Central Energy Fund (CEF) and subsidiaries 2012 Strategic Plans

Energy

07 May 2012
Chairperson: Mr S Njikelana (ANC
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Meeting Summary

The Central Energy Fund Group and its subsidiaries – the Strategic Fuels Fund,  Oil Pollution Control South Africa, the South Africa Supplier Development Agency, the Petroleum Agency South Africa, and the African Exploration, Mining and Finance Company - presented their strategic plans for the current financial year going forward. One of the over-arching objectives of the Fund was to reduce the “spider-web” of their group’s comprehensive corporate structure. The way in which this was to be done was through the merger of various entities in the group where there were commonalities in production.

The Committee's concerns included vacancies that had not been filled, the recruiting and retaining of essential and appropriate skills, the participation in certain projects, and the insufficient representation of women and people with disabilities within the Fund and its entities.

Meeting report

Central Energy Fund (CEF) Strategic Plan 2012 briefing
Ms Busi Mabuza, CEF Acting CEO, presented on the CEF Group of Companies Strategic Plan. She initially addressed the issue of the “spiders-web” appearance of the Group’s comprehensive corporate structure. She made reference to the CEF's  various associates in which the CEF had a less than 50% holding. She noted that the restructuring and minimising was as a result of the Minister’s pronouncement at the last Budget Vote. The CEF had previously been administering funds on behalf of various parties. Most of this restructuring had now been completed; however there were still entities for which the CEF still performed this function. With regard to the associates, the intention for the various holdings in these associates was primarily to enable access to information to bring back to South Africa, as well as to exert the requisite influence and gain access to the development of the technologies for import into this country. Some of the associations had been ended due to the capital requirements that would be required on the part of the Group.

In terms of the Darling Wind Power project, the Group had retrospectively realised that it had entered into a very unfavourable power purchase agreement with the client. The Biotherm project was experiencing a feedstock problem, which, Ms Mabuza assured the Committee, was being rectified. In Energy Joburg (Landfill Gas Electricity Generating Business), the CEF owned 29% and was involved in business.

With regard to the subsidiaries, Ms Mabuza noted that ETA Energy housed CEF’s Solar Water Heater roll-out project. The CEF board had approved R10 million for the roll-out of 500 solar water geysers in the Nelson Mandela Bay area as well as Ekhuruleni. This was the pilot project. She noted that, to date, 250 such geysers had been installed in Nelson Mandela Bay, and 12 in Ekhuruleni. She then noted that this entity, for the purposes of oversight, had now been moved to the Clean Energy Division of CEF, as per the reasoning of the Board. The Cape Cleaner Energy (CCE (Pty) Ltd) had been intended to be a waste-to-power generating plant in George; however, this had failed, due to the fact that CEF had failed to acquire the proper licence. The Group then discovered that there was not enough feedstock to warrant a licence. CEF Carbons was formed to harness all the carbon requirements of the Group, which had also been moved into the Clean Energy Division of the Group. The South African National Energy Development Institute (SANEDI) had also been incubated into a Schedule 3 entity by the Group. As part of the reorganisation of CEF, she noted that the Minister had called for the merger of iGas and PetroSA, which, she noted, was already in the pipelines. She then noted that the anticipation would be that the Group would be leaner and far more streamlined, assuring the Committee that discussions were still underway to secure further changes.

Ms Mabuza then noted that the Group’s strategic intent was to provide energy resources for national energy security while minimising environmental impact and in pursuit of Government policies. She then noted that various pillars had been identified in this regard that were to be managed in an integrated manner as the Group executed its plan. She also indicated that the interventions in terms of change management had been structured and deep to ensure that all actors were on the same page. In terms of progress on the ongoing review process, she noted that the capital requirements of the programmes had been a challenge, and the aim had been to ensure that these programmes did not affect the balance sheet adversely. The aim had been to ensure that there were more subsidiaries that were money generators that would allow for funds to be extracted from them to fund other projects.

