South African National Energy Development Institute on its 2013/14 Annual Report

Energy

16 October 2014
Chairperson: Mr F Majola (ANC)
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Meeting Summary

The Committee met briefly to discuss SANEDI's annual report for 2013/2014. The presentation highlighted  ways to reduce carbon footprint as a way to show the public how serious  SANEDI was about the environment as well as ways to reduce company overheads - where saving could be used elsewhere in the organisation. The vision and mission were also an important part in the presentation to show \which direction the entity was heading and give the Committee an idea of its future plans. SANEDI achieved nearly 90% of its targets and the rest were partially achieved - this included projects in the development process, finding new innovative ways for energy savings, a review of basins and securing new sources of funding. The CFO took the Committee through its expenditure pattern for the year under review, and revealed how projects were funded, sponsors of these projects and the amount of money that was spent on each projects. There were no incidents of irregular expenditure.

The briefing by SANEDI was followed by a brief discussion with Committee Members; Members were not happy with the report - a lot of details had been left out from the report and there was not much for members to discuss on. Members noted that SANEDI was not solely responsible for all the failures of its projects- the Minister also should be questioned. Members asked why SANEDI did not spend its entire budget. Members questioned whether it was sustainable to have only contract workers and asked about the entity’s role in energy fragmentation. Members noted with displeasure that the report did not contain any facts of which the entity can provide evidence.

Meeting report

The Committee Secretary at the start of the meeting noted that the Minister, Ms Tina Joemat-Petterson, would not be able to attend the meeting due to other commitments abroad, as well as the Deputy Minister, Ms Thembi Majola.

Mr G Mackay (DA) said Mr Mr L Greyling (DA) will not be attending the meeting.

The Committee Secretary added that Ms E Louw (EFF) was running late for the meeting.

South African National Energy Development Institute (SANEDI) on its 2013/14 Annual Report
Mr Kevin Nassiep, Chief Executive Officer, introduced the representatives from SANEDI, while noting that the Chairperson, Adv. Nothemba Mlonzi, was held up in Johannesburg and will be arriving late for the meeting.  The presentation commenced with a highlight of the mission and vision of SANEDI, promising advanced innovation of clean energy solutions (see document). Some of SANEDI’s targets for the 2013/14 financial year included the completion of current projects, a review of its governance structure, establishment and activation of international PCSP Advisory Committee (PAC), PAC review of geological information of Algoa and Zululand Basins, compilation of a shale gas investigation work plan and securing additional funding- some of these targets were achieved and others were partially achieved (see document).

Ms Lethabo Manamela, Chief Financial Officer, said the entity received an allocation of R 295,648,000 in the year under review, of which most of this funding was allocated to projects. SANEDÍ’s funders include foreign government institutions, private sector partners, rollover funding and rollover funding from administration. The total expenditure was R 92 250 000 of which R71 800 000 was given to Reconstruction and Development Plan (RDP) and the unspent funding was R 131 598 000; expenditure includes investment in plant and equipment which totalled to R7,8 million. The funding achievements have been leveraged to attract support from the World Bank and Norwegian Government for the CCS pilot project.

Discussion
Mr J Esterhuizen (IFP) asked what was meant by the term "rollover funding" and why the institute did not spend its entire budget as it had planned. What was the percentage of staff members on contract and why were those positions not filled with permanent employees?

Mr M Matlala (ANC) said the report did not give the Committee enough detail to understand the going ons in SANEDI and almost half of the report was based on rumours and not facts. The Committee should not discuss the report at the moment but rather allow SANEDI prepare another report that will have facts with details.

Ms Louw said her questions were similar to those of Mr Esterhuizen's but believed that it was important to discuss the report, no matter how bad it, because the Committee had an oversight role over  the entities of the Department. Some of the trained technicians of SANEDI had been employed by other entities, or companies overseas, how will SANEDI ensure that its technicians that were trained over seas will stay within the entity. Was it not better for the entity to buy out rightly buy property rather than rent. It is important for SANEDI to strategically make its long-term and short-term goals visible; this would make it easier for the Committee to assess what is happening.

Ms T Mahambehlala (ANC) was not impressed with the report. The report did not give enough information to discuss; there was so much detail missing from the report. From the report, areas requiring further probing included-, the irregular expenditures, the absence of a Secretary in the entity, the number of vacancies that were filled and the compilation of risk management. Why were there were only representatives present for the briefing - the entity seemed not to hold the Committee and its time in regard. Representatives should motivate as to why the Minister should keep the entity in its current position.

