The Minister of Energy briefed the Committee on the Service Delivery Agreement she had signed with the President. Key focus areas were hydrocarbons, electricity and electrification, nuclear energy, clean energy, climate change and electrical efficiency, and international relations. The Department of Energy was allocated to Outcome 6: an efficient, competitive and responsive economic infrastructure, and Outcome 10, protection of South Africa's environment and natural resources. Other outcomes co-signed by the Minister dealt with health, employment, rural development, human settlements and local government.
Members raised questions over how renewable energy sources could be introduced into the national grid. The importance of the Ministry was stressed and they queried that a number of strategic documents were still to be completed while several targets had been missed. There was a reliance on imported refined petroleum products, leading to shortages of products such as bitumen. It was noted that the staff complement of the Department had been reduced. Members questioned the fuel price structure, the target for the provision of solar water heating systems. They stressed that while many jobs would created by renewable energy projects, very few of these would be permanent. Opportunities for local manufacturers were being lost. An important role for the Department was reducing greenhouse gas emissions.
Members were informed that the Integrated Resource Plan would be reviewed every second year. The role of women in advancing energy efficiency projects was emphasised.
The Department of Performance Monitoring and Evaluation in the Presidency said its role was to assess the performance of the various departments and to evaluate management processes. A system of outcomes had been put in place. The Department of Energy was responsible primarily for outputs under Outcome 6 (economic infrastructure) and 10 (environment). Performance against the majority of sub-outputs was described as showing progress but was not on schedule. Progress was completed in some aspects, but there was a strong likelihood that targets would not be achieved in other areas. Members were informed that the purpose of this Department was to encourage government departments to put a sharper focus on service delivery. Evaluation should be on the basis of evidence. There were various levels of monitoring. The Department was invited to return at a later date to discuss management practices within the Department of Energy.
The Chairperson welcomed Members after the brief recess, and greeted the Minister and her team. It would be a hectic term for Parliament.
Ms Dipuo Peters, Minister of Energy, said that the Department of Energy (DoE) was currently involved in meetings with their counterparts from the Democratic Republic of the Congo (DRC) to conclude a treaty. The Deputy Minister would soon be leading a team to visit South Korea. In the State of the Nation address, the President had said that performance would be monitored. Ministers would sign a performance agreement. Outcomes 6 (economic infrastructure network) and 4 (employment) fell within the ambit of her office. The DoE had embarked on the process of delivering services. A range of programmes and initiatives had been put in place. The Committee would be acutely aware of the challenges faced by the DoE, particularly regarding resources. These challenges had hampered service delivery. She was confident that the DoE was on track to deliver on its mandate.
The Chairperson said that the project being negotiated with DRC was Grand Inga, which would deliver 400 000 MW of electricity.
Mr Tseliso Maqubela, Deputy Director-General (DDG): Hydrocarbons and Energy Planning, DoE, said that the DG would present later in the week on the achievements of the previous year. The focus would be on the various forms of energy and international co-operation agreements. He would touch on government outcomes 6, 10 and 4. Other delivery agreements had been signed. In most outcomes, the DoE played an enabling role. This was sometimes taken for granted.
Mr Maqubela said that the focus on hydrocarbons was in improving the refining capacity. New capacity was needed, but the existing infrastructure needed upgrading as well. In the 2011/12 financial year (FY), the imports of diesel oil had doubled. Something was not right. The demand could not have doubled, and he presumed this was due to a problem in the refining sector. The rest of the supply network needed to be upgraded. The multi-purpose pipeline had been completed, but the rest of the network needed attention. Infrastructure had to be developed. The focus in the electricity sector had to be on expanding on the work of the Integrated Resource Plan, the security of supply and the distribution system. The Integrated National Electrification Programme (INEP) had to be streamlined to eradicate backlogs. The Integrated System and Market Operator (ISMO) needed to be established. The programme to pursue nuclear energy continued. There was also a focus on education and awareness. Clean energy had also been a focus area. This area was being taken for granted. South Africans had to support and protect this programme. The provision of solar water heaters was on track. In terms of energy efficiency, he would have liked to see more work done. It was a focus area in the current FY. On the demand side management, more could have been done. DoE had participated prominently at COP 17. The Grand Inga Memorandum of Understanding (MoU) had been signed together with other agreements.
