Department of Energy on its 2011/12 Annual Report

Meeting report

Department of Energy (DoE) on its 2011/12 Annual Report
Mr Jeetesh Keshaw, DoE Acting Chief Director for Nuclear Energy, stated that the Nuclear Branch mandate included: implementation of the nuclear energy policy, development of nuclear technology and establishment of a national radioactive waste disposal institute. Key focus areas included establishment of a national waste radioactive disposal institute, and community outreach.

During 2011/12 Cabinet approved the establishment of the National Nuclear Energy Executive Coordination Committee (NNEECC) to oversee the roll-out of the nuclear build programme. South Africa also undertook the necessary “stress” tests (safety re-assessment) on its nuclear installations. The recommendations resulting from this exercise would be implemented to ensure safety was maintained. However, following the approval of the business case for the National Radioactive Waste Disposal Institute, physical establishment of the entity remained a challenge due to lack of funding. Processes to fund the operationalisation of the Institute were in progress.

The target for standardisation of security measures at main ports of entry including installation of Radiation Portal Monitors (RPMs) was not met. The department also failed to get funding provisions legislated for radioactive waste management, among other unmet targets. Targets were achieved for authorisations / denials for nuclear materials and related equipment issued, and nuclear safeguards compliance inspections, audits and investigations conducted. Targets for number of community outreach events per annum was partially achieved.

He stated that challenges included inadequate human capacity and financial resources, and inability to match commitments with resources.

Dr Wolsey Barnard, DDG: Energy Programmes and Projects, stated that 14.5 million households had been identified for electrification in 2011. Out of these, 1.3 million were regarded as informal households. The key players were Eskom and municipalities: 75 % in Eskom supply area and 25% in municipalities supply area. No other electrification project in the world had delivered the numbers (5.5 million households) that South Africa had achieved. He said that in 2012, the number of connections decreased because of the move to rural areas where the cost of connection was much higher, spending on new infrastructure, and an increase in cost of hardware due to increased prices of base metals. He explained that municipalities had a different financial year from the national financial year, hence the differences in figures. He said that the department has held an indaba to meet with stakeholders to find solutions. Eskom had allowed the department access to their machinery hence the DoE was able to squeeze more efficiency out of them.

Dr Barnard stated that since the challenges of the department were obvious to Members, he would only focus on the solutions. He reported that 50 000 non-grid electrification connections had been made; this was a considerable success. There was a need to increase the amount of electricity supplied through non-grid so that people could use it for more than just black and white televisions.

He added that before, the department did not have a master plan for the country. The problem was a lot of back sit drivers trying to influence their direction, but if the department realised that if they wanted to succeed they had to stick to the plan. They made a deal with National Treasury to increase their funding if the Department succeeded. He said that universal access depended on funding and technology.

Discussion
Mr A Nyambi (ANC) said they needed to simplify the percentage linear graph. In the previous week they were in the Northern Cape and the challenges there compared to challenges on the graph were not similar. The graph did not indicate reality on the ground. Slide 107 and 109 on universal access, showed no consistency in terms of numbers. Slide 107 talked about 2025 and Slide 109 talked about 2023. What were the current numbers, considering they had an impact on the Department’s projections?

Mr Nyambi noted the Department had reached 72% of their targets; could they clarify the report. On programme 4, the nuclear programme, the Department introduced the presenter as Acting Chief Director, but the report stated that an employee acting in higher office for more than 12 months was against public policy; could they explain.

Mr Nyambi said the Public Finance Management Act (PFMA), the strategic plan, the State of the Nation Address all said departments had to pay service providers within 30 days; why was the Department unable to comply?

Ms B Abrahams (DA) asked the Department to give a breakdown of the electrification programme figures.

Mr K Sinclair (COPE) said the Department was becoming a post box: all they did was transfer 100% of their money to different entities, but Members wanted to know the productivity of the money. Eskom was still the elephant in the room; it continued to take the big brother approach, and that needed to be addressed. He was amazed to learn that Eskom would run the South African Nuclear Programme. This was surprising because there was a need to diversify and bring new players to the industry. What was DoE’s opinion?