As to the various ‘acting’ positions, Ms Mabuza noted that various steps were underway to ensure that positions were filled permanently. She noted that the Group had experienced various resignations as well as in the subsidiaries for various reasons, but noted that the Group was committing itself to acquiring deep skills to serve in the group and that advertisements had been published for this end. The board had noted that the objectives had been failing to measure the quality of the outputs as opposed to the quantity. She voiced her belief that significant work had been done to reposition the group in a positive way. Progress had been made to identify new opportunity as well as in building an effective and efficient human capital contingent. She noted that the income statements were not for discussion as they had yet to be audited by the Auditor-General. The objectives of the Group were to develop a portfolio of projects that would enhance the country’s energy security of supply, and, for CEF, the focus would be on harnessing clean energy. There was also to be a focus on education and training as well as to design and implement a range of internal business processes. The last objective was to develop and adopt the appropriate systems to ensure that the balance sheet of the group was not at risk.

On the budgeted statement on income, she noted that the anticipation was to spend more on projects and development costs in the current financial year. She noted that the Group’s balance sheet remained strong and was projected to remain this way to ensure that the funds were utilised effectively going forward.

With regard to the projects, she noted that there was a Solar Park project that was intended to attract various investments; however, there had been a delay due to an inability to secure land access. She noted that funds had been delegated for carbon and climate change activities, as well as Basa njengo Magogo demonstrations to educate communities on how to use wood-fired stoves in a manner that limited pollution and contamination in their areas. There had also been funds allocated for renewable energy. She then made reference to the organogram of the group (see presentation for details). She then noted that there had been a commitment to beef up the internal audit function of the Group, that had a very vibrant fraud hotline that was monitored and action taken. She then further highlighted the need for the vacancies at senior level to be filled urgently and noted that this was certainly a priority of the group.

Dr Sankie Mthembi-Mahanyele, CEF Chairperson, then made reference to the investigative research that the Group was conducting to identify the challenges that were being experienced, as well as find ways to counter these challenges. She noted that the environment in which the Group was operative required that the Group be stronger in its operations. She also noted that the mandate and scope of the work done had expanded, and that it became necessary that Group members understood the framework. She noted that the environment had both a social and commercial aspect to it. She then noted that energy was at the centre of the economy, and work in this sector must be in line with the understanding of this role. She then echoed the need for skills recruitment as the energy area was highly scientific. She also highlighted the need for extreme commitment by the current human capital contingent as such commitment would be essential due to the nature of the work. She noted the importance of a working environment where there was a meeting of the minds in order to function effectively.

Discussion
Mr S Radebe (ANC) sought clarity on the Solar Water geyser project and noted the challenges encountered by the Committee when attempting to conduct an oversight visit. With regard to the shareholding in Phillips Lighting in Maseru, he wanted to know what the possibilities were for the whole company to be bought and for the projects to be South African projects. On the issue of the Wood-waste product, he noted that there was an assertion that the stock was not enough. He noted that Mpumalanga province had ample stock and wondered why these were not being utilised. In terms of the CEF Carbon and CarbonStream South Africa (CSA) association, he noted that the impetus for this was for skills training. He wanted to know what the effects were that were expected in terms of countering the skills shortage problem. He also wanted to know which higher education institutions were being engaged in this regard. In terms of the internal audit team that was to be used, he wanted to know what external audit teams were going to be used to acquire an external view. He also sought a timeframe for the filling of vacancies within the Group. He then wanted to know what the Group’s retention plan was in terms of retaining employees.

In terms of the vacancies, Dr Mthembi-Mahanyele, assured the Committee Members that there would be interviews for the CEO positions of CEF and SFF as the vacancies had been advertised and the hope was  that the right people for the roles would be attracted. In terms of the Solar Water geyser projects, the Acting CEO noted that there had been revenue received from this project and that it was operational. She also noted that the wood-waste project opportunities were being evaluated for the opportunities currently in response to the question posed. In terms of external auditors, she noted that such role was being conducted by the Auditor-General of South Africa.