Mr Maqubela said that Outcome 6 was the efficient, competitive and responsive economic infrastructure network. Government took a collective approach to these Outcomes. Some areas had been highlighted which would be led by DoE. A number of outputs had been identified. The first was the improvement in competition and regulation. The ISMO Bill had been introduced. A due diligence process was being followed regarding the possible transfer of transmission assets. It was important for this Bill to be taken forward. It would create certainty for Independent Power Producers (IPPs) going forward.
Mr Maqubela said that the new pipeline had been built between Durban and Johannesburg. At present it was only being used for diesel. Work was being done to ensure that by the end of 2012, low sulphur diesel could also be carried. This would be an achievement. Jet fuel had more sulphur in it than motor vehicle fuel. If it went in the same pipeline there was a chance of contamination. The current work was to ensure that Transnet could find a cleaner fuel solution, and to find a solution for jet fuel. The older pipeline was still fully operational, and was currently being used for jet fuel. The bulk of the requirement at OR Tambo International Airport was serviced by Sasol.
Mr Maqubela said that Output 2 was ensuring reliable generation, distribution and transmission of energy. The Department's vision was to see Eskom working side-by-side with IPPs. The Minister had expended a lot of energy in trying to get this programme under way. Sometimes one forgot how difficult it was to change mindsets. Obstacles had to be removed. It was a work in progress. He was confident that there would be a change in attitude.
Mr Maqubela said that contract negotiations had been concluded on open-cycle gas turbine (OCGT) systems. Some focus was needed on this area as IPPs needed to be encouraged. In terms of distribution and transmission, the DoE had been tasked to develop a funding and implementation plan. These were put in place by March 2012. The proposal for distribution asset management had to be completed.
Mr Maqubela said that the backlog in the distribution infrastructure maintenance backlog was currently estimated at R27.4 billion. A target had been set to reduce this to R15 billion by 2014. A funding and implementation plan had been put in place by March 2012. In terms of the restructuring of the electricity distribution industry (EDI), the Cabinet Memo on the Approach to Distribution Asset Management (ADAM) proposal had been completed. The challenge of the backlog would be addressed on an ongoing basis. Substations would be developed. Household access to electricity would be increased to 92% by 2014.
Mr Maqubela moved on to Outcome 10. This dealt with the protection of environmental resources. DoE developed policies to reduce greenhouse emissions and the impact of climate change. The Department was part of the collective approach. The DoE had dealt with this through the deployment of renewable energy. A focus area was energy efficiency. A target of 12% improvement in energy efficiency by 2015 had been set. Discussions continued with the industry. An energy efficiency campaign had been launched during COP 17.
Mr Maqubela then moved on to additional outcomes which had been co-signed by Min Peters. Outcome 2 was to ensure a long and healthy life for all South Africans. The DoE was assisting here by electrifying clinics and health centres. Solar water heaters were being provided. The backlog in terms of clinics had been cleared.
Mr Maqubela said that outcome 4 was the provision of decent employment through inclusive economic growth. Renewable energy programmes were creating a number of jobs. Everything had to be done to see these programmes reach closure. He expected that 14 000 construction jobs would be created under the solar programme together with 415 permanent jobs, the wind programme would create 3 400 construction and 183 permanent jobs, and the concentrated solar power programme would provide 1 827 construction and 120 permanent jobs. Over 270 000 solar water heaters had been installed, and R4.7 billion had been secured over the Medium Term Expenditure Framework (MTEF). A centralised procurement system was being introduced. The Eskom rebate programme would probably be replaced by a new contracting model, based on locally manufactured technology. There were engagements with the Siyathemba Municipality to allocate land for a solar park.
Mr Maqubela said that Outcome 7 was concerned with rural development. A number of district municipalities had been earmarked for development. There was a plan to increase the number of households connected to the grid to be increased to 70%. Cost reflective tariffs would be provided and the poor would be shielded from tariff increases. Liquid Petroleum Gas (LPG) needed to kept affordable. There had been an improvement in the availability of LPG.
