Department of Minerals and Energy 2019/2020 Annual Report

NCOP Land Reform, Environment, Mineral Resources and Energy

02 February 2021
Chairperson: T Matibe (ANC) (Acting)
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Meeting Summary

Video: Portfolio Committee on Environment, Forestry and Fisheries, 02 Feb 2021     Part 2

Annual Reports 2019/20

In a virtual meeting, the merged Department of Mineral Resources and Energy (DMRE) presented to the 2019/20 annual performance report of the former Departments of Energy and Mineral Resources, noting target performance, finances, human resource management, programme achievements and challenges and audit outcomes.

The Select Committee commended the improved audit outcomes and DMRE's progress on tackling gender-based violence (GBV) and gender equality in the mining sector. Committee members asked about reasons for the accumulated irregular, fruitless and wasteful expenditure and its prevention strategy. DMRE explained that the Auditor-General found the two payments made towards the IT system for the Nuclear New Build Programme irregular expenditure. DMRE acknowledged this in 2019/20. The fruitless and wasteful expenditure was a result of travel costs. The matter is being investigated and those responsible will be held accountable.

The Committee raised concerns about the missed target in not bringing the National Nuclear Regulator Amendment Bill and the National Radioactive Waste Management Bill to Parliament. DMRE explained that it is a long process as the legislation requires input from different stakeholders such as the Civil Aviation Authority and the National Nuclear Regulator (NNR) to resolve matters. With the National Radioactive Waste Management Bill, the Chief State Law Advisor needed clarity on the governance structure. It had also to ensure that there is sustainability in funding to manage waste management in future.

The Committee raised concerns why it achieved only 99 of its intended 120 inspected Social Labour Plans (SLPs). DMRE explained that consultations with the community can take longer than expected. In some cases the needs of the community change and the entire process has to start from over to accommodate these needs. The Department only reported on SLPs that have been inspected as the Department needs to verify that the work has been done. Money constraints also prevented inspectors from inspecting projects. DMRE noted it recently started a programme where oil companies will assist it in collecting the bulk of its revenue from the oil companies' retailers.

In response to the Committee asking what made the Department of Energy revise its targets, DOE explained this happened halfway as the Renewable Energy Master Plan was created indicating the renewable energy that SA will pursue after 2020 and its impact. This plan required it to revise its targets. The unachieved target for installation of solar water geysers was also discussed.

On the question of navigating South Africa to green energy, DMRE responded that the challenge of being dependent on green energy is difficult for SA because energy security does not come from one energy source. The Department has an Integrated Resource Plan which includes renewable energy. This plan deals with the challenges and mitigates the consequences there might be in the change of its energy resources.

The Committee noted that the Department of Mineral Resources (DMR) failed to note its challenges the mining sector faced in 2019/20. The Chief Inspector of Mines replied that most  gold and platinum mines are deep and the biggest risk in these mines are fall-of-ground and seismic incidents. There are instructions that before a mine opens, it needs to submit the method of mining to the Department to ensure that the method is safe. A task team was established with the Department of Labour (DOL) and mining CEOs to manage the risks. Another challenge is occupational diseases such as pulmonary tuberculosis, silicosis and noise-induced hearing loss. Of the 57 fatalities in 2019/20, the gold sector had 24 fatalities; platinum sector had 21 fatalities and the coal sector had 8 fatalities.

The Committee asked for the challenges of the merger between the two departments. DMRE indicated that although the merger took longer than expected, the employees were integrated successfully and they are carrying out the Department’s mandate with good morale

Meeting report

Mr T Matibe (ANC) asked the Committee if he may chair the meeting because the Chairperson was unable to attend as she was sick leave.

Ms L Bebee (ANC, KZN) moved for the proposal. Ms W Ngwena (ANC, KZN) seconded.
 
The Acting Chairperson requested that the meeting observe a minute of silence for those who have died and been affected by the Covid-19 pandemic.

Department of Energy (DOE) 2019/20 Annual Report
Mr Lucas Mulaudzi, DMRE Head of Strategy, reported on the Department of Energy annual performance for 2019/20. DOE achieved 17 of its planned targets – an improvement from the 13 achieved in 2018/19. DOE partially achieved nine in comparison to the 18 in 2018/19. It did not achieve seven targets which is an improvement from the 10 targets in 2018/19.

Performance Highlights for 2019/20
Mr Mulaudzi indicated the objectives achieved in the DOE programmes of DOE including:
• 98.98% approved invoices were paid within 30 days of receipt.
• Annual Energy Balance report for 2017 data was published.
• Biofuels regulatory framework was gazetted.
• 1080 fuel samples were collected and tested.
• 1367 retail site inspections were conducted.
• 91.85% (733/798) of licence applications approved have a minimum of 50% HDSA ownership;
• 214 517 newly electrified households exceeding a target of 195 000.
• 3 new substations built; 3 substations upgraded; 174.87 km new MegaVolt power lines constructed and 11 km of existing MegaVolt power lines upgraded
• 2 reports on interventions and support given to municipalities on electricity were produced.
• Authorisation applications were consistently processed within 8 weeks to achieve 70% target.
• 6.3 Terawatts per hour energy savings realised and verified from Energy Efficiency Demand Side Management (EEDSM) projects.
• 2018/19 Annual Compliance Report on 3rd Environmental Management Plan Edition approved.

Performance Challenges
• Only 14 Izimbizo out of 20 were conducted, due to budget constraints.
• Proposals of “end-state” of electricity sector delayed by production of overarching electricity policy.
• Off-take agreement on the Grand Inga Project not negotiated due to delays in appointment of the project developer by Democratic Republic of Congo (DRC).
• Appointment of panel of contractors for the non-grid electrification was delayed.
• Draft National Nuclear Regulator Amendment Bill was not submitted to Cabinet due to engagements with stakeholders on outstanding issues taking longer than expected.
• Radioactive Waste Management Fund Bill could not be submitted to Cabinet due to delays in consultation with stakeholders.
• Reports on National Solar Water Heaters (NSWH) installation were produced. However the installation target was not achieved due to under-delivery of geysers to participating municipalities and the need for training of installers.

Department of Mineral Resources (DMR) 2019/20 Annual Report
Mr Mulaudzi noted:
• 17% improvement in overall fatalities.
• 2% improvement in number of injuries.
• 4% reduction in occupational diseases.
• 99% of investigations completed.
• There were 57 fatalities  in 2019/20: Gold Sector 24; Platinum Sector 21; Coal Sector 8; Other mines 4 (the numbers were corrected in the meeting).

Highlights
Key results for the sector included:
• Rights and permits granted/issued to HDSA-controlled entities – 176 against a target of 120
• Consultations/engagements and conflict management with communities/ stakeholder and the mining industry – 523 achieved against a target of 150
• SLP inspections – 228 achieved against a target of 212
• SLP projects completed – 99 achieved against a target of 120
• Black Industrialists – 10 achieved against a target of 10
• Legal compliance inspections – 142 achieved against a target of 150
• Environmental compliance inspections – 1 381 achieved against a target of 1 275
• Mine Economics compliance inspections – 434 achieved against a target of 425.

Discussion
Mr C Smit (DA, Limpopo) asked the reasons for DOE not achieving its targets in energy, policy and planning. He asked for more details about DOE irregular expenditure. What budget was to be made available for the filling of critical DOE positions? He asked for the challenges raised by stakeholders about the National Nuclear Regulator Amendment Bill and Radio Waste Management Fund Bill. He asked DOE why it decided to revise the targets for the terms of reference for the Renewable Energy Technology Roadmap (RETRM). He asked DOE about the budget constraints which limited the achievement of only 14 of its 20 events for the Izimbizo programme. He noted the DOE  comments on deviations and asked about the activities it referred to in the Gas Infrastructure Master Plan (GIMP) report. He asked DOE to explain the term ‘end-state’ and what were the external factors it referred to. He asked what for the external factors the Department referred to in the off-take agreement of the Grand Inga Project (GIP).

Mr Smit asked DOE what were the delays in appointing a panel of contractors in Programme 4. He asked why there were no funds available for the energy technology roadmap and asked if it had been included in the budget. If not, why not? He asked DOE for the external factors it referred to. In Programme 6 what were the reason for delays in geyser deliveries and what did DOE plan to do to tackle the delays in the Technical Feasibility Assessment Studies (TFAS) in municipalities. He asked who was responsible for the R91 million fruitless and wasteful expenditure and what actions are being taken against those responsible.

He raised concerns about the number of engagements due to conflict between communities and the mining industry. The number of engagements were 523 much higher than the expected total of 150 which raises concerns. He asked the Department of Mineral Resources what the challenges DMR faces with the communities. He commended the DMR for its report and did not want to criticise the DMR but said that sometimes the reports are too good to be true. The concern is that DMR included only highlights and he asked if DMR does not have any challenges. He asked DMR what it plans to do about illegal sand mining because it is a big problem especially in Limpopo province where he comes from.

Ms L Bebee (ANC, KZN) noted that in its engagement with DMR in July 2020 on the special adjusted budget allocations, the Committee recommended that gender should be a top priority in the mining sector and she commended DMR for adopting these recommendations and having a Gender-Based Violence (GBV) committee to attend to these issues in the mining sector. She also commended its improved audit compared to 2018/19. She asked what the main challenges were for DMR not achieving its targets as it only achieved 85.8% of its annual targets and asked why DMR and Council for Geosciences (CGS) regressed in their audit.

Ms Bebee asked how households in each province benefitted from the electrification process. It is an important question as the bulk infrastructure projects have a major impact on service delivery and the Committee needs to know what the percentage was achieved in each province.

Mr A Arnolds (EFF, Western Cape) said that the two departments had shown improvements but need to deal with the challenges that affected achieving all its targets. He asked what impact will the merger have on service delivery. He asked for an indication on staff morale and what were the challenges of the merger. The Social Labour Plan (SLP) development projects only achieved 99 of its 120 planned targets. What is DMR doing to address this as mining companies are required to use mineral wealth for the development of communities and its workers. He asked DMR if it is a requirement for mining companies to submit an SLP when applying for a mining licence. He asked for an indication of how compliant the mining companies are in the submission of SLPs.

Mr A Cloete (FF+, Free State) said that the current targets were set before the Covid-19 pandemic and asked how the pandemic would affect the targets for 2020/21 and what DMRE was going to do to improve its targets. He commented that Eskom said green energy is the future of South Africa and that DMRE and government have a different view of energy supply in SA. Many countries do not know how to tackle the problem of energy supply and that a country like Germany decided to go entirely green and "then realise that they need energy". SA needed to have energy available and protect livelihoods and move to a system where SA depends on renewable energy. Having signed the Paris Agreement, he asked how South Africa is navigating its move from the energy status quo to renewable energy. Urbanisation means there will be a shift in the need for energy from the small to the big municipalities and there will be less income in the smaller municipalities. How will DOE address the shift in the need for energy?

Ms W Ngwena (ANC, Gauteng) commended DOE for reaching its targets for electrifying households. The Department should be acknowledged for its good work. She commended the South African Diamond and Precious Metal Regulator (SADPR) for achieving a clean audit for 2019/20. According to the Auditor-General (AG) findings, the Department is struggling to comply with legislation in maintaining its financial records. She asked what about the plan to address the audit findings. It recorded R551 000 wasteful expenditure under travel of its employees. Wasteful expenditure have been happening since 2012. Why were its employees not held accountable and what did the department plan to do to prevent wasteful expenditure in future.

The Acting Chairperson said that R199.83 million was unused in the Integrated National Electrification Programme (INEP) for non-grid households due to procurement not being finalised. He asked what the main reasons for this were. DOE had more fruitless and wasteful expenditure then DMR and asked what it is doing to address this. If you add up the fruitless and wasteful expenditure of previous years it accumulates to more than R200 million. DOE takes 35 days to pay its creditors and asked what is the reason for this. The area of revenue enhancement should be addressed. The CFO had said this area had not been doing well but there should be improvements in the future because the merger took place. There were a lot of fatalities in the gold and coal sectors. This might be because mine owners were not implementing safety regulations. He asked DMR what it is doing to address this. He agreed that DMR must give an explanation about achieving only 99 of its 120 intended SLP targets as 99 is very low.  

Department responses
Ms Yvonne Chetty, DMRE CFO, replied that the irregular expenditure resulted from the Nuclear New Build Programme (NNBP) because the Information Technology (IT) system which it procured was classified as irregular expenditure by the AG. The former DOE had participated in terms of Regulation 16A.6.4 [allowing organ of state to deviate when it is impractical to invite competitive bids]  undertaken by the Free State Treasury and the AG classified the bid as irregular because certain terms of reference or specifications of the bid were not in sync. The remaining irregular expenditure was also in the NNBP for the transaction advisors which the AG classified as irregular expenditure. DMRE tried to dispute this classification and argued that the expenditure was not irregular but the AG did not accept that explanation. In 2017/18 and 2018/19 DOE had a qualified audit and in 2019/20 the department accepted the irregular expenditure and disclosed it. The 2019/20 irregular expenditure of R8.5 million were the two payments made for the NNBP IT system.

The AG made recommendations and DMRE responded with an audit action plan on what it would implement and by what date. The practice is that after the Department has made commitments about the audit outcomes, the Internal Auditor (IA) verifies the progress made on implementation of the AG recommendations. The IA reports to the Executive Committee (EXCO) and the Audit Committee on a quarterly basis. The majority of the recommendations have been implemented which would include those on fruitless and wasteful expenditure. Once expenditure happens and the person doing it has not followed procedure then the expenditure is regarded as irregular. The Department cannot undo the irregular expenditure; however, consequence action will follow.

She explained there can be a more than 30-day delay in payment of invoices. The finance department is the central point for receiving invoices. In some cases service providers work closely with project management and regional offices and the service providers will have to sometimes submit their invoices to the project managers. The time it takes the project manager to submit the invoices to the finance department can cause delay. Some projects require verification before payment is made and this verification process can be delayed and it cannot pay if verification has not yet been made.

On the Acting Chairperson’s question on whether DMRE has looked at performance in both DMR and DOE and implemented further controls to improve its revenue collection. In the petroleum sector there are credit card machines for retailers to pay their licence fees when doing site visits and change of ownership in retail or manufacturing sites can only happen if all debt is cleared.

Mr Zizamele Mbambo, DMRE Deputy Director General: Nuclear Energy, replied about the delays in the two Bills. Legislation is an area which requires consultations with a lot of stakeholders. It is difficult to progress because the stakeholders respond at different times and the consultations of all the stakeholders is required so that there is an alignment. The important amendment to the National Nuclear Regulator Amendment Bill was regulation of cosmic radiation exposure to air crew and there were delays in the Civil Aviation Authority (CAA) engagements in agreeing how this could be regulated. The Department had two meetings with the CAA and the National Nuclear Regulator (NNR) to resolve this. The Office of the Chief State Law Advisor (OCSLA) is now making progress with certifying the Bill. With the National Radioactive Waste Management Bill, OCSLA needed clarity on the governance structure which caused delays. The Department consulted on the national governance structure and to ensure that there is sustainability in funding to manage waste management issues in the future.

