2010/11 Budget Review and Recommendations Report: briefing by Department of Energy
Meeting Summary
The Acting Chief Financial Officer and Acting Deputy Director-General of the Department of Energy presented the 2010/11 Budget Review and Recommendations Report to the Committee. The total budget of the Department amounted to R5.535 billion but only 37.71% of budget had been spent.
The presentation included a summary of the budgeted amount and expenditure to date of each of the Department’s programmes. The delays experienced with the Transnet Pipeline project had been resolved and the quarterly payment to Transnet was being processed. Details of the organisational structure of the Department and the cost-saving measures introduced were provided. A total of 458 posts had been filled in the preceding six months and only 73 vacant positions remained. Of the approved 925 positions, 531 positions were funded and 394 were unfunded. To date, 298 applications for the licensing of petroleum products were processed. 120,000 solar heating units were installed. The solar water heating programme aimed to install 5 million units by 2019.
Members of the Committee were not satisfied with the report submitted as it did not include enough detailed information on the programmes and projects of the Department. The Department was requested to prepare a more detailed report, to be presented to the Committee at a later date. Members were concerned that the lack of local skills would result in delays in the roll-out of the solar water heating programme. Other questions asked by Members were about the delays with the Transnet Pipeline project and the implementation of the Regional Energy Distributors programme.
Meeting report
Briefing by the Department of Energy (DoE)
Mr Dakalo Netshivhazwaulu, Acting Chief Financial Officer, DoE gave a brief overview of the departmental budget review, major funded projects, organisation and establishment structure and the key unfunded activities.
Mr Ompi Aphane, Acting Deputy Director General, DoE presented a report on the status and completion dates of the Department’s projects.
The total budget for 2010/11 was R5.535 billion. To date, only 37.71% of the budgeted amount had been spent. The budget for Hydrocarbons and Energy Planning was R1.558 billion, of which only R402 million had been spent. The budget for Electricity, Nuclear and Clean Energy (ENCE) was R408 million, of which R29 million had been spent. The budget for Administration was R104 million, of which R60 million had been spent. The budget for Associated Services was R3.4 billion, of which R1.618 billion had been spent to date.
The key administrative projects included the filling of vacancies, achieving the procurement target of 40% spent on historically disadvantaged South Africans and training. Key programmes for Hydrocarbons and Energy Planning included the fuel strategic stock policy, fuel specifications and standards and the Transnet Multi Product Pipeline. The budget for the Transnet Pipeline project was R1.5 billion but only an amount of R350,000 was spent. The problems causing the delays in the project had been solved and the quarterly transfer to Transnet was being processed by the Department.
Key projects under ENCE included the Integrated Resource Plan (IRP) for 2010, the Electricity Regulation Amendment Bill and the Regional Energy Distributors (RED).
The organisational structure of the Department was presented. A total of 458 posts had been filled in the preceding six months and only 73 vacant positions remained. Of the approved 925 positions, 531 positions were funded and 394 were unfunded.
The Department had implemented austerity measures to curb costs, which included restrictions on international travelling, a review of the internship programme, restrictions on advertising expenditure and stringent measures to control the cost of telecommunications. A brief outline of the progress and the completion dates of projects were provided. The completion date of the Department’s Integrated Resource Plan was December 2010 and the plan had been released for public comment.
The licensing of petroleum products was ongoing. Between April and September 2010, 298 applications were processed, 16 were approved and eight were refused. An average of 52 applications was received per month.
The non-grid electrification programme, which focused on solar heating systems, had commenced in April 2010. A budget of R124 million was provided, of which only 0.71% was spent. 120,000 solar water heating units would be provided in
Discussion
Mr E Lucas (IFP) was happy with the progress made with the SWH programme. He queried the quarterly payments made to Transnet when there had been so many delays in the pipeline project. He was concerned that the work was not being done even though Transnet had been paid.
Mr Netshivhazwaulu replied that Transnet had to provide a progress report with the invoice submitted. The agreement was that payment would not be made if there had been no progress. The delays had resulted in more problems arising. The current quarterly payment was being processed because Transnet had done the necessary work on the pipeline. The problems causing the delays had been resolved.
Mr S Motau (DA) asked what the purpose of the SWH programme was and if a saving on the electricity grid had been observed. He asked if the intention to manufacture the units locally would have any adverse effects because it might take too long to develop the necessary skills to reach the target set for 2019.
Mr Aphane said that the main objective of the SWH programme was to balance the demand and supply of electricity. Other objectives concerned climate change and economic growth. The skills shortage in the local manufacture of the units would become a problem in 2011. Currently, the scope of the programme was limited and the available skills were sufficient. A comprehensive skills development programme for SWH had been developed. SWH could become a broader programme and if could be linked with the National Energy Commission of South Africa (NECSA) apprentice programme.
