Meeting SummaryThe Department of Energy presented its 2nd quarter expenditure and performance report. The Department was allocated a budget of R6,089.9 billion, which, after adjustment, was raised to R6.199 billion. The expenditure was 12.5% in the first quarter, but had reached 46.6% by 30 September. It was noted that R90.9 million, or 50% of available appropriation, was used to compensate employees. Some of the major costs in the Department included lease payments, since the actual cost was R28 million although the allocation for leases was only R7 million. The attendance at COP 17 was also an unfunded mandate. A number of transfer payments were not processed, including one to Transnet, because of difficulties with the Memorandum of Agreement, despite the fact that the funds had been budgeted and they would be transferred in the third quarter. Some of the unfunded mandates, and the reasons for non-payment of other transfers, were set out. A line item tabulation of expenditure was given. It was noted that the Department had forwarded a proposal to National Treasury to reclassify funds originally appropriated for the Renewable Energy Finance and Subsidy Office (REFSO) and for Working for Energy programmes, totalling of R57.32 million. The Department noted that it was operating with minimal resources but was doing its best to keep a close watch on expenditure and shift funding where necessary. Members welcomed the presentation. They raised questions on the major costs, and particularly queried the lease payments and the reason why COP 17 was regarded as an unfunded mandate, despite the fact that the Department must have known about the involvement. They also raised questions about nuclear financing and the work of the National Electricity Response Team were also raised. The impact of the split into two departments, of the former Department of Minerals and Energy, was discussed and Members noted that National Treasury should be approached in regard to the low allocations to the Department of Energy, to try to assist, although this was raised in the Budgetary Review and Recommendation Report.
The Department also outlined the Public Participation Programme, which adopted a strategic emphasis of promoting universal energy access, conservation of resources and the environment and also the ensuring of security in energy supply. Both the Minister and her Deputy were actively engaged in the programme. Partnerships were also entered into, with subsidiaries of the Department of Energy. Some of the activities conducted included community engagements on: solar water heating, sports awards, launching of electricity switch -on and awareness campaign on the safe use of nuclear energy. Budgetary constraints and the bias of the programme towards electricity issues were raised as challenges to the programme. The Department noted that it would continue to interact with communities in an unmediated manner and would include all stakeholders. Members welcomed the programme, but stressed that there was a need for substantial public awareness on nuclear energy in particular. They raised questions on the empowerment of women and why particular preference was given to some provinces. The working relationship between the three spheres of governments was questioned. Members urged that there should be greater involvement of rural communities. Members reiterated that community engagement and consultation were a crucial element in
Department of Energy 2nd Quarter 2011 Performance & Public Participation Programme reports Ms Thandeka Zulu, Chief Operations Officer, Department of Energy, introduced the officials from the Department of Energy (DOE or the Department).
Ms Yvonne Chetty, Chief Financial Officer, Department of Energy, tabled and took Members through the report on the Second Quarter performance in 2011, of the Department. She outlined that her presentation took into account the Minister’s Budget Vote commitments and the Department’s Strategic Plan 2010 to 2013. The Department of Energy had, for the 2011/12 financial year, been allocated started R6,089 billion. National Treasury approved a rollover of R88.2 million, and R7.27million was redirected to pay the National Electricity Response Team (NERT). R21,192 million was allocated from National Treasury towards the National Nuclear Regulator, and this was meant to fund the gap created by the loss of authorisation fees as a result of the closure of the Pebble Bed Modular Reactor (PBMR) project. This was part of the Department’s unforeseeable expenditure. The effect of the adjustments meant the available budget was increased to R6,199.3 billion. The Department had disbursed 46.6% of its adjusted appropriation by 30 September 2011.
She then set out detailed tables of the expenditure line items (see attached presentation for full details). In relation to compensation of employees, she indicated that R90.9 million, or 50% of available appropriation, had been utilised, and the spending was in line with the available budget. In respect of Goods & Services, the total actual expenditure amounted to R75.7 million or 59.9% of the total 2011/12 budget. Spending in this area was negatively affected by unfunded mandates, which included unfunded mandates for 75% of the Office Accommodation Lease, the National Energy Response Team Unit (NERT), side events and participation in the Conference of Parties on climate change (COP17), the Public Participation Programme, African Energy Ministers Conference (AEMC), International membership fees, and the fact that the approved structure was not fully funded. Major cost drivers were the unfunded mandates.