Mr Maqubela said that Outcome 8 dealt with the establishment of sustainable human settlements. The solar water heating programme was making an impact there. Outcome 9 dealt with a responsive, accountable and efficient local government system. Households would continue to be electrified in terms of the INEP.
Min Peters concluded that all the work being done was co-ordinated by the Presidential programme. The DoE was part of the green economy accord and the skills development accord. The DoE had great expectations of the renewable energy project, especially in terms of job creation. The closure of Window 1 had been delayed. The implementation of Window 3 was postponed. There had been engagement with the private sector. It was a revolutionary programme. She did not want to see jobs being exported. There should be maximum benefit for South Africans. In terms of energy efficiency, there was a network of Chief Executive Officers (CEOs) committed to reducing energy consumption. Regarding schools, many were now electrified by the Department of Basic Education (DBE) through its own infrastructure. Non-grid specifications had been improved. There was a bit of reluctance to adopt home solar systems. The DoE had found that the technology being used was outdated, and the specifications had been upgraded. Systems were improving. The IRP would be reviewed during the current year. She was happy that the Development Bank of South Africa (DBSA) was part of the front-loading system which would accelerate the electrification programme by financing municipalities. The DoE was part of the Municipal Infrastructure Support Agency (MISA), and also participated in the Department of Co-Operative Government and Traditional Affairs (COGTA) MinMec. DoE did not have a similar forum.
The Chairperson was glad to hear the last point. There was always apprehension over the way that municipalities used tariff revenue, and electricity tariffs were often used as “cash cows”. There was concern over how renewable energy could be incorporated into the current grid.
Mr L Greyling (ID) had a number of questions. The importance of this Ministry to the economy had to be emphasised. He was concerned over the number of outstanding strategy documents mentioned in the Annual Report (AR). He understood that hard work was been done despite staff constraints, but a number of targets had been missed. The Integrated Energy Plan (IEP) stemmed from an Act of 2008. He asked when this plan might be completed. The Minister had mentioned the review of the IRP. He asked if the IEP would be reviewed first. Clarity was needed. A number of decisions were needed on building of new generation capacity. In terms of EE strategy, public hearings had been held. It was clear that the existing infrastructure was insufficient. The document that would have been completed the previous year had still not come forth. He congratulated the DoE for their work in terms of INEP, but it was clear that there were still delays in terms of non-grid programmes. Many communities still had no electricity. He asked when the INEP document would come to Parliament.
Mr E Lucas (IFP) was concerned over the old pipeline, and was pleased to know that it was still in use. He asked what the future plan was. It seemed that there was a greater reliance on imported refined products. In particular there was a shortage of bitumen. He was concerned that IPPs would not be able to operate as envisaged. Eskom was still a formidable competitor. He was happy to know that the DoE was also concerned with the price of LPG. Municipalities were using electricity tariffs for other purposes.
Mr J Smalle (DA) had picked up that there was a decrease in the number of DoE personnel. There was a lot of comment in the Annual Report on the lack of specialised skills, but there seemed to be no plan to address this problem. On the hydrocarbon issue there was uncertainty. The Mtombi project, a refinery initiative by PetroSA, had been on the table for some time. Cleaner fuel standards should be met by 2017, but there was a possibility that these targets would not be achieved. The increase of storage capacity at the pipelines, and at the harbours, needed to be addressed. Land space was limited. Nothing had been said about the fuel price structure. Gate prices were usually on the unprofitable components. He was glad to hear that the discussions with DRC were continuing. He asked how this agreement might affect the IRP and future expenditure on generation, such as the nuclear programme. He asked if gas sources such as those in Mozambique had been secured. A shortcoming was the lack of MoUs with municipalities.
Ms B Ferguson (COPE) was concerned over staffing of the DoE. A lot had been said about the situation with diesel. In terms of solar water heaters, she asked if the target of a million systems would be met. She asked what was being done to increase internal capacity. She asked if Transnet had given a time-line for the pipeline. She asked if DoE was succeeding with its targets on housing issues. It was exciting to see that a number of jobs were being created. However the vast majority of these were only of a temporary nature. She asked what was being done regarding MoUs with municipalities. She asked what progress was being made with the IRP.
