DOE on its Quarter 2 & 3 Performance, with Deputy Minister

Energy

07 March 2017
Chairperson: Mr F Majola (ANC)
Share this page:

Meeting Summary

The Department on Energy adjusted total budget is R7.5 billion for 2016/17. The year-to-date budget at the end of Quarter 2 (1 April to 31 August 2016, which was six months), was R5.1 billion. Year-to-date the Department had spent R4.6 billion, leaving a variance of R438 million. The variances were: Programme 1: Administration,  collectively overspent R21 million; Programme 2: Energy Policy and Planning under spent R5.2 million; Programme 3 Petroleum & Petroleum Products Regulation incurred a small underexpenditure; Programme 4: Electricity and Energy Programme & Projects Management was under spent by R13.2 million; Programme 5: Nuclear Energy was under spent by R77.9 million, and Programme 6: Clean Energy was under spent by R390 million.

The Quarter 2 performance information encompassed major achievements under Programme 1 that were acquiring a clean audit for 2015/16, as well as having 100% of invoices approved and paid within 30 days of receipt. Challenges were the vacancy rate stood at 11.58% at September 2016; the target of 2% of people with disabilities was a challenge not only for the Department, but its entities as well; and the target of 50% of women in Senior Management Staff (SMS) positions has not been achieved.

The Quarter 3 results until 31 December 2016: The year-to-date budget for the nine months was R6.6 billion. Year-to- date the Department had spent R6.3 billion, leaving a variance of R266 million under-spent. The variances were as follows: Programme 1: Administration had an overspent of R31.2 million; Programme 2: Energy Policy & Planning had an underspent of R6.5 million; Programme 3: Petroleum & Petroleum Products Regulation overspent by R3.5 million; Programme 4: Electricity and Energy Programme & Projects Management had underspent by R75.3 million; Programme 5: Nuclear Energy had underspent by R95.6 million, and Programme 6: Clean Energy was underspent by R124.1 million.

In discussion, Members questioned the unforeseen costs that led to over expenditure in Programme 1 Administration such as Minister travel costs; would the funds previously allocated to the procurement management system be warranted to Eskom or will Eskom reimburse DOE for the money already spent on it; why was the remaining R171 million derived from the DOE budget; had the Provincial Treasury of Free State issued a contract that resembled a procurement management system for nuclear energy as this was a national competence; National Nuclear Regulator variance of R24.3 million for the nuclear new build licence; the Quarter 3 R1.73 million payment to the IAEA for the hosting of the IAEA Integrated Regulatory Review Service (IRRS), thus what exactly were the outputs as a result of the payment; the international membership fees kept escalating, what was the cause of its increases; could a report be given on the engagements made at the Youth Energy Indaba; the problem of acting officials and what exactly the challenges and stumbling blocks were in making permanent appointments; the Solar Water Heater Programme (SWHP) lack of progress and the lack of transparency about its complications; which kinds of work required hiring contractors; what the total retail petroleum sites available were and how many required inspection to ensure that the annual target would be achieved; the additional households that the municipalities and Eskom electrified for the quarters were noted  and its effect on the annual target.

MPs commented that underlining the regress of South Africa was the failure of the petroleum sector, of which the loss of R14.6 billion was evidence; it was peculiar that DOE had proceeded with a procurement management system for nuclear energy at least a month prior to the pronouncement by Cabinet that Eskom was to be the procuring agent. MPs asked for an explicit indication of the role that DOE plays in the Nuclear New Build, yet budget allocations on its various projects were both outlined and spent; it was unacceptable that virements occurred as it was a reflection of poor planning, for which DOE has had recurring excuses. MP were dissatisfied with the DOE vacancy rate that was above the prescribed threshold and the many Senior Managers present in the delegation who were ‘acting’ as temporary appointment may evade consequence management. These echoed that fundamentally the planning of DoE was not in order.

Members of Parliament also questioned DOE on matters not in the presentation such as a request for the curriculum vitae of Mr Luvo Makasi who was appointed Central Energy Fund chairperson in December 2016, as well as those who had applied but were not given the position. It was deemed controversial that Mr Makasi had not only utilised affiliation with CEF as a means of defence against the personal allegations made against him in the media, but it was outright impropriety given the short time he was afforded the title. MPs questioned the validity of assertions that Block 9 of PetroSA shall be sold to a private sector company of Russian origin, of which a BEE company shall benefit from R400 million annually as a mere result of facilitating the transaction. MPs appealed for the Genesis and Apollo Reports that were to have entailed turnaround strategies and account for the shortcomings of PetroSA. Members felt that these were matters were too weighty to ignore or defer response on.
 

Meeting report

Mr Lloyd Ganta, Acting Chief Operations Officer, DOE explained that the Minister and Director General were on an official visit to the United States, and the Deputy Minister would join the meeting later. He introduced the delegation: Ms Yvonne Chetty, Chief Financial Officer; Ms Nonhlahla Tshabalala, Director for financial management and planning; Mr Zizamele Mbambo, DDG for Nuclear Energy; Mr Jacob Mbele, Acting DDG for Programs and Projects; Mr Khanyiso Zihlangu, Project Management: renewable energy project; Mr Lucas Mulaudzi, Acting DDG for Corporate Services; Ms Mokgadi Modise, Chief Director for Clean Energy; Mr Tseliso Maqubela, DDG for Petroleum Regulation; Mr Abednigo Hlungwani, Chief Director; Ms Louisa Mohlamme, Head of the Deputy Minister’s Office; Mr Adam Callum, Advisor to the Minister. The CFO would lead the presentation, after which human resource would be explained to ensure understanding for the extent of those acting in senior management level positions.

Quarter 2 Performance
Ms Yvonne Chetty, Chief Financial Officer, DOE, presented that the adjusted budget in total for The DOE was R7.5 billion. The year-to-date budget that was from 1st April to 31st August 2016, which was six months, was R5.1 billion. Year-to- date DOE had spent R4.6 billion, leaving a variance of R438 million. The variances were as follows:- Programme 1: Administration, which covers the offices of the DG, ministry, CFO, COO, Internal Audit and Corporate Services collectively overspent R21 million; Programme 2: Energy Policy and Planning under spent R5.2 million; Programme 3: Petroleum & Petroleum Products Regulation incurred a small underexpenditure; Programme 4: Electricity and Energy Programme & Projects Management was under spent by R13.2 million; Programme 5: Nuclear Energy was under spent by R77.9 million, and Programme 6: Clean Energy was under spent by R390 million.

She noted an overview as per the economic classification. The R7.5 billion comprised of R318 million for the Compensation of Employees; R396 million for Goods and Services; R6.8 billion for Transfer Payments, and R4 million for Payments of Capital Assets.

Compensation of Employees (CoE) was overspent. However, there had been a reduction of budget allocation for CoE across all national departments. The budget for CoE was exclusively appropriated, which means that liberty cannot be taken to do virement to augment the deficit, only an Act of Parliament could change the allocated figure. The reasons for the overspending on CoE within the entire Department were: there was reduction in the baseline allocation by National Treasury that had contributed to shortfall in the CoE funding. The overspends were R5.24 million, which was 3.39% on the budget allocated to it. Further contributors to the overspending: Contract posts for 69 contract positions carried additional to the establishment and overtime payments of R2.58 million mainly from Programmes 1, 3 and 4.

