Department of Energy Annual Report, with Minister & Deputy

Energy

10 October 2017
Chairperson: Mr F Majola (ANC)
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Meeting Summary

Annual Reports 2016/17 
The meeting to consider the annual report of the Department of Energy (DoE) got off to a controversial start when Members of opposition parties questioned if the meeting was legal or not, as they wanted an assurance from the Minister of Energy that the appointment of Mr Thabane Zulu as chief executive officer (COE) at the Strategic Fuel Fund (SFF) had been done legally. Although the Minister assured the Committee that she was satisfied she had done everything legally, there was dissatisfaction with her answers, and it was eventually resolved that the Minister had to put in writing all the processes she had followed, including the legal provisions that she had relied upon to make the appointment.

The matter of the strategic fuel stock that had apparently been sold off in 2015 proved to be another major bone of contention. It was asserted that the contract that had resulted in the sale of the stock was illegal, and that the Department would institute proceedings to have the court officially declare the transaction illegal. The Minister was asked questions about what had happened to the fuel stocks, and she responded that the stocks were still in the country and that the money was still there. The Department said it would engage the traders in negotiations, but that it could not divulge further details as this would compromise the negotiations.

There were also questions about the statutory mandate of the SFF, with Members observing that the entity had embarked on oil explorations in Equatorial Guinea when it was specifically set up as a strategic oil reserve. The Acting Director General (ADG) stated that article 4 of the memorandum of incorporation (MoI) allowed the SFF to engage in oil explorations, but this position was disputed by a Member, who challenged the ADG to study the article.

In the 2016/17 financial year, the Department had a total budget of R7.55 billion, but only 9% of that was for operational costs, with the 91% balance having been set aside for special projects. The Department had incurred irregular expenditure amounting to R76.5 million. The Department was criticised by some Members for honouring illegal contracts which had resulted in the irregular expenditure. Of particular concern was what Members believed to be a lack of consequence management by the Department. They wanted action taken against the individuals who were involved in the sale of the strategic oil reserves and those involved in other illegal contracts that had resulted in irregular expenditure. They were also concerned about the transfer of African Explorations from the DoE to the Department of Mineral Resources, believing that this move would result in liquidity problems for the CEF.

Meeting report

The Chairperson welcomed the Minister of Energy, Ms Mmamoloko Kubayi, and her deputy, Ms Thembi Majola, the Acting Director General (ADG), Mr Tseliso Maqubela, and his delegation, as well as a visiting delegation from the University of Utah in the US, which was seated in the gallery.

The Minister requested to be allowed to leave before lunch time and to come back around 14h00, as she had another engagement.

The Chairperson said he wanted the meeting to end by 13h30.

Mr G Mackay (DA) said it would be difficult to do the answer and comment session in the absence of the Minister, and that it was important for her to stay the whole day. He argued that no other meeting was as important as this one, as the Minister was accountable to Parliament.

Mr M Dlamini (EFF) said this was the most important meeting and no other meeting was as important as this one. He asked that she stay the whole time. He asked the Minister to clarify whether there was a resolution by the Central Energy Fund (CEF) Board regarding the appointment of the chief executive officer (CEO) for the Strategic Fuel Fund (SFF), otherwise the meeting would be declared illegal.

The Minister said she had no intention of making opening remarks before the meeting. She said the process of appointing the CEO had been done legally. She asked for the presentation to be made first and that she would clarify all issues after the presentation.

Mr Dhlamini said he was simply asking whether the appointment of the CEO was backed by a resolution of the board. He said the minister was not a shareholder of the Central Energy Fund (CEF) and if she had appointed Mr Thabane Zulu as CEO of the SFF without a board resolution, then she had gone beyond her powers. He asked the Chairperson if he would take responsibility for chairing an illegal meeting.

The chairperson said he would take responsibility for the ruling to start the meeting. He also assured Mr Dlamini that his question would be answered after the presentation.

Department of Energy (DoE): 2016/17 Annual Report

Mr Tseliso Maqubela, ADG: DoE, said the financial year 2016/2017 had been a tough one for the Department, but that through all the difficulties the Department had not disadvantaged the economy. The country was now enjoying a surplus of supply through renewable energy and new capacity from Eskom power generators. Investments in liquefied gas terminals had been completed. There had been improvements in the governance of the entities in the Department and efforts were being made to stabilise the situation at the Strategic Fuel Fund. The year saw the supply of liquid fuels stabilise, and no fuel shortages were experienced. It had been tough but the Department had done its best to deliver the services that were expected by the public.

