Department of Energy Budgetary Review and Recommendations Report


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

The Committee discussed the draft Budgetary Review and Recommendations Report (BRRR). It was noted that although the report was a useful tool, it was compiled under tremendous pressure because the guidelines for the format of the BRRR had changed and, it was put together over a short period of time.

The first 40 pages of the BRRR spoke mainly to information sourced from entities documents. The last four pages spoke to the Committee’s findings and recommendations. The “Summary of Previous Key Financial and Performance Recommendations of the Portfolio Committee on Energy” showed recommendations that were made by the Committee since 2010. The Committee disagreed with how the section was formatted as it only stated whether each recommendation was achieved or not achieved. Members agreed that the section should speak to the Department of Energy’s responsiveness instead, as they had made efforts to attend to the Committee’s concerns.

It was decided that a general recommendation would be included in the BRRR to say that the Committee should receive an update wherever there were investigations within the Department or its subsidiaries.

Recommendations in the BRRR spoke to the Grand Inga Hydro Power Project, energy efficiency, the construction of Integrated Energy Centres, lack of skills required for the national electrification programme, the energy efficient demand side management programme, growth of the gas market, designs and structures of future government buildings, the Independent Producers Renewable Energy Procurement Bidding process, and locally produced renewable products. The Committee agreed that deadlines would be attached to each recommendation, by which various entities would have to update the Committee on matters of importance. 

The BRRR was adopted with amendments.

Meeting report

Opening Statement
The Chairperson announced that the Committee’s agenda for the meeting was to adopt the Budgetary Review and Recommendations Report (BRRR) of 2012/13. He stated that the Report was compiled under tremendous pressure, over the space of two weeks. The reason for this was because the guidelines for the format of the report had changed, so the Committee was met with new challenges in this regard. However, Members tried their best and managed to put the BRRR together.

The Chairperson read out apologies from Mr J Selau (ANC), Mr S Radebe and Mr L Greyling (ID), who could not attend the meeting for various reasons.

The Chairperson stated that the Committee would go through the BRRR page-by-page.

Department of Energy Budgetary Review and Recommendations Report
The Chairperson noted that the first 40 pages mainly showed information sourced from various entities documents. He found it was the last three pages, which spoke to recommendations and findings that were the most important. He also noted that the current format for the BRRR was more demanding than previous one because it asked Committees to look at previous recommendations that were made and to state the extent to which its respective department had responded.

Pages 1-5
The Chairperson noted that no changes were made.

Page 6
The Chairperson stated that Energy Efficient Programme should be changed to Energy Efficiency Policies.

Page 7-9
No changes were made.

Page 10
Prof S Mayatula (ANC) suggested that the Minister’s full name should be left out of the BRRR, and he should only be referred to as “Minister”.

The Chairperson agreed, saying that reports usually spoke to the Minister or Ministry, but did not state the full name of the individual.

Pages 11 and 12
No changes were made.

Page 13-17
The Chairperson directed the Committee to page 13, section 3 of the BRRR, which spoke to the “Summary of Previous Key Financial and Performance Recommendations of the Portfolio Committee on Energy”. He wanted Members to focus on this section, as it showed recommendations that were made by the Committee since 2010. He noted that the section should have indicated financial years instead of being formatted according to the calendar year.

Mr K Moloto (ANC) suggested that the Committee read through each recommendation. Members needed to understand the reasoning behind why some of the recommendations were said to be achieved and why others were not.

Mr Mayatula agreed, saying that he had a problem saying whether a recommendation was achieved or not, without an accompanying explanation.

The Chairperson stated that the Committee would go through each recommendation. He noted that the support staff was on hand to assist the Committee. The terminology was fine but that it did not speak to the Department’s degree of responsiveness to the Committee’s recommendations. He suggested that the section should speak to responsiveness instead of only saying if a recommendation was achieved or not. The Committee had seen honest attempts from certain entities that were working very hard to improve themselves.

Mr D Ross (DA) agreed with the suggestion to use responsiveness. This way, the Committee could say what the Department had actually done regarding recommendations.

The Chairperson said that the Committee would look at the recommendations one at a time. The Committee could not say that recommendations were achieved or not without making reference to what was being done. The Committee had visited a number of entities that worked with the Department. At times, the Committee was unhappy with the slow pace at which they worked, but at least they were working with other entities. He noted that the Committee had to work through the entire document, conclude it, and give the staff time to make the necessary adjustments.

[The recommendations were not numbered in the report; however, they have been for this minute]

Recommendation 1, 2, 5, 7, 9 – 22, 24 and 25
The Chairperson noted that some initiative was taken by the Department to address these recommendations. This should be noted. There were also some recommendations that were achieved. He also noted that these recommendations had to be assessed and the institutions’ responses had to be analysed. The Committee also had to check minutes and other relevant documents to be sure of the extent to which the recommendations were addressed.

Recommendations 3, 6
The Chairperson agreed that these recommendations had not been achieved.

Recommendations 4, 8, 23
The Chairperson stated that these recommendations were not applicable, as they were the responsibility of another Minister or another department.

