The Departments of Mineral Resources and Energy briefed the Committee on their Annual Performance Plans (APPs) and budgets for the 2019/20 financial year.
The Chairperson pointed out that the Committee was dealing with two former departments which were now being combined into one, and it was still trying to find ways to link them both together. In the meantime, they were still dealing with them as separate departments.
After the Department of Mineral Resources had presented its plans, issues of concern raised by the Committee included illegal mining and what the Department was doing to combat it; the manual processing of licences which had led to backlogs; what plans were in place to ensure that the mining communities also benefited from mining; what their plans were to ensure adequate health facilities for people who were affected by diseases in the mining industry; and the steps needed to achieve procurement targets.
Several Members expressed concern that the bodies of three miners trapped underground since an accident at the Lily mine in Mpumalanga in 2016, had not yet been recovered. They were told the mine now had new owners who had undertaken to retrieve the bodies. Another issue was the failure of the current social and labour plan to adequately address the negative impact of mining activities.
A cause for concern was that the current licensing regime was hampering the process of job creation and transformation, and the DMR was urged to take action to counter the serious threat to jobs in the mining sector.
The Committee raised the prospect of local beneficiation of minerals, as this had been mooted for several years and yet not much had been done in that regard. Nothing was being said by the Department about time frames to introduce large-scale beneficiation, despite its potential to reduce unemployment and enhance transformation efforts.
The Department of Energy placed emphasis on finalising the Integrated Resource Plan (IRP) by the end of September. It had made a number of achievements, which included the signing of a treaty between South Africa and the Democratic Republic of Congo (DRC) on the Grand Inga Hydro Scheme power project. They had also ensured that the licences which were being issued to entities contained at least 50% ownership and control in the hands of black South Africans. There had also been significant energy savings through the roll-out of the Energy Efficiency Initiative..
Areas of concern for the Committee were the decrease in the Integrated National Electrification Programme (INEP) municipal grant, the securing of feedstock for PetroSA, the bills outstanding from the Fifth Parliament, and the vision of the Department. Members also commented that there was a lack of attention given to the Central Energy Fund and the role it plays in the Department; officials were demanding kickbacks when processing licences; and action was needed to deal with illegal electricity connections. They also emphasised the need to start focusing on small nuclear power plants rather than on bigger ones.
The Chairperson said that the Committee was dealing with two former Departments which were now combined into one, and was still trying to find ways to juggle the two Departments together. However, they were still dealing with them as separate Departments whilst trying to move to finally have one Department. At the time of the budget presentation, these two Departments were still separate and now, unfortunately, the task rests with the Committee. The first component to present was the Department of Minerals Resources (DMR), followed by the Department of Mineral Resources and Energy (DMRE).
Department of Mineral Resources annual performance plan and budget
Mr Gwede Mantashe, Minister of Mineral Resources and Energy, said that the presentation addressed the seven priorities identified in the State of Nation Address (SONA). This was because these priorities were part of the manifesto of the governing party. The priorities of the Sixth Administration were as follows:
- Economic transformation and job creation.
- Education, skills, and health.
- Consolidating a social wage through reliable and quality basic services.
- Spatial integration, human settlements and local government.
- Social cohesion and safe communities.
- A capable, ethical and developmental state.
- A better Africa and world.
The year which they were reviewing was a year when the country was drawn into a recession following a year of contraction. The deteriorating economy had led the mining industry to come under extreme pressure. Mining in the first quarter declined by 9.9%. In the second quarter, there was a recovery of about 4.9%, which was the only quarter in which the sector reported positively. In the third quarter, it declined by 8,8%. By looking at these declines, one could see that mining was in trouble. Also, at the end of 2018, a total of almost R100 billion worth of investment had been pledged by the mining companies. This was after the mining industry had suffered from extreme policy uncertainty which had led to a decline in investments and major losses. A total of R71.5 billion was from Anglo American, with R21.3 billion from Vedanta, R4.5 billion from Ivanplats, and Bushveld Minerals had pledged R2.5 billion. However, a threat to jobs remained a cause for concern in the Department.
The Minister said there were about 60 mining projects for the period 2018-2020 in the pipeline. These projects’ estimated investment value was R110.1 billion, and the projected employment was 32 000 jobs. When they talked about 32 000 employment, that was a positive side, but the most important number was the net figure left after retrenchments and the disruption of jobs. Of these mining projects, ten were exploration projects. Exploration was about looking for minerals, and the dream was to increase the number of exploration projects because if there was no increase in this, the life of the mining industry may be shortened. Additionally, 26 of these projects were expansion projects, meaning that there was an expansion in the already existing operations. The other four projects were on processing plants. That meant a number of mining companies used next door processing plants for their projects, so building their own plants would be a good investment for the sector. The other four were sustainability projects to extend the life of mines.