Ms N Mathibela (ANC) was glad to hear the acknowledgement of the outdated technology for solar energy. People were unhappy over the issue of nuclear waste disposal. She asked if local manufacturers would be used in preference to overseas suppliers, as had been found in the solar water heater programme. Her experience in Gauteng was that the targets for this programme would be achieved.
The Chairperson said that while the 2011/12 FY was under review, more recent developments did catch the eye. A slower approach might be needed for renewable energy. There had been some highlights, such as the investor conference. The role of the DoE in the reduction of emissions should be highlighted. The Department had made an excellent contribution to COP 17. Skills in the energy sector were essential. He agreed with the drive to increase LPG usage to 20%. He assumed that Inga was not the only initiative being pursued. Energy also played in indirect role in job creation. The public participation programmes inspired public confidence.
Min Peters agreed that more had to be done to introduce renewable energy, but government should proceed with caution. In developing the framework and plan, and time-lines, the Department had put undue pressure on itself. The challenges of the regulatory requirements had not been appreciated. Environmental issues had been considered, but there had been a lack of emphasis on the post-procurement process. All the lessons of Window 1 would be factored into Windows 2 and 3. She appreciated the input regarding Eskom's electrification programme. Front loading had been considered as a way of making finances available up front. Another challenge was the building of substations. This was often delayed by other factors, such as environmental impact assessments (EIAs) but also access to land. Often the people bickering about the land were those who needed the service. The ruling party had spoken on the electrification of unproclaimed areas. It was a question of the responsibility of the Department or of the municipality. On the IRP, the need to review every second year was to keep pace with new technology and energy carriers. Government could not lock itself into long-term strategies. The IRP had been adopted in March 2011, and should be reviewed in March 2013. There were many stakeholders involved.
Min Peters said that DoE had dealt with the IRP to give certainty to the country on the security of supply. Attention must also be given to the supply of liquid fuels. It was not just infrastructure issues. In terms of job creation, it was a challenging environment. Some technologies could provide better benefits in terms of future jobs. The other challenge was that many jobs after construction were more related to control room environments. Fewer people were required to provide a higher skill level. In many cases, such control rooms were in remote from the site locations. She recounted the experience of visiting a solar energy plant in El Paso, where there was a single employee. There was no need for security, as venomous snakes took shelter under the solar panels.
Min Peters thanked the Members for their comments on COP 17. It had been a collective effort. Resources remained the challenge. There had been intensive media focus. Information would be released. South Africa was part of the Clean Air Ministerial forum. 24 countries consumed 80% of energy generation worldwide, and South Africa was one of these countries. There was a special focus on getting women to study this technology. Women brought a particular understanding to EE, as they put more thought into buying appliances. At a public participation level, there were restraints on resources. The DoE would increase the platform. A road show would be developed. This would be taken to all nine provinces. Municipal infrastructures were decaying with a negative impact on commercial activities. She excused herself due to a prior commitment.
Mr Maqubela said that DoE was itching to grow. Resources were restricted. There was a need to update the IRP. Much had already been done. He expected the Department to conclude its work by the end of 2012, after which the consultation process would start. It could then be taken to Cabinet. Collection of data was not good. Regulations were now in place to encourage stakeholders to submit data. The Department was being restructured. There was now one central policy planning unit.
Mr Maqubela said that the refinery question needed to be seen holistically. It was not just about petrol and diesel. It could happen that jet fuel was imported but then found to be off the required specification. This illustrated the need for a healthy refining sector. Without a refining capacity, separate imports would be needed for bitumen, wax, bunker oil, fertilizer, polymers and other products which were created at the lowest level of refining. Imports of bitumen were competing with local manufacturers. There was an argument to close all refineries in the cause of cleaner fuels, but there was a hub that needed to be maintained. When looking at the LPG strategy, the DoE team had noted that market players would wait for the strategy. The delay had been deliberate, and the result had been better availability of LPG. Price was still an issue. Market forces could be left to decide production priorities. The only intervention should be to prevent runaway prices.