Mr Mackay said he wished Members were as passionate about the Nkandla issue as they are about the entities irregular spending and disagreed that the report was bad and had incorrect data. What is the function of SANEDI in the Cogent Project and how much money was needed to implement its functions? SANEDI is not solely responsible for all the failures of its projects; the Minister should also be blamed for her lack of involvement and support for the entity. 

Ms Z Faku (ANC) said the report had its weaknesses but there is room for improvement. What had the entity done to bring about integration and co-ordination on the part of energy efficiency being fragmented?

Mr R Mavunda (ANC) said the entity seemed to be populated by contract workers and no permanent employees- it was worrisome that the entity will not be sustainable by having only contracts workers.

Mr Nassiep said the Chairperson would no longer be attending the meeting as she had been admitted to hospital in Cape Town- her absence should not be seen as a sign of disrespect to the Committee, she had been feeling ill before boarding the plane. There is an extensive stakeholder engagement process that is underway to establish the public's perception in regard to Carbon Capture and Storage (CCS) and not many people realised SANEDI was involved in the process; the cost of storing carbon dioxide is extremely high, and would have capital implications, which means that overall the leveraged price of electricity would go up. Nobody enforces CCS voluntarily, and the role of SANEDI would be to inform government as to the cost implications of CCS and the regulatory framework that was needed for the safe and cost effective use of CCS should it become a government policy. An attempt was being made to cut costs on its pilot plant which was planned to be operational between 2017 and2018, where tens of thousands of tonnes of carbon dioxide would be injected. The power stations produced millions of tonne of carbon dioxide, so the effectiveness of the technology could be judged by the success of the pilot plant. The World Bank had already given support to a project in Mexico, and South Africa (SA) has received a share amounting to of USDS27M, as a pledge towards South Africa's understanding of the technology, but there was no pressure for Souh Africa to implement CCS technology, in that it was done voluntarily. The only project that was motivated totally on environmental grounds had been done in Norway, on the North Coast; everyone else does CCS technology for enhanced gas recovery, whereby they inject carbon dioxide into gas and oil wells and the gas is extracted, and  the heavier carbon, which remains underground, is used. Not enough progress had been made in the areas of smart grids; the aim would ultimately be to introduce a network in SA which would respond to consumer’s needs, which would allow the consumer have a choice. It would take a number of years to set up a smart grid, gaps in knowledge would have to be identified. It would be implemented in a phased rolled-out programme, involving municipalities. Some municipalities had already started the process of installing smart meters, as a smart meter needs an infrastructure to support it. A document had already been delivered to the Department of Energy (DoE) and feedback is awaited from them. Industry support has already been achieved. SANEDI has been conducting interviews to appoint a company secretary for the past six months, but unfortunately had found the candidates unqualified themselves; however, it was still in the process of successfully appointing a company secretary.

Ms Manamela in response added that SANEDI reported no incidents of irregular expenditure, and that control policies were also in place to deal with such occurrences- it would take disciplinary action against wrongdoers. An action plan had been implemented to centralise procurement and effectively implement the training of staff members. In future, more contract staff would be employed, the general trend being on a three year contract basis. There was a 52% component of women in the company, and SANEDI had one coloured manager. SANEDI was seeking a partner in the private sector in a bid to manufacture standardised components to be utilised in the co-generation of electricity, as this would be more cost effective.
 
Mr Nassiep further responded that on the most cost-effective way of proceeding with shale gas exploration in an environment which is sensitive, one of the biggest challenges would be to introduce an effective, waterless fracking technology for the safe production of shale gas, which is awaiting approval. SANEDI’s role was to support the Department of Mineral Resources (DMR) so that Cabinet could allow for the safe and cost effective use of shale gas, the work plan has been made available to and was awaiting approval from the DMR. The World Bank is supporting initiatives in Mexico.- R27million from the World Bank had been received as a pledge and  the only other country which has voluntarily introduced this technology is Norway- the first CCS project motivated purely on environmental grounds. Other countries using CCS technologies do it for enhanced oil and gas recovery.  There was no commitment yet to CCS- the economic issues first had to be understood. The Committee was urged to support SANEDI’s initiatives in the hopes that additional funding would be forthcoming through donor funded agreements, tax incentives etc. Support was definitely needed for areas that were underfunded.

The Chairperson noted that many of the failures of the entity were not due to its lack of competency but rather the Department as a whole.

The meeting was adjourned.

 

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