Geoscience mapping was important to identify the minerals that the country had and where they were. This mapping programme would bring South Africa in line with progressive exploration and mining jurisdictions. It was their intention to secure a minimum of 5% of the global exploration budget within the next three to five years. Marine mining was an area they also wanted to explore. There was a need to strengthen their relationship with the International Seabed Authority (ISA) through the Council for Geoscience (CGS) and the Petroleum Agency of South Africa (PASA) to undertake research on the mineral and petroleum occurrence in these extra-territorial waters. Shale gas was something they would also like to partake in, and research had already been undertaken on shale gas occurrence onshore in the Cape and Karoo basin in the Western Cape. They had already commenced with the environmental impact assessments (EIAs) in preparation for drilling a stratigraphic hole in the Karoo basin.
The Minister expressed the need for a minerals beneficiation strategy in order to grow the economy, as well as to create jobs. He also spoke on the issue of licensing for prospecting and mining rights, as these were enablers for investments. However, the challenge they were facing was the manual processing of licences, which had led to backlogs. They would develop a strategy for the processing of these applications within the legislated timeframes.
On the issue of health and safety, the Department would continue to implement appropriate measures to prevent harm to mineworkers. The rehabilitation of derelict and ownerless mines remained a priority area for environmental management.
The Department also intended to pursue a transformational agenda by using all the regulatory instruments to drive transformation within the sector, with a particular focus on the inclusion of women and youth into this strategic sector of the economy.
The Minister lastly spoke on illegal mining, which he regards as a criminal activity, commenting that it was an area which was mostly dominated by non-South Africans and needed to be looked at.
The 2019/20 Annual Performance Plan outline was divided into four programmes: Corporate Services and Financial Administration; Mine, Health and Safety Inspectorate (MHSI); Mineral Regulation (MR); and Mineral Policy and Promotion (MPP). Ms Ditsietsi Morabe, Acting Chief Financial Officer, Mr David Msiza, Chief Inspector of Mines, Adv Mmadikeledi Malebe, Deputy Director General (DDG) and Ms Ntokozo Ngcwabe (DDG) presented their 2020 vision on each of these programmes respectively.
Mr D Mthenjane (EFF) said there were some matters which were not clear. For example, they were not coming up with a proper plan to solve the issue of illegal mining. In 2015, it was estimated there were about 30 000 illegal mines operating in South Africa. Illegal mining was so big that it was disturbing the economy. What strategy was in place to resolve this? There were accusations that this was being done by mostly foreigners, so what was being done to prevent it?
He had heard that there was a plan for some resources to be refined in South Africa, but the problem was that the Department was not giving an exact timeline of when this would happen.
He observed that no one had mentioned anything about the three Lily miners trapped in Mpumalanga. What was being done to retrieve the three bodies of Yvonne Mnisi, Pretty Nkambule and Simon Nyerende. According to the African tradition, people needed to bury their loved ones and yet no budget had been set aside to retrieve these bodies. This was sad, because if these people were of another colour they would have been retrieved by now, but because they were black Africans nothing was being done.
Mr M Nxumalo (IFP) raised concern that there was a lot of “Isidingo” acting happening, which did not give people a comprehensive report and analysis of what was happening. There was a need to fill the acting positions in the Department, because when someone was acting they did not fulfil their duties to their full potential.
Although there were plans in place for licensing, especially of young miners, he questioned how swift the plans were, and whether they addressed the transformation agenda and integration of black people. There was a need for the previously disadvantaged during apartheid to also be included in the mining sector.
What their plans were to ensure that people who were affected by diseases such as TB and HIV in the mining industry were given adequate medical attention?
Mr V Zungula (ATM) commented that illegal mining (“zama zama”) had been a huge issue for a long time. What was the Department doing to eliminate this market?
There was a problem where communities were failing to support the mining sector because it was not clear how they would benefit from it. What plans were in place to ensure that the community also benefited from mining?
What kind of bursaries were being offered by the Department? These bursaries needed to focus on developing a special or critical skill which was needed in the sector, to avoid unemployment. Also, the use of foreign companies or nationals did not benefit South Africa in the sense that they would leave with their skills. He suggested that South Africans should shadow those foreign nationals so that they could learn the skills as well.
He asked the DMR to define what their idea of a transformed mineral sector was.
Mr K Mileham (DA) expressed his concern over the size of the delegation brought to the meeting, considering the need to cut costs.