He stated he had asked the Minister about the solar park in Upington, but the Minister replied there was no need to make stories where there were none. When he had visited the park, it did not seem like it would create the 14 000 jobs that the Minister had suggested. There seemed to be political undertones surrounding the Upington project. What was DoE’s opinion?

He commented that nuclear energy could be an asset to SA. What was DoE’s opinion on how to use nuclear energy to enhance the economy of the country? When was this project going to be started because it linked to energy security? How could DoE stabilise the grid? He believed that nuclear energy was fundamental, unlike what many other Members thought.

He said the slides indicated that there was inadequate funding for community outreach events. This was cause for concern because public consultation was a crucial part of the constitutional prescription. Who were those concessionaries in terms of funding? What was the water quality of South Africa?

The Chair stated that in Dr Barnard’s previous brief, he had mentioned that there were talks between the Integrated National Electrification Programme (INEP) and the Development Bank of Southern Africa (DBSA). But when members visited constituencies the previous week for their program: “Taking Parliament to the people,” they heard complaints of municipalities having to take out funds from their operational budgets to fund INEP programmes, and then having to wait long periods for the money to be paid back by DoE. How far had DoE come in terms of negotiations with DBSA to reduce this waiting time?

How far had DoE come in terms of meeting their target of 1 million solar heater geysers since 2009?

Ms Nelly Magubane (Director General, DoE) replied that the staff member in the nuclear position in question was on sabbatical, earning a Master’s degree in Nuclear Law. Out of the organisational structure approved, DoE could only meet 52% for 2011/12. Thus they could not fill those positions. She stated that they did not believe in consultants, and preferred having people on contracts to keep skills in-house.

She said that DoE had done better than most departments in paying debts. One problem was that when they partnered with municipalities to do public outreach projects, they had to pay service providers that were hired by municipalities directly. But sometimes, those service providers were not approved or had been blacklisted by other departments, or provided banking details that were rejected for one reason or another. DoE had decided to the service providers only in their database. She admitted that on one occasion in 2012, the delayed payment was because DoE did not have enough money in its account. However, this was a one-time occurrence.

Dr Barnard stated that backlogs in the Northern Cape were relatively low but communities were very spread out. If Northern Cape was an urbanised area, it would be easier to deal with. He added that the ground was also very challenging: they had to use dynamite to break the ground to plant poles in some places. The differences between reporting on 2025 and 2023 was that they received their last funding for the project in 2023, but the implementation would be completed in 2015. Universal access was an ideal that could never be reached; thus 85-89% was an acceptable expectation. They were working with Statistics SA to understand their progress and projections for the years reported.

Ms Magubane said that they needed an anchor for the nuclear program. It didn’t mean that Eskom would be the only entity involved; they would be guided by the Nuclear Energy Task Team. Eskom would also have help from the private sector.

DoE was struggling to get land for the solar park in Upington. Land earmarked for the project was also an option for another company. DoE therefore identified another piece of land in Prieska. Lawyers were working to solve the issue in Upington. The National Radioactive Waste Institute would also be established. DoE was working with Andar, a similar institute in France. They were aware that radioactive energy was a valuable resource. She explained that the electricity distribution industry as a whole comprised both municipalities and Eskom. DoE had started a company called EDI Holdings that aimed at consolidating the industry, but it failed so it was dissolved. Maintenance of infrastructure was becoming a part of the electrification problem.

On the issue of DoE being a post box, DoE had agreed with Treasury to have a program management capability. That is why they had had to go to Eskom’s machinery. Sometimes municipalities were not paid in time because they failed to submit reports on how they had performed as they were required to. DoE signed the first Independent Power Producers (IPP) the previous week. On Eskom’s perceived bully tactics, the Minister had indicated issuing proposals for more IPPs. There was a move to ensure as many IPPs as possible.

Mr Keshaw added that the Minister for Energy would be visiting the identified rural disposal site at Vaalputs, on 23 November for a community outreach program. Construction would begin in 2016/17 and nuclear energy plants had a lifetime of 60 years. Construction of nuclear plants required a lot of planning. DoE was waiting for an Environment Impact Assessment Report. Once approved, the licence would take 3-4 years to be processed. Recently, a fire had ravaged the Vaalputs area and caused a lot of destruction. But once the plant was built, the community would benefit from excellent firefighting services. Even though there was a strong resistance movement against the project in the area, the community needed to be made aware of these advantages.

Dr Barnard stated that they did 50 000 connections in a new dispensation. They were still was not sure about the financial model. Funding that municipalities got were not grants but subsidies of 80%-100%. The tariffs that municipalities were allowed to charge were about 30% to higher. The agreement DoE had with DBSA was that they set aside R2.8 billion for electrification programs, but DoE targetted the biggest backlogs. The municipalities also had the option of getting funding directly from DBSA.

Mr Khanyiso Zihlangu (Deputy Director: Off-Grid Renewables, DoE) said that there was a challenge of jobs and local content that needed to be emphasised. Out of 29 local installers appointed, 19 were from municipalities. DoE needed trained installers. Localisation in terms of content was being facilitated by the Department of Trade and Industry regulations. No wholly imported content would be allowed to participate. The challenge on water quality was that some households depended on communal taps. They reported their progress was not in sync with their set targets but that they were hopeful numbers would pick up. There had been the exercise of checking functionality of systems through audits. A system was being created so that all systems in the country could be checked in real time. Only locally produced objects could be used in the program but the challenge was lack of capacity.

The Chair asked for details per province on installations of geysers.

Mr Zihlangu said that the figures were not evenly distributed because service providers preferred to go to places like Gauteng because of logistical advantages. Gauteng had 87 000 geysers whereas Limpopo only had 2 000. Kwazulu Natal had 41 000 and Eastern Cape 52 000. The national average was 33 000.

Ms Abrahams asked what criterion was used to install solar water heaters. It seemed unfair that the project was benefiting wealthy people with three-storey houses in some cases.

Mr Khanyiso said that DoE let that be the prerogative of municipalities. The municipalities looked at their beneficiary list and allocated the heaters based on that. DoE dealt with low pressure systems for poor people. For high pressure systems, people had to pay themselves. Eskom had to have a contract with local firms so that rich people could also access solar heaters.

Mr Nyambi said that in the last financial year DoE contravened the PFMA by paying workers overtime in excess of 30%. What was their explanation? How did DoE define “informal settlements?”

Mr Sinclair asked whether they had enough energy supply for the country. There was a lot of talk that businesses could not afford the cost of electricity, for example in mining and farming. What was the status of energy supply in SA? The National Planning Commission was clear about affordability of the nuclear programme. A British expert had also recently claimed that DoE was under-costing the program. Why was DoE not heeding the concerns of the National Planning Commission? He needed a better explanation for the Upington issue. He claimed that politics was costing the people of Upington a solar park. The unwillingness of local municipalities to prevent vandalisation had made it so that people who had been allocated houses refused to move into them due to lack of electricity.

The Chair asked what DoE was doing about laying down the law in terms of violation of regulations and getting young people trained in repairing geysers.

Ms Magubane said that DoE used the same definition that Statistics SA used for informal settlements: settlements built in an unclaimed land and have structures that were not formal. She said the discussion should be about how much electricity SA needed and at what cost. The cost of renewable energy was too high. There was need to have an honest discussion about energy. She suggested the Committee have a public hearing about energy. If they had a conversation around Eskom, they would have a villain but would not get anywhere. The problem was that nuclear energy had high capital costs. DoE had had this conversation with Human Sciences Research Council. She advised that they learn from the experiences of other countries like Finland. It was good to have a balanced conversation with all the players. On politics in Upington, she suggested the member ask the Minister in the National Assembly.

Mr B Mnguni (ANC) said DoE had to weigh the risk of going over time or losing assets like generators. Most people who worked overtime were in security. The Auditor General did not highlight this issue because it was justified.

Ms Magubane said that they wanted Eskom to team up with suppliers to deal with the repair of geysers. There were discussions to impose strict penalties such as financial penalties in IPP contracts. DoE would also establish a whistle-blowing hotline. She asked members to find out about concerns raised on the ground.

Mr Sinclair stated that there was need for regulations. He suggested that the Chair write a proposal for the committee to go to Spain for an oversight visit.

The Chair said this trip would be arranged for the later weeks of January 2013.

Meeting was adjourned.