Energy Budgetary Review and Recommendations Report

Meeting report

Opening remarks
The Chairperson welcomed the members and requested the Committee Secretary, Mr Arico Kotze, submit any apologies from absent or late coming members. He advised the Committee to work steadily so that it can meet its deadline for submission, and hopes that members would deliberate on the report and adopt at the end of the meeting.

He handed over to Mr Kotze to take the members through the Report.

Briefing by the Committee Secretary on the Budgetary Review and Recommendations Report
Mr Kotze took the members through the report page by page, and commenced his briefing by stating that the content of the report is a combination of the presentations documents from the department, its entities and the Auditor-General South Africa. However, he only read out the Findings and Observations of the Committee on page 26.

Some of the Findings and Observation were:
-In the previous financial year the Department had 76 annual targets and of these 39 were achieved
-In contrast, under the current financial year the Department had 77 targets and only 32 targets were achieved. According to National Treasury guidelines an acceptable performance required is 80% of targets to be achieved
-For the first time the Department received a qualified audit opinion, the basis for this was an irregular expenditure of R98 million year-marked for the procurement of the nuclear programme. However, the Department is still challenging the AG’s findings
-The Minister acknowledged the performance could have been better, and it is continuously working hard to ensure that performance is achieved
-Even during the period the Department managed to ensure that there is no shortage of electricity in the country, in fact there has been a surplus of energy in the country
-The additional challenge affecting the performance of the Department is that over 90% of the budget is for subsidies and transfers and the remainder for the department’s operations;
-According to the Department the budget for operations is inadequate for it to execute its mandate, for instance for compensation of employees the Department had to overspend by over R35 million. However, under the current economic conditions the Department will have to do more with less
-The Committee was concerned about the claims that SNF Group is involved in oil exploration in Equatorial Guinea, and it was of the view that the mandate for SNF is to manage strategic reserves. The Department argued that exploration is provided for in terms of the company’s memorandum of incorporation
-The Minister argued that there is no such agreement for oil exploration in Equatorial Guinea, because for that to be approved it has to go through certain processes
-The SNF Group remains a going concern meaning that the group will continue to operate in the foreseeable future because its assets are more than its liabilities
-The bulk of the SNF Assets comprises of cash equivalent of R15 billion
PetroSA posted a loss of R1.4 billion compared to last year’s total loss of about R449 million;
-On Nuclear, the Minister stated that Cabinet confirmed that the Nuclear procurers are Eskom and the South African Nuclear Corporation;
-On the outstanding balance of R24 million on the Nuclear programme, the Department confirmed that the balance will be paid to the service providers as the services have already been rendered
-The Department is of the view that there is a need to build a refinery this year in the country because SA is a net importers of crude oil, however the department awaits Cabinet’s decision on this before the end of December 2017;
-On solar water heaters, the Department stated that systems were installed and there were efforts to install them but the uptake was not received as anticipated;
-The Department also noted that with regards to the installation of solar heaters the municipalities were not too eager to install as this would impact on their revenue;

Some of the Recommendations were:
-The Minister must present to the Committee the resource plan for the fourth quarter of 2017
-The MTSF targets must be implemented
-The Department must update the Committee on the progress made regarding localisation
-The Department must present progress and strategy to overcome challenges experienced regarding the implementation of the solar water heater programme;
-The Department needs to ensure the application of consequence management;
-Once the Department has resolved challenging the AG’s findings in relation to the qualified audit opinion, it must present a report to the Committee

Mr J Esterhuizen (DA) commented that the solar water heater programme continues to be a problem because municipalities are not installing the geysers but yet they are receiving the money. If municipalities are not installing the geysers, the Department needs to halt the provision of funding.

Mr R Mavunda (ANC) shared his concerns about the performance targets of the Department because it continuously under-achieves the set targets. All those targets that were set given the allocated consideration, were supposed to have been achieved. He suggested that the outstanding targets should be outlined in the report as well. He added that the report as it is represents what has occurred in all the committee’s deliberations with the department and its entities, and information relating to under-performance and outstanding targets should be clearly outlined.

Mr M Matlala (ANC) suggested that the Committee should get a sense of which positions are going to be abolished by the Department, that information should have been indicated in the report.

The Chairperson stated that in terms of the process, unfortunately the report will need to be adopted today and the Committee did not have time to peruse the report thoroughly. However, the fact remains that the Committee is chasing its deadline, so the report needs to be adopted today. Therefore, any corrections that need to be effected will have to be done today. The report does accurately outline what occurred and reflects on what the Department and its entities indicated to the Committee before. The problems already exist and they will not be resolved in the document or report, but they are issues that will have to be raised at a later stage.

In addition, it is unknown at this point what direction the Department is going to take regarding its disagreement with the AG findings, surely when that process has taken its course the Committee will be informed. As for the solar water heaters, the Chairperson wasn’t aware how this will be resolved at this point because the Committee is merely dealing with the report right now. He suggested that members ask the Department directly all the questions they have that emanated from the report.

The Chairperson stated that what is in the report is factual information, and there is nothing that can be done at the moment because the current challenges and problems were inherited. When people are changed from their positions and inherit problems from predecessors that tends to misalign things and affect the performance of the department. The report is final, and what the Department wants to do is completely up to it and the Committee is in support of the AG’s report.

The Committee adopted the report

Ms T Gqada (DA) noted the report; however she reserved her comments. This will be submitted at a later stage after it has been perused by the party caucus.

The Chairperson noted the DA’s comments.

The meeting was adjourned.