Page 17 and 18
No changes were made.

Page 19-24: Auditor-General’s Report
Prof Mayatula noted that the section contained information that was relevant to the findings and recommendations at the end of the BRRR. He directed the Committee’s attention to page 20, which spoke about two cases of irregular expenditure that were under investigation. He suggested that the Committee ask for an update on this under recommendations. He pointed out two more investigations on page 21.

Mr Moloto suggested that the Committee make a general recommendation at the end of the report asking for updates on all investigations.

The Chairperson noted the Committee’s agreement.

Page 24-28, Section 4.5
The Chairperson drew the Committee’s attention to section 4.5 of the BRRR, which spoke to the summary of key financial issues contained in any other relevant report(s) for 2012/13 for the Financial and Fiscal Commission (FFC). He said that a recommendation should be made to the Minister regarding tariffs. References to “red” tariffs had to be replaced by appropriate policies for tariffs.

Page 29-30, Section 4.6: Financial Performance 2013/14
The Chairperson stated that it was difficult to analyse the financial performance in such a short time. He noted that the table for First Quarter Financial Performance on page 30, had to be included below section 4.7, which was the section for the first quarter financial performance.

Page 31, Section 4.8: Concluding comments on financial performance
The Chairperson suggested that a recommendation should be added to address the inadequate resources of the Department in terms of legal services. The Department was struggling on the legal side and the Committee had to play a role and emphasise the need to expand the Department’s legal capacity.

Page 32 – 40, Section 5: Overview and Assessment of Service Delivery Performance
The Chairperson noted that the focus of this section was on programme performance.
No major changes were made.

Page 41-42: Oversight Visit Reports – Summary of key service delivery issues
The Chairperson stated that some of the points could be restructured and done properly. He reminded the support staff that a few points regarding service delivery issues were made at previous meetings.

Page 43, Section 6: Committee’s Findings and Response
The Chairperson drew the Committee’s attention to the fifth finding, which said that there were problems with procurement practices within the entities. Further to this, problems were identified with regard to meeting targets and irregular and wasteful expenditure. The Chairperson suggested that the sentence stating, “The issue of Acting Chief Financial Officers at entities must also be urgently addressed” should be shifted to the recommendations. He noted the Committee’s agreement.

The Chairperson talked to the sixth finding, which said that the Committee acknowledged the success of the Department in achieving 202 835 electricity connections in the last year. However, challenges were identified in terms of the working relationships between municipalities, Eskom and the Department. He proposed that the last sentence, saying “The Portfolio Committee on Energy finds that the cohesive working relationships between the various sectors of government was not well managed by the Department of Energy” be removed. He stated that this was a controversial areas for the Committee to enter into if they were not going to talk about all the facts. It seemed as though the Committee was putting the blame solely on the Department, whereas this was not the case. In some instances it was the municipalities fault. He noted the Committee’s agreement to remove the last sentence.

Page 44, Section 8: Findings and Assessments
The Chairperson proposed that the section be integrated into either into section 4, the overview and assessment of financial performance, or section 5, the overview and assessment of service delivery performance.

Members agreed.

Page 45-47: Recommendations
The Chairperson proposed that the Committee discuss the recommendations one-by-one. He also suggested that the recommendations include a time by which the Committee should be given updates.

Recommendation 1: In terms of interaction with the African continent, the Minister of Energy lists the Grand Inga Hydro Power Projects as one of its main projects on the continent. This, and other initiatives can be of benefit to SA and the Minister needs to ensure that it focuses on developing this space for SA.

The Chairperson suggested that the recommendation should be reworded to say what the Committee wanted out of the recommendation. He also stated that the Committee should get an update on the project by the end of the third quarter of 2014/15.

Recommendation 2: The Minister has identified energy efficiency as one of the challenges facing SA and acknowledged that we need to redouble our efforts. The Portfolio Committee on Energy agrees and recommends that this be addressed by empowering entities that can focus on this e.g. SANEDI. There must be some progress shown in the current financial year.

The Chairperson warned that recommendations had to be clear. The recommendation had to be more specific about energy efficiency. He proposed that there should be a strategy and plan in place regarding energy efficiency by the third term of 2014/15.

Recommendation 3: The Portfolio Committee on Energy acknowledges the construction of the two Integrated Energy Centres constructed at Ulundi and Mbizana last year but recommends that the Minister increases this rate of delivery of Integrated Energy Centres and builds at least three in the current financial year. The Department needs to challenge itself to improve on this and seek additional industrial and community partners to ensure faster delivery.

The Chairperson suggested that specific focus should be put on rural areas.

The Committee agreed.

Recommendation 4: The issue of lack of skills, required for the nation’s electrification programme was highlighted to the Committee numerous times. The Minister is to urgently address this with the respective entities and higher education institutions and report back to the Committee by the end of the current financial year. 

The Chairperson noted that reporting back to the Committee by the end of the current financial year was impossible. The deadline would be pushed to the third term of 2014/15.