The reasons for under-spending on Goods and Services within the entire Department were attributable to: Delays in finalizing contracts for the implementation of the Solar Water Heater Project (SWHP) and Monitoring & Evaluation (M&V) of energy savings achieved by municipalities under the energy efficiency projects being implemented by chosen municipalities. As well as the Nuclear New Build Programme (NNBP) due to delays in the internal verification process. However, it should be clarified that this information was applicable to Quarter 2 that ended the 31 August 2016 and had been overtaken by events and where possible mention shall be made if instances were corrected in the 3rd or 4th quarter. The total under-spending in this classification was R131.35 million or 45.21% of the YTD budget.

The reasons for the under-spending on Transfer of Payments within the entire Department were due too: Solar Water Heater Project for R263.73 million, there were challenges with the recommended Preferred Bidders, i.e. challenges with Original Equipment Manufacture and Performance Guarantee requirements. Energy Efficiency Demand Side Management (EEDSM) Municipalities of R60 million and INEP-Non-Grid of R28.53 million as a result of the delays in the certification and approval process of the contracts with implementing municipalities and service providers.  The process has since been finalized. NEP-Municipalities of R38.66 million was as a result of a misalignment between DoRA projections submitted to Treasury and the gazetted transfers. There is also an overspending of international membership fees of R2.06 million relating to the African Petroleum Producers Association, carried over from the 2015/16 financial year and could not be rolled over to 2016/17. Collectively, the under spending was R312.52 million or 6.71% of the YTD budget.

Under or over expenditure in Programme 1:
- Compensation of Employees (CoE) was R67.9 million, but R74.5 million was spent that meant that overspends were R6.6 million. The overspending was attributable to: Contract posts with 41 contract positions carried additional to the establishment. Overtime payments amounting to R1.70 million as well as the reduction in the CoE baseline allocation by National Treasury.
- Good and Services had YTD budget of R49.4 million, R62.6 million was spent, which meant that over spends were R13.1 million. The overspending was mainly due to shortfalls in:
• Travel and subsistence and associated administrative costs of R6.01 million due to the number of national and international commitments, PPP events, as well as the ministerial and departmental events undertaken by the Department.
• IT license fees for regional offices of R3.71 million over budget due to the procurement of a VPN system, additional software packages and the difference in the rand - dollar exchange rate.
• Communication expenditure had increased.
• Legal services, due to costs in relation to litigation matters currently underway and costs for operating leases for office accommodation as a result of additional service costs following the relocation of the Regional Offices.
- Transfer of Payments overspending of R1.72 million in was due to international membership fees relating to the African Petroleum Producers Association that was carried over from the 2015/16 financial year that could not be rolled over to 2016/17. These were the main variance under the administrative programme.
[See document for spending patterns of other programmes]

Transfer of Payments incurred delays in the implementation of the Solar Water Heater Programme. However, much progress had occurred in Quarter 3 and 4 for the SWHP.

Mr Ganta elaborated on the performance information for the Quarter 2 for each programme:
Programme 1 had a clean audit for 2015/16, as well as having 100% of invoices approved and paid within 30 days of receipt. Challenges were the vacancy rate stood at 11.58% at September 2016; the target of 2% of people with disabilities was a challenge not only for the Department, but its entities as well; and the target of 50% of women in Senior Management Staff (SMS) positions has not been achieved.

Programme 2: Policy and Planning had three major achievements. Challenges were human resource constraints, since it was awaiting appointment of two specialists. DOE received a number of resignations from Senior Managers before 31 January 2017 and there had been delays in filling specialist positions.

Programme 3: Petroleum & Petroleum Products Regulation had no major challenges, but three achievements were: 500 out of a cumulative 800 retail site inspections conducted in Quarter 2. 701 fuel samples collected and tested. 173 applications processed, of which 134 applications scored 50% and more on historically disadvantaged South African category.

Programme 4: Electrification and Energy Programme & Project Management had three major achievements: July-Sept municipalities electrified 35 157 additional households and Eskom electrified 61 775 additional households, including rollovers, the total was 96 932. A total of 2 863 connections were achieved. Draft policies on gender and disability have been finalised. Youth draft policy has been developed. Overall progress of 17% has been made for substations and most are in progress which was a major challenge. Also, overall progress of 16% has been achieved for MV power lines and most projects are still in progress, whilst some of the projects were on schedule.

Programme 5: Nuclear Energy noted meetings were held with stakeholders on the monitoring report for compliance of procurement with the National Nuclear Energy. Executive Coordinating Committee (NNEECC). However, having the Project Management Office (PMO) establishment pending approval by Energy Security Sub-Committee was a major challenge.

Programme 6: Clean Energy had one major achievement in that the Draft 2015/16 Annual Compliance Report data for 2nd Environmental Management Plan had been collected. An outline and the project plan for the development of the draft National Biogas and Biomass Strategy were prepared. It was recommended that a Biomass Resource Assessment be conducted for this. Major challenges included that to date 11 municipalities out of 26 participating in the 2016/17 EEDSM programme have submitted their draft business plans. Most municipalities are still delaying to submit due to changes in the administration personnel.

He concluded that much of the challenges incurred in Quarter 2 were addressed in the quarters that followed. For instance, the Solar Water Heater Programme encountered a delay particularly due to the manufacturing rate by local manufacturers, but DOE preferred to utilise the services of a local manufacturer, as opposed to imports.

Quarter 3 Performance
Ms Chetty noted that the Quarter 3 results were until 31st December 2016. The year-to-date budget for the nine months ended was R6.6 billion. Year-to-date DOE had spent R6.3 billion, leaving a variance of R266 million under-spent. The variances were as follows:  Programme 1: Administration had an overspent of R31.2 million; Programme 2: Energy Policy & Planning had an underspent of R6.5 million; Programme 3: Petroleum & Petroleum Products Regulation overspent by R3.5 million; Programme 4: Electricity and Energy Programme & Projects Management had underspent by R75.3 million; Programme 5: Nuclear Energy had underspent by R95.6 million, and Programme 6: Clean Energy was underspent by R124.1 million.

The 2016/17 original appropriation of R7.545 billion had 90.15% going to transfer payments to the Department’s entities and implementing agents.

Financial performance per economic classification entailed that the Compensation of Employees (CoE) was overspent by R11.7 million, of which the reason was the reduction in the baseline allocation by National Treasury and it would suffice throughout the financial year as the cause for the overexpenditure. Contract posts of 69 contract positions carried additional to the establishment and overtime payments amounting to R3.4 million mainly from Programmes 1, 3 and 4, were further contributors to the overspending. Allocation for CoE was adjusted upwards by R7.5 million from R310.8 million to R318.3 million following the conclusion of the 2016/17 Adjusted Estimates of National Expenditure (AENE) process will partially contribute to a reduction in the projected overspending at the end of March 2017. DoE had requested R20.19 million but had only received R7.5 million. Expenditure was projected to increase to R324.64 million at the end of the financial year against a budget of R318.3 million and it will result in an over spending of R6.34 million. This will lead to a possible unauthorised expenditure in this classification at year-end.