He referred to the statement that had been made by the DG on one of the visions of the DMR, of being a global sustainable resource and a meaningfully transformed mineral sector by 2019. The DG had made the comment that he thought that South Africa had already achieved this. He disagreed with this in the sense that the mineral sector had declined over the past ten years and as a result, 20% of the jobs had been lost. Over the past two years, mineral production had declined. What this indicated, therefore, was that South Africa was not a globally competitive mining sector and the sooner everyone could accept, that the sooner they could start to find solutions to this problem. He added that gold production in South Africa had now become second on the African continent behind Ghana, and yet South Africa had more gold reserves, which meant the country was no longer as competitive.
On the issue of mine health and safety, he said there was need to train for mine rescue in order to get people out in dangerous situations.
Mr Mileham suggested there was need to put in place a plan to legalize the zama zamas and make a plan to bring them into the mainstream sector. The Department could not just be punitive, but should rather also look at the remediation of that current workforce.
One of the priority issues raised had been the legislative programme in the policy and regulation section. A target of four legislative regulatory interventions had been mentioned. He asked the Committee to establish a road map and timetable of what and when these were expected to be tabled before the Parliament.
He described the South African Mineral Resources Administration System (SAMRAD) as largely dysfunctional. There was nothing in the presentation that had talked about how they were going to fix the mining rights regime and make sure that people knew their rights. There would be no turnaround plans without fixing that first.
He said the mining sector was expected to be competitive, and yet it had to deal with a large number of additional activities. For example, in the presentation it had been stated that mining hospitals should extend their services to the broader community. He argued that what this did was to place the burden of government on the mining companies. The problem was that this was not a core function of the mine, so this undermined its core function and diminished its competitiveness. He suggested that mining companies should rather be encouraged to fund communities instead of expecting them to actually provide the service.
Minister Mantashe, replying to the issue on hospitals, said that all they were saying was that the facilities were already there, and they should be accessible to the communities which surrounded them. They were not imposing the responsibility of building hospitals on the mining companies, but rather saying that people should just use what was already there.
On the Issue of global competitiveness, the Minister said that Mr Mileham had benchmarked competitiveness only with gold, which had been actively mined for more than 130 years. Using the example of gold was unrealistic, therefore, because mining was a depleting industry -- mining had a starting date and an end of life date. South Africa’s gold was in decline, but this did not mean that the country did not have gold deposits. There were many deposits in South Africa, but the issue was that the country did not have enough economically minable deposits. The environment was deep, dangerous, and became hotter as the mines were drilled further. What determined the country’s competitiveness was not just gold, but rather a variety of minerals that the country has. It was about having minerals that met modern demands. He was working with the Mineral Council to develop a document on the competitiveness and sustainability of mining into the future.
There was a temptation to think that illegal mining was a social activity. It was not -- it was theft. People who wanted to be regulated should come to the Department, and they would be regulated. They also had started a programme to try artisanal mining.
Lastly, on the issue of acting positions mentioned by Mr Nxumalo, the Minister said that of the five branches in the DMR, four of them had fulltime DDGs. They did not have a problem with acting positions in the Department. The only person acting in the Department was the CFO, and when they had wanted to fill the position they had been told to stop until the reconfigurations of the Department were complete. They were serious about filling these positions because when someone was acting they could not take decisions, which was not good for the Department.
Ms Bavelile Hlongwa, Deputy Minister, DMR, responded on the issue of licensing. She said they were currently having discussions on how they could digitise applications, given that they were in an era of rampant technology advancement. However, there were some limitations, for example, in what the Act stipulates. The Act requires about a year to process the applications because of the stages that people need to go through first. There was a need to go through the legislation and see if they were any areas where the time could be reduced. Also, there was a need to take into account that some of the things that were required by the Act were located not only in the mining Department, but in other areas such as the environment Department.
Youth inclusion was one of the DMR’s great focus areas. They wanted to see the inclusion of youth, women and people with disabilities, so that they became part of the transformation and also benefited from mining.
On combating diseases in the mining sector, she said that the diseases they were monitoring were those which were the result of exposure to mining. There was a programme which was already in place between the Departments of Mineral Resources and Health to determine ways to deal with these diseases.
Ms Hlongwa said there was a need to have an intensive discussion on how they should educate members of the community about what they had in the mining communities they lived in.
On the issue of bursaries, she commented that the people who were mostly targeted were those in the mining sector -- that is, upstream (on exploration) and downstream (the actual mining). She also agreed with what Mr Mileham about the need to train rescue personnel. There was also a need to have a discussion on what technologies could be used to improve ground stability in order to avoid the loss of life.
Referring to illegal mining, she said that the stealing of minerals needed to be stopped. For example, in Ekurhuleni the illegal miners were from Lesotho and they were also armed, because they knew that what they were doing was wrong. There was therefore a need for the Department of Police to be involved.
