Department of Energy on its 4th Quarter 2015/16 & 1st Quarter 2016/17 performance, with Minister & Deputy in attendance

Energy

30 August 2016
Chairperson: Mr F Majola (ANC)
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Meeting Summary

The energy sector was deemed to be an essential service under the Constitution of South Africa. This brought to light the importance of the performance of the Department of Energy (DoE). While the DoE presented a pleasing report on the surface, Members of the Committee were quick to express strong criticisms over the inadequacies in the report.

The DoE focused on the broader, more strategic issues, while the Members questioned the DoE on actual performance and on-the-ground issues. The DoE felt that they had followed its brief, but Members were under the impression that the DoE would be informed on all matters, whether referred to in detail in the report, or briefly mentioned. This frustration resulted in the Chairperson setting a return date for the DoE to answer all questions put forward by the MPs. This date was set for 14 and 15 September, in order for the Committee to be presented with a thorough picture of the DoE’s activities.

The main issues revolved around the non-achievement of targets, non-compliance with Committee recommendations, continuing with Bid Window 4 projects while Bid Window 3 was only at 5%, as well as the demystification of nuclear energy and the lack of progress on new energy laws. An additional issue was the lack of a communication unit within the DoE, as well as the challenges arising from Eskom falling under the ambit of the Department of Public Enterprises, and not the DoE. 

Meeting report

Opening Remarks

Ms Tina Joemat-Pettersson, Minister of Energy, said that the DoE was aware of the existing imperfections and weaknesses in the report which would soon be presented, although the DoE had received a clean audit for the previous financial year, which was promising. The DoE had been engaging with the Auditor General (AG) and working hard to ensure a clean audit was maintained. The Deputy Minister and all senior managers had attended the meeting with the AG, who had highlighted certain areas that the Director-General of the DoE would include in his presentation.

Ms Thembisile Majola, Deputy Minister of Energy, agreed with the Minister that the presentation was quite long. The areas presented on were the main focus of the DoE. Like all other departments, the DoE was affected by the issue of budget cuts. These cuts had serious implications for the implementation of programmess, particularly on electrification. These issues had to be dealt with, as the #Fees Must Fall had affected all government departments.

Briefing by Department of Energy

Mr Thabane Zulu, Director-General: DoE, said the last quarter of the financial year was of critical importance, and the achievement of targets which were set yearly. More detailed information relating to the targets set had been attached in the annexures to the presentation. It was exciting for the Department that despite all the challenges, it had maintained a high standard that the Minister, Deputy Minister and the team would maintain going forward. Such action would not have been realised without the effective oversight of the Portfolio Committee on Energy.

Ms Yvonne Chetty, Chief Financial Officer of the Department of Energy, began the presentation with the fourth quarter financial performance. The budget had been divided into the main categories of compensation of employees, goods and services, transfers and subsidies, and payment of capital assets, and a detailed review of the Department’s spending and under-spending was set out in each of the above areas.

A request has been submitted to National Treasury for a rollover of funds. At year end, there had been a timing issue. The rollover request had been submitted in April, before the audit had commenced, and therefore there had been an audit adjustment. The rollover request to Treasury had actually been for R126 million, but had had to be adjusted down after the audit. A rollover of R3.8 million had been requested for goods and services, R122.9 million for transfers and subsidies, and an audit adjustment of R1.2million.

With the energy efficiency demand side municipality solar water heating programme,

23 complying bidders had been approved by the DG. These companies had been duly informed of their status. Nine provisional appointment letters had been sent to preferred bidders. These were provisional awards made to service providers, so the money could not be committed.

The conditions of the awards had been conducted by internal auditors of the Department with the line function to verify these two conditions.

Mr Ompi Aphane, Deputy Director General: Policy, Planning and Clean Energy, continued with the performance targets for the fourth quarter. Policy and Planning covered the Gas Utilization Master Plan (GUMP), amendment bills that needed to go through Parliament, biofuels, the Petroleum Products Bill and different legislative issues. The annexure attached provided more detail on exactly what was and what was not achieved, and gave a narrative of the comments by the Department as to why not all targets had been achieved.

In the first quarter of the new financial year, there had been changes and improvements to some of targets. Some processes were not able to be completed by the end of the previous financial year, but had managed to be achieved by the first quarter of the new financial year. The National Energy Regulator Amendment Bill had come back with conditions relating to the review board.

