South African Nuclear Energy Corporation & National Nuclear Regulator on their Annual Reports for 2012/13

Energy

15 October 2013
Chairperson: Mr S Njikelana (ANC)
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Meeting Summary

The National Nuclear Regulator (NNR) and the South African Nuclear Energy Corporation (Necsa) briefed the Committee on their 2012/13 Annual Reports.

The NNR was a public entity which was established and governed in terms of Section 3 of the National Nuclear Regulator Act of 1999, to provide for the protection of persons, property and the environment against nuclear damage, through the establishment and enforcement of safety standards and regulatory practices. The NNR obtained an unqualified audit report for the fourth year in succession during the 2012/13 financial year.
Some of the highlights within the NNR during the 2012/13 financial year were: the NNR compiled and submitted South Africa’s National Report to the Convention on Nuclear Safety; signed bilateral cooperation agreements with the Russian Federation; achieved a performance rating of 81% against the set objectives and targets, which was above the 80% threshold set by the NNR Board; and all nuclear facilities in the country were inspected and found to be generally compliant with the required safety standards.

The total operating revenue for the year was R 134 889 million, of which R 99 million was derived from authorisation fees, R 447 160 from application fees and R 30 912 million came from a direct government grant. The audit report showed an improved state of controls as well as with the quality of financial and performance reporting.

Members asked which international stakeholders the NNR signed agreements with; how the NNR was handling radio-active material in dumped/ ownerless mines; and did the NNR have any partnerships with structures such as the BRICS countries?

Most of the Members’ questions were about the NNR’s role in government’s nuclear build programme, as well as the plans and lifespan of the Koeberg power plant. Were residents around the plant well educated about the safety and evacuation measures? Had the emergency plan been updated? Other questions included: how would the NNR monitor various activities such as the mis-use of mines? Was the view of civil society, which was opposed to the nuclear build programme, being acknowledged? Was civil society represented at the NNR Board?

The majority of questions from Members around the Necsa’s annual report were around Pelchem, a branch of Necsa which was poorly performing. Did Necsa have a realistic chance of capturing the global share seeing that Pelchem was not performing well? Other questions were around Necsa’s plans on improving transformation within the entity and within the sector. What plans did Necsa have to bring in more women within the organisation?
 

Meeting report

Chairperson’s opening remarks
The Chairperson welcomed the teams from the National Nuclear Regulator (NNR) and the South African Nuclear Cooperation (Neca).

Presentation: National Nuclear Regulator (NNR) Annual Report 2012/13
Dr Bismak Tyobeka, Chief Executive Officer (CEO), NNR introduced his team. He explained that due to his recent appointment, Mr Tselane, who was the acting CEO before his appointment, would lead the presentation.

Mr Thabo Tselane, Senior Manager: Compliance, Assurance and Enforcement, NNR explained that the NNR was a public entity which was established and governed in terms of section 3 of the National Nuclear Regulator Act of 1999, to provide for the protection of persons, property and the environment against nuclear damage, through the establishment and enforcement of safety standards and regulatory practices.

The NNR Board successfully met and fulfilled its fiduciary duties during the period under review. The NNR obtained an unqualified audit report for the fourth year in succession during the 2012/13 financial year. The international obligations of South Africa were fulfilled through NNR’s participation at both the 2nd Extraordinary Meeting of Contracting Parties to the Convention on Nuclear Safety, and the 33rd Meeting of the Commission on Safety Standards, held at the International Atomic Energy Agency (IAEA) in Vienna. Among other highlights, the NNR compiled and submitted South Africa’s National Report to the Convention on Nuclear Safety. The NNR also signed bilateral cooperation agreements with the Russian Federation.
The NNR achieved a performance rating of 81% against the set objectives and targets, which was above the 80% threshold set by the NNR Board. All nuclear facilities in the country were inspected and found to be generally compliant with the required safety standards, as stipulated in the NNR conditions of license and the approved Safety Assessment Reports operational technical specifications.  The NNR also continued to represent South Africa in the technical working groups of the Forum for Nuclear Regulatory Bodies in Africa (FNRBA). A nuclear regulatory emergency exercise was conducted at the Koeberg Nuclear Power Station to test the effectiveness of the station’s emergency preparedness and response arrangements.

Mr Dakalo Netshivhazwaulu, Chief Financial Officer (CFO), NNR explained that during the year under review, the NNR continued to manage the balance sheet conservatively. The total operating revenue for the year was R 134 889 million, of which R 99 million was derived from authorisation fees, R 447 160 from application fees and R 30 912 million came from a direct government grant.

The operational grant from the fiscus decreased by 13% during the year as National Treasury imposed compulsory budget cuts. The trend has been going on for the past three years.

Mr Tsepo Mofokeng, Chairperson, Audit Committee, NNR said the NNR obtained an unqualified audit report for the fourth consecutive year. The audit report showed an improved state of controls as well as with the quality of financial and performance reporting. The entity developed and was implementing an audit management letter resolution plan, addressing among other things the following key issues raised by the Auditor General:

•Irregular expenditure

•Performance monitoring and evaluation

•Compliance with laws and regulations

The Regulator was therefore on course to implementing adequate policy dispensation for training procurement, legal compliance monitoring system and dashboard performance monitoring during the third quarter of the financial year under review.

