Energy Budget Review and Recommendations Report


20 October 2015
Chairperson: Mr F Majola (ANC)
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Meeting Summary

BRRR 2015-2010: Budgetary Review & Recommendations Reports

The Portfolio Committee on considered the Committee’s draft Budgetary Review and Recommendations Report (BRRR), with the Minister of Energy, Ms Tina Joemat-Pettersson in attendance.

Some recommendations discussed by Members were: fragmentation of the energy sector and the fact that regulation on petroleum (Minerals and Petroleum Resources Development Act) did not include oil and shale gas. Members agreed that there needed to be a forensic investigation into PetroSA and the R14.5 billion impairment. It was recommended that PetroSA brief the Committee on Project Apollo; a turnaround strategy for the entity. Members also recommended that the Solar Water Heater (SWH) programme be rolled out with urgency and that the DoE look into the location of Eskom and whether the Department of Public Enterprises was still the right place to have the state owned entity. The Department of Energy was urged to come and brief the Committee on the progress made on the implementation of the recommendations made to it by the Committee in the last financial year and on the progress made on the Grand Inga project. Members recommended that the Clean Energy budget was low and should be increased. Members however struggled to agree on the appropriate timeframes to issue to the Department of Energy, especially on when the Department would come back to brief the Committee on Necsa’s Annual report which was still with the Auditor General; it was not tabled in the current financial year. 

Meeting report

Draft Portfolio Committee on Energy’s Budgetary Review and Recommendations Report (BRRR)
Dr Pradish Rampersadh, Content Advisor, Portfolio Committee on Energy, indicated that the report would look at the activities of the DoE during the past financial year (April 2014 – March 2015), together with the performance of the entities. The meeting would then discuss the Committee’s recommendations and findings.

Mr P Van Dalen (DA) said the Chief Executive Officer (CEO) of PASA indicated that there were problems within the entity that needed to be addressed; yet this was not reflected in the report. The CEO indicated that the entity would not be getting a clean audit in the coming financial year because the entity did not have any income. (p39)

Dr Rampersadh said the report did contain some comments relating to that issue.

The Chairperson said the challenges which Members had discussed with the entities needed to be included as part of the body of the report, preferably under “recommendations”.

Mr Van Dalen was satisfied with the suggestion that the matter would be included in the report. 

Ms T Mahambehlala (ANC) said under “findings” some of the issues Members had raised were not included in the report; issues such as fragmentation and the fact that regulation on petroleum did not include oil and shale gas. On PetroSA the Committee had said there needed to be a forensic investigation into the company. This information was not included in the report. On Project Apollo Members indicated that as much as the Project was a turnaround strategy for PetroSA a comprehensive presentation needed to be given to the Committee on the Project. On the Solar Water Heater (SWH) programme the Committee indicated that the programme needed to be rolled out immediately however the way that statement was worded in the report did not suggest any urgency. She indicated that a Member made a recommendation that the Clean Energy budget was low and should be increased. None of this information was part of the report.

The Chairperson said the section containing all the recommendations had not yet been included in the report. He suggested that Dr Rampersadh bring it to the Committee for discussions. All the issues raised by Ms Mahambehlala were noted. Any new issues Members raised would be included in the recommendations.

Dr Rampersadh read out the Committee recommendations and findings, which included inadequate oversight by the Department of Energy (DoE) on its entities and stricter financial controls on PetroSA among others.

Mr R Mavunda (ANC) said the Central Energy Fund (CEF) structure had to be attended to, together with the “acting positions”, and timeframes needed to be added to this recommendation.

Mr M Mackay (DA) said the cleaner fuels specification seemed as though the DoE was going to miss the 2017 deadline, the DoE indicated to the Committee that the department was meeting with various stakeholders, could the Committee get more information on the progress the DoE had made so far?

Mr Van Dalen said the recommendation about the liquid fuels value chain including storage needed to be narrowed down to prompt the DoE to provide more clarity on whether the DoE could meet South Africa’s fuel demands or not.

