Special Appropriation Bill [B10-2019]: deliberations

Standing Committee on Appropriations

18 September 2019
Chairperson: Mr S Buthelezi (ANC)
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Meeting Summary

The Committee reviewed the Draft Report on the 2019 Special Appropriations Bill in a page by page fashion. In its deliberations on the oral and written submissions on the Special Appropriation Bill, the Committee was in agreement that stringent conditions had to be attached to the transfer of funds to Eskom. It was also advised that conditions be brought to Parliament before it was published. Members had comments about funding the bailout; accounting by Eskom; the need for the Department of Public Enterprises (DPE) to be more effective in its shareholder role; the lack of Parliamentary and government oversight of Eskom; restructuring and the role of the Chief Restructuring Officer (CRO); municipal, household and corporate debt to Eskom; the coal contract and others; renewable energy; job protection and development, and the need to engage with organised labour.

Members felt strongly that a capable team was needed to support Eskom through the DPE and that there had to be a further tightening of conditions for Eskom. Members heard that one entity owed nearly a billion Rand to Eskom, which lead to the question of how to get the top 20 debtors to pay. Members noted the National Treasury had to be encouraged to consider ways other than the national fiscus to fund Eskom and other SOEs and that it was essential for Eskom to engage with organised labour.

Members asked if there was any way of righting the issue of high rates and would the Committee be allowed to debate the restructuring of Eskom.

Members considered and approved of the proposed oversight programme which was to take place from 15 to 28 October 2019.

The Draft Committee Third Term Programme was adopted without amendments.

Minutes of 4, 10 and 11 September 2019 were adopted without amendments

Meeting report

Opening remarks by the Chairperson

The Chairperson announced the agenda for the day. Apologies were received from Ms Ntlangwini, Ms Komane, and Mr Kwankwa.

The Chairperson took the Committee through the Draft Report on the Special Appropriations Bill [B-2019 (reprint)] in a page by page fashion. The Report dealt with written submissions on the Bill received from the Fish Hoek Ratepayers and Residents Association; Alternative Information Development Centre (AIDC); Organisation Undoing Tax Abuse (OUTA); COSATU; National Union of Mineworkers (NUM); Mr G Sigwela, and Mr G Gulston. AIDC, OUTA, and COSATU with the NUM, also made oral submissions. The Committee consulted with the Department of Public Enterprises, Eskom, the Parliamentary Budget Office (PBO) and the Financial and Fiscal Commission (FFC). He asked Members to comment on the report.

Deliberations on submissions received about the Special Appropriations Bill

Mr A Sarupen (DA) commented that public participation had proved that although there were widely divergent views, all were agreed that Eskom had to be fixed. Persistent bailouts had to end. The Committee was agreed about strengthening conditions. No blank cheques were to be handed to Eskom. The financial sustainability of Eskom over the following two years had to be considered. The PBO economic briefing on Eskom in the previous term had stated that an IMF bailout for Eskom was not necessary, as government bonds were still being purchased in capital markets. Money could be raised without having to dip into the Unemployment Insurance Fund (UIF) or Government Employee Pension Fund. South Africa was not (yet) in the same predicament as Argentina or Venezuela.  According to the AIDC, the economy was not yet in such dire stress.

Mr Z Mlenzana (ANC) said that he wanted to make a generic comment on the presentations. Advice from the FFC and the NT could sharpen the analytical tools of the Committee. He would suggest that there be continuous engagement with stakeholders, from which the Committee could learn much. A broad spectrum of presentation was needed. Almost all the presentations took a serious view of measures for accounting by Eskom. He agreed with Mr Sarupen. Decision-making had to be considered in terms of legal advice. He advised that the term “conditions” be changed to “regulations”, with legal assistance. The NT and the DPE could be invited to present on regulations before final decisions were made. It was not the sole responsibility of the Committee to develop regulations. The SC might not be able to hold the DPE accountable after regulations had been approved.