Mr Maqubela said that the fuel price strategy should be reviewed. He felt that the current system was working despite its imperfections. There was a discussion on levies, which was outside the mandate of the DoE. The levies in South Africa were much lower than in other countries. In Europe levies were used to encourage energy efficiency. The question was whether the benchmark prices being used were still relevant. Most imports now came from India.
Mr Maqubela said that biofuels did require attention. A decision had to be taken soon on subsidising this sector. There was potential job creation. Sorghum, sugar cane, sunflowers and soya should be the standard crops to produce this fuel. The increase in diesel imports was due to refinery outages in the recent past. Availability had since improved. The use of diesel by Eskom had also contributed to the increase.
Ms Yvonne Chetty, Chief Financial Officer: DoE, said that National Treasury was opposed to increasing the number of support staff in particular. There had been some funding for specialised line functions such as IPP. The Auditor-General (AG) had picked up that oversight functions at municipalities should be improved, and Treasury had put out some funds to increase this capacity. There was a plan in place for identified skills. The municipalities had also experienced shortages of skilled staff, leading to delays.
Mr David Lyons, Acting Chief Director: INEP, DoE, said that there were problems in transferring money to municipalities. The Department entered into agreements with the municipality concerned on specific projects. There was a trouble-shooting programme. The ordinary citizens were suffering as a result of misuse of funds and not the municipal officials. Areas of backlogs had been identified.
Mr Zizamele Mbambo, DDG: Nuclear Energy, acknowledged that the establishment of the institute to dispose of nuclear waste was key in allaying the fears of the public as the programme was taken forward. Efforts were under way to ensure that the institute would be established. A motivation had been submitted to Treasury. Funds would be provided during the MTEF. Work was being done to ensure that new build programmes were fast-tracked. Work would be done in a systematic way. A self-assessment was being conducted. A report had been compiled which would now be independently reviewed.
The Chairperson said that it would be helpful if the report structure were clearly defined at a high level. The other area of concern was impact assessments. These were fundamental concerns.
Briefing by Department of Performance Monitoring and Evaluation (DPME)
The Chairperson remarked that the reporting process was getting more complicated. The Department of Performance Monitoring and Evaluation (DPME) would now also report on the performance of departments.
Mr Sean Phillips, DPME Director General, said that the DPME was briefed to monitor the performance of the departments of state and on management practices.
Mr Mahesh Fakir, DDG: Outcome Facilitator: Outcome 6, DPME, said that the main objective was to spend on correct priorities. Constitutional imperatives should be followed. The strategic focus of government should be sharpened. Resources should be used optimally. He defined the concept of a delivery agreement. Performance agreements were concluded between the President and Ministers.
Mr Fakir listed the twelve outcomes, of which DoE contributed to three. The DPME allocated three statuses. Green indicated satisfactory progress, yellow some concern, and red an opinion that services would not be delivered.
Mr Fakir said that Outcome 6 sub-output 2.1 was the creation of regulatory and institutional structures for the introduction of viable IPPs and to start their participation. The targets were to enact the ISMO Bill by 2011/12, conduct financial and technical due diligence, and to put systems and change management processes in place. ISMO legislation was in process. A due diligence study was being undertaken. The legislation should be ready by early 2013. Some progress had been made with the legislation. Eskom had ring-fenced the functions of the ISMO. New generation capacity regulations had been promulgated under the Electricity Regulation Act to accommodate IPPs. Approximately 2 400 MW of renewable energy IPPs had been identified.
Mr Fakir said that there had been delays in the final agreement, and the closure of Window 1 had been delayed. The DPME had assigned a yellow status as there had been some progress, but it was still behind schedule. The due diligence process had to be expedited, and in this regard DoE, the Department of Public Enterprises and Treasury had to work together.
