Department of Energy on Strategic Plan 2012

Energy

19 March 2012
Chairperson: Mr S Njikelana (ANC)
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Meeting Summary

The Department of Energy presented its Revised Strategic Plan for 2011/12 - 2015/16 with its proposed six programmes Administration; Energy Policy and Planning; Petroleum Regulation, Nuclear Energy, Clean Energy, Programmes and Projects. However, it reported that when the DME had split. The DMR had received 70% of the budget and the DoE only 30%. This allocation of funds from National Treasury, was adversely affecting DoE’s ability to carry out its very important mandate. Such restriction would result in a programme having to be shelved due to their being so severely underfunded.

The Committee called for more realistic goals from DoE, as a result of the budget constraints. They called for effective prioritization for certain programmes. The DoE Budget presentation highlighted the problems that DoE was having when it came to allocation of scare funds. This meant they were heavily dependent on the permitted 8% virement to shift funds from one area to another, depending on the most urgent need.

The Committee voiced their concern with the system of fund shifting which the CFO justified by noting that DoE had to engage in this practice to survive. Other questions and concerns included:
▪ what would happen to Programme 6 (Programmes and Projects) if DoE failed to secure the required funds ▪ the
single buoy mooring (SBM) being suspended for a month
▪ the many flaws in the Petroleum Products Act meant this act should be overhauled not amended.
▪ lack of a report on energy savings
▪ the budget cuts to the
National Nuclear Regulator
▪ what would happen to the old pipeline when the
New Multi-Product Pipeline was in operation
▪ the Coal Roadmap
▪ the inclining block tariff
▪ expedite the drafting of required legislation otherwise there would be an avalanche effect in Parliament
▪ role ISMO and StatsSA play in energy data collection and data management.
▪ the importance of National Radioactive Waste Disposal Institute funding
▪ a request for the Solomon Associates report on refineries
▪ the capability of the adjudication committee as they were handling billions of rand
▪ the restructuring of the CEF companies.
▪ request for a dedicated session to ascertain how brutal DoE had been in handling corruption
▪ was DoE ensuring the relevant Sector Education and Training Authorities were doing their jobs.
▪ resolving the
Electricity Distribution Industry Holdings (EDIH) issue
As the Director General was unable to be present due to his attendance at a Cabinet meeting, many of these questions remained unanswered. The Director General would provide written responses later.
 


Meeting report

Ms Thandeka Zungu, DoE Chief Operations Officer, noted that the strategic plan was in line with the revised strategic plan framework as set by the National Treasury. When devising a strategic plan, the COO noted that DoE considered how it could contribute to the priorities identified by government, namely decent work, education, crime prevention, health and rural development. It also took into consideration the 2012 State of the Nation Address, the Millennium Development Goals, the UN’s declaration of 2012 as the Year of Sustainable Energy Access, DoE’s performance against the Minister’s 2011 Budget Vote Speech commitments, the Minister’s signed Delivery Agreements on government outcomes, as well as DoE’s capability to deliver on its mandate in terms of its financial and human resources.

She noted DoE’s key focus areas for 2012/13 were: finalisation of the Integrated Energy Plan; energy efficiency; implementation of the Integrated Resource Plan; electricity and electrification; clean energy; nuclear energy; security of fuel supply; contribution to job creation; as well as international relations.

Mr Hennie Kruger, DoE Director for Strategic Management and Planning, noted that one’s strategic plan should cover a five-year period, and should not be changed during that time, unless necessary. However, it had become clear that the department needed to publish a revised strategic plan. The changes in the service delivery environment were what warranted the need for a revised plan. There had been an expansion of DoE’s constitutional, legislative and policy framework. He noted the variation between the old and the new programmes. The new six programmes were: Administration; Energy Policy and Planning; Petroleum Regulation, Nuclear Energy, Clean Energy, Programmes and Projects. These catered for the various needs and requirements of DoE moving forward and establishing a new identity, separate to that of the old DME (Department of Minerals and Energy). He outlined the purposes of these new proposed programmes, in line with DoE goals and budget.