She noted that an amount of R15.8 million had been paid to the service provider for the NERT. The operating payments included membership fees, including those to the International Atomic Energy Agency (IAEA) for R9.8 million.
In respect of transfer payments, she noted that movement within this category was slower than anticipated in the first quarter, but there were improvements in the second quarter. A total amount of R2.7 billion was transferred from the total available drawing of R3 billion. The total transfers made so far amounted to 46.2% of the total adjusted budget. For a number of reasons, no transfers were processed, although they were budgeted for, to EEDSM Eskom & Municipalities, because municipalities were not complying with their contractual obligations, in particular relating to the requirements for business plans and signing contracts. Payments were also not made to South African National Energy Development Institute, Renewable Energy Finance and Subsidy Office (REFSO) and the second quarter transfer for the Transnet pipeline, the last because the Memorandum of Agreement (MOA) with Transnet needed to be corrected. The R375 million budgeted for this would be paid in the third quarter, after completion of the negotiations to amend the MOA.
Ms Chetty stated that the Department had been able to operate with minimum resources. It had, however, constantly to review the baseline to establish which items were slow on spending and to redirect this to other critical areas. The Department had forwarded a proposal to National Treasury to reclassify funds originally appropriated for REFSO and Working for Energy programmes, totalling R57.32 million.
Mr S Radebe (ANC) appreciated the report. He asked about subsidisation of some of the Department’s programmes by its subsidiaries. He also wanted an outline of the programmes that had funds committed to them.
Ms Zulu pointed out that subsidies from DOE entities had helped in cutting costs when they participated together in activities where the subsidiaries also had an interest. She gave an example of international conferences, where entities paid for their own exhibitions and also various public participation arrangements that they participated in.
Ms Zulu undertook to forward details of programmes and their funding to the Committee.
Mr Radebe asked about the impact on service delivery as a result of non payment to Transnet by National Treasury.
Ms Zulu said that the funds to Transnet would be forwarded in the third quarter. These funds would come from National Treasury. She noted that there was a contract between the Department and National Treasury, in which R4.5 billion would be paid over to Transnet, in batches of R1.5 billion per year. The money was earmarked, and the only outstanding detail was the correction of the MOA.
Mr Lucas called for clarity on the lease amounts.
Ms Chetty noted that the Department had requested a larger budget for lease expenditure but only received R7 million, and this could have been as result of the previous year’s spending.
Ms N Mathibela (ANC) also noted her appreciation for the report and the hands on approach of the Department’s Chief Financial Officer.
Mr E Lucas (IFP) wanted clarity on the R21million authorisation for the National Nuclear Regulator.
Ms Mathibela wanted more details on the financing of nuclear energy programmes.
Ms Chetty pointed out that R64.7million was still available in the budget, but this was committed funds.
Ms Zulu added that the amounts for the NNR represented more of a refund by National Treasury on operational costs, since the PBMR project had been shut down. In the past there had been a working arrangement between municipalities and the Department, in which interns trained and managed by the Department were placed in various municipalities. This initiative, which was intended to assist the municipalities, would be re-introduced next year, when funds became available. She noted that the Department had quite a small budget and had had “a shaky start” since its split from the current Department of Mineral Resources.
Ms Mathibela also asked for a report on the compliance of municipalities.
Mr K Moloto (ANC) pointed out that in future the Department should forward the list of municipalities that failed to comply.
Mr Moloto wanted further clarity on Eskom’s complaint of the poor quality of water from municipalities.
Ms Chetty confirmed that she would forward to the Committee a list of the municipalities that failed to comply, as also reports on the Eskom issues and the quality of water.
Ms B Tinto (ANC) asked why COP17 was not budgeted for, despite the fact that it was commonly known that the conference would be taking place.
Ms Chetty noted that the DOE had a baseline budget and even though it knew about COP17 it had to rely on what was available. It was constantly reprioritising, as outlined by Ms Zulu.
Mr P Dexter (COPE) lamented the fact that the division of the former Department of Minerals and Energy had placed an onerous burden on the Department and that the new Department of Energy was expected to run with few funds. The Committee should try to find ways to assist the Department.
The Chairperson noted the issue of establishing a correct resource base for the Department of Energy was raised in the Committee’s Budget Review and Recommendations Report. Energy remained a vital sector in nation building, and this must be reflected by its resource allocation.
The Chairperson noted that the Committee needed to know exactly what the NERT was doing.
The Chairperson noted the African Energy Minister’s Conference of 2011 as a landmark event, and asked that the Committee must share its experiences on this with the Committee.
