Committee Reports on Eskom Special Appropriation Bill [B16-2015] & Eskom Subordinated Loan Special Appropriation Amendment Bill [B17-2015]

Meeting report

Eskom Special Appropriation Bill

The Committee dealt with errors in the report on the Eskom Special Appropriation Bill, most of the corrections being for spelling, grammar and syntactical mistakes.

Ms S Shope-Sithole (ANC) said the report had to include that the Department must monitor Eskom to ensure that it focused on strengthening its liquidity position to ensure the financial viability of the company, and on improving its operational performance by prioritising critical maintenance and ensure effective governance.

Mr A Shaik-Emam (NFP) said Eskom also need to monitor its own performance

Ms Shope Sithole said the Eskom implemented policies and Department monitored. The issue raised by the Parliamentary Budget Office also needed to be monitored.

Ms M Manana (ANC) said acting positions in Eskom were a concern -- even the Department’s top executives were in acting positions.

Mr A McLoughlin (DA) said sanctions must be put in place if something did not happen.

Mr Shaik-Eman said Eskom had indicated load shedding would be over in the next few years, without looking at future electricity demand.

The Chairperson replied Eskom was preparing for a future electricity demand of around 50 000MW.

Ms S Nkomo (ANC) said Eskom must consider not disconnecting hospitals, as two patients had died at a hospital as a result of load shedding. Eskom had to find a way of addressing the skills flight in its engineering sector.

The Chairperson said the Committee’s recommendations should indicate that the Department of Energy and Public Enterprises must tap into public private partnerships and independent power producers.

Mr N Gcwabaza (ANC) said the Committee had to admit that load shedding was a reality. The Committee must recommend that Eskom had to find a way of minimising it and its effect on the socio-economic life of South Africans.

Mr McLoughlin said there must be full disclosure of state assets to be sold -- to whom and for what price. State guarantees to state-owned companies must be used as a last resort. Eskom must not carry out maintenance in peak demand time.

The Chairperson said the last time he had spoken to the Deputy Minister, he had said he could not disclose the sale of some of the assets, as they were equities in listed stocks, and Parliament had to be briefed on what would be sold.

Ms Shope Sithole said the filling of vacancies in the Department and Eskom should be the first recommendation. The Department must monitor and evaluate all governance arrangements in Eskom, in particular the internal audit and risk management committees, and ensure that there was an independent audit committee.

The Chairperson recommended that Eskom should fill all vacant positions in this financial year.

Mr Gcwabaza said the National Treasury must present to Parliament on the sale of non-strategic assets.

Mr Shaik-Emam said the recommendations should be written as the Department or Eskom “must”, not “should,” because “should” made it voluntary to oblige with a recommendation.

The Committee Secretary replied that using “must” was instructing another arm of government.

Ms Shope Sithole said the Committee seemed too nice to its friends by using “should,” but Parliament had to flex its muscles in the same way as the courts and media, which always noted that the Minister must do x, y and z.

Ms Nkomo said Parliament could be nice to its friends by removing “should” or “must” in a sentence, and it would still sound friendly.

Mr Shaik-Emam said the Committee must use harsh words to ensure that Eskom got back on track.

The Chairperson said the Committee would stick to using “should,” yet in its heart it knew that it meant “must.” Parliament could at any time summon a Minister to appear before it.

Mr McLoughlin said the recommendation that the National Energy Regulator of South Africa (NERSA) must set cost reflective tariffs should be removed, as it was interference in the work of the regulator.

The Chairperson said Eskom must report to Parliament on its turnaround strategy in order to pick up any challenges early.

Ms Nkomo said Eskom must communicate more to the public on electricity supply issues.

Mr M Figg (DA) said the DA objected the clause that the Minister of Finance may impose a condition on any part of the appropriation. The DA did not agree with the Minister being given authority to impose conditions on the bill ex post facto. The DA also disagreed with the non-disclosure of the sale of state assets, as announced by the Finance Minister during his mid-term budget statement.

Mr Shaik Eman moved for the adoption of the report, and was seconded by Ms Manana.

Eskom Subordinated Loan Special Appropriation Amendment Bill

Mr Shaik Eman asked why there was conversion of the loan within a few years when it was a 30-year loan agreement.

The Chairperson replied that 30 years had been reached earlier, hence the conversion of the loan.

Mr Shaik-Emam replied it was not fair for tax payers, while accepting Eskom was in crisis.

Mr Figg said the Committee had inadequate information to discuss the bill.

Mr McLoughlin said the Eskom Subordinated Loan Special Appropriation Act of 2008 and the loan agreement talked about different things on interest rates, which meant the report and the Act were different, as the Act stated that interest rates must be market related, yet Eskom had been given a ten-year interest-free loan agreement.

Ms Avril Halstead, Chief Director: Oversight, National Treasury, replied that what had been captured in the report and the loan agreement was correct.

Mr McLoughlin said the Committee must not in its findings state that the loan agreement and the 2008 Act were inconsistent.

The Chairperson said the loan agreement was confidential.

Ms Shope Sithole said the loan agreement was not confidential, but classified, and it was only she, who was vetted, who could see it.

Ms Halstead said the loan agreement entered into with Eskom provided the main terms and conditions. There was no ten-year interest-free agreement, but Eskom start repaying when its credit metrics were strong.

The Chairperson said the Committee must stick to what the Act states.

Ms Shope Sithole said her DA colleagues could be satisfied by providing them with Eskom’s audited financial statements, without their having to go for vetting like her.

Mr McLoughlin said the Committee’s finding must note that there was a loss of revenue by converting the loan into equity.

Dr Madlopha said the Committee should ensure that money given to Eskom must be used for the intended programmes, as previous funds had not been used for their intended functions.

Ms Shope Sithole said such a statement could only be noted if the Committee had picked up such a comment from the auditor’s report.

Mr Figg said the DA did not believe the Committee had been given sufficient information on the loan deal, so the DA reserved its right.

Ms Shope-Sithole moved the adoption of the report, seconded by Ms R Nyalungu (ANC).

The Chairperson closed the meeting by saying there was a proposed oversight visit to Gauteng to the Passenger Rail Agency of SA (PRASA) in Ekurhuleni to see the work it was doing, as well as the city of Johannesburg, towards the end of July.

The meeting was adjourned.