Mr George Mnguni, DDG: Corporate Services interjected, providing some background as to the process that had occurred to create the new Department of Energy. The need for the organisational change came about to ensure that the organisational structure was best suited to ensure that DoE realised its mandate.

Mr Kruger said that the new structure of six programmes was suggested so as to best cater to the effective realisation of DoE’s goals and government outcomes, with an emphasis on the Millennium Development Goals (see presentation for details).

Discussion
Mr E Lucas (IFP) voiced a concern that since the DoE had separated from the DME in April 2010, there had been a policy shift. He was concerned that there might not be a long-term plan. There was the continual rise of energy prices. If they were to restructure, there should be a proper plan for the long term, not the short term. He commented on the dangers of over-strategising and not being realistic about the budget and what DoE could realistically achieve.

Mr S Radebe (ANC) asked about the current status of limited budgets and insufficient funds.

Mr K Moloto (ANC) noted that the revised strategic plan was based on two reasons, one being significant policy shifts, and the other being changes in the service delivery environment. He asked what these were.

Ms N Mathibela (ANC) wanted to know how long DoE was to be controlled by the DMR. She wondered how long before DoE would no longer be reliant on DMR.

The Chairperson asked for the documentation on the SMART principle from National Treasury to be presented to the Committee and wondered why this principle should be coming from Treasury. He referred to the expansion of mandate and wondered about the implications of this on the already strained budget, as DoE was notably under-resourced. Noting that DoE now had six programmes, he wanted to know what had inspired DoE to focus on Petroleum Regulation. He suggested that there be a joint meeting with all stakeholders for the purpose of ascertaining how collectively, there was to be movement forward.

Mr K Moloto (ANC) noted the importance of interrogating the document and asked to be convinced of the plight of DoE, in line with scrutiny of the figures. On Programme 2, Energy Policy, the suggestion was that the variance there impacted negatively on DoE. He asked how the 38% variance would impact negatively on DoE. On Goods and Services, he asked how firm these Treasury proposals were, based on actual years.

Mr Kruger noted that there would always be issues that arise with restructuring. The proposed and approved structure of 1 April 2010 was not a significant change, but merely the old DME structure with simply a few more DDGs. There was a lot of unfunded support staff as well. A line-by-line evaluation of the strategic plan would be the best way to ascertain the appropriate structural needs. In terms of Petroleum Regulation, there was a concerted effort to segregate this function from that of policy. With regard to the strategic framework and why SMART came from Treasury, Treasury was tasked, under its mandate, to create the requisite framework. The reference made to an “expansion” was merely to denote an expansion of the descriptions and definitions, and not the mandate.

Ms Zungu noted that DoE, on a number of occasions, had had an incorrect baseline. Work had been done to match the new structure to the budget. This warranted the need for an interim measure as there was no way to implement the approved structure, seeing that the interim structure itself, was not fully funded. There had been questions about why there continued not to be a finalised allocation, which meant as a result that programmes had had to be shelved. She noted the frustration of working with their hands tied as there continued to be issues surrounding allocation. However, every attempt was being made to ensure that their mandate was carried out.

Programme 2: Hydrocarbons and Energy Planning
Mr Robert Maake, Director for Hydrocarbons Operations, said the aim was to finalise the Integrated Energy Plan, develop the policy analysis framework with appropriate key indicators and complete the Centralised Electronic Energy data repository, as well as improve the lag time for publications. The current publications were: Energy Price Report; Energy Digest; Energy Synopsis. There was the planned introduction of two new publications, Review of the Energy Sector and Outlook of the Energy Sector. There was also a desire to improve the completeness of data dissemination to local, regional and international stakeholders. They aimed to have Clean Fuels 2 implemented in 2017, but the main challenge here was the upgrading of refineries to make them more efficient and better equipped to deal with the CF2 requirements. He spoke of the revision of the Petroleum Products Act, 1977, to close regulatory gaps, particularly when it came to enforcement. The
Petroleum Products Regulations and the Coal Policy discussion paper had been published for public comment and it would participate in the drafting of the South African Coal Road Map. There was also a proposed amendment to the Gas Act of 2001 to allow for development around gas activities and gas products. He listed various implications for DoE in their bid to improve petroleum licensing and inspections, as well as to implement corrective action for non-compliance with the Liquid Fuels Charter and technical, legal and commercial licensing conditions.