When the Department was making its plans for the year in question, some of the challenges were not anticipated so there was a need to improve foresight by developing assumptions and then adjusting plans accordingly. The Department had implemented its annual performance plan through six programmes: Administration, Energy Policy and Planning; Petroleum and Petroleum Products Regulation; Electrification and Energy Programme and Projects; Nuclear Energy and Clean Energy.

He reported on the performance review regarding the 2016 budgetary recommendations of the Portfolio Committee on Energy

Recommendations

Recommendation 1 - Finalise the Integrated Energy Plan during the last quarter of the financial year.

By end of the year they were still busy with public consultations, having gone to all the nine provinces.

Recommendation 2 - Present the Integrated Resource Plan in the first quarter of 2017/18.

They had consulted on the draft in the fourth quarter, and consolidated comments were received and processed. The process should be concluded during the financial year.

Recommendation 3 - State Owned Entities (SOEs) should fill all critical vacancies.

All critical vacancies within SOEs had been filled while others were in the process of being filled. There were also others that would only be filled in once the process of structural re-organisation was completed, resulting in new organograms.

Recommendation 4 – Ensure that challenges related to the maximum retail price of liquefied petroleum gas were resolved by 2017/18.

The Gas Amendment Bill had been developed to regulate the sector.

Recommendation 5 – Engage the committee with legislative proposals for the reform and restructuring of the electricity sector once the Integrated Resource Plan and Integrated Energy Plan had been adopted by Cabinet.

Once the approval processes had been completed, the Department would engage the Committee on both policy frameworks.

Recommendation 6 – Develop initiatives together with other government departments and entities to ensure security of electricity supply.

The initiatives would be developed once the Integrated Resource Plan was finalised.

Recommendation 7 – Develop a strategy to address the backlog concerning the distribution network.

The Department was collaborating with National Treasury, the municipalities and the National Energy Regulator of SA (NERSA).

Recommendation 8 – Address challenges of renewable energy.

Eskom was working on the challenges of connections to the national grid.

Recommendation 9 – Address the legislative mandate of NERSA

The regulator was already empowered under the Electricity Regulation Act, but amendments had been proposed.

Mr Maqubela reported that the DoE’s six programmes, 42% of the targets were achieved, 38% were partially achieved and 20% were not achieved. There were 77 targets in the Annual Performance Plan (APP), with 32 being achieved, 29 being partially achieved and 16 not being achieved.

On governance, it was decided that no CEO could take a decision which the board was not aware of, especially regarding delegated authority.

On the distribution sector, he called for more funding to invest in the distribution network as the culture of non-payment was still pervasive in the society. The cost of electrification was not uniform, even for rural areas.

Regarding the nuclear programme, there was a change in where the programme would be operated, and the plan was to move it from Eskom. The Western Cape court ruling had set aside some plans so there was a need to take into consideration the court ruling when designing alternative plans.

On staffing, he reported on the compensation of employees (COE) constraints and a high turnover of staff. The Liquid Fuels chief director had resigned, and the Department could not fill that post.

Capacity by some municipalities concerning energy matters was lacking and a challenge to the Department.

There were challenges in the inter-governmental processes, and there was a need for improvement regarding communication and the implementation of decisions.

Financial Report

Ms Nonhlahla Tshabalala, Acting CFO:r DoE, reported that in the 2015/16 financial year the Department had achieved a clean audit and there had been no material findings reported by the AG. For the material findings that were mentioned by the AG in the 2016/17 financial audit, the Department had already developed an action plan by which it was aiming to address the findings of the AG and the internal auditors so that those findings were not repeated.

The budget allocation for the Department for 2016/17 and the performance regarding the utilisation of the funds per programme was indicated in the appropriation statement. The Department had received a total allocation of R7.55 billion. However, 91% of it, or R6.84 billion, had been allocated for transfer payments -- earmarked funds going to specific projects. That meant that the Department was left with 9% as operational funds. Total expenditure for the year had been R7.51 billion, equivalent to 99.5% of the allocated funds. There was a net budget balance of R37.71 million remaining at the end of the financial year.

In administration, there was an overspending of R35.74 million which was mainly in current payments in compensation of employees, and in the goods and services classification. Compensation of employees resulted in R5.5 million overspending and that was attributed to that fact that the budget was already constrained due to a budget reduction that had been implemented previously by National Treasury. In goods and services, there was an overspending of R31 million, with 70% of that being mandatory costs, such as office accommodation costs and all the associated costs for both head office and regional offices. In 2016/17, the process of relocating six of its nine regional offices was completed. This had meant an increase in lease costs and property payments for those office buildings. The move had been necessitated by the need to be accessible to customers. When the process of relocation started, there had been enough funding, but then budget cuts were effected.

In Programme 4, there was under-spending of R36 million. This was because there was a delay in the commencement of the implementation of the Integrated National Electrification Programme (INEP) Non-Grid Electrification Programme. Nuclear energy had R7.4 million remaining, because a number of projects in the programme could not be completed. Clean energy had an unspent budget of R29.8 million due to the performance of the solar heater programme. This programme was implemented in two ways: firstly, the transfer of payments where funds were used to procure units and secondly, the goods and services which involved aspects such as feasibility studies. The first aspect of procurement had been effected, as units were procured, but it was the goods and services part that was lagging behind because municipalities had to identify where the units had to be installed.

The 9% operational budget amounted to R705 million, and R697 million was utilised. The budget under-spending in the operational budget was just 1.1%, or R7.8 million.

In the transfers and subsidies budget, which was 91% of the budget, the allocation was R6.84 billion and actual transfers amounted to R6.82 billion, so the net budget balance of this programme was R29.9 million. This was mainly due to the delay in the electrification programme, where some municipalities delayed identifying installation sites for the electricity units. There was overspending on the international memberships by R5.9 million because the membership of one entity had not been cleared from the 2015/16 financial year.

The income statement showed that as at 31 March 2017, the Department had generated revenue of R8.7 billion, which was an improvement from the R8.4 billion that was generated in the 2015/16 financial year. The revenue was collected from three main sources, -- the annual appropriation, which generated R7.55 billion, in-house generated revenue from departmental activities, such as petroleum licence fees which generated nearly a R1 billion, and aid assistance. The in-house revenue had increased mainly due to that fact that Eskom had been surrendering income to the Department. In 2015/16, Eskom had surrendered R800 million and in the period under review, R950 million was surrendered. These funds came from the time they were the Department’s implementing agents for the Solar Heating Programme. At the end of 2014/15, a decision was made stop this arrangement. Income also came in from donor funds from the Reconstruction and Development Programme (RDP) Fund run by National Treasury for two projects that the Department was currently running. There was money from the European Union and from Denmark for the Renewable Energy Development Programme. The Department had generated R188 million from donor funds in 2016/17. The total expenditure was R7.6 billion, most of which was under transfers. The surplus was R1.1 billion, of which R37.71 million was for voted funds, R957 million was departmental revenue and R97.4 million was aid assistance.

Unauthorised expenditure increased from R14.86 million in 2015/16 to R50.6 million in 2016/17 -- an increase of R35.74 million -- which was due to the overspending in Programme 1. The voted funds had to be surrendered to the National Revenue Fund, which was R73.5 million, although the net budget balance that was left was R37.71 million. The reason for that was that the Standing Committee on Public Accounts (SCOPA) had had to clear the issue of the unauthorised expenditure, so the money had to go back to the National Revenue Fund.

Contingent liabilities increased from R35.4 million in 2015/16 to R96.6 million in the current financial year, and this came from two areas. There were costs related to litigation with the management agent of a building the head office used to occupy. The claim stood at R14.4 million in 2015/16, but the agent had adjusted the claim to R42 million. The other claim was from a private individual affecting the Minister of Energy as one of the respondents, equivalent to R33.1 million. Commitments regarding services contracted amounted to R183 million. Accruals in 2015/16 were R8.5 million, but in the current financial year they had increased to R32.4 million. The major accruals had come from the Non-Grid Electrification Programme and the Solar Heater Programme. The accruals referred to the expenditure the Department had already incurred. The services had been received, but the invoices came after the reporting period.

In 2015/16 there had been no irregular expenditure, but in the current financial year it had amounted to R76.5 million mainly due to the partial compliance with the Financial Compliance Committee (FCC) processes and non-compliance with the Treasury regulation 16A6 dealing with the contract that was adapted from one organ of state. Fruitless and wasteful expenditure was R16 000 was mainly from traffic offences by individuals and these funds were normally recovered from the individuals concerned after investigations.

