The Committee met and discussed the Budgetary Review and Recommendations Report (BRRR) about the Department on Mineral Resources and Energy (DMRE) and its entities. The Committee was concerned that it had not been briefed on the annual reports and audited financial statements of the South African Diamond and Precious Metals Regulator, Central Energy Fund and South African Nuclear Energy Corporation as they had not been tabled in Parliament on time according to the law. The Committee would seek legal advice on the way forward, especially as this was the second consecutive year for NECSA and CEF. They would need to be told to submit these documents by the first quarter of 2022 as the Committee could not authorise the 2022/23 budgets without this information. The Committee met and discussed the Budgetary Review and Recommendation Report about the Department on Mineral Resources and Energy (DMRE) and its entities. The Committee was concerned that it had not been briefed on the annual reports and audited financial statements of the South African Diamond and Precious Metals Regulator, Central Energy Fund and South African Nuclear Energy Corporation as they had not been tabled in Parliament on time according to the law. The Committee would seek legal advice on the way forward, especially as this was the second consecutive year for NECSA and CEF. They would need to be told to submit these documents by the first quarter of 2022 as the Committee could not authorise the 2022/23 budgets without this information. It was noted that the Auditor-General had not helped or done much to assist the Committee in ensuring these state funds are audited.
In a virtual meeting, the Chairperson asked the Committee secretaries, Mr Arico Kotze and Ms Ayanda Boss, to take the Committee through the Budgetary Review and Recommendation Report. The focus was on the Observations and the Recommendations. Members were asked to raise any matters they wanted to deliberate on about the entities.
The Chairperson noted that three entities did not submit their annual reports which worried him. He asked the Committee if there were any matters based on the presentations by the Department and its entities, that they wanted to note.
Mr M Mahlaule (ANC) noted that on page 14 or 15 it states that DMRE had planned to submit the National Nuclear Regulator Amendment Bill for consultation but this target was not achieved due to an extended stakeholder consultation process. He did not have a problem with this. However, on the next page it also refers to the same National Nuclear Regulator Amendment Bill.
The Chairperson noted that first reference is not extensive enough and the second reference is better and both should be on the same page.
The Chairperson asked that the word ‘recommended’ not be used as the sentence would no longer be an observation.
Mr Mahlaule was worried about the use of the word 'noted'.
The Chairperson said this was acceptable to use in this section, since it reflects an observation. He noted the observation of the audit opinions for each entity. Only one entity, National Radioactive Waste Disposal Institute (NRWDI), obtained an unqualified audit opinion with no findings while nine entities remained unchanged – CGS, DMRE, MHSC, MINTEK, NERSA, NNR, SADPMR, SANEDI and SDT – received financially unqualified audit opinions with findings on compliance with legislation.
The Chairperson asked that the South African Diamond and Precious Metals Regulator (SADPMR) be removed from the report. It was not supposed to be mentioned as the Committee did not deal with it as SADPMR did not submit its annual report on time – so it logically should not appear.
The Committee had been unable to review the annual reports yet again of the Central Energy Fund (CEF) South African Nuclear Energy Corporation (NECSA) and now SADPMR had joined them. He requested that the report mention that the Auditor-General South Africa (AGSA) had for the second consecutive year tabled a disclaimer audit opinion with findings for the South African Nuclear Energy Corporation (NECSA). The Chairperson spoke about taking the Auditor-General reasons for the disclaimer or state what the Committee observed because taking the AGSA reasons would make matters worse. The Central Energy Fund (CEF) Group audit is not yet finalized due to late submission of financial statements for consolidation by PetroSA on 30 July 2021.
Mr Mileham agreed with the Chairperson about this observation. For the second consecutive year the Committee has not seen the CEF and NECSA audited financial statements and SADPMR has joined them. In the recommendations the three organisations should be flagged as action is needed to rectify their audit outcomes.
The Chairperson requested that the report observe that in addition to the audit status of most DMRE entities being unchanged, this included the Department as well. There had been no major regression or improvement in audit outcomes.
The Chairperson noted that two entities, CEF and SADPMR, did not table their annual reports on time due to delays. This would make the Portfolio Committee unable to render an opinion on the annual reports not tabled in Parliament.
Mr Mileham noted that the second recommendation puts the responsibility on the Minister and he has no problem with this. He later suggested that the Committee does not recommend to the Minister but to Parliament. He requested that the Committee be briefed on the audit action plans for DMRE and each individual entity and that there be a regular reporting on a quarterly basis on progress in addressing the action plan.
The Chairperson said he accepted AGSA's apology for not having reported but he has not heard yet from AGSA when it will give its briefing on NECSA. He said the ‘the books are a disaster’ from what he understood from prior engagements with AGSA, and the Auditor-General cannot even express an audit opinion. He was concerned as he did not get a sense as to the Committee's feelings on this.