In summary, DoE sought to revise the LPG framework; implement and monitor a
Regulatory Accounting System (RAS); implement the Bio-fuels pricing framework; fix the retail margin of illuminating paraffin; appropriately price petroleum products; draft new liquid fuels empowerment framework, as well as conduct Petroleum Products Act and Licensing Awareness campaigns.

Programme 2
Electricity, Nuclear and Clean Energy

 = Energy Policy and Planning


Mr Ompi Aphane, Acting DDG, spoke of the current quest to increase electricity generation and noted the issue of the multi-year tariff programme. DoE would aim to introduce a long-term tariff trajectory programme. On distribution, the ADAM programme (Approach Distribution Asset Management) intended to close the loop and fix the distribution wires. The intention was to extend the programme to secondary cities. There was a bid to rehabilitate distribution networks through pilots in the secondary cities. They intended to conclude the establishment of an Independent Systems and Market Operator (ISMO) as well as the splitting of the Integrated Resource Programme and establish an Independent Power Producers unit within DoE.

The plan, in the short term, was to implement a Risk Mitigation Plan, as part of the IRP implementation plan. On the supply side, the intention was to increase supply and decrease demand through the implementation of various programmes. DoE was aware of increasing prices, and noted the aim to monitor the Inclining Block Tariffs (IBTs) for the purposes of cushioning the poor from the rising costs. To do this, there would be a monitoring of the Multi-Year Price Determination Programme (MYPD2). IBT would be extended to cover prepaid meters in more municipal areas. He noted various legislative revisions that DoE was to undertake in the current financial year (see presentation for details).

Mr Aphane moved to discuss the nuclear programme. He noted the need for an external determination of DoE’s capacity and plans for the introduction of nuclear infrastructure. DoE sought a determination as to whether they were at a point to effectively launch a nuclear programme. The pre-feasibility studies had been completed. The National Radioactive Waste Disposal Institute (NRWDI) had been approved, but was still experiencing funding problems. There had arisen a need for improved security measures at ports of entry, with the implementation of Portal Radiation Monitors at the main ports of entry. He noted the various nuclear safeguards that DoE was to implement. The aim was for Cabinet to approve amendments to the National Nuclear Regulator Act and a draft Fund Bill for the
National Radioactive Waste Disposal Institute. A Framework for the withdrawal of the nuclear safeguards function from National Energy Corporation of South Africa

 was required (NECSA was currently responsible for this).

On the issue of clean energy, he noted that monitoring and reporting on energy-savings could not happen unless there was a proper system that could quantify this. There was a goal to reach a saving of 5TWh. He noted a proposed incentive for companies that save energy, in the form of tax breaks. Such savings may take various forms (see slide 24 for details). He highlighted the target to secure an accumulative total of 500 027 solar water heating units installed, as well as to assess the impact of such initiatives. Data was not collected as effectively or appropriately as DoE should, and work would be done to remedy this situation. He pointed out that the Renewable Energy White Paper had been reviewed and approved, which would institute various Renewable Energy Interventions (see slide 25 for details). There was also to be a departmental commitment to the reduction of Green House Gas emissions over and above all the other clean energy initiatives.

Government had also undertaken to create a framework for compliance with climate change adaptation that required action from the energy sector in the form of mitigation strategies. There was currently an analysis underway, as well as a report, on the risks associated with climate change response measures. He noted the desire to implement an Environmental Management Plan, amongst other initiatives. With regard to COP17, there was an intention to compile a report on the lessons learnt from this, as well as the lessons learnt by the country as the host of this summit.

Programme 1: Administration
Mr George Mnguni, DDG for Corporate Services, spoke about the implementation of Phase 2 of the HR Plan (see presentation for details). Some positions would be affected, which would bring about a need for job evaluation. The intention was to ensure equal pay for equal work. This included the review of Phase 1 of the HR plan. There had been collaboration with Department of Public Works for the relocation of the DoE to their new headquarters, as they had been sharing office space with the DMR. The current space did not cater for the needs of DoE. During the relocation process, there was to be an implementation of the Facilities Management Plan, as well as the Records Management Plan. Security Risk Strategies would also be developed and reviewed.

He noted that DoE was currently dealing with only 50% of legal requests timeously, and signalled DoE’s desire to increase this to 100% of all the legal requests submitted to Corporate Services, to avoid unnecessary legal action. A Communication Strategy and Plan was also to be implemented to ensure that the DoE was effectively branded and clearly distinguishable from the DMR.

Ms Yvonne Chetty, CFO of DoE, spoke about the activities of Office of the CFO, noting that the monthly and quarterly spending trends were monitored and reported to National Treasury. They were seeking 100% compliance in the timely payment of creditors, sound internal controls and monitoring and evaluation, asset register reconciliation with the general ledger and value-for-money goods and services procurement.
 
Ms Zungu spoke about the strategic objective targets for the Office of the COO which had four main functions: Strategic management and planning; Monitoring, evaluation and reporting;
Oversight, guidance and support to State Owned Entities

(SOEs) and International relations. She spoke about the DoE’s Enterprise-Wide Risk Management

 as well as its Anti-Fraud and Corruption Plan.

She noted as part of the strategic objective targets, the approval and implementation of an SOE Oversight Framework, which addressed compliance issues, as well as DoE’s expectations for the SOE. She spoke about the CEF group of companies restructuring.  She made reference to the
Electricity Distribution Industry Holdings (EDIH) and the processes undertaken to finalise the closure of this entity. She mentioned the responsibility of the DoE to ensure that its SOEs had board members.

On the topic of international relations, the COO noted the move of the DoE to align its international strategy with DIRCO’s international strategy. They aimed to create a relationship with DIRCO to identify countries of interest to DoE. There was also a hope to conduct a stakeholder survey that was currently experiencing funding issues. A
Monitoring and Evaluation Report

 would be provided on signed bilateral and multilateral agreements. They would provide quarterly and annual International Relations reports.



In terms of internal audit services, there had been issues surrounding capacity and the authority levels under which these audit services functions were carried out. There was an emphasis towards full compliance on implementation of corrective measures, stemming from the audit findings on the internal audit services. She noted the importance of DoE being able to comply with recommendations, especially those of the Auditor-General.

The new programme,
Energy Programmes and Projects

, would evaluate the impact DoE’s programmes had on the public. This programme would undertake projects for the mainstreaming / upliftment / empowerment of disadvantaged / vulnerable groups. The aim would be to consolidate and implement the programmes and projects identified in Programmes 1, 2, 3, 4 and 5.

Discussion
Mr K Moloto (ANC), noted that in Programme 1: Administration, under Goods And Services, the amount was R106 million, but in the Estimates of National Expenditure (ENE), the figure was R84 million. He asked which figure was correct. He asked what medicines DoE was supplying and what learner support was being provided. He noted the reduction of R80 million on the electricity demand management grant, and asked for the reasons advanced by National Treasury for these cuts. He asked why the World Cup was still being included as a cut when World Cup 2010 was now over. He voiced concerns about the cuts to the
National Nuclear Regulator, as they were the regulator. The NNR had complained about the cuts that it was being subjected to. He also wanted justification for the cut pertaining to the nuclear programme, when this was a new endeavour. He wondered if it was not time for belt-tightening - especially with regard to catering budgets.

