Minister and Deputy Minister of Energy & Department of Labour on their 2014 Strategic Plans

Meeting report

The Chairperson welcomed the Deputy Minister to the meeting and explained that the Minister was running late but she would be joining the meeting shortly.

Presentation: DoE Annual Performance Plan, Strategic Plan and Budget Vote 29
Ms Thembisile Majola, Deputy Minister of Energy, said the National Council of Provinces (NCOP) was a very important aspect to the work of DoE primarily because of their proximity to local government and the oversight work Members undertake. Over 90% of DoE’s budget was allocated as transfers. Only a small percentage of funds remain for the running of DoE.

Mr Tseliso Maqubela, Acting Director-General, DoE thanked the Committee for the invitation. He explained that DoE was established in 2009 as an outcome of the Department of Minerals and Energy being split into two. DoE was mandated with the responsibility of ensuring secure and sustainable provision of energy for socio-economic development in our country – a mandate that has been reconfirmed via the National Development Plan (NDP) and the President’s 2014 SONA. Since its establishment, the Department’s financial and human capacity has seen a steady increase. DoE was supported by six state-owned entities reporting to the Minister of Energy:
National Energy Regulator of South Africa (NERSA)
National Nuclear Regulator (NNR)
South African National Energy Development Institute (SANEDI)
South African Nuclear Energy Corporation, (SOC) Ltd (NECSA)
Central Energy Fund (SOC) Ltd (“CEF” Group)
National Radioactive Waste Disposal Institute (NRWDI) recently established.

The Department ensures that the strategic plans and annual performance plans of these entities are aligned to the overall Government priorities. In its first five years of existence, the department has been focusing on the development and improvement of policy in support of energy security (as mandated), through an integrated energy planning approach while strengthening the regulatory framework within the energy sector and playing a role in helping to reduce the impact of greenhouse gas emissions.

Some of the highlights for the first five years were that access to energy services in rural areas has been improved through electrification of over 1.1 million new connections and the construction of Integrated Energy Centres. DoE was also able to produce the country’s 20 year plan, the Integrated Resource Plan 2010, for electricity, with a deliberate bias towards cleaner energy. Independent Power Producers were also introduced during this period. He argued that DoE had gone a long way in creating regulatory certainty, which was bearing fruit through significant investments in energy infrastructure.

Some of the challenges however were: inadequate generation capacity, distribution infrastructure and management of distribution business, the rising cost of energy, inadequate access to electricity, increasing energy efficiency, the lack of adequate skills and the slow transformation of the economy/sector.

The Department has reviewed its 2014/15 APP tabled in February 2014 to align it to the MTSF targets as well as the SONA and for the 2014/15 financial year. The Department is appropriated R7.4 billion, with 93% of the total budget earmarked for transfer payments. The bulk of the budget increase from the 2013/14 budget is allocated to the electrification programme and the solar water geyser programme. DoE was also involved with various Strategic Integrated Projects (SIPs) throughout the country, working with the Presidential Integrated Coordinating Commission (PICC). The key focus areas for 2014/15 were increasing access to electricity with an additional 265 000 grid connections and 15 000 non-grid connections, increasing momentum on the installation of solar water heating units, finalising the Integrated Energy Plan (IEP) with more detailed infrastructure plans, addressing maintenance and refurbishment backlogs in the electricity distribution industry, strengthening the liquid fuels industry and facilitating the process leading to the implementation of decisions taken on the nuclear programme.

Presentation: 2014/15 Budget Overview
Ms Yvonne Chetty, DoE Chief Financial Officer, explained that from the spilt of the Department of Minerals and Energy in 2009 into the Department of Mineral Resources (DME) and the Department of Energy, DoE received only 30% of staff and resources while the majority of resources were left with the DME. The total appropriation which DoE received for 2014/15 was R 7.4 billion.

Ms Tina Joemat- Pettersson, Minister, DoE apologized to the Committee for her late arrival.