Overall, Goods and Services had a net budget under-spending of R164.98 million or 43.98%:
• Earmarked funds for the Solar Water Heater Project (SWHP) and Monitoring & Evaluation (M&V) of energy savings achieved by municipalities under the energy efficiency projects being implemented by chosen municipalities was delayed due to the finalizing of implementation contracts for these projects.
• Earmarked funds for the Nuclear New Build Programme (NNBP).  There were delays in the disbursement of payments under this programme in relation to the procurement of a project management system, the outstanding payments on this project has been rectified in the 4th quarter.

Budget for goods and services adjusted downwards by R31.96 million in 2016 AENE to cater for:
• R12.15 million reprioritized from the NSWHP and the NNBP respectively to the National Nuclear Regulator to the value of 24.3 million to assist the Regulator with a cash flow matter. This entailed the licence application that NNR was busy with, but had incurred a cash flow issue during the licensing process.
• CoE budget deficit partially addressed by a virement of R7.5 million reprioritized from goods and services.
• R1.73 million to cater for payment to IAEA for hosting of IAEA Integrated Regulatory Review Service.

Transfer of payments was under spent by R113.01 million due to:
• Solar Water Heater Project of R56.57 million. Payments to suppliers are being processed as deliveries of completed units are confirmed through the governance processes in place.
• INEP Non-grid: The under-spending of R83.9 million (1.69%) was as a result of delays encountered in finalizing contracts with non-grid services providers. However, ten individual contracts were signed and orders issued during December 2016 and progress has been made on this project.
• The international membership fees item was overspent by R4.37 million.

Ms Chetty went through the spending patterns of each programme (see document). She said a request was made to Treasury to approve reclassification of earmarked funds to augment projected budget shortfall on CoE and Goods and Services. She concluded with a summary of the virement requests made to Treasury.

Mr Ganta noted the achievements and challenges per programme for Quarter 3 (see document):
 
Discussion
Mr M Mackay (DA) thanked DOE for the presentation, and requested clarity on the significant overspends under Programme 1: Administration for both Quarter 2 and 3 that subsequently lead to the request for reprioritization of funds, which derived from a once-off allocation under Programme 5: Nuclear Energy. What were the major unforeseen costs that lead to the over expenditure? There was a citation of travel costs, such as the overseas travel and events that were attended by the Ministry. Thus, what proportion of the total variation was attributed to travel costs?

Secondly, there was much confusion about the role of DOE regarding the nuclear deal since it officially resides with Eskom. Upon review of DOE’s documentation from last year to present, there was no evidence of a framework agreement in which the division of responsibility between DoE and Eskom was stated and an outline of how the nuclear program shall proceed. There had been an indication by means of the RSI at the end of last year that Eskom was in the driving seat of nuclear procurement, which provokes even more the need for clarification of the exact role of DoE. Hence, if there was no explicit delegation between DoE and Eskom on the role of DOE regarding such; it was surprising to note that under Programme 5: Nuclear Energy of DOE financial reports that quarterly targets had existed. These outlined quarterly targets had specific issues, for instance the expenditure on the appointment of a transaction advisor that shall be finalised in 2017; the establishment of a project management office, of which the project management system was already procured; as well as the role of monitoring the reports of nuclear power react as per procurement processes. Therefore, explicit indication of the role that DOE was to play ceases to exist, but yet budget allocations on its various projects were both outlined and spent? The understanding was that since Eskom was to be in the driving seat it would be responsible for the transaction, which was why it had issued the RSI. Thus, why were DoE spending funds on its execution, such the transaction advisor, because such logistical expenditure was to be housed in Eskom’s budget? These budget allocations under Programme 5: Nuclear Energy may possibly result in wasteful expenditure for DOE.

Also, why was a project management office being established for the nuclear procurement process, if that process would probably reside within Eskom, because Eskom have had already the skills to suffice procurement management, technical expertise and other particulars required by it? The R171 million contract for the nuclear energy management system provoked confusion as well. Apparently, there was an allocation of R200 million, of which was used as the primary payment for the system, but according to the financial reports two payments had occurred yet there was an outstanding amount. Therefore, DOE needs to clarify the following- was this particular contract currently under investigation by the Auditor- General, as there an notion that it was; was the AG aware that this was possibly a violation of the Procurement and Supply Chain Management legislation; and, therefore, why in terms of the citation of the CFO had the verification processes been completed and payments had been made? It was known that the Provincial Treasury of the Free State Province upon which this contract was piggybacked was in immense disarray; consequently current engagement with National Treasury and the AG took place regarding the issuing of the contract. This reiterates the issue that contracts in terms of the Supply Chain Management needs to be virtual identical for one to piggyback on the other. The amounts involved needs to be the same and the elements that require procurement needs to be the same. Thus, why in any way had the Provincial Treasury of the Free State issued a contract that resembled procurement management system for nuclear energy as it was actually in the scope of national competence? Therefore, there were many queries regarding the nuclear system procurement, of which DoE had warranted half-hearted answers in response last year. Yet the fact of the matter remained; DOE had not been able to define the nuclear management process; the management and procurement system should reside in Eskom and subsequently its costs should be incurred within their budgets; there were also concerns about the validity of the contract that was supposed to be investigated by the AG, and DOE’s involvement around the investigation was requested as well. Could clarity be made regarding variance of the National Nuclear Regulator of R24.3 million in relation to nuclear new build licence? During the Quarter 3 R1.73 million was spent on an IAEA to cater for a payment to the IAEA for the hosting of the IAEA Integrated Regulatory Review Service (IRRS), thus what exactly were the outputs as a result of the payment? Also, there were several reallocations of funds among the Programmes, which were alarming, because it insinuates that planning within DOE was not optimal. Since the reallocation would entail that certain programmes would be sidelined for others, for example the compensation of employees that was partially explained and the overt expenditure on goods and services. These should highlight concerns for effective management. Finally, with reference to slide 22 of the Quarter 3, the virement request comprised of approximately R50- 60 million from the once-off allocation under Programme 5: Nuclear Energy, coupled with the cost of the contract for the procurement management that was R171 million does not amount to R200 million. Could DoE account for the discrepancy?

Mr J Esterhuizen (IFP) expressed concern for the recurring overspending annually, of which were pardoned with quite feasible excuses. Each time there was an increase in tariff there was an accompanying lowering of demand of energy in the country. A collective budget of R7.550 billion was spent coupled with the request of additional funds, yet R318.30 million was spent merely on compensation of employees, which comprised of R3.5 million designated to just overtime. Yet the DoE proceeds with the issuing of contractors across the entities, which was omitted in the reports as an explicit stipulation. The Solar Water Heater Project (SWHP) under Programme 6: Clean Energy was a duplication of the citations noted in the previous financial year, inclusive of identical excuses warranted for the under- spending then too. None progress was evident and DoE have had tabled the same particulars annually. Additionally, if ever the regress of South Africa was to be accounted for it was not necessary to look further than the issue of petroleum. Notably, the loss of R14.6 billion incurred as a result of managerial incompetence within Petrol South Africa. The noted sentiment about nuclear energy was agreed upon. Why had DOE both paid for and continued to allocate millions of Rand on expenditure regarding the execution of nuclear energy? The levels of debt and the length of time taken prior to repayments should also be considered in its occurrences as well.