Recommendation 5: One of the strategic objectives of the sub-programme corporate support is “research Co-ordination”. The Minister must not only ensure coordination of research at the entities it oversees but assist the entities to ensure the full value chain all the way to commercialisation is addressed.

The Chairperson proposed that a strategy and plan for this recommendation should be presented to the Committee in the fourth term of 2014/15.

The Committee agreed.

Recommendation 6: In terms of the energy efficient demand side management programme, over R1 billion was transferred to municipalities and Eskom. The Department of Energy needs to ensure that robust oversight is demonstrated over this programme.

The Chairperson suggested and Members agreed that the Committee would receive feedback on this in the third term 0f 2014/15.

Recommendation 7: One of the entities indicated that “the growth of the gas market remains a challenge given the avaialbaility of domestic natural gas and the substantial investment cost involved for new entrants.” The Minister needs to investigate what can be further done to increase the usage of gas in the economy and develop strategic interventions to ensure this happens. The Minister is to report to the Committee on the plan with this regard by the end of the financial year.

The Chairperson noted that the Department owed the Committee a transformation strategy and plan for the gas industry. The Committee needed an update on the Department’s strategic interventions.

Recommendation 8: The Minister to ensure replication of the Kuyasa CDM project throughout SA on a mass scale.

The Chairperson suggested and Members agreed that there should be an update on this recommendation by the fourth term of 2014/15.

Recommendation 9: The Minister in conjunction with other sectors of government is to ensure all future designs and construction of government buildings are energy and resource efficient and such be extended to all built environment as a matter of urgency. The Minister, in conjunction with the Minister of Public Works is to report back to the Committee within six months of receiving these recommendations.

The Chairperson noted that if the recommendation was going to talk about design, then it should talk to retrofitting as well. It was agreed that the Committee would ask for a report back in the fourth term of 2014/15, given that elections would take place during the year.

Recommendation 10: In terms of the Independent Power Producers Renewable Energy Procurement Bidding process, the Committee recommends:
The Minister to urgently consider challenges of the complex and expensive bidding process, the lack of BBBEE policies, job creation, skills transfer and work with other departments to address such challenges;
The Minister to try and reverse the lack of initiatives to take advantage of the opportunities to increase local content had to be addressed as a matter of urgency;
The Minister to ensure focus must be on the establishment of local manufacturing renewable energy industry particularly achieve a 60 percent local content target;
The Minister to closely monitor skills transfer which is also paramount;
The Minister to ensure the 2.1 percent of project costs that are earmarked for socio-economic development are strictly adhered to – such must include clear guidelines on how this money should be spent;
The Minister should motivate South African bidders such that there are more local participants during subsequent phases beyond windows 1 and 2;
The Minister to work more intensively with the Minister of Economic Development and the Minister of Trade and Industry on the job creation aspect of the programme;
The Minister to mobilise provincial Financial Development Financiers to enhance their contribution on the renewable energy programme;
The Minister is to report back to the Committee on how these points are being addressed within six months of receiving these recommendations.

The Chairperson proposed that (a) should be removed, as new codes of BBBEE practice were just announced, (b) and (c) should be combined, (g) should be removed and that the Minister should report back to the Committee regarding (i) by the end of the 2014/15 financial year.

The Committee agreed with the Chairperson’s recommendations.

Recommendation 11: In terms of “Exploring solutions to challenges on financing and certification of locally produced renewable products”, the Committee recommends that:
SA Renewable Council (SAREC) engage with the Banking Association of SA (BASA), the Industrial Development Corporation (IDC) and other financing entities as well as the SABS to excplore solutions to problems faced by the renewable energy sector.
SAREC engage with the National Treasury, the Department of Energy and the Department of Cooperative Governance and Traditional Affairs to explore ways of resolving the issue of local government authorities being prevented from purchasing energy from IPP’s.
More engagement with Further Education and Training (FET) institutions was necessary to address the issue of skills development.

The Chairperson stated that the focus had to be on the Minister to facilitate these entities. The Committee would run through the entities one at a time.

Pages 47-48:
The Committee made minor amendments to these pages, which spoke to recommendations for NERSA, NECSA, NNR, SANEDI, and the CEF and its subsidiaries.

The Chairperson noted that the Committee was at the end of the deliberations on the BRRR. He said there was one last issue to work through – the matter of green transport. Transport was a big portion of energy usage. He proposed that the Committee ask the Department to give them a presentation on green transport by then end of the third term of 2014/15.

Prof Mayatula asked if there were any entities that needed the Committee’s budgetary support. This was not mentioned in the BRRR.

The Chairperson stated that Prof Mayatula was correct, and that SANEDI was in need of the Committee’s help. The Committee would recommend to the Minister to enhance SANEDI’s financial situation.

The Chairperson asked if he could get a final endorsement for the BRRR.

Ms N Mathibela (ANC) moved for the adoption of the BRRR. Ms B Ferguson (COPE) seconded the adoption.

The Chairperson noted the adoption of the draft BRRR with amendments. He stated that the BRRR was a useful tool and commended the leadership for implementing it; however, he was concerned with the speed at which they were completing it.

The meeting was adjourned. 


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