Adv Malebe, DDG: Regulation, responded on the issue of mining to benefit the community. She said section 104 of the Mineral and Petroleum Resources Development Act (MPRDA) states a preferential right for the communities. Therefore, any community could apply for that right.
Ms Morabe, Acting CFO, said there had been an enhancement of SAMRAD with regard to implementing a new integration system. In her presentation, she had indicated that previously the Department had kept going to the Treasury to ask for additional funding, as its budget was quite tight. However, it had to ensure that some of its activities were trimmed so that funds could be redirected to this critical automation of processes and the enhancement of the system. The Department would have loved to have implemented the integration system in one year, but due to a lack of adequate funds they had decided to stagger the process. In 2019/20, what they were going to do was refresh the whole system and make sure that the system was available, and the processing of information would be much quicker. In 2020/21 they were going to spend R31 million to develop the actual integrated system. They were going to focus on the implementation of co-functionality, which involved safety activities and mineral regulations. In 2022/23 they would then implement support functions, such as administration. The reason why they had not started this was that they could not identify the funds for that development in one financial year.
Ms Patricia Gamede, DDG: Corporate Services, said that the bursaries’ focus was mainly on the core skills of the industry, and excluded support functions like finance and human resources. The core skills which were always given priority were for those professionals who were difficult to attract, like mine engineers, geologists and rock engineers.
Referring to the three miners trapped in the Lily mine, she said this was something which should never happen, where people were not recovered for this extended period of time. Immediately after this incident happened in 2016, they had instructed the employer to ensure that rescue services were dispatched underground. Unfortunately, all the effort to recover the container which was suspected to be containing the trapped miners was impeded by a further surface collapse. The area had become very dangerous even for mine rescue services to continue searching for the container. However, the Department, together with the mining company, had engaged geotechnical expects both locally and internationally on the safest method recommended for accessing the area underground. The method which was recommended was to come up with a new decline which would be independent of the structures that were affected after the collapse. She added that since this period, the mine had gone into business rescue, meaning there was no longer production and the mine could not come up with funds. The Department had since been working with the mine and other entities of government to get the funding which would assist in opening a new decline which would be safer to search for the container. It had also conducted and finalised an inquiry into the incident, and the issue was currently with the National Prosecuting Authority because they were other things which had been reviewed during the inquiry which indicated that the pillar that was meant to provide support had been compromised, so there had been a fault.
Adv Thabo Mokoena, Director General (DG), commented on the issue of the involvement of communities. He said that when the mining charter was drafted, it had been done with the input of the society. Also, during the Mining Charter engagements, the Minister had decided to have a Mining Charter summit to which all stakeholders and ordinary people were invited. What came out of that summit was a serious appreciation of the challenges that people were facing at the hands of mining companies. The Minister had identified that there was a trust deficit between the mining companies and communities because of the lack of consultation and communication.
Mr M Wolmarans (ANC) commented that the licensing regime was hampering the process of job creation and transformation in the sector. There was a need to address this issue, as well to try and get new black industrialists into the market.
Referring to beneficiation, he said that local beneficiation had been on the radar for years, and yet not much had been done in that regard. There was nothing being said by the Department about a time frame to actually massify beneficiation. Issues such as unemployment and transformation were actually relying on beneficiation, so it was an area which needed to be looked at.
Regarding procurement targets, the communities were being informed about the opportunity of procurement benefits, but most of the time these procurements did not materialise. There was therefore a need for the government to make a follow-up by monitoring procurement within the sector.
There was also a need for coordination between the social and labour plan (SLP) and the integrated development plan (IDP) of municipalities.
Mr Wolmarans also observed that there had been a decline in the Department’s performance in 2016. He asked what the cause was and what could be done to improve it.
He added that hospitals which were owned by the mining companies should also accommodate members of the community where they were located.
Mr J Bilankulu (ANC) said that there was a serious threat to jobs in the mining sector, and asked the Department what plan they had to mitigate this situation.
The Department had spoken about sector procurement targets in terms of women, youth, and people living with a disability. He asked what progress had been made to ensure that this was fulfilled.
He said there was a report by the South Africa Human Rights Commission (SAHRC) after it had conducted public hearings in areas disaffected by mining, which addressed social labour plans. The Commission had found that the current social and labour plans had not adequately addressed the negative impact of mining activities. It had also set out what the DMR ought to do to deal with the challenges of SLPs. Had the Department had done all the things which were recommended by this Commission?
In the area of mine safety and health, they had spoken about having done 8 000 inspections and 396 audits. He asked over what time frame they would take place so that the Committee could hold them accountable.
Mr M Mahlaule (ANC) said that there was a need to provide statistics to support their allegation of foreign nationals being involved in illegal mining so that they could properly monitor the trend.