The DoE recognised the challenges experienced during the period, including the failure to focus on the upgrading of medium voltage lines. The focus had been on installing the new medium voltage lines, which had resulted in a failure on the maintenance side.

The challenges relating to remote areas were the electrification programme, the terrain issues, the delivery of materials and internal capacity issues, such as the internal audit and branch capacity for the verification of the electrification project, which had slowed down the programme to a considerable extent.

The Chairperson asked the DoE to proceed with the first quarter performance report for this financial year. While being aware that the strike issue was not required to be dealt with, he requested the DoE to comment on what had happened during the recent refinery strike. It appeared that the employees, as well as the employers, had been on strike. He asked for an explanation as to what happened, in order to gain an indication of how to respond in the future, as well as how to manage employees going on strike.

The Minister declined to respond, but highlighted the fact that Members had been visiting constituencies in formal and informal settlements to assess service delivery strategies and outcomes. In all the communities that had been visited, water, electricity and sanitation had been the main focus for both the government and the people, as these issues had been at the centre of many service delivery protests. The DoE must report on how the interaction with communities had been strengthened through public participation, and how this participation had been facilitated, to engage more acutely with communities.

All trips abroad by the Department and state-owned enterprises had been limited in order for the actual work on the ground and fiscal space to be considered. It was important to consider clean energy plans for the year ahead. Due to the budget cuts, some targets had had to be reassessed and reviewed. When targets were not met it, created a negative perception of the DoE’s ability to govern efficiently. These perceptions become reality and have an influence on rating agencies and credit ratings. In the current fiscal space, the Minister requested more intensive scrutiny, vigilance and oversight of what was happening within the Department, as well as sufficient accountability to the Committee.

The CFO continued with the first quarter report, saying that goods and services, and transfer payments, had been split in the budget. Goods and services covered social facilitation, feasibility studies and the project management office, while transfer payments covered the installation and manufacture of solar water units, including trading.

Changes to the compensation of employees’ budget would be implemented only through an Act of Parliament. This item had been prioritised by the DG as an area of discussion, and the way forward on how to deal with vacancies would be discussed. The DOE had engaged National Treasury on this matter.

With regard to the national solar water heating programme, National Treasury’s central database of suppliers had experienced some system glitches which had subsequently been resolved. The suppliers had had issues registering on the database.

Turning to the financial performance, Mr Aphane said the details and narrative on what had not been achieved was described in the annexure. There had been changes from the fourth quarter to the first quarter reports, especially in the biofuel regulatory framework. The DoE had gone to the Cabinet on 29 July 2016, where comments had been made. However, the fourth quarter target of 2015/2016 had not been achieved.

The major focus in the first quarter had been on energy-efficienct projects and interventions. This included agreements with other government departments -- for example, with Correctional Services to implement a programme, since they had 246 correctional facilities with high electricity bills. This project sought to determine an energy efficient strategy to reduce the demand.

Discussion

The Chairperson highlighted general issues of concern. The first was about progress on the recent strike action. The second was related to the setting performance targets. As an old government with a new department, the Department’s capacity should be taken into account. The DoE must be aware of its capabilities and set realistic targets. It was problematic to set ten targets, but meet only four.

Thirdly, last week the Independent Power Producer (IPP) procurement programme’s office had provided a report that considered the progress of the different bid windows. In broad terms, the presentation had indicated that Bid Window 1 was 100% complete, Bid Window 2 was 84% complete and Bid Window 3, 5% complete. If Bid Window 3 was only at 5%, why had the DoE moved on to Bid Window 4 -- and was in the process of expediting the process of Bid Window 4? It may appear attractive to host a variety of projects, but when one considered the success of the projects, the progress of actual implementation was too slow.

Mr P Van Dalen (DA) said that targets had been set, according to which the DoE had received a budget. The DoE had then used 90%, or 96%, of that budget but had reached only 49% of the target. This was a failure on the part of the DoE. This year, the term ‘partially achieved’ had been included. Last year, targets had been categorised into ‘achieved’ and ‘not achieved,’ which had made it very difficult to fully assess the performance. This year the Department had not performed any better, despite some of the targets being set lower. Realistic targets that the Department could meet must be set. Once these targets were achieved, the DoE could slowly increase the targets. It did not bode well for the requested budget when targets were not being reached.