Ms T Gqada (DA) thanked DoE for the presentation, and reiterated that the reprioritizing of funds was an indication that the planning within DOE was very poor. Review of the reshuffling of funds from one Programme to another reflects an explicit indication of it. However, the concern to be highlighted was the reporting of the vacancy rate within DOE. The delegation present comprised of mainly acting appointments. Therefore, the Portfolio Committee should consider monitoring the vacancy rate of DOE and evaluate the happenstances of its appointments. Repetition shall not be made regarding the contract posts, as it was already cited. Yet the overtime requires highlighting, because its budget allocations had also increased with the adjustments, thus where had the funds for its realignment derived from? In other areas that entailed over-spending was done without much divulging of why it had occurred. Having had for the Quarter 2 meetings held with the stakeholders noted as a major achievement for Programme 5: Nuclear Energy was amusing. During the Quarter 3 for Programme 5: Nuclear Energy a major achievement noted was a Youth Energy Indaba. Therefore, a report on the outcome of the engagements made, such as the achievements made among the youth and how exactly had they benefiting from it. Lastly, the international membership fees kept escalating, what was the cause of its increases? This echoes that fundamentally the planning of DoE was not in order.

Mr M Dlamini (EFF) noted that he had two sets of questions. The first set related to the financial reports under deliberation and the second set would be directed to the Deputy Minister, as it related to issues to DOE as a collective whole. Firstly, was the concern of the vacancy rate. In South Africa, there were issues of unemployment across the country; amongst it was the high rate of graduates that were unemployed. Therefore, to the Acting COO and the Deputy Minister, the question poses- “what was so difficult in filling vacancies?” It was nonsensical that the vacancy rate of DoE was perpetually high, whilst there were unemployed graduates and other candidates with expertise in search of employment. What exactly was the issue to make appointments and could the stumbling blocks, if any, be stipulated? These also need to outline why there were so many personnel appointed in Senior Management positions in the capacity of merely “Acting”. It served as a crisis across DOEs in government, because personnel appointed temporarily in the position as an Acting Senior Manager entailed that decisions were made during their appointment, but they never took responsibility for the consequences or outcomes of their decisions. Therefore, what was the difficulty involved in appointment, particularly with the basic interview process and the finalization of a permanent contract that was fundamental to recruitment? Acting appointments entailed that the official would not deem their position sufficiently significant to prohibit unintended consequences and ensure that the results were contingent to the mandate of DOE. Hence, when the Portfolio Committee requests an outcomes report it would be excused that the particular official responsible was merely acting in the role and so was no longer appointed to be held into account for any discrepancies, whilst a new official would also be then temporarily appointed as acting in the role. Thus, having officials acting in senior management roles should cease.

He turned to Programme 5: Nuclear Energy. Since the execution of nuclear energy was moved to Eskom, what was the role of DOE regarding it? Clarity on it was necessary, because without explicit citation the money already spent on it by DoE as well as allocated to it should be moved to Eskom, because currently nuclear energy incurred double dipping. There was limited progress by receiving separate answers from DoE and Eskom, thus it should be unanimously decided which of the two should be ultimately held into account. Thereafter, both the responsibilities of execution and funds would be exclusively in the scope of work of the so stipulated. Next, was the issue of the Solar Water Heater Programme (SWHP) under Programme 6: Clean Energy. It was two and half years since the programme was first devised, yet particulars pertaining to it was on ground level. Could DOE warrant explanation for its lack of progress? Next were the set of questions directly for answer by the Deputy Minister of Energy. To create context it should be understood that the Portfolio Committee on Energy had written letters to the Minister of Energy, Director General, Accounting Officer and Chief Executive Officer. Yet none of the Executive Authorities have had responded to the letters. Therefore, upon return to office it should be noted to those stipulated that, they were not the “seniors” of Committee Members, “politically or otherwise”. When letters were sent, a due response was essential. It was not a matter that they could be selective regarding which letters they had chosen to respond too. There was a notion that neglect of response were either due to refrain from compounding existing problems, or reluctance stemmed from the misbelieve that the assessment would seem as though they were doing the work of the MP for them by outlining responses. However, what was not realised was that their lack of response was lack of compliance and, in essence, it was undermining the Parliamentarians; but yet they displayed defiance by the decision to ignore it, all of which Parliamentarians should not be take kindly. Therefore, the Deputy Minister should both liaise to her colleagues the grievances of their neglect, as well as now answer the questions directly posed, as it were the content of the letters sent. Firstly, the contents of the Letter of the 21st February shall be deliberated. An appointment was made of Mr Luvo Makasi into the position of the Chairperson of Central Energy Fund (CEF), after many prior complications with the preceding Chairperson. The Minister officially announced it on the 7th December 2016 after finalization by a meeting with Cabinet. It was necessary that the Deputy Minister answer the following right now: what were the processes that the Minister undertook for the appointment of the Chairperson; of the other candidates who were contenders, could their Curriculum Vitas be submitted to the Portfolio Committee; what was the criterion used by the Minister for the appointment of this particular individual as the Chairperson of CEF, and what academic and professional experiences had the individual possessed that caused the ministry to consider himself as the most suitable candidate? Additionally, regarding the newly appointed Chairperson of CEF there was a newspaper article stating that he was the “Ben 10” of Minister Nomuvula Mokonyane and that he was influencing DOE on Water and Sanitation (DWS). The latter was not a concern for DoE. However, the concern for both DOE and the Portfolio Committee was that following the allegations in the newspaper reports, Mr Makasi called for media briefing to defend himself that he was neither the “Ben 10” nor had political influence in DWS; but he had done so using the banner of the CEF and within his newly appointed capacity. Therefore, the question now poses to DoE- why was that allowed to happen? Who gave Mr Makasi permission to use the resources of DOE to defend a personal allegation? The banners clearly visible in the media briefing belonged to Central Energy Fund, thus when initially watching the media briefing the assumption was that CEF called for a media briefing for announcements of some urgent matter, just to discover that the sole purpose of it was to defend personal defamation of character, which was scandalous. This was alarming, because the Chairperson was appointed in December 2016, but already in February 2017 he had used the resources of DOE for personal advantage. What remedial steps had been taken in response to such presumption? Had the ministry even considered taking remedial action against it? This was a matter of serious misconduct, due to its scandal. The proximity of appointment had not warranted his liberty to defend himself in its capacity. Secondly to the Deputy Minister; regarding PetroSA, notably there was a serious loss of R14 billion. However, currently it was advocated that PetroSA was in the process of selling Block 9. Was the ministry aware of this transaction? If so, why was Block 9 in PetroSA being sold? How much was it being sold for? What were the processes in place to ensure that the transaction would be profitable? Was it true that this transaction was linked to a Russian- owned company? There was also a BEE company that had links with DoE, which was supposedly involved in this transaction as well. Did the ministry know that that BEE Company would be afforded R400 million annually on the mere basis of facilitating the transaction? Was the office of the ministry aware of these happenstances and if so, what were the processes followed during the transaction? Therefore, initial letters were sent out to address these instances on January 5th and then again on the 31st January, but to date none response was granted by the ministry nor Director General. The recent letter sent was on the 21st February 2017. The broadcasts on SABC were the very queries that the Portfolio Committee would be inundated with, because once any offence would be beyond repair civil society would then assert blame on the Committee for lack of oversight. Civil society would question why the Parliamentarians would merely address such controversy when it was too late as it had reached the public’s awareness already, of which only then the Parliamentarians would want to regain control and be deemed as taking their positions seriously by commenting on it in the media, but the reality was that such controversy was meant to have been dealt with by means of oversight long before it reaches the point of public spectacles. When misconduct occurs and hypothetically government remains silent about it for three years or so until it reaches the attention of the media, it would then suddenly provoke a response, as no one would want to be deemed as affiliated with the misconduct. It may be acceptable in other Committees, but in this Portfolio Committee on Energy it shall not be allowed. Therefore, the Deputy Minister should grant answers to these critical issues posed now before the wheels come off.