Mr Fakir said that sub-output 2.2 spoke to developing a funding and implementation play to reduce the electricity distribution infrastructure backlog from R27.4 billion to R15 billion by 2014. The targets were putting a funding and implementation plan in place by March 2011, compiling a report detailing a map of distribution assets for 50% of municipalities by 2012/13, and initiating interventions to reduce the backlog by R8 billion in 2012/13.
Mr Fakir said that Cabinet had reported on ADAM. It had been approved at cluster level and would go to Cabinet for consideration. Various options for funding had been considered based on either tariffs or concessionary financing. All metros had been mapped. Pilot projects would be initiated once Cabinet had approved the ADAM concept.
Mr Fakir reported that some progress had been made with ADAM. This sub-output was also allocated a yellow status. Planning was behind schedule. It was difficult to ascertain if the R8 billion target would be met, as DoE was not reporting on allocation of municipal funds. Municipal expenditure had increased.
Mr Fakir said that sub-output 2.3 was the electrification programme for households and other users, with access at 92% of households by 2014. Targets were to have 180 000 households electrified in the 2012/13 FY, 500 schools, 10 000 solar electricity home systems installed, and 200 000 households electrified through non-fiscal funding.
Mr Fakir noted the progress reported by DoE in the first quarter of 2012/13. By June 2012 there was an 86% access to household electricity and the Department had implementing agents in place to reach the 180 000 target. There had been 4 900 connections in the first quarter. DoE was in discussion with DBSA to provide R2 billion in funding. Fifteen municipalities had been identified to participate in this programme.
Mr Fakir said that DPME had allocated a red status to this sub-output. They were not optimistic that the target for electrifying schools would be met. Between 2002 and July 2011 the number of electrified schools had increased from 57% to 86%. Between 2008 and 2010 1 000 schools had been electrified. Delivery on this objective was below the required trajectory despite an improvement in the previous two years. A significant effort was needed to reach the 2014 target. DPME was not optimistic that the 92% target would be reached.
Mr Fakir said that sub-output 2.4 was the development of a funding model for the electricity generation programme. The target was to have a funding model submitted to Cabinet by 2010/11.
Mr Fakir noted the progress reported by DoE. By June 2012, 78% of the funding for the Eskom build programme. A Cabinet memorandum had been completed. Eskom continued to focus on the domestic money market. Government had approved an Eskom request to increase the issuance of bonds. An achievement was the granting of access to the Clean Technology Fund. Eskom had also secured American and Italian funding for the Kusile and Ingula projects.
Mr Fakir reported a yellow status was allocated for this output. Much work was still needed on the nuclear development side.
Mr Fakir said that sub-output 2.5 was the long-term energy mix diversification process. The first target was the extension of the IRP over a 25 year window. A target of 1 000 MW was set for 2012/13. A million solar water heaters would be rolled out by 2013. There would be a demand side management saving of 9 TWH in 2012/13.
Mr Fakir said that DoE had reported that the IRP had been completed. Renewable energy would constitute 40% of all future investment until 2030. The Renewable Energy IPP (REIPP) Procurement Programme had already secured 1 416 MW from 28 IPPs in Window 1. In terms of solar water heaters, 289 201 claims had been made by 31 March 2012. Eskom was continuing to provide assistance in energy efficiency campaigns such as the provision of low-energy light bulbs, geyser blankets and the Power alert system.
Mr Fakir said that the IRP had been completed and a green status was allocated. However, the solar water heating programme was behind schedule. On the demand side management, a 9 TWH saving had been targeted. Both of these programmes had been given a yellow status as they were behind schedule.
Mr Fakir said that sub-output 2.6 was the migration of the transport of Eskom coal from road to rail, and the rehabilitation of roads used for coal transport. The targets were to rehabilitate 380 km of coal haulage roads by 2012/13 and to transport 19 million tons by rail.
Mr Fakir said that DoE was reporting that by the first quarter of 2012/13, 2.3 million of a targeted 12 million tons had been transported by rail. Preparatory work was being undertaken on the haulage roads. By the end of the first quarter, 21 km of road had been resealed and strengthening and reconstruction of 3 km had been completed. Eskom had spent R500 million of the approved amount of R950 million for the rehabilitation of roads.