Ms Yvonne Chetty, DoE Chief Financial Officer, said the final audit for the 2013/14 financial year was currently under way; 99.6% of the budget was spent and R 26.1 million was unspent and R 24 million has been requested as a rollover from National Treasury. The outcome of this application would be made available to DoE around the second week of August 2014. The projects for which DoE has requested rollovers were still underway. Between 2013 and 2014 there has been a decrease of 3% and the main contributor to this was the multi project pipeline. From 2013 to 2014 financial year there has been a 14% increase primarily due to the growth in the electrification programme which was carried out by Eskom and municipalities.

The share of DoE’s budget allocation per programme was:
Programme 1: Administration – R 244 122 million (3.29%)
Programme 2: Energy Policy and Planning – R 52 583 million (0.71%)
Programme 3: Petroleum and Petroleum Products Regulation – R 39 865 million (1.12%)
Programme 4: Electrification and Energy Programme and Project Management – R 4.1 billion (0.67%)
Programme 5: Nuclear Energy – R 723 998 million (0.59%)
Programme 6: Clean Energy – R 1.9 billion (0.68%).

The rest of the allocations were South African National Energy Development Institute (Sanedi) at R 162 685 million (2.19%), international membership fees at R 12 055 million (0.16%), the Demand Side and Efficiency Programme at R 1.7 billion (23.91%), South African Nuclear Energy Corporation at R 760 678 million (0.45%), the Integrated National Electrification Programme (INEP) which took the bulk of the allocation was at R7.4 billion taking up (55.95%) of DoE’s budget allocation. Some of the transfers to municipalities have also been increased. Necsa has been allocated a one off funding of R190 million to upgrade aging facilities at the Phelindaba site. Compensation and goods and services for the line function branches were fairly low however there were continuing engagements with National Treasury to address some of these issues. The staff component was also not sufficient. The transfers to the municipalities were at 93% and this took a fair portion over the Medium Term Expenditure Framework (MTEF) period. Funds to municipalities were transferred according to the Division of Revenue Act for non-grid connections, for grid connections the funds were transferred in terms of memoranda of understanding and agreements with municipalities. However there was no focus required in terms of oversight functions. She agreed that DoE was experiencing quite a few challenges about oversight over municipalities and some of the reasons were due to vacancy levels and skills shortages. DoE was assisting municipalities wherever necessary. National Treasury was also engaged in this.

Dr Wolsey Barnard, DoE Deputy Director-General: Energy Programmes and Projects, said the electrification programme was managed through three entities: Eskom, concessionaires (private service providers) and municipalities. R 320 million was allocated in the last financial year to the mini Electricity Distribution Asset Management (ADAM) programme. A provincial breakdown was given. During 2013/14, the target was 260 000 INEP connections and DoE managed to achieve 303 773 connections, an over performance of 46 773 connections. DoE had experienced good co-operation from Eskom and less good co-operation from municipalities. With regard to oversight, municipalities were required to report on a monthly basis. For the current financial cycle he mentioned Independent Power Producers (IPPs) for renewable energy and indicated that the Integrated Resource Plan 2030 made provision for IPPs. For the Solar Water Heater (SWH) programme, Eskom was the designated implementation agent under the National Solar Water Heater Programme. The available funds were shared between Low and High Pressure systems in the ratio of 80:20. Service level agreements would be signed between Eskom and municipalities for project implementation.

Mr Maqubela said within the Nuclear Energy Programme, DoE planned to demystify nuclear energy through public awareness campaigns. Financing and funding mechanisms for the nuclear programme would also be finalised. A transactional advisor would be appointed to conclude technical work as a precursor to the launch of nuclear procurement.

With regard to the 2014/15 legislative programme, DoE intended to develop the following pieces of legislation:
•Electricity Regulation Amendment Bill
•National Energy Regulator Amendment Bill
•Gas Amendment Bill
•Independent Systems and Market Operator (ISMO) Bill.

Discussion
The Chairperson thanked DoE for the presentation. The Committee would appreciate a full indication by DoE about the projects which were currently underway so that Members could adequately perform their oversight functions.

Mr E Makue (ANC; Gauteng) thanked DoE for the exciting presentation. It was however worrisome that DoE seemed to be experiencing some constraints around DoE’s human resource and financial resources pertaining oversight. It was crucial that DoE adequately perform its oversight function because a huge portion of DoE’s budget was allocated to municipalities. He asked about the Inga project in the Democratic Republic of Congo and whether any progress had been made. How did the present political instability in countries such as Nigeria impact the country’s supply of petroleum?

Ms E Van Lingen (DA; Eastern Cape) said National Treasury had indicated that the upgrade of infrastructure in municipalities was currently in the pipeline; these backlogs amounted to around R 50 billion. What happened to the debt owed by municipalities to Eskom? On nuclear, she asked about the progress which had been made around the regulatory framework; would the relevant legislation be finalised before the full rollout of the nuclear programme? She asked for an explanation on the allocation to the ADAM programme.

Ms M Dikgale (ANC; Limpopo) also made mention to the ADAM allocations and asked why the allocations varied. Often times Members did not applaud the departments on the good work they do, however from DoE’s presentation, great work had been done by the department especially in the last five years. The 6 million electricity connections in the past 20 years were highly commendable. She asked that DoE continue to take care of rural areas.

The Chairperson agreed and said a number of areas throughout the country had adequate access to electricity.

Dr Y Vawda (DA; Mpumalanga) thanked DoE for the presentation. He asked that DoE elaborate on its initiatives around responsible usage of electricity; how was DoE trying to save electricity and how did the different sectors in the country consume electricity? He referred to the R 100 billion investment, and said investments to South Africa should always have a South African component; investment should be made with socio-economic justice in mind. He argued that the safety aspect of nuclear energy was very important seeing that the country had taken a decision to move ahead with the programme. Sub-Saharan Africa had huge potentials for energy alternatives and nuclear was not necessarily the right way to go. The potential to produce energy from the Congo River alone was sufficient for the energy needs of the entire country. What kind of interventions came from Nersa at local government level? He reiterated that close to 93% of DoE’s budget was allocated to municipalities; how was the 2013/14 budget reconciled when DoE really did not know where the money was going? Countries such as Venezuela and Iran, which South Africa had good international relations with, could be looked at as one of the more stable countries with resources which South Africa could use; why was this option not being explored?

Mr S Mthimunye (ANC; Mpumalanga) asked for clarity about DoE’s relationship with Eskom, especially around Eskom not being directly accountable to DoE.

Mr J Londt (DA; Western Cape) asked about the kind of support DoE provided to municipalities. What would DoE classify as a fuel-efficient car and what cars did DoE officials drive? He asked whether an audit had been conducted on Parliament’s building to assess the energy efficiency of the institution.

Mr L Mokoena (Free State) asked about the natural gas pipelines between Mozambique and Secunda; the pipelines were owned by government but Sasol had a 20 or 30 year lease on the pipeline; when would the lease expire? Given the huge energy problems in the country, why was government not using reticulation especially towards the free housing offered by government?

Mr Maqubela responded to the question on Nigeria and explained that the oil production in most countries has moved off-shore therefore the political disturbances which take place on-shore did not affect oil production. This was an attempt to de-risk the commodity. On the Inga project, he said the project was on track and had well advanced, the details would be presented to Parliament by the Minister at an appropriate time. On Angola, he said oil companies did the purchasing. In 1999 the procurement of crude oil was de-regulated as a result there was a tendency to close the discussions from competition. On nuclear regulation, he said good legislation was passed in 1999 which catered for all the requirements for the nuclear programme. However there were now more requirements around liability for regional equipment, which manufacturers needed. Therefore there needed to be amendments to current legislation to restrict this liability.

He informed Members that Kenya had also recently discovered oil and a number of other African countries were being trained around nuclear, in preparation for various nuclear programmes throughout the continent such as in Kenya, Nigeria and Egypt. South Africa was therefore not alone in this. On the question on Venezuela he said PetroSA was continually strengthening the relationship with the country, however Venezuela did not have crude oil procurement facilities. In addition, crude oil in that region was known to be heavy and sour, meaning it had high sulphur content. In the past South Africa received 30% of its crude from Iran until sanctions were imposed by the United States and the European Union and this had an impact on the relations between the two countries. He noted the pipeline was 50% owned by Sasol, 25% owned by Sasol and 25% owned by Mozambique.