Discussion
The Chairperson thanked NNR for the presentation. A number of interesting things were being done by the NNR. With regard to international agreements, who were the stakeholders the NNR worked with? The institution’s performance against objectives was also commendable. However the targets for disability employment were too low, what was the rationale of this? The work which the NNR was doing on ensuring stringent compliance on employee exposure and dosage should also be in the public arena for informing the public, especially about risks to exposure. How was the NNR handling radio-active material in dumped/ ownerless mines? On the emergency response centre, he said independent laboratory work being done by the NNR strengthened the character and independence of the institution. On peer support, how would NNR rate itself against other stakeholders with regard to the work being done on the nuclear build programme? Did the NNR have any partnerships with structures such as the Brazil, Russia, India, China, South Africa (BRICS) group? External stakeholders needed to be engaged for the nuclear build programme; the views of non-supporters should not be dismissed. On monitoring, evaluation and compliance, he argued that there should not be any repeats in the coming financial year.

Ms N Mathibela (ANC) congratulated the NNR for their good work in securing an unqualified audit report in four consecutive years. The workshops on stakeholder meetings should be taken further because such workshops helped inform ordinary people about the work of the NNR. She suggested that the Committee be invited to attend some of these workshops. The NNR stakeholder meetings had only taken place in three provinces; what about the rest of the provinces, especially those such as Limpopo which had a significant number of old mines and dumps?

Mr L Greyling (ID) asked whether civil society was represented on the NNR Board. On the self-assessment report by the IAEA, he asked about the role which NNR played as a regulator and whether the NNR had actually looked at the findings of the report. What recommendations were made about the funding of the nuclear build programme and the human resources which would be needed for the programme? Overall, what impact would these recommendations have on the nuclear build programme? Had the NNR made any comment of the environmental impact assessment from nuclear one? The expected life of the Koeberg nuclear plant was 60 years; when would it be de-commissioned and how much would this cost? Had the emergency plan in Koeberg been updated? The plant had high level radio-active waste.

Ms B Ferguson (ANC) congratulated the NNR for the 4th unqualified audit report. A concern however was raised about the NNR Information Technology (IT) strategy; no mention was made of one throughout the presentations. With a lack of a strategy, how was the NNR contributing towards the nuclear build programme and how was the controversy of the inputs being handled? What safety preparedness assessments had been conducted with the residents around the Koeberg plant?

The Chairperson asked why the operational grant had declined by 13%. He pointed out that most of the strategic objectives which were not achieved were internal; what impact has this had on the overall performance of the NNR and what plans were there to prevent repeats? He asked that an explanation be given about the poor availability of service providers in certain areas; seeing that this resulted in delays around the implementation of some of the NNR’s programmes. How would these delays impact the nuclear build programme? What were some of the other reasons for the challenges in the delayed implementations of projects?

Mr Mofokeng replied to the question about civil society representation on the NNR Board and said there was one civil society representation.

Mr Greyling said the representative was from the South African National Civic Organisation (Sanco) and had been appointed by the Minister; was civil society consulted before this appointment?

The Chairperson said the Minister appointed all Board members therefore the Board would not know the details of the appointments and whether civil society had been consulted before the appointment of the representative.

Mr Greyling asked whether a process was in place for the representative to be directly linked to civil society.

The Chairperson said Mr Greyling should direct all such questions to the Minister.

Mr Gino Moonsamy, Manager: Stakeholder and Communications, NNR responded to the question on international stakeholders and said the NNR had various collaborations and was advanced by the IAEA which was established by the United Nations. The National Nuclear Regulatory Act entered into several bilateral agreements for information sharing. From the BRICS countries, the NNR had cooperation’s with the Russian Federation. As a result, Russia would be hosted by NNR for a nuclear safety conference towards the end of November 2013. Collaborations with other BRICS countries would be looked at. On regional cooperation, he agreed that African relations needed to be deepened. A forum for nuclear regulations had been established which was constituted of about 20 African countries. The forum tacked different themes such as radioactive waste, mining and nuclear research and power plants. The information sharing which took place at these forums was of significant value. South Africa would be hosting the next technical workshop at the end of November 2013. On public engagement, he said communities had been targeted for awareness programmes; especially those around mining and nuclear sites. However the activities of the NNR in this regard would be expanded. Civil society was involved in various meetings with the NNR and representatives from civil society were a large combination, which included both supporters and non-supporters of nuclear. Information sharing therefore created alignment of bi-directional engagements where possible. The NNR was pro-nuclear and would seek to enhance the quality and depth of all such engagements.

Mr Tyobeka added that the NNR had obligations to engage countries within the Southern African Development Community (SADC) about the new nuclear build programme; more interaction and information sharing with neighbouring countries was necessary.