Ms Mahambehlala indicated that the Committee had agreed that the DoE should come back to brief the Committee on the Grand Inga Project, and this had not happened. The DoE also did not have an Energy Master Plan; what timeframe was the Committee giving the DoE to ensure that the Plan was completed? The recommendation that PetroSA come back to brief the Committee on Project Apollo in three months was too long a period, PetroSA needed to be given two weeks to do this. The turnaround strategy for PetroSA should be treated as a matter of urgency. The Committee also needed to put a timeframe on the presentation of the PASA. There also needed to be a presentation to the Committee on the key nuclear procurement documents; however Members needed to be cautious when dealing with these documents to ensure that the process was not compromised. No department has ever presented its procurement process to a Committee however it was understandable that the nuclear deal was of high public interest.

Mr Mavunda said the concern around the “acting” positions within the DoE and its entities needed to be included in the recommendations.

Mr Mackay said the Committee needed to get clarity from the DoE within the next three months on whether the Department would meet the 2017 deadline on Cleaner Fuels Specifications.

 Mr M Matlala (ANC) said the issue of Eskom accounting to the Department of Public Enterprises (DPE) about its energy challenges had to be addressed somehow, together with the structure and location of Eskom.

The Chairperson welcomed Ms Tina Joemat-Pettersson, Minister of Energy, to the meeting.

Minister Joemat-Pettersson wanted to hear about the recommendations from the Committee firsthand. 

Mr Van Dalen raised a couple of concerns that emanated from the Auditor-General’s report, specifically about putting in place consequent management; this matter was not in the Committee’s report. The DoE needed mechanisms to identify matters timeously. The report from the Auditor-General also spoke about the accounting authority and the lack of leadership within the entities; the Committee needed to make specific recommendations on those matters. Another part of the Auditor-General’s report spoke to the lack of commitment from the Minister of Energy to fix certain problems; that needed to be rectified for the next financial year.

Mr Mackay said the correct location of entities such as Eskom was indeed a matter that needed further discussion. Gas was also located under the Department of Mineral Resources (DMR) and it would be worthy to add a recommendation that in other countries gas was under the DoE and the country needed to relook the DMR’s mandate around gas. Stronger coordination between the two departments was necessary.

Mr J Esterhuizen (IFP) said Members only received the draft report the previous night, therefore not giving Members enough time to adequately go through the report. With regard to the recommendation that the DoE and its entities needed to be staffed properly with the correct technical skills, there needed to be a clear understanding of the responsibilities of the Boards of these entities and that of the Minister of Energy.

The Chairperson agreed that the draft report being sent the previous night that brought with it time constraints. However Members were asked to go ahead and assist in discussing the draft report regardless. Members have already raised a number of issues for consideration.

Dr Rampersadh responded and said the recommendation on PASA would be incorporated into the report.

Mr Van Dalen asked that Dr Rampersadh go through all the recommendations and send them to Members first thing the next day.

The Chairperson said all process issues could be dealt with at the end of the meeting.

Dr Rampersadh said the recommendation of the Committee was that the structure of the DoE be revised to deliver on its key mandates, which were policy, research and development.

Mr Mackay said it should be clear in the recommendations that the whole point of revising the structure of the DoE was so that the department could better provide oversight on its entities.

Dr Rampersadh said there would be a recommendation to the DoE on the Grand Inga Project. The other recommendation was that the DoE brief the Committee on Project Apollo and that the three months initially suggested was too long, Members suggested that the timeframe should be reduced to two weeks.

The Chairperson said the Project Apollo turnaround strategy would still be coming back to the Committee within the current calendar year; the Committee was still considering its programme. He proposed the date could be 27 October 2015.

Dr Rampersadh said the issue raised by Members around timeframes when the Annual Report for the National Energy Corporation of South Africa (Necsa) would be tabled before the Committee.

Mr Van Dalen asked whether the Committee had an idea as to when the Auditor-General would be finished with the Annual Report so the Committee could set a realistic timeframe.

The Chairperson said the recommendation could be tricky because the Committee did not want to put forward a timeframe that might not be achievable.

Mr Van Dalen suggested that the timeframe be a month after the Annual Report has been completed by the Auditor-General.

Ms Mahambehlala suggested that the Committee add an amendment that said the DoE must ensure the completion of the Necsa Annual Report. The DoE had a responsibility to ensure that all outstanding documents were provided to the Committee. The DoE needed to ensure that the audit was completed.

The Chairperson agreed that it should be indicated that the DoE needed to take the appropriate steps to ensure that the audit was complete. Secondly, Necsa needed to come and brief the Committee within a month of the Auditor-General finalising the Annual Report.