Dr Barnard responded to the question on backlogs and said the contracst between municipalities and Eskom were being looked at and DoE was looking for ways to address them. However the problem also had a lot to do with funding constraints. The pilot mini-ADAM project was allocated R 320 million and the R 60 billion backlog would not be adequately taken care of. A list of all municipalities had been compiled and the ADAM pilot project was focusing on seven municipalities and two metros. Very good progress however had been made. There were some challenges around not only funding, but also around skills shortages at municipal level. A team has been put together by DoE to attempt to address these challenges. With regard to the R100 billion investments in renewable energy and IPPs, he said the contracts stipulated the need for a strong focus on local content and from 45% this was gradually increasing. On the 93% transfer to municipalities he said the electrification component was only 56%, and from that only 20% was allocated to municipalities and the rest was for Eskom. There were 182 licensed municipalities, of these around 6% were faced with challenges of delivering on what DoE expected. On a monthly basis, DoE compiled a report on each municipal project; there were over 90 DoE projects divided across various municipalities.

The Chairperson thanked DoE for the presentation. There was clearly still a lot which Members wanted to know but there was not enough time for further engagement. He suggested that any further questions which Members had be forwarded to DoE in writing.

Mr Mthimunye agreed with the Chairperson and said the Committee needed to have further engagement with DoE on a number of other issues. However it was acceptable that for now, Members forward any follow up questions to DoE in writing.

Department of Labour – Workshop on Budget Review
Mr Shadrack Mkhonto, Compensation Commissioner, DoL, relayed apologies from the Minister, the Deputy Minister and the Director-General who were unable to attend the meeting due to other engagements. He explained the organisational structure of DoL and highlighted its vision, mission and values. He clarified the constitutional, legislative and other policy mandates. He enumerated the challenges that DoL faces in the labour market. They were: unemployment and under employment, the changing nature of work, inequalities and unfair discrimination, domestic and cross border labour migration and the inadequate instruments for constant performance monitoring and evaluation of the labour market and DOL programmes to determine their impact on the economy.

He noted the peculiar problems confronting each province (see document) and outlined the seven programmes under DoL: Programme 1: Administration which consists of the Ministry; Deputy Minister, Director General’s Office; Corporate Services (CS), Chief Operations Officer (COO), Chief Financial Officer (CFO), Programme 2: Inspection and Enforcement Services (IES), Programme 3: Public Employment Services, Programme 4: Labour Market Policy & Industrial Relations, Protected Employment Enterprises (currently trading as Sheltered Employment Factories, Unemployment Insurance Fund (Schedule 3A Public Entity) and the Compensation Fund (Schedule 3A Public Entity).   

Mr Bheki Maduna, DOL Chief Finance Officer, reported on the audit outcomes of 2012/13 financial year, explaining that predetermined objectives were not well defined, funded vacant posts were not filled within 12 months, vacant positions were not advertised within six months, some creditors were not settled within 30 days of receipt of the invoice and the accounting officer did not take effective steps to prevent fruitless and wasteful expenditure. He presented the budget allocation for 2013/14 and 2014/15 and the unaudited expenditure results for 2013/14. As at end March 2014, 95% of the appropriation for Administration was spent whilst 97% of Inspection and Enforcement Services was spent. Public Enforcement had spent the whole amount allocated to them and Labour Policy and Industrial Relations spent 98%. The 2014 budget was decreased by R106 million. The funding challenges of the Department were: spending pressures, strengthening of existing programmes and new priorities, implementation of the new Employment Services Act, funding of the Office of the Chief Information Officer, funding of Inspection and Enforcement Services and funding of the new Deputy Minister’s Office.

