by spreading additional workloads and tasks over the Medium Term Expenditure Framework (MTEF) period.
Mr Mnguni affirmed that two branches from the old DME had been kept as they were, and those who were brought over to the new Department of Energy were still doing nuclear work, for instance. Wherever staff were lost, their jobs would be advertised. Vacancies would be filled.
The Chairperson remarked that more clarity was needed about what had remained the same, and what had changed.
Mr Motau asked about the huge drop in funding for nuclear energy in 2013.
Mr Ragimana replied that the two-year funding period for nuclear energy ended in that year.
The Chairperson remarked that there had to be more concern with outcomes, mostly with regard to electricity and solar energy. The Department had to explain how money was translated into outcomes.
Mr Ragimana responded that when it came to goods, services and transfers, the picture was less complicated. Money would go out to service providers like Eskom, and the outcomes of that could be checked.
The Chairperson asked about outcomes for solar units, and asked how many had been put in place. She also asked how many electricity connections would be delivered.
Ms Neliswe Magubane, Director General of the DOE, replied that the solar water heating programme involved the entire Department. There would be a presentation on 31 March. Other departments would also be drawn in, as the Department of Trade and Industry and the Economic Development Programme would be involved in the rollout. The Department of Labour had to assist with skills development to get more plumbers on board. The object was to build the units in South Africa. The Department of Water and Environmental Affairs had to assist with making water available. Skills building, funding and rollout would be geared towards gaining leverage on local manufacture. The Department would return to Parliament as soon as approval from the Minister had been obtained. The Department was looking at funding, with the aim of reaching a target of 150 000 electricity connections over the following three years.
The Chairperson asked how many solar water heaters had been fitted. The drive towards local manufacturing was commendable, but she would like to hear how many units had actually been implemented. She added that the costing and finance was another issue; the Department only had to give a straightforward answer.
Mr Motau agreed that it was a valid question. One million solar heaters had been promised over a period of five years.
Ms Mathibela opined that the Department should have grappled with the old DME departments. During previous meetings, the Department had been able to say how many households had been electrified. There had to be continuity.
Mr Ragimana answered that Ms Magubane had in fact supplied more information on the process, on pages 34 and 35, under targets. Targets had been set at 150 000 for the previous year, 200 000 for the coming financial year, 300 000 for the year following, and 500 000 for the next. The process was based on internally funded programmes. R2,8 million had been allotted for the current year, and that figure had to be divided by cost per connection calculations. The cost per connection had to be reviewed from year to year.
The Chairperson asked if that was attainable, and questioned also whether the previous year’s target of 150 000 had been reached?
Ms Thandeka Zungu, Deputy Director General: Corporate Services, DOE, answered that towards the end of the previous year, around 120 000 electricity connections had been made by the municipalities and Eskom. The capacity of the implementers had to be taken into account when making the calculations. 7 400 solar heaters had been installed, and the process was reaching into new environments. A target of 200 000 would be pursued.
Mr Motau noted that there was under-funding for the new structure. He noted that matters agreed upon had to be implemented, and the Department had to have information at hand. He said that structural constraints were serious, and questioned how the work would be done.
The Acting Director for Financial Planning, DOE, reiterated that line function capacity had not been tampered with. The squeeze was related to support structures. The people who had dealt with municipalities in the past were still in their positions, and they could carry the load. This made it easier to review the numbers.
Ms Mathibela said that the Portfolio Committee was in a difficult position, regarding the DOE. The Committee had to pass the budget, but what it had been told was not sufficient. It had to know more in order to help the Department obtain funds.
Mr J Selau (ANC) urged that it was fundamentally important for the Committee to build a relationship with the Department. The Department had to inform the Committee of its intentions, but it also had to account to the Committee about outcomes. For all programmes, there should be clarity on what the Department intended to achieve within the current financial year, and the two following years. He stressed that the Department had to know that the Committee was not trying to “catch it out”. The budget debate was scheduled for 20 April. Key energy stakeholders would be present, and whoever engaged in that debate had to be informed. The Department of Energy was independent for the first time, and there were many changes. However, it was necessary to inform the Committee, by about two weeks before 20 April, on the past achievements of the Energy branch, with programmes and projects. The Department had to know what it wanted to achieve by the end of the finance year. He asked if this information could be provided to the Committee.
The Chairperson requested that the Department should forward additional information to Committee members by 13 April. She asked that the Department keep the information practical. The organogram presented was commendable, but the question remained whether the Department could achieve targets. It simply had to deal with renewable energy.
The Chairperson announced that a team was needed for 2010 readiness visits. It was to be a multi-party team. She proposed that the team consist of Mr Ross from the DA, whilst Ms Mathibela, Mr Radebe and herself would represent the ANC. The team would be called together before the recess.
Mr L Greyling (ID) referred to the model countries for renewable energy, namely Mozambique, Germany, Brazil and Japan. He suggested that China also be considered, seeing that it was perhaps the best model for South Africa.
The Chairperson responded that there was a five-year plan, and that a mix of developed and developing countries had been decided upon. India had been considered, but the listed countries were the preferences selected. Denmark was an attractive possibility, and ranked among the world top five for progress made with emissions.
The meeting was adjourned.
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