Mr Netshivhazwaulu replied to the question on the IT strategy and said the NNR was well advanced with its strategy; all procurement had been completed and implementation was next. On the grant decline, he explained that the National Treasury issued guidelines and that had been the trend for the past four years. No additional funds were given to institutions which had external sources of funding, and this posed serious challenges for the NNR. On the non-availability of service providers, he said there were talks with technical skills for addressing backlogs and appointments were a long process seeing that tendering first needed to be done nationally. Lead times for delivery were therefore extended. The NNR was busy building skills and capacity internally, rather than on relying on external service providers. A number of function managers for supply chain have been trained and appointed.

Mr Tselane replied to the questions on Koeberg and said the plant was 29 years old, plant life extension was executed by management but nothing had yet been submitted to the NNR. Upgrades of the plant were expected. The NNR issued a directive to Koeberg about revising the emergency plan seeing that the emergency control sector within the NNR had been upgraded. Public safety forums with people within nuclear power station communities were held and information was collected and exchanged at these forums. The NNR self-assessment was different from that of the IAEA Report. All regulators were expected to look at themselves using the IAEA tool. He explained that the NNR was providing leadership with regard to the nuclear build programme and various working groups had been established. Skills gaps have been identified. The issue of ownerless mines was an international problem. As a result, the IAEA made provisions for an international network which provided regulations and supervision practises for these legacy sites. A lot of sites have been identified by the NNR and strategies in line with international practices would be implemented. Canada was a good model to loot in dealing with such matters.

The Chairperson thanked NNR.

Presentation: South African Nuclear Energy Corporation (NECSA)

Mr Ruby Ramatsui, Senior Manager: Strategy and Performance, Necsa

(The presentation will be added later)


Discussion
The Chairperson thanked Necsa for the presentation. He said the Chief Executive Officer should have been around for the meeting because the Committee would be making recommendations to Necsa. He said the structure of the report could be improved. Even though the research and development pillar within Necsa was performing well, the corporate pillar however needed to be improved seeing that Pelchem was not doing well. Aging infrastructure was not an excuse. The 68% performance achievement was good but could be improved. Which of the remaining 32% targets were not met? These could be areas of significance. Necsa’s targets for staffing were not pleasing; how were these determined? Training and development was good but targets and performance were too low. The 62% achievement for study assistance and mentoring was too low. Why were learnerships and apprenticeships not mentioned in the presentation? Necsa’s Black Economic Equity rating was worrying, especially given the challenges within Necsa around transformation. This would have a negative impact on enterprise development. What were the reasons for the decreased staff and how did this impact the staff morale throughout the organisation? The clean financial report however was wonderful. On resource efficiency, he said the concept should be promoted beyond energy efficiency. What advancements had Necsa embarked on to improve transformation within the sector?

Ms Mathibela congratulated Necsa on the progress it had made with regards to skills transfer, which had a low performance rate in the previous year.

Mr Greyling said Necsa was a difficult organisation to get into grips with. He asked whether the government grants were sustainable. Were the NTP group’s financials subsidized? Did Necsa have a realistic chance of capturing the global share seeing that Pelchem was not performing well?

Ms Ferguson also shared the disappointment that the CEO was not able to attend the meeting. She added that the acting CFO should be made permanent. On the 100 young nuclear professionals the imbalance of 40% of the staff being technical staff, while the primary mandate of Necsa was research and development, needed to be addressed. What plans did Necsa have to bring more women into the organisation? On the Black Economic Empowerment rating she said Necsa was a level 4; what plans were there to improve this rating? On Pelchem, she said Necsa was a niche market and asked when the strategic plan would kick in. Necsa however could do better with regard to the 32% targets not achieved.

Mr Daniel Moagi, Senior Executive Manager, Necsa, replied to the question on targets and said Necsa developed a 5 year plan which was approved by the Board. It would be reviewed in the next financial year. If requested, the plan would be shared with the Committee. On the areas Necsa targeted for improvement and investment was training and development. He indicated that Necsa did infact offer learnerships but they were funded externally. The number of   candidates which Necsa could take was dependent on the amount of funding available. On the 100 professionals, he said the professional were at registered universities. Necsa provided the use of their labs but did not offer any accreditation. The Chief Financial Officer post would be filled after the approval of the new structure. The post has been advertised. On disability he said the issue of low targets would be taken into account.

Mr Fadl Hendricks, Chairperson: Risk and Audit Committee, Pelchem, said all the question asked about Pelchem were interrelated. The important feature of Pechem was that in needed to be competitive internationally in terms of the mandate. The downstream chemicals needed to be increased so as to increase the entity’s returns and ensure sustainability. A recapitalisation programme has been drafted and sent through to the Minister. The Public Finance Management Act however stood in the way of Pelchem acquiring private equity partnership.

Mr Greyling asked how money was needed for the recapitalisation programme.

Mr Hendricks said the accurate figures would be forwarded to the Committee.

Ms Mbali Mfeka, Acting CFO, Necsa said Necsa requested R62.8 million for recapitalisation and R64 million to retain fluorine production.

The Chairperson thanked Necsa for the presentation.

Meeting was adjourned.
 

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