The Department had received a qualified audit opinion for the 2016/17 financial year from the AG. This was based on the contention that the Department had misstated the value of its irregular expenditure by a total of R98.4 million. Other significant findings mentioned included the material under-spending of the vote of R73.2 million from programmes 4, 5 and 6. Unauthorised expenditure of R35.74 was also identified and flagged by the AG. Other material findings included not complying with National Treasury regulation 16A6.6, and effective steps not taken to prevent irregular expenditure, and contracts extended or modified without proper approval by a delegated official.

Discussion

The Chairperson reminded the Acting DG that the last time he had asked him who the acting CFO was, he had introduced someone who was not at this meeting. He asked him to explain.

Mr Maqubela explained that the tenure of the Acting CFO had ended the previous day, and Ms Tshabalala had taken over.

The Chairperson asked Mr Mackay whether he wanted to say anything before the Minister made her comments, and he declined.

The Chairperson then invited the Minister to make her remarks on the report.

Minister’s comments

The Minister acknowledged that the Department could do better, and said they were looking at ways of improving performance. She admitted it was not an ideal performance report to table, but that the DoE was upfront and honest to accept that it was not what they wanted. She bemoaned the fact that only 9% of the budget was meant for operations. The Department was having to do more with less. One way of trying to manage the limited resources was by looking at some of the vacant posts and abolishing them, to avoid over-expenditure.

She also admitted that the audit report was not ideal, and indicated that she had met with the executive and audit team and expressed concern that she did not get satisfactory answers, specifically about one programme, as to why there were two management letters signed on the same day with different content. Secondly, there was a contract which had been flagged and the findings by the AG were accepted, but she complained that things should not have happened the way they did.

On the information technology (IT) system, she had had a disagreement with the AG team. Initially, the AG team had no concerns about the terms of reference of the contract, but had concerns about the pricing. In the process, when evidence of the pricing was provided, it was discovered that the Free State tender had not included VAT, and that was why it looked less than what the Department had indicated. It was later proven that when VAT was added, the price came to that indicated by the Department. The AG team accepted this, but later they had gone back to query the terms of reference which they had initially accepted. That was the bone of contention with the AG team. and the Department had asked the AG to look at this matter again. They wanted to know why the AG team had shifted the goal posts. She had raised those issues with the AG’s office.

The Minister said there was no illegality in the appointment of the Mr Thabane Zulu as CEO of the Strategic Fuel Fund (SFF). She was comfortable with the matter, and the Hawks were aware of it.

Mr Dlamini said that on the day she had made the remarks about the appointment, she was not requesting, but was announcing, that Mr Zulu would be the acting CEO of the SFF. He accused the Minister of changing her position. He reminded her that she was not a shareholder of the SFF.

Mr Mackay said the Minister’s response was inadequate. He claimed that when she made her budget speech in May, she said she had recommended the appointment of Mr Zulu. He asserted that it was the board of CEF that was supposed to make a recommendation to the Minister concerning the appointment of the CEO of one of its subsidiaries, and not the other way round. He stressed that the Minister was accountable to the Committee and not the board. He emphasised that the Minister had no authority to second people to entities. He demanded for a clear answer as to whether the appointment had been done legally or not. He advised the Minister to seek legal advice, as she was not a lawyer

The Minister maintained that when she made the budget speech, she said she had requested, and not recommended. Mr Zulu did not assume office before the right processes had been followed. She had a different interpretation of the law and how the processes had to be followed. She believed that what she had done was correct. She had made the request based on budget and policy issues. She would not be seeking any legal advice as it would be a waste of taxpayers’ money, as she believed what she had done was right.

Mr Mackay addressed the Chairperson, complaining that the Minister had not answered the question regarding the processes that she claimed she followed.

The Minister replied that she had said that she had requested, and not recommended. She argued that she was just giving a context to the question, and affirmed that nothing had been done illegally. She challenged Mr Mackay to prove that she had acted illegally.

Mr Mackay asked the Minister if the board had been informed, and what their response had been.

The Chairperson intervened, saying the Minister had already answered that that had been done illegally, and suggested that the meeting proceed to other matters.