Ms Yvonne Chetty, CFO of DoE, noted the R106 million in the 2011/12 budget and the conflicting figure in the ENE document. DoE was entitled internally to shift the funds in order to survive. DoE had asked for another R21 million, under Goods and Services, that had been granted, which resulted in the new figure. The trail of shifting funds between programmes was limited, as there was an 8% leeway on virements - that was carefully monitored. The decreases and the increases cater for the situation on the ground that justified the movement of money.
 
Mr S Radebe (ANC) referred to the Petroleum Products Amendment Bill, and voiced concern about the fact that there were more than 20 loopholes found in the old legislation. He noted that the Act was old (1997) and needed not only to be amended, but to be completely reviewed. On the issue of the
single buoy mooring (SBM) and it being suspended for a month or so, he was concerned that this would affect the fuel industry. With regard to the Liquid Fuels Charter, the Committee had not received a report as to compliance with the recommendations. He asked if the recommendations were being implemented. On the issue of the Renewable Energy White Paper, he sought clarity as to where this process was currently. With regard to the Public Participation Process (PPP), he had not been invited to these programmes and noted that he had made a special request for one of these to go to Mpumalanga Province. Only one currently existed in the province, which was very large, and it needed more. He asked which building DoE was moving into and whether such a move was tantamount to the inheritance of assets.

Mr Maake noted the comment about legislative review and said that he would take this comment to his colleagues in the department. On the issue of having only one SBM in the country, an alternative SBM for the country was under discussion. On the liquid fuels audit, the final report had yet to be presented to DoE. Once this was done, DoE would implement the recommendations presented.

Mr Mnguni said that the Committee would be invited to attend the PPP. The Minister and the Deputy Minister would also be in attendance.

The Chairperson noted that an invitation to attend should not be something that the committee member should have to request, but rather something that DoE extended on a continual basis.

Mr E Lucas (IFP) asked what would happen to the old pipeline when the
New Multi-Product Pipeline (NMPP) was in operation. On the coal roadmap, he asked if this was going to pertain to coal-to-liquid. With regard to the mixing of diesel and paraffin, how was DoE monitoring the reduction of this. On the issue of the inclining block tariff to cushion the poor, such an act also benefited the rich.

In terms of cushioning the poor, Mr Aphane noted that there was difficulty in isolating who was the poor, so as to only devolve benefit to them. He noted the difficulty in isolating those that were in the most need for free basic electricity. On the nuclear power programme, there could not be such a programme without a strong security institution.

Mr Maake noted that there was going to be a study that would ascertain whether the old pipeline could be used perhaps for jet fuel transportation. On the coal roadmap, DoE would be looking at coal as an energy source, and not just for coal to liquid application. The reduction of diesel and paraffin mixing was a good thing and that such would require the consumer to incur further expense with the purchase of an essential dye.

Ms B Tinto (ANC) asked about energy savings, noting that there was no report on such which displeased her. She asked if the last programme could not be incorporated with the others for the purposes of limiting the number of DoE programmes being created, which would strain human resources.

Mr Aphane clarified about savings, saying there were no independently verified savings, however there were some savings being achieved. There were reports from measurement and verification companies that existed. There was an engagement with SARS to provide tax breaks with companies that comply and ensure that savings occur. On renewable energy and the Green and White paper process, this was a culmination of a process that encapsulated government’s position.

Ms N Mathibela (ANC) asked what would happen to Programme 6 if DoE failed to secure the funds required. On March being the Energy Month, reference had been made to a constraint on capacity and wondered if this referred to funds. She asked how far DoE was with the public stakeholder workshops, and how many provinces had been engaged.

Ms Zungu said DoE was experiencing a challenge in securing funding to cater for the on the issue of the energy month event. People would be taken away from their work for two to three days and this could create some issues, but DoE was looking into who they could spare. So there were funding as well as human resource issues that were causing this limitation. On the question of stakeholder workshops, there were workshops that occur, cutting through all the various branches in DoE, covering various issues.

