Department of Energy Quarter 1 performance, with Deputy Minister


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

Highlights for the First Quarter were 55 358 households connected to the electricity grid; 100 percent of invoices processed for payment within 30 days, and 28 municipalities signing contracts to implement energy efficiency measures. There was overspending on the Administration programme and the Nuclear Energy programme. Only R82.77 million from the projected spending of R414.84 million for Clean Energy was achieved. There was overspending on Compensation of Employees.  Performance challenges included a vacancy rate of 14.29 percent, due to a moratorium on filling of vacancies to curb budget constraints in the Compensation of Employees. The draft National Biogas and Biomass Strategy could not be finalized due to inadequacy of publicly available information. Collection of data for the Third Environmental Management Plan Edition could not be completed due to delays in establishing an intergovernmental committee. Out of 44 APP targets, the Department achieved 24, partially achieved 8, and did not achieve 12.

In discussion, Members made remarks and had questions about consistent underspending, spending on consultants, nuclear underspending without tangible results, and unspent budgets in three programmes. Also of concern were internships and youth employment, audit outcomes, interventions in municipalities, municipal capacity and spending and unspent Departmental funds. Electrification constraints led to questions about the role of Eskom. Members demanded answers on excessive travel expenses. The moratorium on vacancies in important positions and the implications for programmes were a worry for Members. The Chairperson concluded that the Energy portfolio had made steady progress during the Fifth Parliament, but that the audit outcomes of the previous financial year had been a setback. He urged the Department to proceed with caution.

Meeting report

Introduction by the Chairperson
The Chairperson welcomed Mr S Mbuyane (ANC) after his absence, and also the acting Director General of the Department of Energy, Mr Tseliso Maqubela. The Minister sent his apologies as he was part of the delegation that was meeting with the State visitors from Senegal. The Chairperson welcomed the Deputy Minister, Ms Thembi Majola.

The Deputy Minister noted that the President of Senegal was being received, along with seven Ministers. It was Oil Week in Cape Town. Among other engagements, there were bi-laterals with the US Secretary of Energy, a former governor of the state of Texas, and with Ministers from the Continent. She had been part of the Presidential delegation that had received the Senegalese party.

The Chairperson asked about the meeting with the US Secretary of Energy. The Deputy Minister replied that nuclear, oil and gas issues had been discussed. She asked the Department to proceed with the presentation.

Briefing by the Department of Energy on its First Quarter performance
Mr Lloyd Ganta, DDG: Governance and Compliance, DoE, explained that highlights for the First Quarter included 55 358 households connected to the electricity grid, 100 percent of invoices processed for payment within 30 days, and 28 municipalities signing contracts to implement energy efficiency measures. There was overspending on the Administration programme and the Nuclear Energy programme. Only R82.77 million from the projected spending of R414.84 million for Clean Energy had been achieved. There was overspending on Compensation of Employees (CoE). Performance challenges included a vacancy rate of 14.29 percent, due to a government moratorium on the filling of vacancies to curb budget constraints in the CoE. The draft National Biogas and Biomass Strategy could not be finalized due to the inadequacy of publicly available information. The collection of relevant data for the Third Environmental Management Plan Edition could not be completed due to delays in establishing an intergovernmental committee. Out of a total of 44 APP targets, the Department achieved 24 (54%), partially achieved 8 (18%) and did not achieve 12 (27%) of its planned quarterly targets.

The Chairperson asked that other officials in the delegation be introduced. It was getting to the end of the year and there had to be a joint meeting about the Electricity Distribution Industry (EDI). A date had to be agreed on. The process would have been covered by Cabinet by then. The Deputy Minister needed time to obtain clarity and to identify issues yet to be discussed. A notice would be sent out. He asked the acting Director General to make additional comments and to introduce his team.

Mr Maqubela responded that it was African Oil Week in Cape Town. Over 20 countries on the Continent were represented. There were bilateral discussions with counterparts of the Department in other countries, at the level of both officials and Ministries. Countries like Nigeria, Ghana, Equatorial Guinea, Angola and Senegal were represented. Prolific oil producing countries were present. Senegal was emerging as an oil giant. The Department had brought its whole team for the week, to cover all areas. He introduced the team, which represented the areas of Government and Compliance, Petroleum Regulation, Finance, Clean Energy, and Electrification. There were issues between the Department and the South African Local Government Association (SALGA) about Eskom electrification responsibilities.

The Chairperson asked Members for comments and questions.

Mr M Matlala (ANC) referred to slide 3, which dealt with targets not achieved and remedial actions taken. It was mentioned that there were cuts to important positions. He asked which positions were affected by the financial situation. If important positions were cut, programmes could not be implemented. He referred to consistent underspending, and asked about the reasons for that.