Mr Dlamini insisted that the Minister had announced that she had seconded Mr Zulu to the SFF. He asked whether imposing a person on the board was the right way of doing things. He added that Mr Zulu had made some pronouncements about procuring oil from Equatorial Guinea (EG). He told the Minister that he was not scared of her and that the Committee would take her for a legal review.

Mr Mackay observed that there had been a significant shift in the mandate of the SFF under the Minister’s watch, and that rather than focusing on oil storage, the Fund was now exploring for oil in West Africa. He repeated that there were serious questions regarding the legality of the appointment. He asked the House to suggest processes that would help to ascertain the legality of the appointment. He said the law does not care about intention, but about whether something was done legally. The appointment was not just bad governance, but it undermined the board. He challenged the Minister to state the legal references that she used in making the appointment. He asked her whether the Members should bring the board before the Committee and ask them about the processes that had been followed, and draw a conclusion thereafter.

The Chairperson agreed with Mr Mackay that the question of the legality of the appointment needed to be settled. He suggested giving the Minister the opportunity of providing her answer in writing. She would outline the processes that were followed in effecting the appointment and the specific legal provisions that were employed in support of the appointment.

Mr Mackay wanted to be clear that the Minister would detail the processes and provide documentary evidence, such as letters. He also requested documentary evidence of the board’s recommendation.

The Minister agreed to draw up the letter, but challenged the suggestion that she was the one responsible for the change in the mandate of the SFF from being an oil storage entity to an oil explorer. She contended that the oil explorations in Equatorial Guinea had been approved in 2015 before she took office. She denied that she had anything to do with Equatorial Guinea. She then shifted the blame on to the Committee saying that if anyone was responsible, then it was the Members of the Portfolio Committee on Energy because it had happened under their watch.

Mr Mackay asked whether the Committee had agreed that the Minister would write about the appointment.

The Chairperson said it was agreed, and there was no need to have a show of hands. If anyone was opposed they would have objected. He invited further questions from the Members on the report.

Mr Mackay alleged that the Department was deeply steeped in corruption, which was reflected in the findings of the AG, the DDG suspensions, the firings and un-firings, including the Russian deal. He referred to the performance report, which indicated that the Department had failed to achieve seven of its targets in the financial year. He asked where it was indicated in the memorandum of incorporation (MoI) that the SFF could carry out oil exploration. He stressed that it was a company that should be focused on oil storage, but now there was information that PetroSA had subsidiaries in West Africa. He asked why Mr Zulu had said that the documents were with the Minister. She was not a business woman and therefore had no business with the SFF. It was a governance issue, and he asked why the Minister was by-passing the board.

He asked if the strategic fuel stocks had been lifted, and if that was the case, he wanted to know if they had been onsold. He demanded that the oil should be brought back. He claimed that there was a KPMG report which contained price calculations. He also asked what the consequence management would be regarding the actual sale of the stock. He asked the Minister about a certain Nigerian national called Kase Lawal, and wanted to find out if she had met him and whether she was aware of any contracts. He also asked her whether she had met Sibusiso Gumede, and if she knew anything about multi-million rand nuclear tender. He further asked whether her statements regarding nuclear energy, as reported in the Sunday Times, were accurate. He said her remarks were pre-empting the Integrated Energy Plan (IEP) report, or perhaps she had been speaking about the draft. He requested a nuclear price model that Eskom was using for price increases. He wondered why she was talking about nuclear power when she did not know how much it was going to cost. He asked who the procuring agent was going to be, saying there would be a conflict of interest if Eskom were to do the procurement.

Mr Dlamini asked if Mr Zulu was also implicated in the IT contract. Was the Department going to court to nullify the oil deal? He asked what would happen to the people in the Department, including the Minister. What did the Department hope to achieve by going to court? He cautioned the Department that if they decided to go to court, they would raise a whole lot of other issues and they needed to be prepared for that. Had the Department spoken to the oil traders? He advised it to speak to the traders first before going to court. He also asked who was going to pay for the shortfall and who was going to bear the responsibility of what the Department had lost. He further requested that the issue of Equatorial Guinea be clarified.

Ms Z Faku (ANC) asked the Department to give a breakdown of the vacancies in the entities.