Mr Fakir said that a red status had been allocated in this case. The target of transporting 19 million tons of coal by rail was unlikely to be achieved. Progress on the roads was also slow.
Mr Fakir said that sub-output 2.7 dealt with the restructuring of the EDI. The target had been to take a decision on the end state of EDI Holdings by 2010/11. DoE reported that the decision had been finalised by Cabinet. A green status had been allocated although there were still backlogs at municipal level.
Mr Fakir noted that sub-output 2.8 concerned setting cost reflective tariffs. The targets were to develop a targeting framework for qualifying beneficiaries. By 2012/13 there would be 100% coverage of beneficiaries. The DoE had reported approximately 75% of qualifying indigent customers were receiving free basic electricity. Eskom had implemented 100% of its Inclined Block Tariffs (IBT) and municipalities 60%. A yellow status was awarded as better mapping and targeting of indigent households was needed so that the poor would not be penalised.
Mr Fakir said that under Outcome 10, sub-output 2.3 concerned the deployment of renewable energy. The target was to have 10 000 GWH of renewable energy generated by 2014. DoE had reported that the REIPP had secured 1 416 MW. The Eskom Board had approved the Sere Wind Farm project. The Upington solar project was in the development phase. A formal tender would be issued later in the year. There was a problem with access to land. A yellow status was awarded. Some progress was evident. Some intervention would be needed in Upington and to clear other obstacles.
Mr Fakir said that sub-output 2.5 was efficient energy use. The target was a 12% saving by 2015. The Department reported that institutional arrangements for the National Energy Efficiency Agency (MEEA) were in place. Incentives would be provided under the Income Tax Act. Cabinet would be approached in October 2012 regarding an EE strategy. In the previous year, a saving of 1.4 TWH had been verified. A yellow status had been awarded. Progress was noticed, more reporting was needed on actual savings.
Mr Smalle would have thought that one of the outcomes regarding municipal distribution would have been the transparency in these departments. More professionalism was needed. He wanted to know if there had been consideration of an increase in the backlog on an annual basis. In terms of the schools, the DoE had reported that DBE now had its own electricity distribution systems. If this was so, then DoE should not have had this as a key performance indicator (KPI). On the IRP, despite the green status, there was no opinion on the need to revise the document in 2013 and at two year periods. The transfer of assets in the EDI was still in process, and he questioned the award of a green status.
Mr Lucas also noted the discrepancy regarding schools. The question of road maintenance was a serious one.
Mr Smalle was concerned that with the answers given by the Minister on the roads. He had asked if the maintenance was done on a tender process. He asked if there was any way for private companies to operate outside of the strict provisions of the Public Finances Management Act (PFMA).
The Chairperson said that this was a complex process. Members must focus their questions on the 2011/12 FY, and not on current issues. A separate meeting could be called to ascertain DMPE's opinion on any current events, such as the revision of the IRP. Eskom fell under the Department of Public Enterprises (DPE) and he was unwilling to allow questions on Eskom in this meeting. He asked the DPME delegation on what guidelines they conducted their review process.
Mr Phillips said that since the DPME had been created, it had developed its monitoring and development work. It has started with monitoring performance against key outcomes. It had made decisions to focus on certain specified areas. The focus on the outcomes was to increase the strategic focus of government. Government had tended to focus on too many things at once. This had led to the adoption of the outcomes approach in 2001. This was reflected in the delivery performance agreements. There was a deliberate encouragement to departments not to report on all their activities. The delivery agreements had particular outputs. These were the focus of DPME. Delivery agreements were now being revised, and this should be a continuous improvement cycle. A key conclusion was that government should improve policies, especially in their implementation. Management practices were evaluated. Their assessment of management practices in the DoE had not been included in this briefing but could be done if requested by the Committee. The experience of citizens was taken into account. A programme of evaluations had been introduced with Cabinet approval.
Mr Fakir said that delivery agreements were in a narrative form. There were appendices which set out expectations over the Minister's terms of office in the form of an implementation plan. Regarding the backlog, there had been a consultation in drawing up the delivery document. The escalation of the backlog had been considered although he could not remember what figure had been used as a baseline. Broad targets had been set.