Mr J Esterhuizen (IFP) noted that the budget had gone up from R7.5 billion to R8.5 billion while inflation was only 6% inflation. Had it been a private company, it would have come down to price fixing. The Committee was talking about enormous amounts of funding. The 2.2 percent granted to Eskom had generated R205 billion for the Eskom. He referred to underspending of 26% in the First Quarter while there was overspending on Administration, which could not increase energy capacity. Electricity prices had gone up, but capacity had not increased. There were staff increases, and billions had been spent on consultants. The price of electricity had gone up over 400% since 2010 but there had been no advance. Nuclear had been overspent by R11.9 million and nothing tangible had yet been started. The new Minister was not there as he was probably in a meeting with Mr Putin. There had been overspending on Nuclear for years and the question remained as to what it was spent on. There was 80 percent underspending on Clean Energy. Only R83 million out of R415 million had been spent. Electrification had to be cost effective so that everyone could be on the grid. The challenge was to increase the demand for electricity in a cost-effective way.  By law, it was not possible for the Department of Energy to engage in unauthorized spending. There were competent and intelligent people in the Department but there was incompetence in other Departments and the Committee could not do anything about the incompetence of Eskom that could not be tolerated any longer.

Mr R Mavunda (ANC) spoke about the financial performance and that there were three programmes in which the budgets had not been spent at all. Yet the Department continued to budget for programmes that were not implemented. He asked what had informed the budget. A budget consisted of itemized money to address activities. If the budget was not implemented, there was a problem. The acting DG had introduced a number of people but it was very important to address vacancies. He was not hearing about ordinary people. The country had to address the problem of employment for young graduates. There was a crisis of high unemployment. He asked how many vacancies there were, and how unemployment was being addressed.

The Chairperson noted that Mr Matlala had referred to overspending in a previous meeting. Doing away with posts had to be discussed at a strategic meeting with the Deputy Minister. He had read through the National Development Programme (NDP) recently. There were big challenges in the public sector. The NDP spoke to challenges at the political and administrative interface, and the instability of administrative leadership. It was not just a problem for the Department of Energy. It would have to be dealt with in context.

Mr Maqubela responded that the fiscal constraints in the economy were felt by the Department. The CoE budget was under strain across the Public Service. The Department was not alone in that. It was being discussed by Accounting Officers. The strain was commonly felt. The Department was unable to fill certain posts as the CoE budget had been reduced. Certain positions had to be prioritized. Guidance had to come from the Minister and Deputy Minister. The Department of Energy was a policy Department. Policy development positions had to be prioritized. Policy positions had to be filled first. An area affected was support staff. Policy and planning could not be compromised on. Principals expected the production of policy. Priority positions were presented to principals. The Chief Directors of Petroleum Policy and Energy Planning had resigned. Because of pressure on the CoE budget, their positions could not be filled. The Department could not move on energy planning as a result. Those positions had to be filled first.

The Acting DG agreed that there was underspending on the solar water heating programme. It was a disappointing programme. The Department would have liked to move faster. The Department depended on the cooperation of municipalities. Council resolutions were needed to identify which municipalities received solar water heaters. Clean Energy had to be a focus area. The non-grid electrification programme could have moved faster towards approval by the bid adjudication committee. It would not do to rush a programme with governance problems. He had told the DDG to tighten things up and follow the trail of money. He was confident that money would be spent as there would be an acceleration towards the end of the year. Overspending on Nuclear had been indicated when the Annual Report (AR) was presented. Programmes not paid in the previous financial year, had been carried over into the current year. Invoices had to be settled. The DDG for Corporate Services would talk to internships. The Department had had a good internship programme, but had to scale down because of the CoE problem. Nevertheless, the Department ran a good internship programme, and people from the programme were absorbed. He asked the DDG for Clean Energy to talk to questions.

The Department of Energy responded that the Energy Efficient Demand Side Management (EEDSM) underspending was due to specific delays encountered on energy efficiency interventions. Normally scientists were expected to implement, but there had been delays in the appointment of service providers who had to implement. A rollover had to be applied for.

The Department of Energy responded that it ran 12-month internships. There were 21 internships and 16 learnerships. Advertisements for internships and learnerships were already placed for 2018/19.

The Chairperson appreciated the statement that the DoE was first and foremost a policy Department.

Ms G Nobanda (ANC) commented that as it was the First Quarter: things had to be done right from the beginning. There was a dispute between the Department and the Auditor-General (AG) about audit outcomes. She asked what the Department was doing to avoid disputes, and whether there was engagement with the AG. She asked about rollovers. There were programmes that underperformed and still got increases. What was being done about those programmes?