Ms G Nobanda (ANC) asked for a timeframe for the filling of key vacancies in the Department. She observed that the Department was struggling to perform, yet it had plans to abolish some positions. On nuclear energy, she asked what was being done to reach out to the public so that accurate information was given to avoid suspicions. She also expressed dissatisfaction with the use of the expression “partially achieved” which was used when referring to the targets under programme 5, which was nuclear energy. She asserted that “partially achieved” was the same as “not achieved.” On the challenges facing the Department, she said these were not new and what was important was to have timeframes set against the targets. On the overspending of R35 million on administration, she asked what the money had been spent on. She further asked why there was overspending on membership fees. Lastly, she asked what measures were being taken to address the inter-governmental challenges that were mentioned in the report.

Mr M Matlala (ANC) requested clarity on the AG’s findings about non-compliance, and especially the report that effective steps had not been taken by management to avert it. He asked what steps the Department was taking to address the findings. He bemoaned the poor planning and unmeasurable annual targets set by the Department. Regarding planning, monitoring and evaluation, he observed that the Department had not reported on expanding oil storage capacity, as well as refining capacity. Many municipalities were willing to participate Solar Heater Programme, but he expressed doubt as to whether many of them had the capacity to support it.

DoE’s response

The Minister responded to the question regarding the abolition of posts. She said that interviews for the position of Deputy Director General (DDG) and other key posts had been done and that they would be finalised by October. Assessments were still being done about some positions to determine whether they should be abolished or maintained. The SFF board was in place, although there were still some vacancies at NERSA.

On the AG’s concern about the failure to meet targets, she disclosed that the Department had undertaken a strategic planning exercise in which they were also trying to align the plans of the entities within the wider plan of the Department.

On the issue of the oil stocks, she said that the stocks were still in the tanks and the Department still had the money. She requested that the Department be given space to finalise the work on that subject. About transactional advisors, she said the acting DG would elaborate on that point and that the process would be done through his office.

She reiterated that she was not in any way involved with the SFF. She denied directly driving the agenda of the SFF, and said that all issues regarding the SFF went through the Central Energy Fund (CEF) which, in turn, made submissions to the Minister. The only issues that went directly to her office were appeals regarding licensing. She asserted that she sends everything to the relevant departments.

Concerning the question of the Sunday Times interview on nuclear energy, she said the question she had been asked was whether nuclear energy had any role in the economy, and she had agreed that it still had a role. As to the pace and scale of the nuclear programme, that was not for her to determine, but for Cabinet. She denied pre-empting any report on the nuclear programme. The only thing she highlighted was the need for more transparency and information for the public. She had observed that there were a lot of suspicions of corruption and fears surrounding nuclear energy. That was the context of the interview, and she had not been speaking about any specific plans for the development of nuclear energy. She added that nuclear energy needed a lot of planning, and implementation would take well over a decade. She admitted meeting the Nigerian, Kase Lawal, and said she was not aware that he was a businessman, but the meeting she had with him was just about information sharing.

Mr Maqubela, replied to Mr Matlala’s question about improving refining capacity, and conceded that there were no developments on that front. The Department would wait for the go-ahead from Cabinet. He admitted that the country was importing a lot of finished petroleum products, and the view of the Department was that investment was needed to build refineries. The cost would be high, but it would be worth it. A cost-benefit analysis had been done in consultation with National Treasury, and the Department was of the opinion that there was need to re-look at it, as the manner in which it had been done was not going to be helpful to stakeholders. Clarity was required by refiners, who were seeking assurances that there would be loss recovery. He revealed that the Minister of Finance had offered some incentives to some refining companies for them to increase their capacity, but the incentives had fallen below the expectations of the refiners.

Regarding consequence management, he said the Department tried not to apportion blame before investigations were carried out and concluded. Once the investigations were concluded, the necessary steps were taken to ensure that individuals accounted for their actions.

Regarding the purported shift in the mandate of the SFF, he said the MoI provided for explorations in article 4.

He attributed the overspending on the membership fees to changes in the exchange rates, as subscriptions to the International Atomic Agency were paid in hard currency.

Addressing concerns that the Minister was dealing directly with the SFF, he said the papers that Mr Zulu had said were with the Minister were not a submission, but documents that were meant for Parliament.

On the procuring agent for the power reactor programme, he said a decision had already been made and that Eskom would be the procuring agents. The Department was still studying the court judgment regarding the proposed installation of a new nuclear reactor, and that in the meantime the Department was looking at ways of strengthening the existing programmes at Koeberg. He also said the Department needed to be more transparent and improve its public relations regarding nuclear energy.

Answering the question about the R24 million of irregular expenditure, he said the approach of the Department was that contracts that had been entered into had to be honoured, and the individuals who were responsible for causing the irregular expenditure would be dealt with afterwards. It was difficult to abrogate contracts when services had already been provided by the parties to the contract.

The Chairperson reminded the Mr Maqubela that there were other questions that were still outstanding, such as those about the strategic stock, the solar heater programme and relationships with municipalities.

The Acting DG replied that the systems for the Solar Heater Programme had already been procured, and that the Department was making efforts to have them installed at the municipalities but the challenge was that the Department was dealing with municipal managers who did not have the authority to make decisions so they had to wait for those with the decision-making powers to grant permission. He regretted that the issue had not been dealt with at a political level, as that would have been faster. He was optimistic that progress would be made, however.

On the strategic oil reserves, he disclosed that sufficient interventions had been undertaken for consequence management, and investigations had already been done at both the CEF and the SFF to get maximum benefit for the people of South Africa. It would be difficult to discuss some of the matters regarding the subject as the proceedings of the Committee meeting were in the public domain and he did not want to compromise the negotiations with the traders.

Mr Dhlamini said he was interested in the Minister’s response that she did not deal with SFF. He also sought further clarity on the subject of the fuel stocks, as he wanted to know if negotiations were still taking place. He asked the ADG, as the accounting officer, to give a direct answer. There were two issues he did not understand: firstly, there was talk that the contract was illegal, and secondly, the negotiations were apparently continuing with the traders. He asked why the negotiations were still continuing if the contract was illegal. He also urged caution about going to court, saying once the courts took up the issue then the Department would no longer exercise control over the matter. He demanded that Mr Maqubela speak like a technocrat and not a politician by speaking clearly and directly about the issues surrounding the oil stocks. He also demanded to know whether the Guptas were after African Exploration.

The Minister reacted angrily, saying she did not work for the Guptas. She said Parliament had made a resolution to move African Explorations (AE) from the DoE to the Department of Mineral Resources (DMR), and she expected that process to be concluded by the end of the year.

Mr Mackay replied that the removal of African Explorations from the CEF would have negative financial repercussions, and he wondered how the solvency of the group would be impacted with AE’s departure. He asked for a re-evaluation of this decision.

The Chairperson agreed with Mr Mackay that many people had raised the same concern, and that he did want to discuss this issue at a later stage.

Mr Mackay also responded to the ADG’s remarks that the Department had to honour contracts resulting from irregular expenditure, and deal with the culprits only subsequently. He reminded the ADG that the AG’s position was that no Department had an obligation to pay for an illegal contract. He expressed surprise that the ADG would even say he was going to go ahead and pay for the illegal contracts. He demanded that the Department should get back the money it had paid for those illegal contracts. He also asked the ADG if he was aware of the onsale. He also asked him if he knew where Mr Sibusiso Gumede was, and if he had instituted any action against him. What consequence management measures had been undertaken against him? He urged the SDG to accept that the oil had been onsold. He claimed that the ADG’s answers were ineffectual and that he could not determine where the whole process regarding the oil stocks was leading to because, on the one hand, he was saying the Department was going to court and, on the other hand, he was saying they were talking to the traders. He asked the Deputy Minister, Ms Majola, whether he could ask the shareholder to speak about the issue.

The Deputy Minister asked the CEF representative to address the question.

Mr Luvo Makasi, CEF Board chairperson, said that it was necessary to go to court as the contract that had been entered into by the Department concerning the strategic oil reserves constituted administrative action. According to the Promotion of Justice Act (PAJA), an action that constituted administrative action by an organ, body or agency of the State had to be nullified by the courts. The contracts were invalid ab initio, and therefore the determination of the court could not be avoided. He said the CEF alone as a body could not declare the nullity of the contracts. A court would also assist to chart a course going forward.

Ms Margaret Phiri, Senior Manager: AGSA , said the process of finalising the audit had taken longer than expected and that had contributed to the misunderstanding that had arisen between the Department and AGSA. The findings had shown that the Department had not complied with the State Information Technology Act (SITA), and that the prices were not the same.

The Chairperson thanked all the Members for their participation and work, and also thanked all the delegates for their input.

The meeting was adjourned.

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