Dr Chris Cooper, CEF Corporate Planner, also noted that CSA had indeed had a life for its training programme that came to an end in February of 2012. He also noted that there had been a considerable change in the carbon market where the prices had gone down from 25 euros per ton to three euros per ton, making the profits negligible. For this reason, consolidation of carbon activities became necessary.

Mr J Smalle (DA) indicated that he found difficulty in seeing any real success in the Group due to the noted CEO resignation that came after the recording of a R1 billion loss in the projects, as well as other key resignations. He sought understanding as to why this was occurring. He wondered if this might be due to management or the communication between the Board and the Group, and called for openness in this regard. In terms of the organogram, he wondered as to the placing of PetroSA and the Strategic Fuel Fund (SFF) into the same basket. He wanted to know how the market would remain fair and transparent should this happen. In terms of recalling cash investments with associates, he wanted to know if this was an attempt at minimising losses due to poor prior judgement calls.

With regard to the R1 billion losses, Dr Mthembi-Mahanyele noted that the problem here lay in the fact that projects with potential would be identified; however, there were not people with the requisite analytical skills to ensure that the projects were economically viable. She noted that the Project Finance Committee was  helping to identify viable projects and counter this adverse effect that had been experienced in the past. She noted that there was to be a need for all subsidiaries to present projects that they had identified to the Project Finance Committee for its scrutiny. She assured the Committee that there would not be any forward movement until the Project Finance Committee was sure that the projects were in fact economically viable.

Ms Mabuza then noted that, at the present moment, none of the associates were in fact receiving any funding from CEF, and conceded that attention had been paid to minimise cash calls from these entities, but made the assurance that none of them were receiving funding from the Group.

Mr L Greyling (ID) indicated that he was concerned as to the self-serving nature of the presentations that had been presented and wondered what the over-arching energy vision was, indicating that the primary consideration should be what was in the best interest of the country, and not necessarily the entity. He wondered if there was a need for the CEF to be involved in certain projects. He noted that the CEF should only get involved in instances where there had been market failure and not be involved for the purposes of the Group’s gain.

In response, Dr Mthembi-Mahanyele noted that there had been various workshops conducted for the purpose of establishing how CEF and its subsidiaries were defining themselves in terms of their mandates. She noted the need for coordination that would speak to the different entities. She conceded that the various activities were not converging at a common place, which affected the resources available in the group. She noted the creation of the Project Finance Committee for the purpose of addressing this problem. She then noted that CEF acted in an environment where it was important for the state to carve a niche for where it felt it would participate. She noted that the private sector environment’s involvement had not yielded requisite competition. She also noted that there were social aspects to the business of CEF which needed to be adhered to. She highlighted the need for CEF to be able to exercise its mind in terms of the commercial aspects of the business. She contended that it had become very important to ensure that the role of the State in the economy became that of an active participant, and not an observer.

Ms Mabuza noted that, in terms of market failure, the investment in Darling Wind Power came at a time where there were no renewable energy projects in the country, so there had clearly been market failure in this regard. She also noted that the venture into Phillips Maseru was also in response to the market failure in this regard.

Ms N Mathibela (ANC) concurred with the assertion that there was a need for skilled people in key positions and was concerned that such people were failing to occupy these positions. She then wanted to know to what extent CEF had addressed the quest for clean energy. She wondered why the fluorescent lights were so scarce in the market and wondered why manufacturers were still being allowed to manufacture any other kind of bulbs.

Dr Mthembi-Mahanyele noted that there was a continual problem with attaining and properly identifying and placing people with the appropriate skills. She also noted the apathy curse and lack of energy in the current workforce. She noted that this was not the case entirely, but in more instances than need be. She highlighted the need to attract people with the requisite commitment to the work for which they were hired. She further noted the need to ensure that the skills that were being acquired were proportionate to the need in the economy.