Ms Zulu said that the NERT was formed after the 2008 blackouts with the objective of looking at the challenges of producing electricity. A briefing on the African Energy Ministers Conference would be organised in future. She noted the Department was very much involved in the Transnet pipeline project.
The Chairperson noted the issues relating to Transnet and office accommodation, and asked if expenditure projections had been done.
Ms Chetty said the legacy of the split was one of the reasons why the Department had received such a low amount for office accommodation. She confirmed that expenditure projections were also done.
Ms Zulu also reflected on the history of the former Department of Minerals and Energy. She noted that the former Department had a bias toward the mining sector, and when the split occurred, few support services were given to the DOE, so it had never started from the correct baseline. The repercussions of the failure to strengthen the Department were being felt now.
Mr Dexter said the situation in the Department could not go on and that the Committee must call in National Treasury and explain that the Department’s performance was affected by lack of funding, which made it difficult to hold the Department accountable.
The Chairperson noted that in future the Committee wanted more details on expenditure projections and the Reports needed to contain reasons why transfers had not processed.
Department of Energy Public Participation Programme
Ms Thandiwe Maimane, Chief Director: Communications, Department of Energy, took the Committee through the Public Participation Programme. She highlighted that in 2010 Cabinet approved a new outreach initiative, named the Public Participation Programme. The programme sought to reinforce accountability by conducting programmes that involved the public. Both the Minister and her Deputy were expected to be involved. The programmes were overseen by the Government Communication and Information System. The Department regarded these programmes as an opportunity for unmediated interactions with affected communities.
Some of the programmes focused on promoting energy efficiency, nuclear energy awareness, promotion of energy sector careers and entrepreneurship among disadvantaged groups. They also promoted projects that demonstrated work done towards the universal access of energy through the Integrated National Electrification Programme. Some of the challenges encountered by the Department included limited funding, the problem of inefficient local level procurement and the fact that the current programmes were biased towards electricity issues. However, she noted that the Department would continue with its programmes, and try to represent all areas of the Department’s work equally. The programmes would be broadened to all provinces.
Mr S Radebe (ANC) asked on why certain provinces were given greater preference than others in hosting events.
Mr Radebe also noted that there were challenges in attempting to collaborate with the three spheres of government.
Ms Zulu agreed that there were sometimes political problems encountered in the working relationship with the three spheres of government. It was easier for her to deal with municipalities when planning events or preparing for programmes because they were on the ground and worked with the community.
Ms B Tinto (ANC) requested that Members of Parliament be forwarded the programme’s schedule so that they could also become involved and promote events in their respective constituencies
Ms N Mathibela also emphasised the importance of involving parliamentarians in the Department’s programmes. She pointed out that follow up initiatives were a vital component to the success of the programme. She asked the Department to approach rural areas more often. In particular, she noted that there was lack of information on nuclear energy.
Ms Zulu noted the comments about more involvement of Parliamentarians, and said that the other comments would be conveyed to her principals. She said that indications of where launch programmes should be launched often were given by constituency offices, as well as because of events happening in those particular areas, such as a switch-on programme.
Mr E Lucas (IFP) pointed out that public participation was a very important topic and the consultation of communities and stakeholders was also important. He too highlighted that people needed to be educated more on nuclear energy. The career guidance programmes were appreciated and there was a need for transformation in the liquid fuel sector as the continued grip by a few firms was uncalled for.
Ms Zulu agreed that the success of deploying nuclear power depended on public support, and agreed that there was a lot of misconception around this issue.
Ms Maimane added that the DOE was working with various organisations in terms of educating people on the use of nuclear energy.
Ms Tinto asked about the empowerment of women in the energy sector.
Ms Zulu said that the Department did engage in a number of programmes aimed particularly at women.
The Chairperson reiterated the importance of public participation and highlighted that quarterly reports on the progress of the programme should be made to the Committee. The importance of nuclear energy awareness was also stressed. He also encouraged the Department to use local suppliers in the procurement processes.
The Chairperson also wanted clarity on the role of Government Communication Information System (GCIS) in the advertising budget.
Ms Maimane pointed out that DOE contributed to the budget of the GCIS and did not receive funds from the latter. The DOE would assess the impact of the programmes and this would give a clearer picture on the success.
The Chairperson said that the Committee would monitor the functions of the Department actively, rather than merely waiting for reports.
The Committee adopted minutes of previous meetings.
The meeting was adjourned.
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