Mr O Mathafa (ANC) commended the public participation process which had been an open and transparent conversation. A platform was granted to stakeholders to provide inputs. Presentations pointed out a lack of proper oversight by government and Parliament. The question was what could be done not to repeat the errors of the past. There had to be frequent and meaningful reporting by SOEs, according to a consolidated approach, for government and Parliament to play an effective oversight role. He agreed with the Minister that Eskom was not sustainable in its current form. Both form and function had to be restructured. Eskom stated that its financial book was the only non-core asset it could sell. It had to be asked if there were others. There had to be a record. It had to be discerned what was core and what not. In taking its turnaround plan further, Eskom had to be transparent, it had to say where it would start, state its goals on a quarterly basis and halfway through. Eskom was saying that it had to protect its competitive edge, but it was not competing. Operations were kept under wraps. The elephant in the room was municipal debt. The challenge was recognised, but there was no plan to deal with it. The Committee had to pronounce on a debt collection strategy, there had to be intervention regarding debt by government and large companies. Electricity was recently switched off at a conference centre because it was not paying its debt.

Ms D Peters (ANC) supported colleagues in the need to emphasise what could be done over and above what the law was saying about conditions. The NT was saying that it was working on conditions. The SC report had to emphasise that conditions had to be stringent, so as to create a protective shield. She pointed out that there were continuous challenges concerning the oversight role of the DPE. Eskom was the biggest in Africa and a global player and could not afford to be shamed. A capable team was needed to support Eskom through the DPE.

COSATU raised the issue of Eskom having to make sure that jobs were not lost. For a secure energy supply Eskom had to guarantee and create decent jobs. How could municipal and household debt be dealt with? Private sector debtors had to be blacklisted. Households in Soweto and elsewhere were consuming and not paying. There was the anomaly that people wanted access to services but were not willing to pay for free electricity, water, RDP houses and SASSA grants. Communities that refused to pay had to be informed that there was no money to subsidise electricity. It could be recommended by the SC that the Treasury consider top-slicing municipal debt. One entity owed nearly a billion to Eskom. The question was how to get the top 20 debtors to pay. The one household one meter system had to be considered. There could be up to ten households in a yard, consisting of children, grandchildren and tenants. A person had to qualify for an indigent grant for free electricity, so that the neediest could be caught in the net. COSATU advised that Eskom had to invest in clean energy, building solar plants and wind energy systems as was part of the Eskom nine-point plan, and would reduce emissions. The coal contract and renewable energy need attention. Joint work had to be done with the Public Enterprises Portfolio Committee to secure oversight of the Eskom bailout. It had to be asked, concerning the non-core asset register, what was in the basket. The Committee was agreed about a further tightening of conditions for Eskom.

Mr D Joseph (DA) remarked that he was not seeing investment in the Eskom nine-point plan. Findings on the reasons for the appropriation had to be summarised. The NT had stated that there was a crisis. The matter of non-core assets had to be sorted out. It was important that the NT set firm conditions pertaining to before and after amounts that were transferred.

The Chairperson referred to the debt explosion, the unsustainability of Eskom, and deteriorating finances, with a loss of R20 billion. There had been no corrective measures, and the situation had gone on for two years. The impact of Independent Power Producers (IPPs) on financial viability and the impact of debt on the sovereignty of the fiscus had to be considered. A closer look had to be taken at Eskom contracts. Companies were making super profits from Eskom and the country had to pay them. Eskom had to inform about contracts, especially terms and conditions pertaining to major contracts. The DPE and the Ministers of Public Enterprises and Energy had to work together and move away from the silo approach. The relevance of the CRO was being overemphasised. It was not the panacea. The Committee wanted to see a plan that it was prepared to fund. Government was responsible for economic transformation, and Eskom had to present a transformation plan. Money had to speak to economic transformation. It had to be clear how the previously marginalised would benefit from the R59 billion special appropriations. The Chair of the Eskom board had stated that jobs would be protected. Eskom had to invest in human capital as a resource. Eskom inefficiency was not to be transferred to the consumer. Eskom had to develop emission reduction technologies. The use of coal could not be abandoned, but it had to be used in an environment-friendly manner, with the help of research initiatives. Eskom was not to deal recklessly with the environment. The NT had to be encouraged to consider ways other than the national fiscus to fund Eskom and other SOEs. The AIDC advised exploring other options.