Mr Kruger said the development of structures was not a single faceted process which involved deliberations and concurrence from various stakeholders, including the Minister of Public Service and Administration. There had not been a specific decision taken as to which one of the programmes was not to be implemented now. This could only be finalised once cost structures had been identified. Programme 6 would ensure that there were people that specialised in the execution of projects, after conceptualisation, noting that this element was very important.

Mr Mnguni re-iterated the fact that a decision on which programme was not to be implemented had not been taken yet. There was a danger in creating functions around an individual’s capabilities, as DoE would find itself in an unfavourable position where services were disabled by the vacating of positions by an essential personnel corps. He noted the importance of the transfer of skills in a situation of labour turnover.

The Chairperson made reference to the previous year’s Annual Report, noting that DoE had said that the revised National Strategic Plan was to have been presented to Cabinet in the 2011/12 financial year, as well as other strategies. He acknowledged the progress on CF2. There needed to be a move away from stating items that DoE plans to do, towards a statement of what DoE had already done or had managed to do, referring to issues that were re-occurring without any resolution. He asked what the delay was and wondered if there could be some light shed on what the role of Parliament should be to ensure that processes were expedited, especially with regard to the passing of various pieces of legislation. He highlighted this so as to counter the avalanche effect that would befall Parliament when all these Bills were presented to it at the same time.

On the solar water heating programme, he pleaded with DoE to present this in a GIS technology format, to illustrate where these panels had been rolled out. He asked to what extent the National Development Plan had influenced DoE’s planning. Given the fundamental importance of the Integrated Energy Plan, he asked if there could not be a mini project plan. On the issue of the centralised collection of energy data, and other related issues, there were data management systems that need to be revised to establish a better collection system for data. In this regard, he asked if a centralised system was the best way to go. Secondly and institutionally, he asked what role would ISMO and StatsSA play in terms of data collection and data management.

On the publications issue, the Chairperson asked what issues would be contained in the proposed publications and for whom would these publications be targeted. He noted that reference was made that the current audit would be out in June, there was a note that it would be out in December; he asked which date was it in fact. On the issue of storage, he asked if there was any cause for agitation amongst the lobbyists in this regard. On the revised LPG retail price, he wanted DoE to be alert as to the various unfavourable manipulations that happen to prices.

He asked for the Solomon Associates report on refineries, and said that the Committee would welcome this. On the establishment of an
Independent Systems and Market Operator (ISMO), he sought clarity to the reference made to ISMO being listed and wondered where this listing would occur. On the establishment of Independent Power Producers (IPPs), reference was made to moderate support. He asked if the support was supposed to be extreme and wondered if there was an issue with the support being moderate. On the Inclining Block Tariff (IBT), he wondered if the unintended challenges would be effectively addressed, and said that the IBTs could be refined to ensure that it becomes a tool. On the establishment of the NRWDI and there being subsequently no funding, he commented that at the same time, DoE was saying that waste was a terrible hazard. He wondered if perhaps there should be more consideration made as to how to deal with this issue.

He noted there was a Wind Energy Awareness Campaign, and wondered about Solar Energy, asking if there were any campaigns for this. He asked how intensive the training of the few staff members was so as to equip them to function optimally in adverse situations. In terms of the adjudication committee, he asked how capable those people were as they were handling a lot of money, in the region of billions. The Chairperson proposed that there be a dedicated session to ascertain how far and brutal DoE had been in handling corruption. He asked when the Committee would be receiving a plan as to the restructuring of the CEF companies. The EDIH issue was concerning and he wondered if there was no better way to resolve the issues. On the new Programme 6, he wanted to know when there would be an update on this, and if there could be a link with the Department of Women, Children and People with Disabilities, ensuring that government was always looking into protecting the vulnerable members of society. He asked how far DoE was in ensuring that the Sector Education and Training Authorities (SETAs) were doing their jobs.

Ms Chetty explained that in the BAC (Bid Adjudication Committee), there were very little operational monies; therefore not many tenders were being allocated. The one big tender that DoE did adjudicate was the Independent Power Producer Project. She assured the Committee that the process was properly audited and that the process did in fact go through the proper adjudication trail. Members on the Bid Adjudication Committee had been properly trained and there was also a legal aspect to deal with legal issues.