Mr Fakir said that it was important for DoE still to focus on schools. Many connections relied on bulk capacity of the distribution system. If this was not there, DBE could not connect to the system. The DoE should respond on the question of the coal roads. DPME could not offer a solution.
The Chairperson said that the Committee faced a dilemma. He suggested that DPME return the following week to discuss management practices. The Department should share its plans on the IRP with the Committee when they were ready. Questions on Eskom should be directed to the Portfolio Committee on Public Enterprises.
Mr Smalle would be happy to discuss the Eskom issue later. He had only used their name as an example, and wanted a general answer on compliance to procedures.
Mr Fakir said that the EDI issue had been substantially addressed. Cabinet had taken a decision, and this had been substantially achieved even though there were still some loose ends to be tied up.
Mr S Mayatula (ANC) had calculated the red status assessments at 18%, yellow at 64% and green at 18%. He asked if this should be taken as an indicator of poor performance by DoE. He asked how these figures could reflect on the Department.
Mr Phillips replied that DPME was trying to institutionalise monitoring and improving planning based on evidence. Clear plans, targets and indicators were needed. These needed to be monitored regularly on the basis of evidence. A learning process was needed for government. Since the introduction of the outcomes basis, a system of quarterly reporting had been put in place. These were discussed at Cabinet. Departments were encouraged to indicate challenges and how these could be addressed. They aimed for factual correctness.
The Chairperson reminded DPME of the Committee's own oversight role. He would have liked to have seen the report for the previous year to see what progress had been made.
Mr Mayatula said that the observations made by DPME coincided with the Committee's own findings.
The Chairperson mentioned the campaign to gauge the response of the public.
Mr Phillips felt that government performance could increase because of good monitoring. It was important for departments to evaluate their own performance internally. It was also important for the President to co-ordinate the work being done by his Ministers. Independent monitoring was also needed, and this role was performed by the Portfolio Committee. Several programmes were in place to monitor the experience of citizens. The President had his own programme of visits to communities. Unannounced visits were made to various service delivery sites in conjunction with provincial premiers. The aim of this programme was to encourage departments at national and provincial level to introduce similar programmes. Information was received using the Presidential Hotline and social media.
Mr Fakir said that the new administration had held extensive consultation on what was going wrong in the country. These problems were described in the narrative element of the agreements. Ministers had discussed the documents and changes were made where necessary. The next step was to draft the implementation plan.
The Chairperson was glad that the issue of the infrastructure backlog had been picked up. There were different figures attached to the backlog. The matter had to be pursued with haste. He thought that ADAM had been approved, but he had now heard that it still had to go to Cabinet. It was not clear when the funding model had been introduced and approved. He asked if it included the nuclear build programme. There were questions over the quality of the solar water heating programme. A lot had been said on the EE strategy. The institutional arrangements of the EE agencies should be verified. A fragmented approach was being followed. One other important area was the control of greenhouse gas emissions.
Mr Fakir said that the reduction of the maintenance backlog was a combination of factors. Different amounts would have been raised each year, but it was not clear if this would have come from the DoE or from the fiscus. For the preceding decade, the redistribution of the EDI had been keeping municipalities in limbo. No money had been spent on the distribution network. Municipalities now had to fund increased spending on maintenance. The DPME was unable to measure these amounts. Treasury might have the answers.
Mr Fakir said that ADAM would not go to Cabinet within the forthcoming few weeks. The nuclear part of the Eskom capital plan had not been approved. The responsibility for managing the quality of solar water heaters lay with whoever was rolling the programme out. All systems were subject to the standards of the South African Bureau of Standards (SABS). The installing agency had to ensure quality.
Mr Fakir was not sure about the 2005 strategy. He would like to get into the detail of the 12% EE target. There were arrangements in place within the South African National Electricity Distribution Institute (SANEDI). Outcome 10 did speak to greenhouse gas emissions. There were two sub-outputs attached to this. The DoE did have responsibilities. This aspect had been assessed.
The meeting was adjourned.
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