Departments of Mineral and Energy 2019/20 Annual Performance Plans: Committee staff briefing and analysis

Meeting report

The Chairperson said the Department had tabled the annual performance plans (APPs) and strategic plans only yesterday afternoon, and this had made it difficult for the researchers to look at them at in any depth.

Analysis of Department of Mineral Resources’ 2019/20 Budget (Vote 29): Briefing

Mr Nkosinathi Kweyama, Content Advisor: Portfolio Committee on Mineral Resources, said the mining industry accounted for about 7% of the country’s gross domestic product (GDP) and employed about 450 000 people. In 2002, there were 11 445 women employed, but by 2017 this had increased to about 56 000, mainly due to the Mining Charter.  
Issues impacting performance were reported as:

Despite good financial and operational performance, there were disturbing trends in fatalities.
The Department was yet to table legislation to Parliament, and that contributed to uncertainty in the industry.
Challenging of the Mining Charter 3 was not helpful. However, some mines were already implementing it.

In conclusion, he emphasised the issue of the legislative agenda because it affected the Committee’s calendar, as it had to clear its work to prepare for that legislation. If the legislation did not come to the Committee, it destabilised its work. The Committee would therefore have to ensure that if the Department committed to bringing legislation to Parliament, Members should tie it to specific time frames or set a date for it.

Mr Kweyama then outlined possible questions that the Committee might want to consider asking the Department when it met with the Committee.

Analysis of Department of Energy’s 2019/20 Budget (Vote 26): Briefing
 
Mr Sivuyile Maboda, Researcher: Portfolio Committee on Energy, took the Members briefly through the analysis and indicated that with regard to its non-financial performance, the Department seemed to do well on financial expenditure but it was failing dismally on service delivery performance.

Key priorities for the 2019/20 financial year were:

Extending access to electricity and enhancing energy efficiency as part of the Integrated National Electrification Programme (INEP), which aimed to provide access to electricity to all households in South Africa. 590 000 households were expected to be connected to the electricity grid over the medium term. The Department anticipates that 20 000 households per year over the same period will be provided with a non-grid (mainly solar) electrification system.
Diversifying the generation of energy mix; and
Focusing on managing nuclear energy.

Key policy and legislative issues for consideration were:
 
The key energy policy, the Integrated Resource Plan (IRP) for electricity, was long overdue. The IRP was supposed to have been updated in 2013/14. However, to date the policy is still work in progress. The Department has stated that the IRP will be finalised in the current financial year. The delays in the finalisation of this policy create uncertainty in the energy sector.
The Department is performing poorly on legislative development and implementation.  In the fourth Parliament, the Department missed the deadlines for planned legislation to table in Parliament. Similarly, in the fifth Parliament, most deadlines for submission of legislation to Parliament had passed. Consequently, the fifth Parliament did not process any legislation.

Discussion
 
Mr M Mahlaule (ANC) said that an overview of the management of the entities should have been summarised for Members to help them understand which entities were doing well and which ones were not. There was a report that had come out from the Department of Mineral Resources claiming that entities had not been doing well in other aspects. This information would be useful for Members.

Eskom occupied one of the priority points in the Department’s programmes – electrification. He was perplexed by the Department’s transfers to Eskom, because it did not report to the Department or the Committee. Eskom failed to meet targets, as the report outlined, but it remained a priority point for the Department.  

He expressed the same sentiments on the Energy and Water Sector Education and Training Authority (EWSETA). The SETA reported to the Department of Higher Education and Training (DHET) and its Portfolio Committee, so he wanted to know at what point it would report to this Committee, and why its targets still formed part of the Department’s targets. The Department continued to transfer money to the SEAT, but it did not report to the Committee or the Department.  He wanted to know why the entities were not reporting to the Committee as well.  

PetroSA’s challenges were clearly outlined in the analysis presented, and the analysis also mentioned that if nothing was done to resuscitate the company by 2020/21, it would dismantle, so what could be done to turn the PetroSA situation around? Lastly, what could be the main drivers leading to the failure of the Department to achieve its targets?