In terms of the Phillips Lighting Maseru project, Ms Mabuza noted that CEF appreciated the suggestion to harness the opportunities there, while supporting the project where it was fell in line with the group’s Southern African mandate.

Strategic Fuels Fund (SFF) Strategic Plan briefing
Ms Linda Makhathini, SFF Acting CEO, made a presentation on the entity’s strategic plan. She initially noted that SFF had storage capacity in Milnerton with 39 tanks with 200 000 barrels of crude. Storage capacity also existed in Saldanha for 45 million barrels of crude, where all strategic stocks were being held. Government and commercial stocks were stored. She noted that the commercial storage aspect of the work was only to the extent as to fund the mandate.

She then highlighted some key strategic objectives; namely to provide for the country’s strategic crude oil needs as determined by the Government from time to time; to lease out storage space that was not utilised for strategic storage in order to fund SFF’s mandate; to operate SFF in line with best international practice with regard to safety, product quality, protection of the environment and health of the people working in the company; to achieve transformation on a continuous basis through implementation of the Employment Equity and Black Economic Empowerment Policies; to maintain the quality and quantity of stock stored in the SFF facilities; to maintain and refurbish facilities; to promote the maintenance and safety standards; to utilise best practice in engagement with third parties; and to have sound financial management (see presentation for details). 

She then noted that the South African directive was for the storage of 10.3 million barrels of crude in case of emergencies. The strategic stock for Singapore, she noted, was 31 million barrels, while India stored 37 million barrels, South Korea 64 million, Russia 78 million, Japan 324 million, China 684 million, while the USA stored 695 million barrels of strategic fuels. She noted that there was a move to ensuring that South Africa stored more as capacity to do so existed.

SFF enjoyed a nett profit of R451 million, as storage demand resulting in a R25.5 million revenue increase. She noted that SFF enjoyed tax exemption after establishing agent of the state status.

With regard to the Oil Pollution Control South Africa (OPC) matter with SFF, she noted that the board had directed SFF to look at how to streamline operations. She noted that OPC was born with the intention that services could be provided to clients other than SFF. She conceded that this move had not happened as rapidly as desired, as a result, there was dialogue as to whether OPC should not be integrated into SFF as it serviced SFF in 75% of its work. In terms of the PetroSA and SFF relationship, she noted that PetroSA was managing the tank farm on behalf of SFF due to their proximity and daily work. She noted that the later realisation was that PetroSA could not focus on the strategic mandate as well as being asked to handle all the maintenance of the tank. This relationship in that regard was therefore cancelled as it stood to eliminate any conflict.

Ms Makhathini then highlighted some of the challenges experienced b the company, namely the challenge of funding additional stock and infrastructure as per the identified need. She also noted the challenge of the optimal utilization of the Milnerton Tank Farm for storage, as well as the change to the Saldanha – Milnerton pipeline to reverse pump. She also noted the issue being experienced by the Group in terms of skills capacity, which it intended to counter through training. On that note, she presented the staff complement (see presentation for details) and signalled the Group’s dissatisfaction with its own progress in securing a fully representative workforce.

Discussion
Mr Smalle wanted to know the range in which the prices for the increase in stock piles would be, as well as the quality of the crude oil that would be kept as stock. In terms of the commercial basis of the leasing, he sought a report as to the entities that were utilising these tanks for storage and what percentage of the storage was being used. He then indicated PetroSA’s expressed desire to own storage and wondered how this would happen. In the planning phase, he also wanted to know what size of capacity SFF was looking to build to ensure that it was still economically viable. In terms of the refurbishment of the Milnerton tank, he noted that the figure indicated was R270 million and wondered if this included the pipeline. He also wanted to know if this would be a dual investment in order to minimise costs. He then touched on the issue of bitumen and its shortage; he wanted to know if there were plans to look into storage of this substance. On the reverse pump issue, he wanted to know if this would occur at the Durban Harbour as well. In terms of strategic levels, he then wanted to know if there were any directives to refineries to hold certain minimum levels. He then wanted to know when Milnerton would be up and running and wondered how many tanks were presently in operation. In terms of the legal issues, he asked if this was due to the instance of contaminated oil. With regard to the stock piles, he wanted to know what type of oil would be kept and what balance this would take.