In the DMR’s report, it was mentioned that they had set aside funds for small scale mining companies. He suggested that it would be useful if the funds could go to young people, women, and people with disabilities.
On the issue of health, he said that mining companies should build hospitals, because people were getting sick because of these companies and their pollution. Mines had a social responsibility to the communities, and this was one of them.
Ms V Malinga (ANC) sid that all the questions she wanted to ask, such as about inspectors and audits, as well as the Lily miners, had already been asked.
The Chairperson said that the Department should be able to tell Parliament that the budget they had been allocated was not enough because it was a “risk” Department, and if they continuously had to undertake cost-cutting, this might lead to the loss of life of miners.
Minister Mantashe said that transformed mining, as stipulated in the Mining Charter, was about giving ownership to those who were not previously owners, given the history of black people. It was about giving people access to procure mines. Employment equity was also part of the transformation.
He said the issue of administered prices was within the jurisdiction of the state, and they had no control over them. The prices of things such as electricity inhibited beneficiation. Therefore, as long as prices were high, beneficiation remained a dream. However, they were raising this issue in the Cabinet, so there was some improvement.
Regarding foreign nationals and illegal mining, he said that he was not being xenophobic by saying it was mostly foreigners who were involved in illegal mining. For example, if one looked at the 18 people who had died at Gloria mining, they had been foreign nationals. Also, the four people who had died in the East Rand were also foreign nationals. These were indicators to show that predominantly non-South Africans were involved in illegal mining.
The Minister said that he was not forcing mining companies to build hospitals. All he was saying was that those facilities were already there, so the communities near them should be able to access them.
On the issue of Lily mine, he said there had been attempts to get the container out, but the mine had been closed so the prospects of reaching it were smaller. When accidents happened at private mines, and they then expected the state to fund them, it became an expensive venture. The private entities should fund themselves to retrieve the bodies. He added that there were some investors who wanted to take over the Lily mine, and part of the conditions for them was to erect a monument where the container was, so that people would know where the bodies were and could pay their respects until they found a way to retrieve them.
Deputy Minister Hlongwa commented on the issue of procurement targets and compliance of ownership. She said that the Mining Charter covered this, and also suggested that every Committee Member be provided with a copy of it so that they could be familiar with what it contained.
She would bring details of inspections to their next meeting so the Committee could ask relevant questions.
She commented that the South Africa Human Rights Commission was helping them to review some of the SLPs to make sure they made sense.
Department of Energy presentation
Minister Mantashe referred to the issue of economic transformation, they have an agency to finalise the IRP (Integrated Resource Plan). He said that by the end of September it should have been finalised and brought before the Cabinet and gazetted.
In the Integrated Resource Plan (IRP), they were demystifying the debate that by 2023 there would be no coal-generated power. More than 71% of the electricity was generated from coal. He observed, however, that there was a need to have cleaner coal generation technology.
Another source of electricity in South Africa was nuclear, which was provided via Eskom’s Koeberg nuclear power stations. Although Koeberg’s had been expected to come to an end by 2024, there was a project which had been initiated to extend its life by another 20 years. This meant that Koeberg would be decommissioned only by 2045. This gave them the opportunity to develop additional nuclear capacity as a country, as nuclear fell within the category of cleaner energy.
Regarding petroleum and petroleum products regulation, there was a project involving the building of a petroleum refinery. Saudi Aramco wants to invest in building a refinery at Richards Bay. Another option they had was to open an energy plant in the Kruger National Park.
He commented on the Integrated National Electrification Programme (INEP), and said that the project allowed for an allocation for other power producers to deliver. Their view on this was that it was a most inefficient way of delivery. Lastly, they had quite a number of state-owned entities, but they were all in trouble. He suggested that the Committee should join him when he visited them one by one.
Mr Thabane Zulu, DG: Department of Energy, said that South Africa had signed a treaty with the Democratic Republic of Congo (DRC) on the Grand Inga Hydro Scheme power project. In the 2018/19 financial year, the Department had accelerated the implementation of bilateral and regional engagements (Botswana, Zambia, DRC and Zimbabwe) in order to realise the objectives of energy cooperation in terms of hydro-electricity.
They had also ensured that the licences which were being issued to entities contained at least 50% ownership and control in the hands of blacks.
Regarding fuel sampling, a total of 1 080 fuel samples from 1 892 sources had been collected and tested by 31 March 2019. A total of 1 590 retail site compliance inspections had also been conducted by 31 March 2019, compared to the target of 1 500.
To assess fuel margins, studies had been conducted to review the asset base and operational expenses of a benchmark service station, as wells as to benchmark storage facilities. The Department wanted to determine the costs of building a service station and the operational expenses associated with it. The revised regulatory asset base had been determined, based on mechanical, electrical and instrumentation items, bills of quantities and construction costs, including the major cost items such as tanks, loading arms, pumps, valves, piping and fitting.