The Chairperson clarified that Honourable Dlamini had not accused Mr Makasi of being a “Ben 10” and so defamed character, but was repeating a crisis that was propagated in the media and requested if the Committee Members had follow- up questions.

Mr Mackay noted that an opportunity was taken to pose difficult questions, which was outside of the concerns of the financial reports. Therefore, if possible, a further comment on CEF and the Apollo report would like to be made specifically to the Deputy Minister. In a report by PetroSA eighteen months ago the Committee was informed about a turnaround strategy to save the group, which would for its finality. The Committee had subsequently never heard of Apollo, but now it was heard that there was a potential sale of assets within PetroSA of which Apollo was specifically meant to have address the shortcomings within PetroSA. Therefore, where was that report and why had it not ever been brought to the Committee? Were actions being taken from that report in terms of the sale? Also, where was the Genesis report? And where was the forensic audit report on the findings of CEF and the sale of oil?

The Chairperson noted that it was unforeseen that the direction of the discussion would pose concerns regarding PetroSA, but it should be assured that since the agenda for the quarter includes a deliberation with PetroSA next week perhaps it would be substantive if they could answer in-depth queries on their own accord then. However, the Deputy Minister shall be warranted a platform to address concerns once the questions on the financial reports were responded too. He then noted that there was none decrease in the issuing of contract work in the Quarter 3. Which kinds of work was necessary that was additional to the establishments and so called for contract work? Additionally, why should senior managers be acting in a role, such as the Acting Chief Operations Officer? Was the need to have acting officials as a result of specialised projects or for what other reason were the human resources designated as such? This element of human resource had a relationship with the pending restructuring of DOE too. Since, in 2014 there was discussion of the role of The DOE and which purposes it was fit was. It was decided that the current DoE was a separation from its predecessor, but none time was taken to evaluate whether DoE in its sole capacity was constitutionally fulfilling its mandate. Therefore, what exactly in sole capacity was the mandate as per the Constitution? Ignorance of the definitive role to be played may result in judgement imposed on DoE that was unfair. As the assumption shall be that DOE was incapacitated to action its mandate, but in reality the shortcomings were due to the separation that was misunderstood. This issue was yet outstanding to resolve. Next, what exactly was the problem regarding the Solar Water Heater Programme? Was its complications deciphered? Since if not, mere repetition of nonsensical information shall be made. Was there a crime in informing the Portfolio Committee the truthful state that it was in? The Portfolio Committee would appreciate transparency regarding the SWHP. A long time ago a discussion on it was made and targets were established, of which the goal was an installation of 1.4 million solar heaters. Yet in the previous financial report its presentation only reflected a total of 400 000 solar heaters installed, some of which were already problematic and was in a process of repair or replacement. This was a massive project for the poor of South Africa, which was crucial, but it shown none progress of development. A target of installing 1.4 million solar heaters was quite huge. Yet when confronted about it DOE utters an excuse that could not be comprehended. Therefore, it has become apparent that problems exist and the Committee would like to be informed about what it was. Omission of transparency shall eventually befall on the Committee’s account for lack of proper oversight. Next, in the Quarter 2 under Programme 3, 500 of the cumulative target of 800 retail site inspections were made. What the overall method used, in other words, what was the total retail site available and how many of it required inspection to ensure that the annual target would be achieved? What exactly was inspected on site as well? Next, in the same quarter for Programme 4, it was noted that both the municipalities and Eskom electrified 35 157 and 61 775 additional households respectively. Were these additional households above the target set for the quarter, but would entail the composition of the annual target?

Mr Ganta assigned a member of the delegation to answer the questions posed based on their specialisation.

Ms Chetty first clarified overspent funds on Goods and Services under Programme 1: Administration. The financial year had begun with R14 million deficits for Goods and Services. The budget was already cut. Hence, the year had begun on a shortfall. Thus, DOE reverted to National Treasury with the adjustment process, of which DoE had requested R21 million for the Compensation of Employees (CoE) in addition to the amount initially allocated. National Treasury consented on the basis that DOE would find the funds within its total department budget allocation. Therefore, DoE reverted to Goods and Services and found R7.5 million, which National Treasury instructed to use for CoE. Effectively, Goods and Services had a shortfall in the budget of R21.5 million. Additionally, during the year by means of the various activities the over expenditure had increased. Amongst the factors that caused the increases were operational leases. Regional offices were relocated and the costs incurred proved much over than the budget foreseen for it. The operating leases inclusive of the relocation increased by R8 million, which was a larger total than anticipated. This was beside events that had cost R29 million for various other reasons. Upon review of the R171 million for the Nuclear New Build Programme, it should be clarified that R200 million was a once-off allocation, of which R121 million thereof was committed to the programme management system for the 2016/17 financial year. Of the R121 million DoE had already paid R99 million that means that there was still an outstanding balance, which shall be paid once everything was verified by 31st March 2017. Also from the R200 million there was R20 million that was paid to the transaction advisor. Therefore, if one was to relook at the R200 million, it comprises of R121 million for the programme management system; R20 million for the transaction advisor, and it was left with a balance of R59 million. There may be additional costs experienced, for instance for the transaction advisor, which may be unforeseen and thus unaccountable as yet. However, there were funds available for a virement. These occurrences were the cause for the execution of the virement. Which means that funds could be taken from one programme to another. Also, virements do occur during the year.

The Chairperson noted that it was not clear of what was committed by the R121 million and what was paid for by the R20 million under Programme 5: Nuclear Energy.

Ms Chetty clarified that the entire system had cost R171 million and would run over two years. For the 2016/17 financial year one purchase order was R121 million and the next R50 million would be spent in 2017/18. Thus, it was a project that lapped over two years. From the R121 million that was a purchase order given to the service provider, DoE had paid R46.7 million plus the R53million that collectively amounted to R99.7 million for the year, which entailed a small balance for the year. It was a multi-year project. Virements does occur during the financial year, per quarter annual targets were reviewed. Hence, if there was funding or budgets that were stagnate and projects that were halted, discussion would occur and decisions would be made to virement, as it would ensure that programmes that require greater financial assistance were assisted through the year. There has to be some prudence that unused funds would not be returned to National Treasury, but utilised elsewhere to ensure execution of the APP of DOE. Regarding overtime, it was cited that there existed a budget shortfall in CoE, the deficit that it carried at the beginning of the financial year was R20 million. A small augmentation occurred of R7.5 million and this was taken from Goods and Services, but ultimately a shortfall still existed. A shortfall shall still be projected by 31st March 2017 of R6.5 million. The shortfall was also minimised by the reduction of overtime; review of prioritisation of certain vacancies, and other means of interventions. However, in The DOE there were areas that overtime were essential for and could not be stopped. One of those areas was Corporate Services for the security services. Overtime was necessary for various other reasons too, particularly for certain periods of the year. NNR received a nuclear site licence application from Eskom, which was preparatory work for the Nuclear New Build Program. The licence application process would have cost about R 24.3 million. The process would have started in March 2016 by NNR, but they did not have sufficient financial resources for it. National Treasury was approached by DOE to assist NNR, but NT did not have the funding available to assist. Basically, bridging finance was sought for, after which since NT could not assist DOE was the only faculty left for assistance that NNR had required. Therefore, DoE engaged NT to devise a modality that could accommodate both DOE and NNR. Through that process, DoE took funds from the Solar Water Heater Programme of R12.1 million, as well as funds from the Nuclear Build Program that was also R12.1 million. National Treasury shall reimburse these funds to DOE in the 2018/19 financial year. Hence, it was assistance warranted to NNR as an interim measure. DOE would have preferred reimbursement in 2017/18, but it was implausible by Treasury.

Mr Zizamele Mbambo, Deputy Director General: Nuclear Energy, DoE asserting that it was essential to contextualise the Nuclear New Build (NNB) to the Portfolio Committee. Over the past six years DOE had developed the Nuclear New Build up until the Quarter 3 of this financial year. The initial decision was that DoE was to be the procurement agent on the Nuclear New Build, hence when engaging with the 2nd and Quarter 3 financial reports it should be understood within that context. To reiterate the role of DoE until the Quarter 3 was still the procurement agent for the nuclear program. Therefore, all aspects listed under Programme 5: Nuclear Energy was conducted within that mindset. Subsequently, various strategies existed in preparation of executing the role of the nuclear procurement agent for its overall Programme implementation, which was inclusive of establishing a framework to operate within. The Nuclear New Build was broader than the other nuclear projects, for instance the Nuclear Power Plant Project, as it encompassed the entire Programme 5: Nuclear Energy from its onset to the completion of it, and was implemented strictly in accordance with the Nuclear policy of 2008. The Nuclear policy of 2008 aims to ensure that the country shall be self-sufficient regarding nuclear production, of which to manifest its reality Cabinet took the decision in the Quarter 3 of 2016/17 financial year to move of its responsibilities to Eskom. This entailed that Eskom would be the owner, operator and procurer of the Nuclear Power Plant, which was merely a component of Programme 5. Recently, Cabinet took a decision to warrant the South African Nuclear Cooperation as the owner and operator of the nuclear field facilities as well as the procurer of the multi-purpose research reactor. Whilst Cabinet did these decisions, it had affirmed that the role of DoE regarding Nuclear Energy was that it should act on its mandate as the policy setter and it should coordinate the NNB programme. Those were the three key roles that Cabinet have done pronouncement on during the Quarter 3, whereby the procurement aspect of nuclear had been delegated from DoE. Up until then the procurement was expected of DOE, thus why funds were spent on practicing such within the budget allocations. Critical to the realignment was that going forward DOE shall be the coordinator of the Nuclear programme as well as responsible for setting the policies required for the programme. Since the responsibilities had been delegated within the various state entities, DOE resorted to engagements with the various stakeholders to ensure that transactional arrangement took appropriately place. The DoE had since developed a governance framework, issued protocol and was in discussion with the different stakeholders in order to clearly define the accountability of each counterpart involved going forward. It should be empathized that a nuclear programme was a long-term, multi-year, project, because the actual nuclear plants were meant to endure for more than a hundred years. Hence, there was a need for DOE to clearly indentify roles to be played by each stakeholder. Also, going forward the following should be reviewed of DOE regarding Nuclear Energy: it shall remain the policy setter for the programme and it shall remain as the coordinator department for the programme, but it shall no longer execute the procurement aspect of the programme. Once the procurement shall be completed, DoE shall then proceed to monitor whether the governmental objectives of the programme were implemented among the state owned entities that its responsibility was delegated to by Cabinet. Next, was the question pertaining to awareness regarding the occurrences in Free State inclusive of National Treasury and the Auditor General. DOE engaged with National Treasury regarding the procurement of programme management systems and these engagements were yet ongoing, only after which further processes would be called for once the consultation process between National Treasury and DoE were finalized. What was the value of the Youth Energy Indaba? Part of the role of DoE was to demystify misconceptions around nuclear energy and this was achieved by means of liaising with stakeholders, of which the Youth Energy Indaba was an expression of it. This was done specifically to ensure that the youth understood its technological implications. In addition, DOE had worked with other stakeholders that were not necessarily youth orientated to warrant them platforms for skills development and training. DoE facilitated programs for youth to receive training abroad as well, such as in China constituting of different phases for young professionals, phase 2 was completed last year and phase 3 was underway of which was much more practical in nature. Professionals were also sent to study Masters degrees in Nuclear Energy in South Korea. Some of the professionals sent abroad had come reverted to the country. In conclusion, at this stage DoE was unaware of whether the AG was in the process of conducting an investigation. The AG had communicated that they shall be going to DOE to do its audits reports, but none notification of a forensic investigation was made. Once the scope of their audit shall be ascertained by means of engagement it only then be known whether a forensic investigation shall take place. Engagements with National Treasury were on going, of which none indication of a forensic investigation was made yet.

Mr Jacob Mbele, Acting DDG, DoE replied on the Integrated National Electrification Programme (INEP). The numbers cited were additional allocations to those of the 1st quarter, but the target for 2016/17 was 235 00, of which by the end of the Quarter 3 210 000 was completed. During the first quarter 67 000 were completed, the Quarter 2 had 97 000 completed and with completion of the Quarter 3 57 000 was completed.