There had been lower spending, coupled with the non-achievement of targets in clean energy and IPP projects. The Department should comment on what would be done with the 39 projects behind completion with the preferred bidder’s status. These projects must be brought to a financial close, including the signing of the Power Purchase Agreements (PPA) by Eskom.

Mr Van Dalen asked for clarity on the legal process that had been followed regarding the unwillingness of Eskom to sign off on the PPA’s. This ‘back and forth’ created doubts in the minds of investors. What could the DoE do to make Eskom comply with the legally binding process? If it was in fact not legally binding, Eskom must be called upon to share the reasons for non-compliance.

The Minister had previously stated that bills would be processed, but nothing had happened since. The ministry was halfway through its term, and there was not much time to complete this work. He urged the DoE to continue with this process.

He requested an update on the controversial sale of crude oil at reportedly bargain basement prices. The Minister had said it had been a stock rotation, but it then had transpired that the oil had actually been sold and the money had not been ploughed back into new stock. If an emergency situation transpired, everyone would need oil, but would not have access. What was the plan going forward? What was the use of a Strategic Fuel Fund if it had no fuel to guard? Where was the R5 billion that had been received for the oil?

Last year, there had been a bid to buy Engen from Petronas. The Engen group was a R140 billion group, and many years had been spent negotiating this deal, accompanied by many years of costs being incurred. Due diligence tests had been conducted, guarantees must have been given, deal sweeteners must have been paid, which suggested a lot of money had been lost regarding this effort. He asked the Minister to disclose how much money had been lost. The newspapers had reported on a bid for Caltex and Chevron -- had nothing been learnt from the Engen saga? Was there a difference between the two deals? Where was the Chevron deal currently? It did not bode well to engage in deals and leave them incomplete. Why had it not been completed? Why had the Committee been left out of the consultations on it?

Lastly, Mr Van Dalen requested an update on the Nuclear New Build programme, as a lot of vendor work had been done on it.

Ms Z Faku (ANC) said that the reasons for not meeting targets had not been convincing. There had been many delays. When setting targets, the DoE had been aware of what was needed -- for example, whether service providers were required or not -- and these factors had to be considered when setting targets. Was the Department failing to do proper planning?

When would the DoE present on the Integrated Energy Plan (IEP)? Ms Faku pointed out that the finalization of GUMP and the Integrated Resource Plan (IRP) was dependent on the finalisation of the IEP. When would the Committee be receiving this plan?

Mr R Mavunda (ANC) posed a complementary question on the setting of targets. If one target was set and was partially achieved, what type of a target was this? Maybe it was not the number of targets set, but a question of capacity. Were targets being set according the capacity to implement them? It was very important to check whether the Department had the resources necessary to achieve the targets.

Ms T Mahambehlala (ANC) also alluded to the issue of targets and focused on questioning why the target of the office of the DG had not been achieved? Since there was only one target, it had to be achieved -- it could not be partially achieved. The report was lacking in many aspects, as programmes which it covered were explained in detail, but inadequate information was provided on all the other programmes. The progress reports had been positive, but disturbing.

The Nuclear Energy Act Amendment Bill had been approved by Cabinet but had not yet been tabled before the Committee. The bill needed Parliament’s approval to be implemented, yet the Committee had not been consulted. Further nuclear compliance inspections had been conducted, but the Committee had no information on this. There had been progress with the GUMP, although the Committee had not been updated. There was a thin line between the Committee and the Cabinet. The DoE reported to the Committee, not to the Cabinet. Why had reports on these issues not been received?

The implementation of procurement processes on the nuclear programme were about to commence, but the Committee had not yet received a progress report on the programme itself. The report stated that the Department had held public awareness campaigns on nuclear energy, but had referred to the Khayelitsha public expo. Had this been a public awareness campaign event?

The report had said nothing on the demystification of nuclear. This had been asked to be implemented long ago. The Department has done nothing in that respect. She said the nuclear energy programme would go forward, so the Department must ensure it was demystified.

The under-spending was consistent. The April report for 2015 had showed an under-spending on petroleum of R39.6 million. This report showed a further under-spending. Energy policy and planning had always had an under-spending to date. Nuclear energy and clean energy had had consistent under-spending.

When performance targets were set, the input, process, output, programmes and policy outcomes had to be considered. If the DoE was unable to spend what had been budgeted for, it meant there were serious issues of efficiency and effectiveness. If the DoE was unable to deliver, then there were problems with the output. This was most likely attributed to inefficient systems. Reports on consistent under-spending meant that every recommendation of the Committee had been left in the meetings and not implemented on the ground.