Ms L Moss (ANC) noted that the procurement process had not yet been finalised. She asked when the procurement programme would commence and which areas would be targeted initially.
Mr Aphane replied that Ekurhuleni was a target area. Expectations had been created and the Department was working with CEF to address the issues.
Mr G Selau (ANC) said that the SWH project was of a long term nature. It might be better if the targets were set for the number of units on an annual basis. He was concerned about the report on the status of the programmes (see slide 26 of the presentation document). He was not convinced that the Department would complete the programmes on time and asked if there was the likelihood that these programmes would be rolled over.
Mr Aphane said that only R300 million for the SWH programme was approved by the National Treasury and the programme would be susceptible to rollovers. The Department could change the report on the progress made on the various programmes and indicate what had been spent to date.
Ms F Mathibela (ANC) asked if a memorandum on the RED’s had been submitted to the Cabinet. The Cabinet had made a decision on RED1 but there had been delays in the implementation of the programme.
Ms Mazugu confirmed that the matter was still with the Cabinet. The delays with the implementation of RED were caused by the lack of direction and an answer from Cabinet about whether or not the Department should proceed with the programme.
Ms Mathibela asked if the problem of land acquisition for the Transnet pipeline had been resolved.
Mr Radebe (ANC) was concerned over how the Department would monitor the CEF to ensure that the programmes were implemented. He feared that commitments were made that would not be delivered.
Mr Aphane said that the collaboration with CEF was limited to the fund that was under the management of CEF, which the Department was trying to leverage into the SWH programme. The SWH programme was not funded by the fiscus beyond the R300 million granted by the National Treasury and without additional funding, the programme would be subject to rollovers.
The Chairperson asked the Department to present recommendations to the Committee.
Mr Radebe asked what the delays with the implementation of the SWH programme were. All the municipalities in
Mr Aphane said that there had been problems with a parallel donor-funded programme. The service provider charged the end-user an amount of R58, which the end-users could not afford to pay (see slide 23 of the presentation document). There were secondary problems with the installation of units as well. The Department was able to provide statistics on the number of installations completed on a monthly basis.
Mr Selau would have liked to see a more detailed breakdown of the budget in the presentation. The Committee needed more information in order to ascertain if the money was being applied properly.
Mr Netshivhazwaulu replied that the Department did have a detailed breakdown of the programme budgets and expenditure available but was not sure to what extent the Committee required detailed information in the briefing. The key unfunded activities were covered in more detail and the Department would be happy to provide any further information required by the Committee.
Mr Selau noted that only 38% of the budget had been spent and asked for the assurance that the Department would be able to spend its budget before the end of the financial year and would not be requesting funds to be rolled over to the following year.
Mr Netshivhazwaulu said that the expenditure rate for Programme 1 currently stood at 58%. The Department was aware of the expenditure pattern and was confident that the budget would be fully utilised by year-end.
Mr Selau said that Members of Parliament had to be in a position to explain things to the people who had voted them into office in a manner that could be understood even by people who had not had a high level of education. The Members did not require details of petty expenditure but the information provided in the presentation was not sufficiently detailed to allow the Committee to carry out its oversight responsibility. An example was slide 5 of the presentation document.
Mr Netshivhazwaulu apologised and said that it was not the intention of the Department to aim the presentation to the category of people with a high level of understanding. He explained that slide five only listed the key projects on which the budget was spent. More information was provided on subsequent slides, for example slide ten gave a more detailed breakdown of the administration programme. He would be happy to provide the Committee with the more detailed breakdown requested.
Ms Mazungo added her apologies as well. She said that the reporting process was new to the officials of the Department and the report was presented at a high level. She reiterated that a more detailed briefing could be prepared and presented to the Committee.
The Chairperson acknowledged that the Department was relatively new and the presenters were not yet au fait with the requirements of the Members. She said that the Department would be requested to brief the Committee in more detail at a future date.
Ms Moss said that a concern over the application of funds provided to municipalities was raised during a meeting held in the previous week. The financial year of Local Government authorities commenced in June and the roll-out of projects was expected to commence very soon.
Mr Netshivhazwaulu confirmed that 98% of the budget of R200 million had already been spent. The municipalities were in the process of finalising their financial audits and he expected that the pace of implementation of the projects would increase and that all the funding provided would be spent.
The Chairperson said that the Committee was not satisfied with the report submitted by the Department. The Department would be called again to submit a more detailed report and recommendations to the Committee in the near future.
The meeting was adjourned.
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