Mr Matlala declared that if Municipal Councils did not take resolutions about solar water heaters, the Department was stuck. Money had to go back to the Treasury. The AG would qualify the Department for not using what it had. He asked if there were programmes to assist municipalities in that regard. Officials responsible for electrification were sleeping on the job. He asked if it was possible to intervene, without interfering, to implement programmes.

Mr Mavunda asked what else, besides a council resolution, was required to transfer money. Municipalities received money without the capacity to spend or implement. It was not just a matter of a council resolution being taken and then Amen. He asked the acting DG about the two important vacancies that were left when people resigned, and could not be filled. The budget for vacancies was not for individuals. The posts remained. It was said that there was no money to employ a replacement. That being so, the question was what happened to the money for the post. He asked what had happened to the money between the time when people resigned and the current moment.

Mr Esterhuizen remarked that there were various approaches to budgeting. A zero base could be established without comparison to the previous year. The global economic situation affected budgeting. The nuclear budget was R1 billion. There was overspending on administration, a 14.1 percent vacancy rate, and overspending on overseas travel. He asked what had happened to the R450 million not spent on Clean Energy.

The Chairperson commented that the Budget Review and Recommendations Report (BRRR) had been dealt with on the previous Tuesday. He agreed that things had to be done right from the First Quarter. The Finance Minister would give the economic outlook on the following day. In the past electrification constraints were the number one issue. The Deputy Minister said that electricity was available, but price had become the problem. It had to be dealt with. Current solutions were not helping to grow the economy.

Mr Maqubela responded to remarks about travel expenses. The Department was involved in a number of multi-lateral institutions like the International Energy Agency. Collaboration was led by the Department. Working groups of the International Atomic Energy Agency were led by the Department. There was a number of outgoing international engagements, with a focus on oil producing countries. South Africa had to be part of discussions with oil producing countries to keep the trade of petroleum and oil products flowing into the country. There had to be interaction with counterparts. There was a cutdown in delegations, in compliance with Treasury regulations. The problem with filling the two positions after people had resigned, was that if the positions were filled, unauthorized expenditure would be incurred. When budgets were cut, there were warm bodies and the Department had to make do with what it had. When there were curbs on expenditure, junior persons had to be employed. It was hard to attract people of the same quality. With respect to AG outcomes, the Department had erred on the side of caution. Boxes had been ticked. It could look like expenditure was being delayed.

Addressing Me Esterhuizen, the Deputy Minister indicated that the Minister was with the Presidential delegation that was receiving the President of Senegal. The Acting DG had spoken of the importance of Senegal. There had been advertising and interviewing for key positions, and the process had been gone through with the Department of Public Service and Administration (DPSA). The challenge was that Energy was a policy Department, but was also expected to implement. The Department, as overseer, had to deal with the challenge of municipalities lacking capacity. There were sensitivities related to the powers of different spheres. Council resolutions were just the beginning of the process. The Department wrote to municipalities. It would say that 1000 solar water heating systems were available, for instance. The Council had to identify the area, the beneficiaries, who had to be trained, and what maintenance was required. Municipalities might be happy if someone did it for them, but the Department could not say which block had to be supplied. There also had to be a public participation process. The Department wrote to the municipality, and then it was in their hands. It was useful if there were areas in which Honorable Members were hands on. MPs pulled more weight and would be able to assist the Department. On travel, she said it was a globalised world, and whoever did not participate would be left behind. There was the African Union and the International Energy Agency. Agriculture was also involved: nuclear energy could advance productivity through pest control. The challenge was that resources were finite. There were real issues around the budget. A presentation by SALGA had indicated that the electricity distribution network had to be upgraded, and R70 billion would be needed for that. Connection costs were different for townships and rural areas.

The Chairperson remarked that, since the beginning of the Fifth Parliament, the Energy portfolio had made steady progress. Previously, the Department and the entities had had serious difficulties, but had slowly moved out of that.  Currently very few entities needed special attention. There had to be further movement to lift the entire portfolio out of that culture. However, audit outcomes for the previous financial year had been a serious setback. He agreed that the Department had to act on the side of caution, but the audit opinion was not to be repeated, as there had been progress, followed by a setback. It was not advisable that a situation arose where pressure had to placed on the entities. If there were problems at the level of the Department, there could not be order at the level of the entities. He hoped that progress could be made from that that point. He greeted the Deputy Minister, who would again be joining the Minister in meeting with the Senegal delegation.

The Chairperson adjourned the meeting.

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