Dr Rampersadh responded to the recommendation around the procurement information. He said, in particular to nuclear structure review, a detailed action plan, finance models and the economic impact of localisation should be completed and submitted to the Committee within the next three months. Members raised concerns about the DoE not being able to make the information available, as it would compromise the procurement process. He asked Members how they wanted to proceed with the matter.

Ms Mahambehlala responded and said the Committee needed a presentation on the DoE’s nuclear procurement process; this could be done without compromising the process itself. The process was of serious public interest.

Mr Mackay supported the recommendation that the information on the nuclear procurement needed to be presented to the Committee, without compromising the process.

The Chairperson said there needed to be a proper balance between those involved in the process and the sensitivity of the information made available to Parliament. Parliament however had a responsibility to act in the best interests of the country. If needed, Parliamentary rules made provision for the information to be made available only to Members of the Committee. Also the difficulty of the next three months had to be factored in; the issue of when the financing model would be available was dependent on National Treasury. Members therefore needed to take into account the work was being undertaken by other role-players outside of the DoE. There was no doubt that the procurement process was going to come to Parliament; the Committee needed to  ensure that the process ran smoothly. Information should be dealt with in a way that did not compromise the process. The issue of timeframes was something the Committee needed to discuss and agree on.

Mr Mackay indicated that the DoE had confirmed that the Integrated Nuclear Infrastructure Review (INIR) report was received and was completed in 2013. Finance models and various studies were also complete. It was therefore not a matter of timing, the reports were done, the decision was with the Executive with regard to what they would and would not share with the Committee. The timeframe of three months was more than adequate. The implications of these reports needed to be digested and engaged by Members, there could be no meaningful consultation with the DoE without these documents. He was willing to consider having the discussions behind closed doors to discuss these reports, but Members of Parliament needed to be brought up to speed with this information; how that was done was up for negotiation.

The Chairperson said making the reports available to Parliament was not negotiable. The Committee was committed to ensuring that all the relevant information on the nuclear process was brought before Parliament. Members should not doubt the process. He did not have information on the finance models being completed. If Members believed it was practical to have these reports brought to the Committee in three months then that would be facilitated. He did not have information about when the process between the DoE and National Treasury would be completed.

Mr Matlala supported the proposal that the DoE come back to brief the Committee in three months.

Dr Rampersadh indicated that the recommendation on the SWH was included in the report, together with the one on the Clean Energy budget. With regard to the recommendation on attending to the structure of CEF and the acting positions, Members recommended that a timeframe be put in place for the recommendation. He asked Members for guidance on what a reasonable timeframe would be.

The Chairperson said the recommendation should have been attended to by the end of March 2016. He said the hiving off of entities was a bit complicated.

Mr Van Dalen asked that an investigation be conducted and a report given to the Committee on the feasibility of the recommendation to hive off entities, something to be done within three months.

The Chairperson agreed. The Committee should ask for a report first on the process of hiving off of entities so that the Committee could better formulate a recommendation with clear and attainable timeframes.

Minister Joemat-Pettersson said the Minerals and Petroleum Resources Development Act (MPRDA) would now move oil and gas into the DoE. 

The Chairperson thanked the Committee and said that was very progressive. The Committee understood the separation of powers between the Legislature and the Executive. At the end of the meeting the Minister could comment on some issues, but the Committee would make its own conclusions and recommendations.

Minister Joemat-Pettersson said the report on nuclear was done by the DoE, but it now had to go through the Cabinet process, which was quite cumbersome.

Mr Mackay indicated that he did not mean to be disrespectful to the Minister however it was very unusual that the Minister was sitting in on a meeting where the Committee was adopting its BRRR. He asked that the Committee be clear in dealing with the inputs from the Minister, the Minister would be given an opportunity to come back to the Committee to address the recommendations. However in the formulation of the recommendations, the Minister, by her presence was influencing the work of the Committee. The Committee was pleased that the Minister was in the country for a change however the meeting was for Members.

Ms Mahambehlala said the Minister was not hijacking the platform. There was no problem with the Minister being present; the entire staff of the Ministry was present in the meeting and the Minister was going to know about the proceedings anyway. On timeframes on the nuclear build programme, three months was very ambitious, given the lengthy Cabinet process that the Minister outlined. She suggested that the timeframe be moved to four months instead.