On energy efficiency initiatives, the rollout had improved, with significant savings being realised over the 0.5 terra watt hour (twh) target.
Mr Zulu referred to the challenges which were being faced by the Department. He said that there was a lack of skills, especially in integrated modelling and data collection. He also commented on the issue of internal price stability, which had impacted very negatively on the manner in which the prices of petrol and paraffin, for example, were continuously increasing and decreasing. The Minister had asked them to start a process of reviewing how the oil price formula was being used in South Africa so as to make sure that they could develop a better approach to dealing with that issue.
Some of the issues they faced were linked to changes in leadership and governance at the SOEs.
The annual performance plan (APP) was divided into six programmes:
- Administration. This provides strategic leadership, management, and support services to the Department.
- Energy policy and planning. This programme ensures evidence-based planning, policy setting and investment decisions in the energy sector to improve the security of energy supply, regulation and competition.
- Petroleum and petroleum products regulation. This programme seeks to ensure the optimal and orderly functioning of the petroleum industry to achieve the government’s developmental goals.
- Electrification and energy programme and projects. This programme is to manage, coordinate and monitor programmes and projects focused on access to energy.
- Nuclear energy. This programme manages the South African nuclear energy industry and controls nuclear material in terms of international obligations, nuclear legislation and policies to ensure the peaceful use of nuclear energy.
- Clean energy. The programme manages and facilitates the development and implementation of clean and renewable energy initiatives, as well as energy efficiency and demand side management (EEDSM) initiatives.
Ms Yvonne Chetty, Chief Financial Officer, presented on the budget. In 2018/19, the budget had allocated about R7.1 billion for the Department’s operation. 90% of that money had gone to different entities, including municipalities and Eskom for the Integrated National Electrification Programme. As an indicative budget, they had been given R7.57 billion, but effectively the final allocation they received had been R7.4 billion, with most of the decrease being for the compensation of employees.
In Programme 1, there had been an increase in property payment (payment of accommodation) and for the funding of the vacant Deputy Director General posts that were advertised.
Under Programme 2, there had been a net reduction, which was also for the compensation of employees, most of it being for realignment of the budget with the headcount in the programme.
In Programme 3, there was a net reduction of R1.43 million, also from the compensation of employees.
In Programme 4, the budget reduction was attributable to reductions in the INEP municipal grant and INEP Eskom grant.
In Programme 5, the budget increase was as a result of upward adjustments in the budget allocations for the Nuclear Energy Corporation of South Africa (NECSA) and the National Radioactive Waste Disposal Institute (NRWDI).
In Programme 6, there was a downward adjustment due to the compensation budget, which had been reduced by the realignment.
In 2020/21, a significant reduction was attributable to a high reduction in the INEP-Eskom grant of R558.75 million.
Ms Malinga asked how far the Department was in securing feedstock for PetroSA. This was because the legacy report of the Fifth Administration said that the entity had been given opportunities to present its case to the Committee, but they did not have a turnaround strategy.
She observed that they were decreasing INEP municipal grant, but pointed out that they still had to electrify rural areas, so the Department had to explain to the Committee why they were decreasing the INEP transfers to the municipalities.
Mr Mahlaule said that the Department’s APP from year 2014/15 in the Fifth Parliament indicated seven bills as part of its performance targets, and they had scheduled to table them by the end of March 2016 and the end of March 2017. However, two of those bills had been carried through to 2018/19, without mentioning the rest. The two bills carried were the National Energy Regulator Amendment Bill and the Electricity Amendment Bill. Now, in the 2019/20 APP, the bills mentioned were the National Regulator Amendment Bill and theGas Amendment Bill. In this report, they had not given a rationale as to why two bills of the previous Parliament had to fall out. He asked the Department if the two bills were not important.
Secondly, he observed that they had listed the Radioactive Waste Management Fund Bill as one of their achievements. He asked the Department to explain how it became an achievement when it had fallen away.
Thirdly, in 2014/15 there had been a problem with energy supply which had negatively impacted on the country and its economy. He asked who accounted for the money that was transferred from the Department to the municipalities and then from there to Eskom.
Mr Wolmarans asked that since they were going to reduce the INEP-Eskom grant by R558.75 million, what effect it had on service delivery.
Mr Mileham said that he did not think the Department’s vision addressed the problems of energy in South Africa. The problem with energy was less about the energy mix, but more about energy security and stability. The questions they should be asking was what they were going to do to stabilise their energy structure and supply by 2025 to meet the demand. They should also outline how this could be done with renewable clean energy.