In response, Ms Makhathini noted that the quality of oil that was stocked as strategic crude was bony. In terms of the leasing, she noted that when the tanks became available, a tender went out and bidders made proposals, and the best prices secured storage. She noted that over the last financial year, all the tanks had been filled and all six tanks were used, while the strategic crude was limited to tank two and six. However, the same type of crude could be stored above the strategic stock. She noted that the one concern that management had was that, in the event of an emergency, Government would have first call to what was stored; however, what would happen was that for most of the people storing, it was later found to be better for them not to store; however, SFF still managed to secure the funds. The issue here lay in the fact that Government then found itself without any reserves to call on in the case of emergencies. In terms of the owning part of PetroSA, she noted that it might have been referring to the fact that it was buying additional stocks for trading in the finished product and not the crude oil. She noted that she was of the knowledge that it was moving to Durban to store the finished product. In terms of the planning phase and the capacity that SFF was planning to build, she noted that it was using this financial year to make this assertion and costs and research would be presented to the board, taking various factors into consideration. With regard to the refurbishment of tanks, the figure quoted did not include the pipelines, she stated. She then emphasised the need for said refurbishments. She then noted that there had been interaction with the state partner Chevron to optimise Milnerton storage. With regard to the issue of bitumen, she noted that SFF had no plans to engage in storage of bitumen. She then noted that the type of crude that would be stored as strategic stock would be dictated by the type of crude that the refineries were going to use in an emergency

Mr Greyling sought clarity as to the status of the tanks in Saldanha as some had been put out to commercial tenders. He also sought comment on the scandal that had ensued involving a Chinese company where a low grade of crude had come from there, which led to a lot of the storage units being subsequently under-utilised. He also wanted to know what kind of price SFF was looking to get for storage. In terms of the problems with the offloading of the diesel, he wanted to know if the ship that had been waiting to offload diesel since January had managed to do so at this present moment in time as the country incurs costs as a result of this delay. He then emphasised the bitumen issue and spoke to its importance.

On the issue of under-utilised tanks, Ms Makhathini assured the Committee Member that the storage tanks were not being under-utilised and that at the end of May there would be two tanks available and that revenue was being received from all the tanks. On the issue of the diesel-carrier, she noted that she was not aware of any unforeseen costs nor the ship in question.

Mr Radebe sought clarity on the plans to assist historically disadvantaged companies to secure storage. He then wanted to know what the status was in effecting transformation and sought concrete figures. He then wanted to know where SFF was intending on building this added storage capacity.

Ms Makhathini assured the Member that she was not aware of instances where HDI companies were prejudiced and asked for information to be furnished to her in this regard. With regard to transformation, she noted that SFF was at the stage of finalising its Employment Equity plan and apologised for this..

Mr G Selau (ANC) sought clarity on the oil strategic stocks and their increase. He noted that there were funding issues already in refurbishing existing facilities and that there would be further challenges in increasing capacity; he wanted to know if there were plans to counter this. With regard to the use of the facilities for strategic stock, he wanted to know how then the SFF covered the income gap created.

In response, Ms Makhathini conceded that SFF did expect that it was likely to encounter challenges with regard to funds, but she did assure the Committee that the R270 million for refurbishments had been approved by the board; however SFF could not as of yet make a determination on how much it would have to spend on increasing capacity as the Minister had yet to indicate by how much capacity was to be increased.

Ms Mathibela wanted to know why Indian and people with disabilities were not represented in the staff complement.

In response, Ms Makhathini assured the Committee Member that the intention was for this to change once the Equity plan had been finalised.

The Chairperson of the Committee sought clarity as to the rationale behind the rental of empty tanks.

Oil Pollution Control South Africa (OPC) Strategic Plan briefing
Mr Nico van Schalkwyk, OPC Acting Operational Manager, made a brief presentation on OPC's strategic plan. He noted that OPC's objectives were to manage SFF’s environmental liability in Ogies, Mpumalanga, by preventing pollution of the aquifers by oil seepage into the surrounding aquifers; provide a Pollution Response Service to SFF; as well as to provide a service to existing clients in Saldanha. He noted that the stakeholders at the moment were SFF (in Saldanha and Ogies), ChevronSA, Mercuria, Morgan Stanley and Transnet National Ports Authority (Saldanha) (see presentation for details).

He then ran very briefly through their income statement, budget, staff demographics, skills development as well as Black Economic Empowerment (BEE) support (see presentation for details).

Discussion
Mr Smalle wanted to know if there had been any serious spills around South Africa and what controls were  in place. He also wanted to know what OPC’s involvement was with spills around pipelines. He then wanted to know what its relationship was with organizations supporting marine life.

In response, the Acting Operational Manager noted that OPC was currently in meetings with key players to establish new relationships. He indicated that OPC had been involved in handling an oil spill in Saldanha and at Robben Island. He indicated that there were groups that knew to contact OPC to handle any spills; however, OPC's work had mostly been limited to Saldanha.

South Africa Supplier Development Agency (SASDA) Strategic Plan briefing
Mr Lunga Saki, SASDA Acting CEO, indicated that SASDA was as a result of the Energy White Paper and the Liquid Fuels Charter. The aim was to address development and transformation in the liquid energy sector. The mission was to develop black suppliers in the industry. He noted that SASDA’s strategic objectives included: its establishment as the supplier development of choice; the development of existing and new black suppliers; the establishment of a sustainable Verification Unit; and to conduct Enterprise Development initiatives as agreed with participating companies.

In terms of performance, he noted various successes within PetroSA and Sasol (see presentation document for details). He noted that there were negotiations with refineries through the Refineries Managers Forum. He noted various challenges that SASDA was experiencing in securing participation from various other companies, namely Chevron, which had shown no real interest. He call for assistance to ensure that companies that made commitments were compelled and obliged to honour these agreements as these were mostly memoranda of understanding (MOUs) and had no real binding power.

Discussion
Mr Radebe wanted to know if SASDA assisted any other Black-owned company other than the ones that it  had established.

Mr Saki noted that there were about 37 companies that they were currently assisting. He highlighted the way in which companies were chosen, saying that oil companies were the ones that presented the area in which they felt there was no black representation and approached SASDA which pulled companies from  its database and sent them through the application process.

Mr Smalle wanted to know how crude oil came into play as crude oil presented more problematic business. He also wanted to know how SASDA dealt with a lack of skills in the BEE companies, and how SASDA ensured that skills were transferred.

Mr Saki pointed out that crude oil was specifically excluded from the SASDA mandate. He also noted that SASDA was very mindful of the challenges that the industry presented to companies. He then conceded that there was no set programme within SASDA to ensure that there was effective skills transfer.

The Chairperson then pointed out that his understanding led him to believe that SASDA’s mandate called upon it to monitor and facilitate.

Petroleum Agency South Africa (PASA) Strategic Plan briefing
Mr Mthozami Xiphu, PASA CEO, noted that the role of PASA was to contribute to the energy resources of the country by promoting and regulating the exploration and production of the country’s natural oil and gas reserves. He felt that it tied in well with CEF’s mandate. He presented a map of where there were exploration activities and the companies involved (see presentation for details).

In terms of the objectives, he noted that there was a resource evaluation aspect as well as highlighting the regulating of the upstream petroleum industry to ensure that players complied with permit requirements. The third objective was the preservation of and the access to geo-technical upstream petroleum information, noting that PASA was the agency that possesses the data that various companies sought, which PASA sold to the said companies. PASA had committed itself to shale gas exploitation strategy, and was submitting a report for shale gas exploration that will go to the Minister.