Mr Mnguni responded to the question on skills development and DoE’s involvement with educational skills training programmes. He noted his personal involvement in the relevant SETAs and also the involvement of other officials. There was the Energy and Water SETA and the Chemical Industries Education and Training Authority (CHIETA).

Mr Maake, so as to not represent DoE himself, proposed that he take some of the questions to the Director General who could provide an appropriate written response.

Mr Aphane responded to the question on delayed legislation, saying DoE was responsible for presenting legislation to the relevant authorities, where the delays occurred. These processes fell outside the control of DoE, particularly at the NEDLAC process level. On the use of GIS to illustrate the spread of solar power, he assured the Committee that this was receiving the requisite attention and that it was not the first time that this issue had been raised. The National Development Plan had had a notable influence on the planning in DoE. He pointed to there being an agreement with StatsSA for certain statistics and data, especially pertaining to development, however, the data that DoE required was very energy specific. He pointed out that the listing of ISMO was a listing as required by the Public Finance Management Act and not in regard to the Stock Exchange. On the question of moderate support from experts relating to the IPP, this was between DoE having its own experts, as well as outside consultants in exceptional cases. On the issue of solar awareness, the Wind sector had been more organised in ensuring that there were awareness campaigns, but there was a benefit in that this helped to localise the value chain. DoE, in monitoring, put in place the framework that was to be followed, but the processes themselves were independently monitored.

Ms Chetty explained that when DoE split from the DMR, DoE received 30% of the budget. DMR took most of the staff as well. Of the funding received, 95% was for transfers to SOEs and projects, and 5% (R400 million) went to DoE operational costs, the bulk of which was for the compensation of employees. This would continue to have an adverse effect on DoE and would affect DoE’s ability to fulfil its mandate. Some SOEs were given allocations with regard to what they do, but were not provided with funds to cover operational costs. The budget presented was an indicative budget of the reality on the ground. She noted the various virements of allocated funds, but said that the problems stemmed from the unfavourable base budget of 30% that was imposed on DoE. She alluded to the situation not being improved until the budget issue was adequately addressed. Noting the World Cup question, all the figures presented were actual figures and that this would continue to occur as DoE continually had to balance back to the actual figures.

DoE Annual Budget 2012/13 briefing
Ms Yvonne Chetty, the Chief Financial Officer, presented DoE’s Annual Budget for 2012/13. The presentation was divided into three key areas: a budget overview by programme; budget composition – economic classification per programme; and transfers to projects and entities.

The figures presented were the budgets as of now, but there may be opportunities to change these figures. In 2012/13, there was an increase of 9.7% to R6.8 billion. In 2013/14, there would be a 6.1% increase of R416 million, mainly in energy policy and planning. In 2014/15, there was a 9.6% increase, mainly in energy regulation and the
Integrated National Electrification Programme (INEP).

She broke down this analysis into the different programmes. On Programme 1, she noted a total 8% decrease, as a result of the deliberate shifting of funds, which was for DoE to be able to cater for other costs that had arisen. The 36% decrease in the payment of capital assets was as a result of the expected move to the new headquarters that did not happen. On Programme 2, she noted a slight movement in the Goods and Services division as well as in transfers and subsidiaries, with the payment of R1.5 billion. Programme 3 had enjoyed a 145% increase, noting the substantial increase in transfers and duties due to the
Energy Efficiency and Demand-Side Management (EEDSM) Eskom project, that increased its project from R118 million, to R1 billion in 2012/13. In terms of Goods and Services, this was for consultants and travel expenses that were necessary due to the limited human capital in DoE. Programme 4 showed an overall decrease of 4%, as well as a 4% decrease in transfer payments, due to the R281 million to the Local Organising Committee that was a once off payment. In Goods and Services, there was a 36% decrease that was due to the travelling expenses that had to come down. For Programme 5, there was an overall 7% decrease, where there was a 6% decrease in transfers and subsidiaries. The 77% decrease in Goods and Services she attributed to the membership fees to international bodies not being paid and had been rolled-over to the following year.