Previously there had been under-spending on electrification, but now there was over-spending. The reasons furnished for this over-spending did not make sense. What were the real reasons? Was it lack of capacity? The reason supplied was that it had been due to delays, but delays alone could not cause the under-spending of millions.

The draft national strategy on biomass had not been presented to the Committee. Nothing would be achieved on this policy without the Committee’s approval. The Chairperson would present the Bill to Parliament, but before going to Parliament the Committee had to approve it. If Parliament had not approved the Bill, it could not be considered as partially achieved. The DoE must understand the processes of governing to achieve the desired outcomes. A Bill approved by Cabinet was partially achieved, as Parliament still had to sign it off.

There were errors in the report that should be highlighted. From 2014, there had been consistent under-spending. This Committee had fought to increase the budget for clean energy, but there had been under-spending on clean energy this year. The energy master plan would not be achieved due to this under-spending. Further, there had been no reports on the energy master plan since the Committee had requested this plan to be developed. If the DoE was unable to understand energy planning, then consultants were available to help. Within the Ministers’ Advisory Council there was a pool of experts on energy. The under-spent money should be used to develop the plan.

Lastly how had the rollover of funds come about, and why? The constant rollovers required a detailed explanation.

The Chairperson commented on the efficiency and effectiveness of the state. A constant interface between the executive and the legislature was needed. A lot of time and money was spent on bringing Department members to Cape Town, but what was achieved in spending this money? He said that there was a need to address the issue of Parliament having teeth, or the DoE would simply travel to Cape Town and prepare reports without any actual action taking place. When the DoE left, what had been discussed was forgotten. This Committee served as a ‘tick box’ platform. The effectiveness of Parliament lay in its oversight role. Parliament had no capacity to get things done, or to enforce compliance. Officials were getting used to nothing being implemented. The role of Parliament in setting up the budget office had been an initiative to try address this issue, yet the same issues kept repeating themselves. Where there were genuine difficulties, support would be provided, but where people did not perform their duties adequately, there had to be consequences. What were the consequences for not meeting the all targets? The Committee had requested something to be done with PetroSA, but a year later R14 billion had been spent, with nothing done. The Committee had to see results for the work done.

Mr J Esterhuizen (IFP) commented that the report said a lot, but without saying anything. The compensation of employees was at R296.3 million. Eskom employees had given themselves R18.3 million in bonuses when the electricity availability factor had been 67%. R66.5 million had been spent on nuclear, yet the programme had not yet started. The report did not display these realities. There had been massive under-spending on clean energy.

He said that Eskom CEO, Brian Molefe, had become very aggressive in fighting this dominant supplier’s case. He noted, however, that there was an ongoing mistrust of Eskom’s operational turnaround and the sustainability of their energy availability and recovery. Eskom claimed high levels of availability and production -- so high that they claimed that IPPs were not required.

The DoE had a competent Minister, but Eskom reported to the Department of Public Enterprises. How could a proper discussion take place, when issues were not communicated to the DPE’s Minister Brown? The Minister had committed to the IPP programme, which should have been carried out under the Constitution. Eskom was bound to follow this programme, but reported to Ms Brown. Why was this the situation?

There were policy gaps around Integrated Resource Plans (IRPs) that were out of date, Eskom should provide clarity. In the previous financial term, the Energy Availability Factor (EAF) had been at 67%, and had admittedly gone up to 75% at the end of this financial term. This country needed energy for sustainable growth, but had achieved 0%.

He commented that a target being ‘partially achieved’ was an arbitrary concept.

Eskom had paid for coal that they could not use. Due to Eskom’s incompetence, plants were not running and coal that had been paid for had not been delivered. The Energy Intensive Users Group had calculated that 11.4 trillion tons alone had been lost due to incompetence. Eskom’s debt collection was completely inefficient. Municipalities did not pay and owed massive amounts.

Dainfern was one of the richest areas in Johannesburg. A resident had refused to pay for electricity. This issue occurred all over local government. People were not paying, and Eskom’s efficiency to collect was horrible.

The National Energy Regulator of South Africa (NERSA) was bound by its mandate to receive revenue on official organisations, which Eskom did not qualify for.

Mr Mavunda was of the opinion that the DoE was using the term ‘partially achieved’ to hide its failure to achieve targets. The report was the same as last year, and was unacceptable. People needed to take Parliament seriously. MPs were blamed at constituency meetings when the bureaucrats were the ones who were really at fault. There was no need for euphemisms such as ‘partially achieved.’ The DoE must simply state where they had failed to achieve set targets so that the Committee could determine the current situation. The DoE needed to work hard throughout the year in order to achieve all the targets set. The term was ending, yet the same reports were presented every year. The DoE was under a duty to ensure that this budget was spent in a manner that gave people better lives.

The Chairperson questioned what ground-breaking bills had come before Parliament to be passed. He commented that at the current rate, the end of term would arrive without any new laws being enacted.

Minister’s response

The Minister replied by stating that the Committee should start with the report of the Portfolio Committee on Energy on the budget of April 2016. The observations and findings on page 10 of that report showed how Eskom’s performance impacted on the effective performance of the DoE, with transmission and distribution lines, in the functioning of the grid, the acceleration of the conversion of gas to power, the allocation related to the Central Energy Fund, certain projects which had been shelved, the expertise of the IPP office, the Education Regulation Amendment Act, the National Regulator Amendment Bill, the Gas Amendment Bill, the Mineral and Petroleum Resources Development Act (MPRDA), biofuels and the slow pace of National Solar Water Heating Program.

Previously, the Committee had given the DoE 23 tasks, with recommendations. The first one was the optimal performance of the DoE; then, updating the Committee regularly on the scale and pace of the nuclear procurement; the Integrated Energy Plan; the Integrated Resource Plan; the Gas Utilization Master Plan; Sanedi; shareholder compacts, which were supposed to be signed with the state-owned enterprises and be in place within the next six months and presented to the Committee thereafter; the details of the turnaround strategy; robust oversight and continually updating the Committee on the performance of entities; ensuring the strategic plans of the entities were aligned with the objectives of the DoE; updating the Committee on the implementation of the cleaner fuels tools specifications; the hiving off of the entities of the Small Enterprise Foundation and the implications thereof; the update on developments of the MPRDA; the end state of electricity; more accessible NERSA public hearings; transformation of the petroleum sector; the roll out of the national electrification programme; building a new petroleum refinery; a report on Grand Inge; working with municipalities; the solar water heater roll out plan; and the National Radioactive Waste Disposal Institute.

The DoE had appointed officials to carry out a specific mandate. The DoE was aware that the mandate needed to be updated.

Ms Mahambehlala had been imploring the Department to use the capacity of the Advisory Council, as seemingly the DoE did not have the capacity. The same questions had been posed. Why did the DoE present the same reports and listen to the same recommendations? Why was it under-spending? What were the consequences for not meeting targets?

The Chairperson asked the DoE to please reflect on the role of the Committee, the role of Parliament, the recommendations made and the consequences of not implementing what the executive had requested.

The DG said that the report had not gone into the detail expected. A full presentation may be required on specific areas, as the report did not cover specific detail on all the issues raised, one of which was the nuclear programme. There were two processes of accountability -- one at Parliament, and the other at Cabinet.

The process of setting targets had to be reviewed, as it was not always scientific. The targets were set according to the daily running of the DoE. It had become evident that targets could not be set on that basis. The process of setting targets would be reviewed, as there was currently a new prioritisation process that been introduced in the last quarter, which called upon all departments to review their targets. The targets set for this financial year would be reviewed.

It appeared that the DoE needed more time to provide details as to why the targets had not been met. In the future, targets would be set according to scientific data and would prove to be more effective. The DoE was trying to ensure that targets were set correctly, so that when there was a shortfall in achieving these targets, the DoE accepted responsibility and was held accountable. The DoE would like to give full presentations on specific areas, explaining why those targets had not been met. Cabinet had taken a decision in terms of budget cuts which compelled all departments to review the targets set for the forthcoming year.

Mr Tseliso Maqubela, Deputy Director General: Petroleum and Petroleum Products Regulation, would provide details on what had happened during the strike, how the DoE had engaged and what interventions it had made during the strike.

On the issue of expediting Window 4 while the DoE had not been performing under Window 3, in terms of the target, this was an area run by the IPPs.

The DG said that despite the report following the format of all government departments, the DoE was prepared to change the format, should the Committee wish so. However it had to be noted that the language used was beyond the control of the DoE. It was not the only department to use this standard format. Reports on targets followed a format set by government for all departments. It was unfortunate that some of the Committee Members were not happy. The DoE could not create its own format without the approval of the National Treasury or government, as those actions would be out of order.

The DG’s office had been asked to submit four reports leading to the outcomes of government, but only two had been submitted. The target had not been fully achieved, but work had been done towards achieving this target -- a process had been followed and moderation had been done, which meant that there had been some achievement on that target. The other two reports had been submitted late. The DoE could not lie and say that during moderating and assessing its targets, that four had been submitted while it was aware that two had been submitted late. There had been a long internal process, which may be due to internal operational inefficiencies, but the fact was that the target had not been met in full. The DoE would not blame internal issues or lack of resources, and there was no need to go into the detail of operationalising and explaining why the two reports had not been submitted, or which DDG had not signed on time.

Those who did not perform would be disciplined within the DoE. Further, once approved by government, the targets may be reviewed only in the next financial year. These were some of the challenges facing the DoE, but there was no excuse for the internal operational inefficiencies that existed in the Department.

Should the Committee allow, the DoE would like to provide more details on targets that were unable to be achieved, in a full two-day session. Particular targets had not been set properly with regards to time or budget, or consideration for other related entities that would be responsible for the targets being met. One of these entities was Eskom, which was not the direct responsibility of the DoE, but the targets set were directly linked to Eskom’s performance. The DoE did not have direct control over the work done by Eskom. This had to be reviewed from a policy perspective. Targets directly linked to entities under the direct control of the DoE, was where the DoE could take full responsibility. These entities were subject to oversight responsibility by the executive. By relying on another entity over which there was no control mades it difficult to achieve the targets together.

Last week, the DoE had signed a memorandum with the Department of Justice and Correctional Services (DJCS) for energy efficiency. The DoE would not be responsible for that target alone, but would be relying on the DJCS for performance of that target. The interrelated performance of targets did, at times, cause a problem in meeting those targets. The DG took full responsibility, as setting the correct targets was the first step in the right direction. All departments had been affected by the reprioritization of certain government departments. If targets were not corrected now, the same would be reflected next year.

This did not justify the fact that certain targets set had not been scientific in nature. Some of them had not been budgeted for, and some had been dependent on other related entities that worked with the DoE in the performance of those targets. If there was consequence management to make sure that all targets were met, the DG was more than willing to be part of that exercise.

Some issues required full and detailed presentations on certain issues, to place them in full perspective. With regard to the Nuclear Energy Bill, the DoE requested sufficient time to make a full presentation. If there was a need to provide a full presentation, the DG was more than willing to do so on any of the 23 recommendations that the DoE was working on, but more time was needed to explore the difficulties and instances of interventions.

The Chairperson highlighted issues on the setting of targets, the format of reports and the content of meetings. He asked the Committee to identify the big issues explicitly and allow the DoE to return to speak on them.

The Deputy Minister agreed on the need to return to this forum. There was always an effort placed on compiling a report which balanced managing the slides with also giving a bit of background. From what the Members had said, it would also be useful to provide an actual narrative. All the issues referred to were dealt with on a daily basis, so they had been dealt with briefly as it had been assumed that the understanding would be carried through. For example, mentioning ‘partially achieved’ referred to targets which had been met halfway.

The issue of a narrative in reports was important. In the annual/quarterly programme, over and above the weekly meetings, the Committee should receive reports to keep it up to date with the DoE’s activities. The Committee was requesting information on issues that had happened almost six months ago. The system must be more efficient. All programmess dealt with by the DoE did not have agendas. Some programmes received more attention than others for various reasons. Last year, there had been numerous meetings on PetroSA, yet the biggest sector for this quarter had been electrification. However, a discussion on this matter had not yet been held. Those two days would aid the DoE in being properly informed to meet the Committee’sexpectations.

The Deputy Minister explained that Eskom was under the review of state owned entities. Part of the challenge was engaging with the Department of Public Enterprises to which Eskom reported. What should Eskom say at a public level as an entity?