Mr Khanyiso Zihlangu, Project Manager: Solar Water Heater Programme, DoE answered that the reports had not divulged expansive detail that the Portfolio Committee had wanted regarding the Solar Water Heater program (SWHP), but it should be assured that as of two and half years DoE experienced progress regarding its programme delivery. There had been some improvement in terms of funding the programme and having it spent accordingly. Admittedly, there had been challenges regarding its delivery. The first issue incurred was that, as the programme was implemented it was essential that it close working relationships were established with the municipalities, because its execution was peripheral to the restrictions of municipalities, viz. Local Government. Entrance into some form of collaborative agreements with municipalities had experienced delays, since decision- making processes were restricted by municipal by-laws. An agreement that clearly maps out the role of the DoE and the role and budget allocation by the municipalities was aimed for. However, to prohibit delay methods of intervention to accelerate or fast-track engagements with municipalities as well as ensure response as much as possible had been devised. If this was not pursued DOE would cease to reach a stage whereby installation was to occur. In terms of delivery of the entire programme, it was to be conducted in two separate stages. The first stage comprised of manufacturing, supply and delivery; it constituted of 70% of the core of implementation. Under this stage, already 50 000 units had been contracted for supply, paid for and to be delivered by the contractors. This was a demonstration of the programmes achieved. However, the second stage was the installation programme, of which hinges heavily upon the participation of the municipalities. Additionally, Cabinet had instructed that as the second stage was conducted all affected organs of state have had to be involved, such as other national departments and/or provincial departments. Thus, to have facilitated effective cooperation among governmental departments and entities a Standing Committee was created with a number of stakeholders, and the inauguration meeting shall occur in March 2017. The other challenges incurred during the implementation of the programme pertained to the targets itself. Such as, a few years ago the agreed target was the installation of 1.4 million solar water heaters, but it should be understood that there was discrepancy between the inspirational targets that were pronounced and the actual ability of installation due to the available funds. It was accepted by DoE that current fiscal constraints affected every department and its endeavours. Therefore, as much as the aspiration was the installation of 1.4 million solar water heaters, merely 50 000 units could be installed annually. Lastly, it should be reiterated that in terms of implementation DOE was over 70% and only have had to launch the actual installation, which was anticipated to occur at a faster rate. In other words, the supply program was feasible in comparison to its manufacturing aspect, as the latter takes longer, especially since the local manufacturers did not have the capacity to manufacture the solar water heaters at the rate that was anticipated.

Mr Lucas Mulaudzi, Acting DDG: Corporate Services, DoE noted that he would clarify the vacancy rate of DoE. The total establishment of the DoE should have 689 staff officials. However out of the provision of 689, currently 543 positions were filled, which gives the balance as a vacancy rate. However, upon further review there were 69 additional vacancies that existed, which was spread across the various branches within DOE. As indicated by the CFO, within each programme and its various economic classifications there was overall overspend on Compensation of Employees (CoE). This resulted due to the fact that the financial year had begun with a deficit for CoE. Adding to it was the reduction of budget by National Treasury, as well as the appointments of additional staff members to the establishment. Thus, the DoE had undertaken a process whereby it engaged with the various head of branches within DOE in order to analyse and determine the critical priority provisions. Hence, if a particular individual was appointed, the appointment should contribute to the strategies derived from the APP as well as other plans in DOE. These specific appointments would minimise further inflation of the vacancy positions. This matter had also featured as a standing item at Eskom that was deliberated to decipher a methodology to reduce the vacancy rate. One of the considered methods was to start by reviewing the additional staff members by noting how many of them were on contract that were expiring soon, after which posed the question- what shall be done once their contract ended? If there were none convincing substantive motivation to have renewed the contract and reappoint the individual it would be eradicated. However, among the contract work that was done on a permanent basis there was review to shuffle the appointee into a similar position that was within the establishment, as in so doing it would reduce the official vacancy rate. The current vacancy rate of DoE was 11.26%, which means that it was above the threshold of 10% of DPSA by 1%. For DoE to fill the positions would depend on how the critical positions were determined. Hence, the CFO had indicated that in order to balance the current deficit a request occurred to move funds from certain programs to another to cover shortfalls. If the vacancy positions were to have been filled without the consideration of financial implications it would cost much funds that DOE does not have. Hence, the need for striking a balance between the permission warranted by National Treasury regarding DOE’s reserve funds and ascertaining methodology to fill the critical positions that functioned the mandate of DOE. Therefore, it was a matter that would be reported on a consistent basis, because the DoE would not want to lose control of it, as affects the structures of management too. Regarding disabled personnel, DoE currently has 1.97% of its officials who were disabled, but the threshold was to have 2% as prescribed by DPSA. In terms of mitigating improvement of the current position, there shall be a drive to prioritize the identification and recruitment of people with disabilities. This will be inclusive of the recruitment of interns as means of kick-starting the improvement and enhancing the 1.97% to the required 2% or even beyond it. Regarding employment equity in SMS level, the mark-up of women at SMS level was currently at 36%, which was below the threshold of 50%. The recruitment processes undertaken going forward shall target the relevant groups as required, of which women shall be targeted for SMS level.

Mr Tseliso Maqubela, DDG: Energy Planning and Hydrocarbons, DoE noted that he shall answer the query of the inspections. At any given time the petroleum retail sector in South Africa shall have about 4800 petrol stations that were operational, employing no less than 70 000 people. Thus, the issue of self-service have not garnered consideration by DOE due to the magnitude of jobs involved. Regarding inspections, at any given year DOE targets no less than 25% of coverage of the service station. Basically, DoE covers 25% as a minimum of all of the operational service stations. Instances did exist when the same service station was visited twice in consecutive years, due to the risks associated with the source from which the service station had acquired its fuel. For example, the imports derived from Mozambique had no assurance that the fuel specifications testing were conducted with sufficient quality. Subsequently, Mpumalanga was given much focus, as many problems occurred there, since most of the imports were purchased there. The petrol inspections entailed testing of the optimal level reached by the service station to prohibit inaccurate purchases, such as the purchasing of petroleum 93 that were labelled as 95. Cases were found in which customers thought that they had purchased petrol 95, but the retail owner had actually sold them petrol 93. Inspections entailed the review of accuracy of quality. Regarding diesel the level of sulphur was reviewed. Diesel was currently sold at 50ppm, since 50ppm was bought, but then 500ppm or 463ppm was labelled onto the tank. Thus, the accuracy of such was checked and should DOE discover discrepancies there were consequences for it. Also, if impurities were found in petroleum or diesel, particularly diesel, at the threshold it would be hazardous as it was the level that diesel ignites. The pricing was also checked, such that the correct price was displayed, which were the price promulgated at the end of each month. The retail petroleum service station would also have the validity of its licence reviewed, inclusive of its ownership. For example, if a site was issued with a licence for Mr X, and in the interim Mr Y moves in and run the site, there would be review that whomever the certification was issued to was the one who was operating the site. Assurance should be given that the petroleum sector in South Africa was robust and was even more so daily. Currently, it was in a better situation than it was five or seven years ago. Since due to the ability of regulation the sector had attracted new investors into the infrastructure.

Mr Esterhuizen emphasised that on the onset of the financial year each department should approach their CFO with the over and under expenditure of the preceding year, which would result in its realignment for the upcoming year. This means that previous under expenditure and previous over- expenditure would be budgeted for accordingly, resulting in a financial year that need not require reshuffling during the year as its accommodations were already made, it was a matter of just spending it as specified, which would be reviewed. Therefore, if there exists cases of over or under expenditure during the financial year it was indicative of an unhealthy situation, especially since DoE perpetually errs it. Additionally, 85% of the annual budget was already spent, which was also unhealthy as a healthy rate would be 75% by the Quarter 3. This entails that the 4th quarter only had 15% of the budget remaining to utilise. Earlier only PetroSA was mentioned, but there were so many more aspects involved with vast financial implications, such as bails out and guarantees required on funds, which had escalated to the point that it could pose as a threat to the fiscal future of the country.