He hoped the Integrated Resource Plan (IRP) would be gazetted by September 2019, because this IRP was already nine years late. Also in terms of legislation, it was supposed to be a living document that was updated every couple of years, yet the last IRP was gazetted in 2010, while the last gazetted Integrated Energy Plan (IEP) was in 2004, which was unacceptable. He hoped that this IRP would be successful because the country needed to know what energy mixing was going on so that they could be certain about what needed to be done.
He said there was a lack of attention in the APP on the Central Energy Fund and its role in the Department. He was also concerned about the continued belief that energy security could be achieved from outside South Africa -- especially referring to the Grand Inga Hydro Scheme power project. Electricity travelling miles across various countries was not a solution. Instead, they should be looking at what they could do here in South Africa to ensure energy security for the country itself and the region, and not what could be done in another country.
He welcomed the strategic objective of improving liquid fuel energy security, because it was something that had been ignored for too long. It also went directly to the country’s fuel pricing and various issues that affected the entire energy regime in South Africa.
He agreed with Programme 3’s intention to promote petroleum licensing, but asserted there was a corrupt element in the Department, where if there was no kickback then there was no licence. There were some instances where people had applied for a licence for more than five years but could not get one because they refused to give a kickback. Therefore there was a need for transparency and greater enforcement of petroleum retail licensing.
Mr Mileham said that in Programme 4, their aim was upgrading existing sub-stations and building new ones. However, Eskom had recently stated that municipalities owed them money, so they were not going to maintain or upgrade sub-stations. Was the Department going to give Eskom the money? In other words, the Department would pay Eskom to upgrade those sub-stations, not the municipalities, so Eskom could not refuse to maintain and upgrade the sub-stations.
Under Programme 5, his concern was that the Department was focusing on bigger nuclear power stations as the only solution. Not enough thought was being given to smaller nuclear stations that could power small towns. It was high time they stopped looking for another Koeberg and looked at what could be done quickly and effectively to provide energy security for South Africa. There was also a need to open up licensing and make it easier for people to invest in and provide renewable energy. Municipalities should be allowed to buy renewable directly from the supplier, rather than Eskom.
One of the mandates of Programme 6 on clean energy stipulated the implementation of energy-related climate change response measures. He was concerned that Eskom did not have either the funding or the willingness to put in the necessary measures in place. He asked if this was something that fell within the Department of Energy or the Department of Public Enterprises.
Mr Mthenjane said the Department should provide them with a timeline on when they could expect the building and upgrading of sub-stations to happen, and the budget involved so that they could hold them accountable.
He asked what the Department’s plan was to deal with illegal connections of electricity. When was it going to discontinue the private ownership of SASOL and provide them with a concrete development mandate to contribute to rapid sustainable development in the country.
Minister Mantashe said that the location of Eskom in the Public Enterprises portfolio, and not in the DMRE, was an issue that needed discussion. This discussion had already indicated that the Energy portfolio should be complete. This was a problem, because quite a number of questions being raised by the Committee were about Eskom, and they did not have jurisdiction over it.
He said that when moving towards cleaner energy, there was a need to consolidate the base load capacity. He agreed with the concept of smaller versions of nuclear, as raised by Mr Mileham. In the IRP, they were talking about small-scale nuclear versions. The plan was to purchase nuclear at a pace and capacity that the country could afford.
Regarding why the Department paid Eskom, he said they paid it for the work they would have done. However, there were discussions going on to determine if it would be wise to get someone else to do the work.
Deputy Minister Hlongwa said two things needed to happen with regard to the pricing of electricity and independent power producers (IPPs). The first was to allow the public to buy directly from the suppliers, and the other was for the government and the owners of Eskom to determine the price. However, this would plunge Eskom into a further financial crisis, because it was a business and had to make a profit. One of the things that the IRP was looking at was what else could be done to alter the electricity prices.
The accusations made about licensing needed to be investigated. She also suggested that there should be courses on ethical leadership so that they knew that when they were captured doing something outside ethical leadership, what it meant. There should be a bit of aggression on this matter.
Mr Zulu said the Department did not just transfer money to Eskom. Eskom first produced a business plan for a particular financial year and identified the areas of the work they wanted to do, as well as where they wanted to do it. Once it was signed, it was binding, meaning that Eskom was not going to choose not to do a particular power station as a result of being owed money by a municipality. Their job was to make sure that what was in the business plan was done, and if it was not done then serious action was taken. They did not transfer all the funds annually, but did so quarterly and monitored what was being done. Therefore, there was an accountability mechanism to ensure that Eskom did not default.
On the vision of the DMRE, the DG noted that during the time they drafted their vision it was when renewable and clean energy was at the top of the government’s agenda, so the Department of Energy had had a duty to highlight it as an area that needed to be attended to.