Under the human resources pillar, he noted that PASA set out to have an optimal human capital pool as well as an optimization of skills (see presentation for details).

Ms Olivia Mans, PASA the CFO, presented the income statement for the next financial year. She noted that there would be a drastic decrease in the income that was due to the ending of the income from permits and licences and that PASA was working on this issue as part of its strategic objectives. She noted that there would be R275 million in the bank at the end of the year and assured the Committee that funds from the fiscus would be available for PASA in order to function in the future. She noted that PASA’s investment activity would basically be capital expenditure that covered the need to manage the data. She noted that PASA would only be able to receive money from 2015; however, if money was not managed effectively, then funds might run out by 2016.

Discussion
Mr Radebe (ANC) wanted to know how PASA was going to operate if they expected their funds to run out by a specific date. He then noted that the role of PASA and that one of its mandate fell into the regulatory spectrum. He wanted to know what distinguished PASA from entities such as NERSA.

Mr Xiphu responded by assuring the Committee that PASA would be able to operate out of reserves that it was  able to accumulate for the next three years. He noted that the hope was that issues would be resolved within the next two years to counter this issue.

Mr Smalle noted the upcoming financial difficulties and wanted to know what programmes would fall away from PASA to ensure that it was able to cut costs.

In response, Mr Xiphu conceded that there had been projects that had had to suffer as a result, such as surveys that were often very costly; however, he did provide assurance that PASA was able to operate as per the mandate required in the law. He noted that the Ministerial directive stemmed from the CEF Act.

The Chairperson asked for a funding model in future.

African Exploration, Mining and Finance Company (AEMFC) Strategic Plan briefing
Mr Sizwe Madondo, AEMFC CEO, noted that AEMFC committed itself to supplying thermal coal to Eskom and to creating jobs for local residents in particular. He highlighted some of the achievements, namely the sales revenue of R87.2 million at the end of the last financial year (see presentation for details). He also made reference to the 200 people that were employed on the Vlakfontein mine to ensure that the local community was employed.

He also noted that production volumes had been exceeded in eight months. He made reference to the challenges that arose as a result of the delay in signing the agreement with Eskom that led to AEMFC's not being able to sell enough coal. He also made reference to gender representation at board and senior management level, and assured the Committee that everything was being done to remedy the situation. He then listed the company’s key objectives (see presentation for details). On the issue of bitumen, he noted that there was a possibility of AEMFC producing bitumen as it was created as a by product of the mining activity that AEMFC engaged in.

He noted that AEMFC would be making a positive income in the next financial year largely due to the increased production volumes as well as the implementation of the new programmes. The profits were expected to be bumped up to R187 million. AEMFC’s capex was said to stand at R158 million, and most of it would be coming from key projects (see presentation for details).

Discussion
Mr Radebe voiced his dissatisfaction with the three bursaries that AEMFC offered noting that it was too low in comparison with other companies. He also wanted to know what the stock pile was at the time of the troubles with signing an agreement with Eskom.

Mr Madondo assured Mr Radebe that AEMFC would certainly look into bursaries but noted that this had everything to do with the funds that AEMFC would have available. In terms of the stockpile, he conceded that the Eskom issue did provide a problem, from which AEMFC managed to recover.

Mr Smalle felt that the task that AEMFC was taking up was very ambitious. With regard to the R1.6 billion capex required, he then wanted to know if CEF had agreed to partner with AEMFC in this regard. He therefore wanted to know when AEMFC would be fully operational. In terms of the T-project, he noted that 2015/16 was when AEMFC would expect production to happen. He noted that AEMFC would be looking at the production of 3 to 3.5 million tons of coal for Eskom. In terms of the capex, he noted that there were discussions with CEF as well as with other players for the purposes of securing the R1.6 billion capex.

The Chairperson asked for CEF and AEMFC to present the Committee with an exit strategy for AEMFC.

The meeting was adjourned.

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