Mr S Kula (ANC) wanted to know what could be done about the decline in the electrification programme, which was affecting the rural areas. He would have appreciated a deeper analysis on the PetroSA matter, as more information would have assisted Members to get a better understanding of the situation.

He asked what had caused the Department to fail to meet its targets and how that failure was affecting government.

The Department had performed poorly on policy development and legislation. How could this process be fast-tracked to ensure that legislation was brought to and processed by the Committee?

Mr M Wolmarans (ANC) referred to the non-financial performance, and said the correlation between the actual budget spent versus the targets that were not achieved was a concerning matter. Targets were sitting at 44 percent, and the budget spent relating to those targets was sitting at 98 percent. The service delivery was extremely lacking. He asked why the budget and the targets did not correlate. What was the Department paying for?

Secondly, was the legislation that might be coming to Parliament not part and parcel of the targets set by the Department? Otherwise, this highlighted the challenges around the exercise of setting targets.

Ms C Phillips (DA) asked for more details on the decontamination of the previous nuclear sites. Secondly, was the money paid automatically to the municipalities, or did the municipalities apply to the Department for it?
The Chairperson said that the difficulty regarding answering the questions lay in the fact that the Department of Energy (DoE) no longer existed. It had been a singular department with its own budget allocation.  That department had now been merged with the Department of Minerals, but the budget still remained as when it was announced in February this year by the Minister of Finance. The question was whether somewhere down the line the DoE’s budget would be combined with the Department of Minerals Resources (DMR). That question remained to be answered. Secondly, some of the questions would be better answered by the merged department tomorrow when it came to present.

The SETAs had had all been moved to the DHET, but the money was allocated to Mineral Resources. However, the accountability and the spending were channelled to the DHET as well as its Portfolio Committee through the SETA. Members should take note that Parliament’s rules clearly state that there was no institution to which any department gave money that could not be convened or called to account to Parliament. Any institution or department could be invited to Parliament to account and report on the money it received from government.

Mr Maboda sought the Chairperson’s protection from responding to some of the questions asked by Members, because some of the questions would best be responded to by the Department.

On the question regarding the overview of management, he would take it upon himself to compile the overview and the challenges associated with it.  

As for Eskom not reporting to the Committee, this was something that Members in the previous Parliaments had shown concern about, particularly the fact that Eskom reported to Public Enterprises instead of Energy. This was a political discussion, and he could not provide any responses on this matter at the moment.

On challenges around PetrosSA, the entity had been requested during the Fifth Parliament to come before the Committee to present its turn-around strategy. However, Members had not been satisfied with the proposed strategy, and had felt that it would not turn the company around. Similarly, the holding company -- the Central Energy Fund -- under which PetroSA falls, was also restructuring. He suggested that the Committee invite the Fund and its subsidiaries, which would include PetroSA, to come to Parliament and update Members on the restructuring process. The restructuring process of the Central Energy Fund group affected its subsidiaries.

The Chairperson highlighted that the under-performance of the Department contradicted the level of its expenditure. The spending was high, but yet the performance sat at less than 50 percent, so what exactly was the Department spending money on?

Mr Maboda responded that questions relating to the budget and its spending should be directed to the Department.

Regarding the targets, the non-finalisation of the policies may impact the targets of the Department, particularly in respect of tabling legislation in Parliament. In addition, the frequent changes of Ministers in the Department had significantly contributed to the negative performance of the Department, because it had caused a lot of delays in signing the     Independent Power Producer (IPP) agreements, although these had eventually been signed.
In the previous financial year, the Department had received a qualified audit opinion for the first time from the Auditor-General of South Africa (AGSA). It had not done well in managing its finances. Members could note this and perhaps find out from the Department why it had received a qualified audit opinion.

The Chairperson said that hopefully the analysis provided some insight into the magnitude of the work that needed to be done.

The meeting was adjourned.