Mr Sam Morotoba, Deputy Director-General: Public Employment Services, DoL presented the DoL Strategic Plan 2014 – 2019 and its alignment with Medium Term Strategic Framework (MTSF) and the National Development Plan (NDP) and looked at the indicators.

Programme 1: Administration
Ms Phelele Tengeni, DDG of Corporate Services, presented on its 2013 / 2014 Annual Performance, Challenges and Annual Performance Plan 2014/2015. She noted that 75% of fraud cases were received, detected and finalised against the targeted 90%. The annual target for women in DOL senior management (SMS) was 45%, youths were 43% and people with disability (PwD) were 3%. As at 31 March 2014, 38.5% of women had been employed at the SMS level, 32.9% of youths and 2.5% of PWD. Some of the challenges included the high staff turnover in the Internal Audit Directorate, lack of capacity and skill to investigate DoL fraud cases, changes in the organisational structure, numerous fraud cases that took longer than anticipated and the additional posts that were created during the performance cycle. (See document for additional details on the Strategic Objectives, Programme Performance Indicators and the Medium Term Targets).

Programme 2: Inspection and Enforcement
Mr Thobile Lamati, DDG of Inspection and Enforcement Services, said its goal is to provide decent work by regulating non-employment and employment conditions through inspections and enforcement in order to achieve compliance with all labour legislation. There are a total of 830 inspectors of which 160 are occupational health and safety (OHS) inspectors, 336 Team leaders, 75 Principal Inspectors and 129 vacancies. The percentage of inspectors in developing countries is 1 inspector to 20 000 entities whereas South Africa has 1 inspector to 114 000 entities and this figure results in an ineffective enforcement of OHS Act provisions. He drew the Committee’s attention to the reduction rate in worker vulnerability through improved compliance and enforcement. A total figure of 75% complied with 69% complying in the Eastern Cape Province, 55% in the Western Cape and 87% compliance rate at Gauteng. Of the total target of 90 000, actual target inspected was 129 259 employers, with 97 526 who complied and 31 733 did not comply. A total of 66% client complaints had been resolved. A total of number of 209 shop stewards were trained as against a target of 100. The challenges experienced during implementation were budget cuts on operations and human resources. Corrective measures initiated was lobbying of the Portfolio Committee to engage with National Treasury to increase the inspectorate baseline to address the impact of budgetary constraints on service delivery.

Programme 3: Public Employment Services (PES)
Ms Esther Tloane, Acting DDG of Public Employment Services, said PES provides assistance to companies and workers to adjust to changing labour market conditions and to regulate private employment agencies. Currently there were 95 Employment Services Counsellors and 214 Employment Services Practitioners. Strategic objectives and their indicators were noted. In 2013/14, the number of work-seekers targeted to be registered on the Employment Services of South Africa (ESSA) database was 500 000, however a total of 618 092 (124%) were registered. 41% (250 160 of 500 000) of work-seekers against a target of 50% were provided with employment counseling. A total of 15 570 (82%) work-seekers were placed in registered employment opportunities in provinces as against a target of 19 000. PES challenges were: PES being under staffed at service delivery points, insufficient financial support for capacity building and implementation of employment schemes, skills mismatch between registered work seekers and registered opportunities (Supply & Demand) and the resistance of registration and non compliance by Private Employment Agencies (PEAs) and Temporary Employment Services (TES).

Programme 4: Labour Policy and Industrial Relations
Mr Thembinkosi Mkalipi, Acting DDG of Labour Policy and Industrial Relations, said this programme ensures the facilitation of the establishment of an equitable and sound labour relations environment and the promotion of South Africa’s interests in international labour matters through researching, analysing and evaluating labour policy and providing statistical data on the labour market, including providing support to the institutions that promote social dialogue. Two challenges encountered were the promulgation and the implementation of legal amendments and the instability of the labour market. Strategic objectives and indicators were outlined.

Discussion:
The Chairperson thanked the DoL for the presentation. Due to time constraints, he suggested that Members forward their questions to the DoL who would provide a written response.

Mr Makue agreed with the Chairperson.

The meeting was adjourned.