Mr Mackay noted that DoE had R171 million allocated to procurement and a context was given indicating that up until the Quarter 2 there was a need for a procurement system for the Nuclear Energy, as only during the Quarter 3 Cabinet had delegated such responsibility elsewhere. However, the CFO had indicated that the payment of the system should occur over two financial years. Thus, when exactly would DOE become aware of the fact that it does not require a procurement management system at all for nuclear energy? If this was a secure system, it cannot be excused that pronouncements were spontaneously made by Cabinet to reshuffle procurement responsibility, of which DOE responded in an unprepared manner as it supposedly already placed an order for a procurement management system. It was also peculiar that decisions for the procurement management systems occurred a month before the pronouncement by Cabinet, as opposed to have had waited for their permission. What happened to expenditure allocated for the second half, as the CFO had indicated for the 2017/18 financial year? Once DOE had decided what its coordinating role would entail,, it would in essence not be responsible for the procurement management system of nuclear energy. Hence, the DoE has a system that it had not required. Would the funds previously allocated to the procurement management system be warranted to Eskom or shall Eskom reimburse The Department of the money already spent on it or shall a different contract be devised altogether? Since this system was unneeded by DOE. Therefore, why was the final payment of the procurement management system still proceeding? It was a huge amount of wasteful expenditure. Thus, either the DoE was definitively the procurement agent, of which it was not, therefore there was no need for a procurement management system. If payments were made to establish a procurement management system, which it had done, what happens now? Why was the remaining R171 million deriving from the budget of DOE?

Ms Thembisile Majola, Deputy Minister of Energy, DoE noted that the last comment was very relevant, because even though Mr Mbambo outlined details there was yet incomplete understanding of what the procurement management system for nuclear energy was actually about, as it was not about procurement in itself, but it was about the role of coordination and issues of governance instead. There shall be a specific session to deliberate it, because it had the tendency to manifest in a manner that derails from the actual presentation and thus focus on it would have to be made. A note was made that the question pertaining to the international membership had not been answered by the delegation yet. Admittedly, the concern about the letters written and sent to the Minister and Director General, which received none response and other matters related to it, was heard for the first time. However, it had been noted and follow-up shall proceed accordingly. To reiterate, there was personal oblivion of the letters the Committee Members had sent. There was also an issue that it was presumed that the Financial Officer would have elaborated on further to clarify its context and it was the concern of over-spending. It should be empathized that the office of the Deputy Minister had not over-spent at all. In fact, if anything, DOE was actually under- staffed for various reasons, but it had definitely has not overspent on CoE. Another issue that would require of DoE to revert for clarification was the mention of PetroSA and the Genesis report. However, a comment should be made that each time the financial reports was deliberated it would provoke overview on issues that were not particularly specific to the reports. Perhaps it could be a matter of timing, as many of the questions asked pertained to current happenstances, but the reports were based on elapsed financial conduct as of July last year. Thus, there were always instances that focused on current concerns that would prevent full interrogation of the report on hand. Some of the recurring issues reflects that the amount of time set out for each programme should be better balanced in future, as there were programmes that received multiple sessions and others that never received a session dedicated to it. This was essential to ensure clarity for the Portfolio Committee. Since the short time dedicated to financial explanation may not fully describe the particulars involved in the expenditure specifications outlined. There was also a query regarding EIA and the Youth Energy Indaba, all of which would be answered in writing. Lastly, would it be possible if the Portfolio Committee on Energy could communicate to the offices of the ministry of concerns pertaining to DOE that may not be listed on the agenda as a matter of contention before convening? This would prevent the instance in which it would be the first time that certain queries were heard and that unpreparedness followed suit. Hence, it would be helpful if the office were contacted first, of which those issues apart from the agenda would be addressed as required.

The Chairperson noted that upon receipt of the 4th quarter financial report discussion should occur to compare its performance against the Annual Performance Plan (APP). Thus, the 4th quarter would warrant a platform for the questioning of details. It was appreciated that Committee Members took the opportunity to liaise about concerns that was not listed on the agenda, but it was of a substantive nature that should be addressed. Emphasis should be made that issues relating to the nuclear new build programme and the role of DOE shall be dealt with accordingly. It seems that the DoE itself was not 100% certain of the role that it was to play at this stage. Therefore, when discussing it at later stage duties should be clearly outlined by the various branches, such as the role of the ministry, gazette determination, as well as the implications of it. Those concerns require a focused discussion. 

Mr Dlamini verified that the Deputy Minister had not captured sentiments correctly. The point was not whether letters were sent; it was that the DM should liaise to the Minister on Energy that letters were, indeed, sent and response was pending- point blank. Next, was a direct question to the Deputy Minister- was Block 9 of PetroSA being sold to Russians- yes or no? Since this was not an insignificant matter. A direct question entails a direct answer. As an Executive Authority of DOE surely the Deputy Minister should know. Therefore, was Block 9 of PetroSA being sold to a Russian grouping? It was not an open-ended question. It had nothing to do with the letters earlier referenced. The citation of letters was just as a note that the Executive Authorities of DOE was not to undermine the Parliamentarians. The Deputy Minister could merely state whether its sale was known or not. This was dealing with a company that had already lost millions of taxpayers’ money. Similarly, regarding Mr Luvo Makasi, what was the process to have appointed him as the chairperson of CEF? Also what remedial steps were taken against his presumption of defence of personal scandal in the capacity of recently appointed Chairperson of CEF? Taking the resources of DOE to have press briefings for defence of a personal allegation was much too weighty to ignore. What had the Minister on Energy to say about such misconduct? It was also a direct question to the Deputy Minister.

The Chairperson noted that those were critical questions, but it was not necessary to ambush the Deputy Minister. Next week, PetroSA shall convene for a briefing, in which all questions regarding its logistics could be divulged then. Therefore, there should not be insistences that questions that had not related to the presentation be answered now.

Mr Dlamini responded that the Chairperson was insinuating that Committee Members could not take the liberty to ask questions that held Ministers into account in the Portfolio Committee meetings? The Deputy Minister was currently present and should be in the stance to answer, as the sale of Block 9 was mentioned of as early as January and would have been finalised by the 31st January 2017. It was March and yet none response regarding it was given. Therefore, going forward, were questions evaded from the Ministers even though they were the Executive Authorities, and the Parliamentarians were to wait for the various entities so that they could answer themselves about queries relating to management above them? Thus, the Ministers were not accountable for their Department? If so, the Committee will not bother them going forward.

The Chairperson clarified that that was not said; in fact the Chairperson has no authority to inform that notion. However, next week the Minister shall be present and perhaps accompanied by the Deputy Minister as well. Then the same questions could be asked to hold them into account. It was not meant that the questions were not to be asked at all; it was a matter that the questions need to be deferred, because there shall be a relevant platform that was specific to the entity. During next week, the Minister, Deputy Minister, Director General and other members of the delegation could be questioned, in addition to PetroSA.

The meeting was adjourned.

 

Download as PDF

You can download this page as a PDF using your browser's print functionality. Click on the "Print" button below and select the "PDF" option under destinations/printers.

See detailed instructions for your browser here.

Share this page: