DMRE 2020/21 Special Adjustments Budget

NCOP Land Reform, Environment, Mineral Resources and Energy

24 July 2020
Chairperson: Ms T Modise (ANC, North West)
Share this page:

Meeting Summary

Video: Select Committee on Land Reform, Environment, Mineral Resources and Energy, 24 July 2020

Tabled Committee Reports

The Department of Mineral Resources and Energy briefed the Select Committee on its budget allocation for 2020/21 and on the impact of the changes on its service delivery programmes, in the light of the 2020 Special Adjustment Budget.

Following the revised programme allocations, the total allocation for the Department in 2020/21 is R7.763bn, a 17% reduction compared to the main budget of R9.337bn.

The only significant budget change was in Minerals and Energy Programmes and Projects where there was a cut of R1.534bn (26% of the total) mainly in the allocations to Eskom and municipalities for the Integrated National Electrification Programme. This would significantly reduce the target for household electricity connections in 2020/21 from 180 000 to 137 000. The reductions would be greatest in the provinces with the largest electrification backlogs (Limpopo, KwaZulu-Natal and the Eastern Cape).

Committee Members enquired about the extent of the electrification backlog and the revised timetable for clearing it. They asked about the affordability of planned nuclear power projects; the efficient use of reduced infrastructure budgets in municipalities; communication with communities affected by infrastructure delays; and mine safety. One Member expressed concern that COVID-19 would be used as an excuse for underspending.

Although this was a virtual meeting, the Committee did not form a quorum as only four provinces were represented. The agenda item on the consideration and adoption of minutes and reports was therefore postponed.

Meeting report

DMRE Briefing 
Mr Thabo Mokoena, Director-General, Department of Mineral Resources and Energy (DMRE), conveyed the apologies of two of his deputies as well as Minister of Mineral Resources and Energy Mr Gwede Mantashe. He then outlined the background of the Department’s adjusted budget. After difficult negotiations with National Treasury, the DMRE had managed to reduce its budget by approximately R1.5bn. He then handed over to Ms Yvonne Chetty, Chief Financial Officer (CFO), DMRE, to take the Committee through the rest of the presentation. 

Ms Chetty broke down the adjusted budget by economic classification. Of the R1.574bn reduction, R42m had been taken from goods and services and R1.532bn had been taken from transfers and subsidies. No reductions had been taken from the compensation of employees, as the Department had committed to using some of the savings that had been made this programme to assist unemployed graduates. The Department was engaging continuously with National Treasury on this plan. The adjustments per programme were as follows:

- Administration: -R25m (-4% of the unadjusted amount)
- Minerals and Petroleum Regulation: -R4m (-1%)
- Mining, Minerals and Energy Policy Development: -R6m (-1%)
- Mine Health and Safety: +R6m (+3%)
- Programmes and Projects: -R1.534bn (-26%) 
- Nuclear Energy Regulation and Management: -R11m (-1%)

Ms Chetty detailed the reductions that had been made in goods and services, and in transfers and subsidies, and the impact that they would have on service delivery. By far the largest reductions had been made to the allocations for the Integrated National Electrification Programme (INEP) to Eskom (R1bn, 33% of the unadjusted amount) and to municipalities (R500m, 27%). These reductions would significantly delay the implementation of planned bulk infrastructure projects, reducing the target of household connections in 2020/21 from 180 000 to 137 000. The reductions would be greatest in the provinces with the largest electrification backlogs (Limpopo, KwaZulu-Natal and the Eastern Cape). 

Ms Chetty said that the effects of the reductions would be felt for many years, especially in electrification projects. There had been competing priorities in negotiating the budget adjustments and National Treasury had not provided any guarantee that reduced budgets would be reinstated in the next budget process. DMRE would motivate for additional funds through budget processes throughout the financial year.

The presentation also included a breakdown of reductions by province and information on the rationale for these reductions. 

Mr Mokoena added that the employment of graduates would be decentralised. They would be employed in regional offices in all nine provinces.

Mr C Smit (DA, Limpopo) asked how big the electrification backlog was. This would give some perspective to the reduced electrification targets. In the context of the government’s intention to invest in nuclear power, what did the Department consider affordable for the country in the present circumstances and the near future? When did the Department foresee investment taking place?

Ms C Labuschagne (DA, Western Cape) asked whether any discussions had taken place to ensure that the reduced infrastructure allocations to municipalities were spent on projects that were ready to be started and that municipalities did not use the existence of other projects that were not ready to justify non-spending. Would it be the Department or the provinces and municipalities that allocated money to different projects? She was concerned that money would be wasted and COVID-19 would be used as an excuse for underspending.

Mr T Matibe (ANC, Limpopo) asked whether the Department would have further engagements to prevent protests by communities in which infrastructure projects were delayed. He asked what the Department was doing to monitor the compliance of mines with COVID-19 workplace safety regulations, as mines were becoming epicentres of the disease. Would the revised budget affect the monitoring?

Mr Jacob Mbele, Deputy Director-General (DDG): Programming and Projects, DMRE, said that about 87% of the country had access to electricity. Since 1994, about 7.8m households had been electrified. In numerical terms the backlog was around 2.2m households. However, it should be remembered that people moved around, and a recent decrease in the percentage of electrified households was accounted for by the growth of informal settlements. He described the process of allocating infrastructure grants to municipalities in some detail. First, a municipality had to apply with a business plan indicating its readiness to begin a project. The Department assessed the plan and made a decision on the allocation. Municipalities had to report monthly on progress and expenditure. The Department verified these reports within capacity constraints, and could reprioritise money from a municipality that was not performing to a project that had not been funded due to resource limitations. The Department communicated continually with affected municipalities and Eskom, and municipalities were expected to communicate changes to infrastructure plans to their residents.

Mr David Msiza, Chief Inspector of Mines, DMRE, said that the Department had conducted almost 1 700 inspections at mines between April and June 2020. Instructions had been issued where there had been non-compliance with Mine Health and Safety Act. Vigorous screening and testing was taking place as per agreements. In addition to inspections and audits, the Department was also engaging with the Minerals Council South Africa and organised labour to develop plans. The Minister had announced that 2019 was the safest year on record, but the Department welcomed the increase in funding for mine health and safety [in the adjustments budget]. 

Mr Mokoena said that it was too early to speculate about the costs of the nuclear build programme. The Department had issued a request for information on the basis of which a thorough cost analysis would be done which would take pace and affordability into account.

Follow-up Questions
Mr Smit said that he had wanted to know what the Department considered affordable for nuclear power per year. He asked for confirmation that the electrification backlog of 2.2m households would be completed in 12-13 years if the annual target was 180 000 and in 16-17 years if the annual target was 135 000.

Mr Mokoena reiterated that it was too early to speculate about the affordability of the nuclear power programme. The request for information would provide the data that would allow the Department to give the committee accurate information.

Mr Smit said that he would follow up on this matter in writing.

Mr Mbele said that the Department estimated that a further one million houses would be electrified by 2024. Municipalities did sometimes allocate additional money from savings to electrification. He pointed out that electrification in the metropolitan municipalities was funded directly from their Urban Settlement Development Grant (USDG), so it was not included in the figures presented. Electrification was also provided to households through municipal housing schemes and Eskom sometimes used its funds directly for electrification. In summary, the precise numbers for the electrification rate were not straightforward.

The Chairperson appreciated the Department’s consultation with affected entities such as municipalities and Eskom. She urged the Department to ensure that the budget adjustments did not severely impact service delivery. She also appreciated the assistance given to unemployed graduates. Municipalities needed to be encouraged to use their budgets and reduce the electrification backlog in their communities. She commended the Department on its achievements in mine inspections and wished the Minister a speedy recovery.

The Committee had planned to consider and adopt minutes and reports but it did not form a quorum as only four provinces were represented, so this item was postponed.

The meeting was adjourned.

Download as PDF

You can download this page as a PDF using your browser's print functionality. Click on the "Print" button below and select the "PDF" option under destinations/printers.

See detailed instructions for your browser here.

Share this page: