National Cleaner Production Centre on energy wastage; Auditor-General on strategic plan oversight

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Trade and Industry

18 March 2013
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

The National Cleaner Production Centre promotes ‘green’ efficiencies to foster industrial competitiveness and through these activities, makes an impact on the country’s climate change targets. Energy resource efficiency, cleaner production processes and the mitigation of greenhouse gas emissions were the focus areas of the NCPC. It had conducted workshops in 300 companies. There was a dearth of skilled consultants but it was involved in training and building the institutional capacity of the NCPC. It offered technical assistance in production processes to companies and provided assistance to companies in accessing opportunities in the Manufacturing Competitiveness Enhancement Program (MCEP). It provided advice in the development of policy, policy tools, and economic instruments and did demonstration projects and case studies. Input costs of materials and energy accounted for 60% of total costs. Resource input efficiency was a neglected area which affected the economic, social and environmental bottom lines of companies and impacted on downstream suppliers as well. Its priority sectors were clothing and textiles, automotive, pulp and paper, metal and engineering. The benefits of participation in the NCPC programs were cost savings, improved plant efficiency, better product quality, the recycling of waste, improved health and safety of workers and the emergence of new marketing opportunities. In current economic conditions, energy efficiency gave a company a competitive advantage. 423 Renewable Energy Cooperation Program (RECP) assessments had been done resulting in R179m of savings. The Energy Efficient Improvement Project was a joint project of the dti, the Department of Energy, the United Nations Development Programme and the NCPC. The project attempted to improve energy efficiency, reduce carbon dioxide emissions and improve productivity. It targeted the automotive, agro-processing, chemical, liquid fuels, metals, engineering and mining sectors. It supported the National Energy Policy Framework and the National Energy Efficiency Strategy had been reviewed and gazetted. It had held 86 national workshops and had trained 1 800 delegates and 31 qualified experts. It had completed 124 Small Medium Enterprise audits.

Members asked if the NPCP worked with oil refineries; what work was done with Treasury on the carbon emissions tax; how the NCPC got involved with people who wanted to save energy; how far the country was in reducing its carbon gas emissions; if companies approached the NCPC or did it have an aggressive marketing strategy; if there were other companies similar to the NCPC operating in South Africa. Members felt that much more needed to be done than the 86 workshops that had been held. Members asked for comment on the statement that the manufacturing industry’s share of the GDP was declining.

The Office of the Auditor General’s said one of the key parameters for the Committee to interrogate was the strategic plan of the Department and its entities. The Committee had to ensure that the entity’s plans were aligned with legislation, with the State of the Nation Address (SONA), the National Development Plan (NDP) and the 12 Outcomes of government. The Committee should look at the strategic plan and the budget together. The goals and targets of the plan should be in accordance with Treasury’s framework for performance plans. Goals and targets had to be SMART (Specific, Measurable, Achievable, Realistic, Time-based) and this was where challenge arose and emphasis should be placed on this area. The implementation of the Annual Performance Plan (APP) had to be monitored and reviewed quarterly. Management had to ensure that a reliable reporting system was in place and being implemented during the course of the year. An audit committee had to play an oversight role. The Committee had to decide on whether the targets were SMART, on whether the strategic and performance plan and budget were consistent and whether the achievements it claimed were valid, accurate and complete. The root causes of qualified audit opinions were the lack of controls and there had to be action plans to address these problems. The entity’s leadership had to exercise oversight, have SMART action plans and conduct training to ensure the training and development of management staff. Quarterly reports should not contain opinions but rather substantive information.

Members questioned whether the SMART process incentivised the Department to “under-promise”. How could the Committee do a qualitative assessment of the APP? Members asked what the measurable indicators should be. How should inter-ministerial work be targeted?

Meeting report

National Cleaner Production Centre of South Africa (NCPC-SA) briefing
Mr Ndivhuho Raphulu, NCPC-SA Director, said the NCPC fell under the green industries directorate of the dti and promoted ‘green’ efficiencies to foster industrial competitiveness and through these commitments, to make an impact on the country’s climate change targets. The NCPC was hosted by the CSIR which allowed industry access to South African based skills. Energy resource efficiency, cleaner production processes and the mitigation of greenhouse gas emissions were the focus areas of the NCPC.

Mr Reuben Kadalie, NCPC-SA Managing Director, said the South African manufacturing sector‘s share of the GDP had declined from 16.2% in 2008 to 14.2% currently and therefore the NCPC’s sought to enhance the manufacturing sector’s competitiveness. The NCPC targeted four areas, namely energy efficiency, waste efficiency, water efficiency and human capacity development and promoted the benefits of resource and energy efficiency. It had conducted workshops in 300 companies. There was a dearth of skilled consultants but it was involved in training and building the institutional capacity of the NCPC. It offered technical assistance in production processes to companies and provided assistance to companies in accessing opportunities in the Manufacturing Competitiveness Enhancement Program (MCEP) program. It provided advice in the development of policy, policy tools, and economic instruments and did demonstration projects and case studies. Input costs of materials and energy accounted for
60% of total costs and resource input efficiency was a neglected area which affected the economic, social and environmental bottom lines of companies and impacted on downstream suppliers as well. Its priority sectors were clothing and textiles, automotive, pulp and paper, metal and engineering. The benefits of participation in the NCPC programs were cost savings, improved plant efficiency, better product quality, the recycling of waste, improved health and safety of workers and the emergence of new marketing opportunities. In the past, energy as an input cost, had not been looked at, but in the current conditions, energy efficiency could give a company a competitive advantage. 423 Renewable Energy Cooperation Program (RECP) assessments had been done resulting in R179m of savings. The internship program integrated graduates into the economy with a focus on green productivity. In three years the interns had generated R10-R15m of savings.

Mr Gerswynn McKuur, National Project Manager: Industrial Energy Efficient Improvement Project, which was a joint project of the dti, the Department of Energy, the United Nations Development Programme and the NCPC, said the project attempted to improve energy efficiency, reduce carbon dioxide emissions and improve productivity. It targeted the automotive, agro-processing, chemical, liquid fuels, metals, engineering and mining sectors. It supported a national policy framework and the national energy efficiency strategy had been reviewed and gazetted. It supported industry standards and capacity building. It had held 86 national workshops and had trained 1800 delegates and 31 qualified experts. It had completed 124 Small Medium Enterprise audits.

Mr Kadalie said the NCPC was targeting short-term behavioural changes and capacity building as energy system optimisation offered low cost energy savings. It’s successes in capacity building in this regard had led to a staff turnover figure of 23% as companies were poaching its staff.

Discussion
Mr G Hill-Lewis (DA) asked if the NPCP worked with the oil refineries in the country. He asked what work was done with Treasury regarding the carbon emissions tax.

Mr McKuur said they had engaged with refineries. The Cape Town one had requested assistance on its steam systems, which recommendations they would in due course implement. They had worked on the pumping system of the one in Sasolburg which would also be implemented and it was currently engaged in discussions with a third refinery. He said carbon emissions were directly linked to energy savings, so any energy savings had a direct carbon dioxide gas emission reduction equivalent.

Ms S van der Merwe (ANC) asked how the NCPC got involved with people who wanted to save energy. She felt that much more needed to be done than the 86 national workshops which had been held.

Mr N Gcwabaza (ANC) asked how far the country was in reducing its carbon gas emissions. Did companies approach the NCPC or did it have an aggressive marketing strategy. Were there other companies similar to the NCPC operating in South Africa?

Mr Kadalie replied that the NPCP was limited in what it could do by its budget. It had started out on a budget of R1m and this now stood at R40m. It invited the technicians of companies to undergo training and brought high-level technicians in from overseas to teach and transfer their skills. The cost model of the unit did not allow for it to deliver a service for gain. It needed to increase its awareness creation and there was a need for tax incentives to get companies to participate. It was looking at making communications a core business item. Five years ago the emphasis had been on the supply side of the energy equation but this had now shifted to the demand side. These measures needed to grow.

Mr Raphulu said that the NPCP was the only one doing the type of work it did. The amount of people it had trained had been circumscribed by the fact that no training material and no standards had existed when it had started and it had to develop these materials from scratch. Its training was now at an international level, approved by the South African Qualifications Authority and the certificates were recognised internationally. He said the MCEP grant was 70 to 80 per cent accessible to companies which were energy efficient. If the carbon emissions programs were done in a more integrated manner, it could make an impact on the 2015/2020 carbon emission targets. Once the Medupi power station came on stream however, its emissions would result in South Africa exceeding its targets. The NPCP had not been able to show feedback on its contribution to job creation. In the past the green economy was seen as nice to do, but now it was becoming something companies wanted to do as evidenced by the difficulty the NPCP was experiencing in keeping its staff in the face of poaching by chemical companies and Eskom.

The Chairperson asked for comment on the statement made that the manufacturing industry’s share of the GDP was declining.

Mr Kadalie said the decline was because of the rising input costs and energy costs which impacted on the competitiveness of companies pricing. Invariably pressure was brought to bear on jobs. The productivity of jobs became a focus point with job losses ensuing. But other areas of the input costs could also contribute which would relieve the pressure on productivity and the consequent job losses. One therefore could not talk of job creation before job retention. He said the geographic distribution of the NPCP needed to be attended to. He said attention should also be paid to how the four government departments integrated their activities on the green economy initiatives they were tasked with.

Auditor General South Africa (AGSA) presentation on Audit of Predetermined Objectives
Mr Lourens van Vuuren, AGSA Business Executive, said one of the key parameters for the Committee to interrogate was the strategic report. The latest publication from the Auditor General’s office gave a summary of national and provincial departments’ performance. The Committee should also look at the plans and the budget of the Department together. The goals and targets of the plan should be a focus of the committee and should be in accordance with the Treasury frameworks for performance plans which were now very comprehensive and had been applicable since the first of April 20012.The Committee had to ensure that the entity’s plans was aligned with legislation, with the State of the Nation Address (SONA), the National Development Plan (NDP) and the 12 outcomes of government. Sometimes there would be misalignment because of budget cuts for example. Goals and targets had to be SMART and this was where challenges arose and emphasis should be placed on this area. The implementation of the Annual Performance Plan (APP) had to be monitored. The Committee should review quarterly how an entity had achieved and if it had under achieved what measures were being taken to remedy the matter. The Committee should check to see if the entity had used 100% of a budget when entities reported only a 40% achievement. A final report and financial statements were developed for the year-end report but entities could sometimes not substantiate their achievements because of no reliable reporting system during the course of the year. Management had to ensure that such a system was in place and implemented. An audit committee had to play an oversight role. The entity had to be able to prove the actual figures and achievements present in its reports. The Committee had to check whether entitles were reporting on other than what was required.  The Committee had to decide on the usefulness of the presentation, on whether the targets were SMART, on whether the strategic and performance plan and budget were consistent and whether the achievements it claimed were reliable, in that the figures were valid, accurate and complete.  There had to be proper management systems processes and controls. The root causes of qualified audit opinions were the lack of controls and this could only be repaired one year later so there had to be action plans to address the previous problems. The entity’s leadership had to exercise oversight, have SMART action plans and conduct training to ensure the training and development of management staff. Quarterly reports should not contain opinions but rather substantive information.

Discussion
Mr Hill-Lewis (DA) questioned whether the process incentivised the department to under promise. How could the Committee do a qualitative assessment of the APP?
 
Mr Van Vuuren said experience should be used to determine what was reasonable. The budget should be looked at and what had been achieved with it, especially whether important targets had been attained. The targets had to be on a realistic level.

The Chairperson asked what the measurable indicators should be. How should inter-ministerial work be targeted?
 
Mr Van Vuuren said an entity had to operate according to valid legislation. It could not move away from its mandate.  There should be a link between its plan and the relevant state outcomes and how the entity contributed towards the attainment of the outcomes. There had to be a link between the budget and the strategic plan. Sometimes too large a percentage of the budget was spent on administration.

Committee Report on Industrial Policy Action Plan (IPAP) public hearings & colloquium
The Chairperson said the Committee needed to integrate the conclusions reached at public hearings and the colloquium and propose recommendations. She asked Members to forward recommendations that would take the re-industrialisation in the manufacturing sector forward. The first draft of the Committee Report would then be redrafted into an integrated document, as the first draft had not fully captured what the Committee wanted to say.

The meeting was adjourned.

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