Mr Tseliso Maqubela, DMRE DDG: Petroleum and Petroleum Products Regulation (PPPR),  replied that the reason DMR could not achieve its SLP targets was due to two challenges. The first is consultations with community members; the challenge is that the consultations took longer than expected. In some cases the needs of the community change and when this happens the entire process has to start over to accommodate this. The second is that DMR reported only on SLPs that have been inspected as it needs to verify that the work has been done. In some cases there are money constraints that prevented inspectors from inspecting projects. He added to the response by the CFO that DMRE needs to improve its revenue collection on petroleum products. It has recently started a programme where oil companies will assist DMRE in collecting the bulk of our revenue from the oil companies’ retailers.

Mr Jacob Mbele, DMRE DDG: Energy Programmes and Planning (EPP), explained the reason it revised its targets was because halfway through the process a master plan was created. This plan indicates the renewable energy that SA will pursue after 2020 looking at the impact of renewable energy and it utilises renewable energy. This plan required DMR to revise its targets.

He responded to the challenges of this programme by saying that the initial challenge of this programme was storage and DMRE is working on this. The challenge the solar geyser installation project faces is that some households are not suitable for solar geysers. However there have been solar geysers which were installed. The challenge of being dependent on green energy is difficult for SA because energy security does not come from one energy source. The Department has an integrated resource plan which includes renewable energy. This plan deals with the challenges of energy security and mitigates the consequences there might be in the change of energy resources.

Mr Mthokozisi Zondi, Chief Inspector of Mines, replied about the challenges that the mining sector is facing. Gold and platinum have deep underground mines and the biggest risks are fall of ground and seismic incidents. Some mines are as deep as 4.5 kilometres and to manage these risks the Department issued instructions to the sector that before a mine opens they need to submit the methods of mining to the Department so it can ensure that the method is safe. Three years ago a task team was established for the mining sector consisting of the Department of Labour and the management of mines to manage the risks in the mining sector. Another challenge the sector faces is occupational diseases caused by high dust levels and noise. To manage this risk the Department is closely monitoring the exposure level of the miners to avoid overexposure. The diseases the mining sector mainly faces are pulmonary tuberculosis, silicosis and noise-induced hearing loss. He corrected a mistake in the presentation – the fatalities in the gold sector were 24; platinum sector had 21 fatalities and the coal sector had 8 fatalities.

Adv Thabo Mokoena, DMRE Director General, replied that the irregular expenditure was because of the IT system procured for the NNBP.  The Department has now disclosed it as irregular expenditure. He confirmed that an investigation is in progress and consequence management will follow. He responded to Ms Ngwenya’s question on fruitless and wasteful expenditure that the department is working together with National Treasury and dealing with this matter.

DMRE will provide feedback to the Committee on both these issues when it is required to do so. The Director General responded to Mr Arnolds’ question that the merger took longer than expected. This happened so that the different stakeholders could be consulted because the Department of Labour had to be included in the task team which conducted the merger and the head of the task team was Mr Mulaudzi, Head of Strategy. DMRE allowed inputs from different stakeholders so that the merger could take place successfully. The merger was managed very well and there are no major challenges to report to the Committee. The primary objective of the merger was to ensure that government is able to make service delivery more efficient and effective and with the current employees of the Department it will have to reprioritise and re-skill its workers. The merger did not cause employees to lose their jobs. There have been no staff morale issues and the Department’s employees are carrying out their duties and DMRE mandate.

The Director General replied to the audit questions that measures have been put in place by DMRE to improve its audit outcomes.  It has encouraged DMRE entities to establish measures which will help improve the Department’s audit outcomes. He acknowledged that improving the audit outcomes is very important and it is actively working to improve these.

The Acting Chairperson thanked the Department for its responses and commended the Department for showing improvement but there is still room for improvement.

The Committee adopted the minutes of 1 December 2020 and the meeting was adjourned.

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