Regarding the Grand Inga Hydro Scheme power project, South Africa was a signatory so whether people liked Inga or not, the country was already committed to the treaty. However, this did not mean that South Africa was going to rely only on Inga as a source of energy. There were other strategies that could be developed locally to ensure energy supply.
He commented that in their budget, they did not accommodate only urban areas, but rural areas as well.
On the issue of the timeline, the Department expected to have achieved most of their programmes by the end of the financial year.
Regarding illegal connections of electricity, it had been discovered that a lot of people were migrating from rural areas to urban areas, leading to the formation of informal settlements. Generally, those areas were not budgeted for and people ended up doing illegal connections. There had been a discussion on how to electrify these informal settlements to avoid the illegal connections.
Replying to the questions relating to the Bills which were not completed during the Fifth Parliament, the Department said it had processed the National Regulator Bill. However, there were issues which had been raised that had required them to go back and review the contents of the bill. One of the issues was that they had recommended that there be an independent appeals board. The Department had been encouraged to reconsider the structure of this board, and that was why it had been brought back to the current administration.
With regard to the Electricity Amendment Bill, they had been asked to explain what the electricity structure in South Africa should look like in the future before putting the bill before Parliament to consider. They were planning to have that report tabled by the end of this financial year. They were also planning to include Eskom in this report, because of it being one entity. Once the report had been approved, then the Department would be able to table a bill to support the structure. This was why they had the two bills carried over to this current financial year.
The Gas Amendment Bill was important due to the developments in the region following the recent gas findings. The aim was to finalise it before the end of the current financial year.
Mr Zizamele Mbambo, DDG: Nuclear Energy, said there were bills that the Department was still working on. The National Nuclear Regulator Amendment Bill was under consideration, with different stakeholders making an input. Their plan was to submit the bill in this financial year. The other bill was the Radioactive Waste Management Fund Bill, which was critical to ensure financial sustainability of the NRWDI. The bill had been submitted to the chief state law advisor. They also planed to submit it to the Cabinet after the public consultation.
The Chairperson commented that kickbacks were a crime and should be reported. The suggestion of the Deputy Minister about having an ethical course would not necessarily inhibit people from indulging in these kickbacks.
He proposed that the Committee should have a broader meeting where even the entities could participate. They would be able to look at the Department and its entities to see whether they were performing at the expected level. He asked the Committee if they agreed with this suggestion
Mr Mahlaule agreed to the proposal, and also made some additions. He said that there were some Departments and entities which may overlap. For example, the fact that they were discussing Eskom outside the Department meant it was an overlapping entity. Therefore, when the meeting took place, there was a need to invite those entities as well.
Mr Mileham agreed to the proposal.
Mr Mthenjane asked the DMR for a timeline when the company that would be cutting diamonds was expected to operate. On the issue of Lily mine, he said the DMR needed to make a plan so that the bodies could be retrieved.
Mr Mahlaule referred to mining incidents, and said there was a need to introduce underground drones and technology that could assist in gathering information underground. This would help prevent instances where there were people trapped underground for three years.
The Chairperson referred to the illegal mining, and said they were now dealing with fully armed syndicates. These had also begun to penetrate even in areas where legal mining operations were taking place. There was a need to take action.
The Minister said that they needed to look at all options available to access cleaner energy. The other area that also needed money was to close derelict and ownerless mines. However, there was a need to appreciate that when a mine was operating, it had to put money into reserve for rehabilitation.
He would deal properly with the issue of illegal mining at the next meeting.
The Deputy Minister agreed with Mr Mahlaule on the use of technology. She said this technology might actually help in Lily mine situation to retrieve the three bodies.
Adv Mokoena (DG) commented on the issue of diamond cutting, and said that they had looked at the model used in Belgium, where people do a diamond cutting course. In South Africa, there was no such a model, but they were currently having discussions with the Council for Scientific and Industrial Research (CSIR) and University of Witwatersrand to see which curriculum they could use. They were also looking into developing their own tools for diamond cutting, since they had been relying on tools from Russia and Belgium. There was beneficiation they could explore in terms of tool manufacturing and maintenance in South Africa. However, the timeline had not yet been properly ascertained.
On the issue of Lily mine, the new owners of the firm were saying once they started operating they would be able to retrieve the container. There was also a conflict between the new owners and old owners, which was delaying the new owners’ efforts to start mining and retrieve the container. However, the Department was doing all it could to ensure that it was retrieved. They were also keeping in touch with the family of the victims.
The Chairperson said they would deal properly with other issues at another meeting. On Friday they would be adopting a report where the Committee would have to state what they recommended, including the issues they had just discussed.
The meeting was adjourned.
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