He asked the secretariat to explain what the post-BRRR process is that the Committee can undertake. The Committee had not dealt with the last CEF financial statements and audit outcome despite the turnaround. The Committee always has an outstanding date for it. The risk exists that the Committee will not prioritise the outstanding audit outcomes of these three entities of NECSA, SADPMR and CEF.
The Chairperson feared that by the next BRRR process, would not have dealt with the outstanding reports. His second fear is that if one listens to the Auditor General especially about the PetroSA investment in the Ghanaian offshore fields [and its waiting for information to be received from Ghana Petro SA], he did not get a sense of investment or when the audit report will be out. In the event the annual reports do get tabled, he wants to deal with the BRRR based on a timeline stipulated by Parliament and not the entities otherwise one might find an environment that is no longer conducive for some of these entities to operate.
Since CEF ‘had books that were so bad’, the Chairperson asked if there is something this Committee can do about the outstanding reports. He is uncomfortable about the situation, he asked for Members' support about the recommendations. However, if Members want to depart from them, then he will. He wants to understand what procedure is to be followed.
Mr Mileham said that the Chairperson should call for the outstanding annual reports to be tabled no later than the first term of 2022 and then presented to the Committee. He asked if this is possible.
Mr Kotze noted that SADPMR has tabled its Annual Report to be presented to the Committee for consideration. This is the only one so far from the outstanding annual reports.
Mr Mahlaule pointed to the sentence in the BRRR which stated these entities have broken the law. When the law is broken, there are consequences within the ambit of the law. He asked the Committee secretary what the Committee needs to do about the law being broken by these entities.
The Chairperson stated they should interrogate the sentence. According to the Public Finance Management Act (PFMA) it is compulsory that the submission of the annual financial statements should be made to the Auditor General three [two] months after the close of the financial year. He noted what Mr Mahlaule had said about breaking the law.
Mr Mileham said the Committee should instruct DMRE and those entities to table these annual reports to the Committee and then seek the legal opinion of Parliament legal services.
The Committee is unsure how the money has been spent and what has been invested according to the strategic plans of those entities. This is a serious indictment. The Portfolio Committee has the power to call for any information if it will assist the Committee in the performance of its oversight task. The Chair had expressed his concern about the lack of annual reports on how resources had been deployed. This lack of knowledge would be worrying for the budget process and annual performance plans in 2022.
The Chairperson asked that the secretariat note that those three entities – although SADPMR had now done so – must table their outstanding annual reports by first quarter of next year. The Committee will have to decide whether they believe there is a breach of law as stated in the BRRR. In the meantime, they will work on why they state there is a breach of law and what action is to be taken in future.
Ms V Malinga (ANC) asked how it happens that the Auditor General agrees to entities not submitting their financial statements for two consecutive years and then the Auditor General is not held to account for state funds not being audited.
The Chairperson said NECSA and SADPMR appeared to have completed their financials, but CEF has delayed and the reasons for the delay are not certain. The Chairperson wanted to know if the deadline is determined by the entities supplying the information. Since this would mean that the Committee would sit in the same position and still be waiting for feedback and reports because the entities can keep rolling over the time – such as waiting for information to be received by Ghana Petro SA.
The Chairperson replied that if they find out the Auditor-General has not performed its duties, they would deal would that at the time.
The Chairperson noted that NECSA is dependent on the Department to table its audit outcomes in Parliament for referral to this Committee.
The Chairperson agreed with Mr Mileham that the Committee is in a mess about this state of affairs. The Auditor-General has not helped or done much.
Mr Mileham suggested that AGSA should review its procedures to ensure the audited financial statements can be tabled timeously in Parliament.
As Auditor General SA does not fall under this Committee, it was agreed that the matter be referred to the Standing Committee on the Auditor General, as a separate issue and that Committee should brief this Portfolio Committee.
The Committee secretary took them through two sets of minutes.
Mr Mileham was concerned that the minutes of 24 August 2021 reflect a one-sided report. The recommendation is identified but it reported only the inputs from Minister and Department but not the discussions of the Committee.
The Chairperson agreed.
It was suggested that the minutes be adjusted. But the Chairperson pointed out that it was tough to go back and restate was said in the discussion.
The Committee adopted the minutes with amendments.
Both the Chairperson and Mr Mileham noted that the minutes of 9 November 2021 reflected a much more balanced view. These minutes were adjusted to include that the concerns raised by the Auditor-General would be referred to the Standing Committee on the Auditor General to receive feedback.
The Committee adopted the minutes with amendments.
The Chairperson outlined the agenda for the next meeting on 19 November 2021 and thanked everyone.
The meeting was adjourned.
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