Ms M Dikgale (ANC) remarked that Eskom was not doing right by the community. There were community members who had started up projects, who were not allowed to use pre-paid electricity. At the end of each month readings were taken, which resulted in electricity cuts and jobs being lost. The rates were very high, was there a way of righting that?

Mr Mlenzana enquired whether the Committee was to confine itself entirely to the Special Appropriation Bill, or if it could engage with the restructuring of Eskom, as that could pre-empt a pronouncement by the Minister. The AIDC had gone into great depth about the economic transformation of the country. Other countries could be studied to aid economic transformation. Would the Committee be allowed to debate the restructuring of Eskom?

The Chairperson remarked that the restructuring of Eskom was relevant to the Committee. Engagement with Eskom restructuring would not pre-empt the President. The NT had to gravitate to firmer conditions. There had to be regulations, which had to be presented to the Committee. The regulations would be published before it could be promulgated. The Minister had to bring it to the Committee before publication.

Mr X Qayiso (ANC) commented that restructuring was in the public domain, and it was a sensitive matter because it was related to job losses. It was essential for Eskom to engage with organised labour.

The Chairperson asked the Legal Adviser to comment.

Adv Frank Jenkins, Senior Parliamentary Legal Adviser, noted that the regulations the Minister might or had to make, had to be in terms of the PFMA. Conditions “may” be set before transfer and “must” be set thereafter. The power of the regulations in itself was not in the Bill itself. A Bill of Appropriation had to go through the PFMA. There were provisions in the Constitution around Money Bills, but there was a little mistake. A former SARS member had pointed out that Money Bills could not deal with anything other than provisions for Money Bills, except for the Appropriation Bill that could deal with what was ancillary to the legislation. Hence things could be added to the legislation. The SC could go into consultation with the Minister to amend the Bill. The alternative route was to state in the report that the Minister had to submit instructions or conditions in the form of an NT circular or directive. There were three or four such instruments that the NT could use. The Constitutional Court had looked at those, and there was some confusion, but ruled that delegated subordinate legislation like regulations carried the force of law. It could be requested in the report that the Minister brings conditions/regulations to Parliament before it was published. If the Minister failed to do so, it would not be non-compliance with the law, but with a resolution of the House. Being a Member of the House, the Minister could be asked why he had ignored what the House had resolved.

The Chairperson asked that Adv Jenkins’s comments be captured. He asked the Committee Researcher for comments.

Mr Musa Zamisa stated that the role of the CRO and its interaction with the CEO and the Board had to be known.

Consideration of proposed oversight programme

The Content Adviser briefed the Committee on the planned schedule for engagement with the NT and the Auditor-General around Eskom finances; with the Eskom Board and organised labour, and the Chief Procurement Officer and head of legal services. There would be engagement with the heads of departments concerned with generation, transmission and distribution, and the head of HR. A planned visit to PRASA included engagement with the Board, trade unions, the business executives of subsidiaries, and the head of legal services. The oversight period would be from 15 to 18 October.

Members requested some restructuring in terms of time allotted to each engagement. There had to be prioritisation in terms of allotted time.

Consideration and adoption of Draft Committee Third Term Programme

The Chairperson noted that the focus would be on budget related matters.

It was asked if there would be enough time for engaging with budget matters. The programme was adopted without amendments.

Adoption of minutes

Minutes of 4, 10 and 11 September 2019 were considered and adopted without amendments.

The Chairperson adjourned the meeting.



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