The Chairperson asked that the Committee to conclude the recommendation and give over to the Minister to conclude. He agreed with Mr Mackay that the meeting was for Members of the Committee to deal with the BRRR, the lines would not be blurred. However there was nothing that prevented the Minister from providing some input.

Mr Van Dalen agreed with Mr Mackay that it was improper for the Minister to comment in that forum. A Minister had never attended a Committee’s BRRR meeting. He pointed out that the Committee had decided on three months and that decision had already been changed to four months; that was not in the interest of best governance and it was wrong. The Minister should not influence Members.

Chairperson asked that Members complete the recommendations.

Dr Rampersadh reiterated that Members recommended that the DoE come and brief the Committee on the nuclear build programme and its reports in the next three months. The next recommendation was on the accountability of Eskom to the DoE, Members pointed out that Eskom was faced with a number of challenges and the question raised was whether Eskom should be moved to the DoE or whether it should remain with the Department of Public Enterprises (DPE).

Mr Matlala responded that because of the SWH the DoE needed to speed up the move of Eskom from the DoE into DPE.

The Chairperson suggested that the Committee come back to that recommendation.

Dr Rampersadh said on consequence management, Members indicated that consequence management should be prioritised to ensure that entities implemented controls timeously. Compliance with legislation should continually be monitored and reviewed.

Mr Van Dalen said the issue of the accounting officer and the lack of leadership was very important.

Ms Mahambehlala said the report already indicated that the Minister should take note of the recommendations from the Auditor General and implement them. The sentence was complete and it covered all aspects. There was no need for another recommendation on the Auditor General’s report.

Mr Matlala agreed with Ms Mahambehlala that there was no need for a new recommendation on the Auditor General’s report.

Dr Rampersadh indicated that the next recommendation was around the location of gas within the DMR, and a suggestion was made that gas be moved from the DMR to the DoE. Members agreed that there needed to be an investigation on the matter because the gas economy as a whole needed to be coordinated by the DoE.

The Chairperson said the matter had already been clarified.

Dr Rampersadh said the last point raised by Members was that the Board of the entities should have a clear understanding of the direction of the entities.

Ms Mahambehlala said there was no editing needed with that recommendation.

The Chairperson asked about the recommendation on Grand Inga.

Dr Rampersadh said the recommendation was that the DoE come back to brief the Committee on the progress made on Grand Inga in three months.

Ms Mahambehlala said the briefing had to be in three weeks, not three months, and before the Committee went to recess. She added another recommendation that the DoE needed to come and brief the Committee on the progress made in the implementation of the previous recommendations made by the Committee in the last financial year to the DoE.

The Chairperson agreed.

Mr Van Dalen said the recommendation on the liquid fuels value chain had to be narrowed down to include a study indicating whether the country had enough fuel to supply the country.

Ms Mahambehlala said Members wanted to raise recommendations for their own personal agendas. Mr Van Dalen’s recommendation had already been captured.

Dr Rampersadh asked whether Members could take a few minutes to go through all the recommendations so the report could be finalised immediately.

The Chairperson asked whether Members could adjourn in the next ten minutes to finalise the report.

Ms Mahambehlala said she was unable to remain for reconvene; she had a meeting with her financial advisor.

Mr Mackay said he would stay behind to finalise the report; he would not agree to recommendations that were not finalised and he had not seen.

Ms Mahambehlala said she had a meeting and would not sit in another meeting. The Committee made recommendations and Members needed to understand procedure and process; the report had not yet been adopted. Members of the DA were not even going to adopt the report because they had to consult their Caucus and come back to reject it.

The Chairperson said none of the Members were making practical contributions about how to proceed with the report. He suggested that the meeting be concluded and the report be adopted.

Mr Van Dalen disagreed.

Mr Mackay said he would not adopt a report that has not been finalised. Members needed to review and finalise the recommendation before concluding the meeting.

The Chairperson said Mr Matlala had to go to another meeting.

Mr Matlala said he could render an apology to the meeting he had to go to, indicating that he would be a few minutes late.

The Chairperson asked that Members stay behind to clean up the report, so it could be sent to all Members for adoption the next day.

Members agreed.

The meeting was adjourned.

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