She presented a table representing a detailed analysis of all the transfers (see presentation). She made special note of the decrease of 29% in the municipalities transfer, noting that there was a feeling that Eskom would be better equipped to handle the amounts allocated to it. The increase allocated to
South African National Energy Development Institute (SANEDI) of 149% was to ensure that it functioned accordingly, independent of the CEF group of companies. On the INEP – Non-grid transfer, she noted the slow rate at which this was happening, resulting in the decrease. She noted that NNR received an extra R21 million which it required for all the projects that it was involved in. As an overall comment, she said the SOEs were allocated funds in line with each of their respective needs.

Discussion
Mr K Moloto (ANC) sought clarity on Learner and Teacher Support materials and how they factored into the DoE. He noted an amount that had been allocated in the previous year, which had not received any funds in the current year. On the catering issue, if DoE was required to cut costs in this regard, the same should be expected of Parliament. He asked what impact the cut in training and development would have on DoE. On payment for capital assets, he asked what kinds of equipment DoE was planning to buy. He asked what venues DoE secured with regard to the cuts incurred in venues and facilities.

The CFO noted that the funds (R43 000) were for learnerships within DoE, which had to be paid for by DoE.

Mr E Lucas (IFP) sought clarity on the Transnet pipelines figure of 1.5 billion that appeared twice. He asked if it was an actual figure or one created just to balance the books.

Ms N Mathibela (ANC) noted the reference made to housing and asked to which housing this referred.

The Chairperson noted the reference to membership fees to international bodies not being paid. He asked if DoE was now up to date in this regard. On the EEDSM for Municipalities and Eskom and the variable figures, he asked if this was an indication of the strategic change in focus by DoE to shift focus from municipalities to Eskom. He referred to the growth in the number of municipalities going up very slowly, while INEP and Eskom went up at a greater rate, and asked what this reflected. On the issue of non-grid allocation going down, he wondered why allocation was not going up - in light of the renewable energy emphasis.

Mr Aphane said that the off-grid programme was not decreasing, but increasing. The number included a roll-over of R57 million, which meant that there was in fact an increase, that reflected as a decrease only relative to the previous year. With regard to the INEP numbers, the municipal allocations had caught up to the Eskom allocations, where as in the past, the allocation ratio was 70% to 30% in favour of Eskom.

Mr Aphane said the EEDSM had not been successful in the desired way due to the fact that municipalities derive their revenue from electricity sales. The allocation to Eskom was a conditional grant that Eskom had to apply for. The allocation, whether to Eskom or the municipality, the beneficiary was still the municipality as Eskom did not have municipalities per se.

Mr Mnguni responded to the housing question by indicating that DoE was normally required to give guarantees to employees that do not qualify for housing loans. The amount referred to was intended for them. With regard to the medical expenses, this reflected the supplements that were provided to employees to boost their immune systems and therefore productivity.

Ms Chetty explained that the amount referred to was an allocation of R4.5 billion over three financial years, noting that the final allocation would be made in 2013 and that there would be no more after that. The international membership fees were in fact not up to date and that one of them had been deferred to the new financial year. Any funds left over would be used to cover these fees. On the issue of machinery and equipment, most of the money was kept to be used in the relocation that was expected to happen soon. Some travel expenses were drawn from various programmes to cover other such expenses in other programmes. The venue decrease merely denoted that the amount had been used elsewhere, but it would appear as a line item as there would have to be continued balance back to the initial budget.

The Chairperson voiced concern about the practice of shifting funds internally and wondered how long this would be allowed to continue.

Mr Lucas said the problem was in the division of the budget into 70% DMR and 30% DoE and that problems would persist if this issue was not tackled.

The Chairperson echoed some essential points that had been raised and called on the DoE to coin the term ‘rural energy’ and making this a priority.

The meeting was adjourned.



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