Mr Maqubela said that the petroleum strike situation had become a national security situation. This was how these issues had been approached. Firstly, the DoE had tried to separate the labour matters, as workers had the right to strike, but the facilities where they worked were national key points. Therefore, the approach taken in dealing with implementation was one that sought to protect national key points. The dispute had been declared on the Thursday before the election. On that Wednesday, there had been a R1 decrease in the price of petrol, and the elections had resulted in members of SAPS being deployed to the polling stations. The number of police available to respond to acts of violence and intimidation had been reduced. The Minister and DG had intervened and written to the Acting Commissioner to ensure that acts of violence were dealt with in the best possible way. The approach taken had been that the trucks would be escorted for a certain distance from the facility. Certain areas were targeted in the strike. Waterloo in Tshwane was a particular target, and therefore it had become difficult to move fuel in and out the area. The police had not used excessive force, and had been able to move people blocking the movement of trucks. However workers had been intimidated in their homes, which was difficult to manage. There had been an intervention with security forces, which had worked well to ensure that key points were protected and fuel was safely moved out the depots.

Within the Department there would be an after-event review to investigate what this strike meant going forward. Due to national security concerns, all solutions could not be divulged.

The source of the dispute had become the source of settlement. The issue was not completely resolved, as there were other negotiations between NuMSA and petrol attendants still going on. The DoE would monitor the negotiations and meet with both parties this week.

There had been no bid by the state to buy Chevron. The DG and Minister had indicated that those who had submitted a bid had done so without a mandate. The bid by PetroSA to acquire the assets of Engen had resulted in funds being expended, and this was seen as part of business development. There had been no requirement for any non-refundable deposit. All funds expended by the entity were those that any institution that wished to acquire assets would go through. Those were incidental costs borne by PetroSA.

The Chairperson felt that it was not a national security issue to divulge solutions.

Mr Maqubela replied that there was a lot of action and contestation of that space in the Department.

Mr Aphane spoke about the IPP legislation, the Integrated Energy Plan and the Integrated Resource Plan. A more thorough presentation would be done on these policies at the upcoming meeting.

He focused on the reasons for moving on to Window 4 while the previous windows were under construction. The actual risk of construction was for the IPP to take. Effectively, the count began from when the financial close had happened, because once the financial close had happened one knew the project was going to proceed. Once that date was determined, it took an average of two years to reach the grid. This was the reason for this lag. All IPPs provided quarterly reports after financial close. Between the various windows, there would be a three-year delay between projects closed this year and projects closed the following year. It was exaggerated by the construction period of about two years. The process seemed to be moving slowly, but the initial construction started slowly and then picked up speed. It was not a cause for concern that projects in the previous window were at 5% while the DoE continued with the next window. Out of the 98 projects, only two projects had not reached construction and generation, therefore it was not something of particular concern.

The annual performance plan required a quarterly reporting cycle, but sometimes the project cycles were longer and therefore not much movement could be seen in infrastructure projects over three years. Quarter 2 may look similar to quarter1. In this financial year, the DoE had set targets according to the ‘smart’ principle and audit findings. The report would be in relation to those issues the DoE had control over. For example, making legislation required a lengthy process, as laws had to go to Cabinet and then enter the Parliamentary process. There was a lot of activity with the various bills, but they were not yet in the Parliamentary process.

The IRP, GUMP, and the biofuel strategy were independent, and when the DoE presented next, those issues would be covered.

The Department had a serious capacity issue with regard to meeting expectations in the energy space, which resulted in it appearing that it was not responsive to the Committee’s recommendations.

The Chairperson reiterated that there was no cause for concern. The pace of window 3 had been slow, but it was related to Eskom.

The DG said that Mr Zizamele Mbambo, DDG: Nuclear Energy, was not present to provide information on the nuclear situation. It could be dealt with comprehensively at the next meeting.

Ms Mahambehlala pointed out that the Chairperson had given the DOE leeway to not answer any of the questions posed. Many issues had been raised which had been left without a response.

The Chairperson requested the DG to respond to all questions asked now, and still give a comprehensive written response to the issues raised. The Committee would outline what to respond on in the two-day session.

Ms Mahambehlala felt that was too late for a full and thorough response. The Members had follow-up questions, but as the initial questions had been left unanswered, the discussion could not continue.

The Chairperson highlighted that there was a long list of questions. He ensured that all parties were agreed that the DG had noted all the questions and would respond in writing to all of them. The written answers to the questions asked today should be provided by the end of business on Thursday. The Committee would agree on a process which provided a comprehensive outline as to what the DoE should deal with on 14 and 15 September. Inadequate responses would impede a thorough discussion of the issues. Members had asked questions on issues for which the DoE had not prepared a report. Those two days would provide an opportunity to run through all the programmes.

Ms Mahambehlala felt that despite the DoE claiming that its report followed the standard set by the National Treasury, the reality was that a career expo was a community outreach programme, not a public participation forum. These problems had to be corrected in the report. The office of the DG had achieved nothing in terms of the report, but had then explained that A, B and C had been done. This was problematic. The Committee did read the reports before meetings, so the reporting must be taken more seriously. The DoE must hold those responsible for errors in drafting the reports accountable, as it impacted on the DoE’s credibility. The excuse of it being in accordance with the norms and standards set by the National Treasury was weak.

One last issue, what had been done on the demystification of nuclear? These issues had been already been raised in 2014/2015. The DG would suffer the consequences, as he had inherited everything that came along with the position.

The DoE had shut down its communications department many years ago. What had the DoE done to ensure transformation? The communications department should publicise the work of the Department. Members of Parliament and the general public had not seen the programmes run, and the communities depended on the news in the media. The DoE should resuscitate or re-establish this department, especially with the nuclear bill programme. The perception was that nuclear should not be run by a black government, while the Koeberg nuclear plant had been operating for almost 50 years. This perception was due to a lack of communication. When the DoE returned, it should please report on what had been done regarding communication. When the Members had visited the DoE, this issue had been raised, but the DG had not beenthere. This issue had been raised numerous times, and now the Committee must be firmer. It was a pity that the Minister had left before the conclusion of the meeting, as her views on this issue would have been of good use.

Eskom could not be reporting to the Department of Public Enterprises when the issues around Eskom were energy issues. If it was a policy issue that was a different debate, but if the Cabinet had the power to take a decision on this entity, it must be implemented. Eskom had a 60% impact on the planning, targeting and performance of the Department, but it had been reporting elsewhere. Either Cabinet moved Eskom under the DoE, or took it elsewhere, if it had the power to do that. The Committee must maybe report straight to the President, as this issue had been raised countless times before. As an energy portfolio committee, there were no answers around the biggest energy regulator. The Committee must run with the proposal that the President and Cabinet must remove this entity from Public Enterprises and bring it under the DoE. There could not be an adequate discussion on nuclear energy and Koeberg in the Public Enterprise Department. There would be contradictions, which would impact on the performance of the DoE. It was now bigger than a policy issue.

The Chairperson noted that the Deputy Minister agreed that Eskom should come to the DoE.

Mr Mavunda said that nothing had been achieved today, and the Members had been left frustrated. The cost of this meeting was at the expense of the taxpayer. The DG had revealed that there were internal issues within the DoE. Was the DG in control or not? The coming two days would be beneficial if the DoE had a clear vision of why they were employed in this Department. Even though it was not written in detail, they should be able to give the Committee the actual narrative, to enable MPs to report the actual narrative to their constituencies. Government funds could not be used for people to come to Parliament and present empty reports.

Mr Van Dalen agreed that it was frustrating to ask the same questions, and receive no answers. As the DoE, it should be aware of IPPs and Power Purchase Agreements (PPAs). If some of this fell under Eskom, thenit should get the person responsible to provide the answers. With the loss to the taxpayer over the Engen deal, it was very important to get these answers. The DoE was the accountable officer, and simply telling the Committee to get the answers from PetroSA was not sufficient.

If the DoE says that in the Chevron deal, people had acted outside their mandate, what had been the consequences? One could not allow this behaviour to be perpetuated in the Department. They should have been fired.

Mr J Esterhuizen (IFP) agreed that the Department was fully accountable, especially with a staff compensation of nearly R3 billion. The preparation should have been better.

The promised target had been 250 000 households connected to the grid, but only 35 000 were currently. It was the poor and vulnerable who were affected by this. More would be discussed on the date set.

Closing Remarks

The Deputy Minister agreed to provide a written report. It was also important to look at the targets in context, as some were annual targets and the DoE was giving quarterly reports. Members were concerned over details that this report did not cover. The workshop would assist the DoE to deal with some of these issues. These reports had seemed to be unhelpful as they had focused on broader, more strategic issues. The DoE needed to find a mechanism to do this efficiently. It was frustrating for both sides, as the DoE had been prepared on certain issues, while others had been questioned.

The Chairperson confirmed the return meeting for 14 and 15 September.

The meeting was adjourned. 

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