A summary of this committee meeting is not yet available.
31 October 2006
MEDIUM TERM BUDGET POLICY STATEMENT: INPUT FROM DEPARTMENTS OF MINERALS AND ENERGY & ENVIRONMENT AND TOURISM
Co-Chairpersons: Ms L Mabe (ANC) and Mr B Mkhaliphi (ANC) [Mpumalanga]
Documents handed out:
Department of Minerals and Energy presentation on 2006/7 Medium Term Budget Policy Statement
Department of Environmental Affairs and Tourism presentation: Part1 & Part2
Department of Public Service and Administration presentation
Department of Public Enterprises presentation
National Treasury: Adjusted Estimates of National Expenditure 2006/7 (available at www.treasury.gov.za)
The Department of Minerals and Energy tabled its strategic objectives and described the key achievements in mining, energy supply and fuels. The Department indicated that the power outages had been a clear indication that the capacity to provide electricity had been overtaken by the rate of economic growth. It needed to procure more generation capacity, and upgrade existing infrastructures, which had not been designed for their current loads. There were still 3.4 million households without access to electricity. There was an urgent need to increase household, school and clinic connections and build five new substations per year, in order to reach national targets. The grant would increase by 23.2% over the Medium-Term Expenditure Framework (MTEF). During the past year the appropriation was R2.25 billion, with expenditure of R2.17 billion. There was 96.45% spending, with a variance of R79 million. Most of the variance arose through municipal transfers and subsidies being withheld owing to non-compliance with the Public Finance Management Act. R10 million had been under spent on electrification. The appropriation for the current year was R2.5 billion. DME had been granted a rollover of R11 million. The estimated expenditure for 2007/8 was R2.7 billion and for 2008/9 was R2.9 billion.
Questions from members related to the rollovers, securing of services abroad, the non-grid supplies, under spending and non compliance by municipalities and assistance given to them by the Department.
DME was asked if it could meet its targets. The electrification policies and national plans were clarified. Concern was expressed on the lack of certainty as to numbers of clinics and schools, and the backlog figures. Further questions addressed weak electricity supply to rural areas, lack of information to these areas, technical audits, alternative energy sources, skills development in the Department, and the moving of funding from one programme to another. Energy failures, nuclear plans, security of supply and the need to cooperate with other Departments were stressed as priorities. It was suggested that the Department must arrange a workshop with other Departments and try to set up a joint project, for instance building a school, in which every service was integrated for simultaneous delivery.
The Department of Environmental Affairs and Tourism reported that DEAT’s priorities aligned with ASGISA targets. It undertook environmental impact assessments that spanned a number of projects. It had its own expanded public works programmes and covered a number of small, medium and micro enterprises in both the tourism and environmental sectors of its work. The Department was responsible for trans-frontier conservation areas, parks upgrades, and recapitalisation of the South African weather services. Research and development included work on the research vessels, particularly the Marion Island projects and other vessels that researched stock at sea and monitoring of marine species. It gave support to municipalities on air quality, water quality and waste management. The key focus areas were the development of sustainable growth in the tourist industry, conservation and protection of the environment, the promotion of global sustainable development, transformation of the Department and public entities, and the growth of the tourism, environmental and fishing sectors. Achievements in each area were briefly highlighted. The allocation was now at R2.18 billion, and expenditure was fairly well on track, with 48% spending up to the end of August. Cash management systems were in place. Savings of 2% had been achieved. Rollovers had been requested and approved by National Treasury in the sum of R28 million, relating to the Marion Island Research Station. Adjustments to the baseline were requested in respect of the S A National Parks, and backlogs in the environmental impact assessment processes. A financial contribution was requested for the first Climate Change meeting to be held in Africa. Some money had been moved from goods and services to transfer payments. Gender and transformation issues were briefly addressed.
Members’ questions related to the backlogs in the assessments, which had hindered the work of other departments, the adjustments in expenditure reflected as unfilled staff posts, and clarification on what was included in administration costs. Movement of funds between programmes and the rollovers were raised and it was questioned whether this showed poor planning. The Matters of Emphasis in the Auditor General’s report were clarified. Capacity issues, the relationship with private parks, and with the training authorities were also discussed. The Department could fulfil its obligations on the current grants but stressed that increased funding would greatly increase its ability to promote tourism.
After lunch the Committee met with representatives of the Departments of Public Service and Administration and Public Enterprises to receive information on the Medium Term Expenditure Framework budget allocations. DPSA would seek to contribute to employment creation and economic development. State capacity had to be enhanced to achieve core objectives. Certain strategies would be introduced to retain scarce skills. A new Public Sector Remuneration Framework had been formulated to enhance delivery. Performance-related pay would receive greater attention. The DPE would seek to foster efficient State-Owned Enterprises and encourage the entrenchment of good corporate governance in the private sector. Specific adjustment allocations to certain key entities were explained.
Members asked various questions including the proposed dual career path model, whether the single public service project had been postponed, the need to address vacancies in the public sector, the phenomenon of ghost posts, the need to enhance incentives in rural areas, when the Pebble Bed Modular Reactor would come into operation and whether the allocation to Denel would boost profitability.
Briefing by Department of Minerals and Energy (DME)
Adv Sandile Nogxina, Director General: DME, apologised that the Minister could not be present, due to the change in date of the meeting. He tabled a report but stated that he would concentrate on only certain activities of the Department. He stated that the DME focused on the priorities identified by the Accelerated Shared Growth Initiative for South Africa (ASGISA) and there had recently been a shift in focus to review internal structures to meet the challenges in capacity. DME aimed to provide sustainable and broad based services and allow access to the mineral and energy sectors. The strategic objectives were tabled, but were not discussed.
Key areas of focus in mining had been the shift in policy to one of implementation to ensure that certain matters were fast-tracked without sacrificing effectiveness. Various pieces of legislation had been identified and dealt with, and were detailed in the presentation.
In the area of energy supply there had also been some radical changes. In December 2005 the power outages had been a clear indication that electricity supply was no longer unhindered, and that the capacity to provide electricity had been overtaken by the rate of economic growth. There was a need to procure more generation capacity and invitations to tender were published. At the same time DME embarked on an upgrade of ageing infrastructure. Historically, the infrastructure was not meant to cater for rural households but was limited to certain apartheid defined areas. There had been some success in electrification, but there needed to be an improvement in capacity to generate and the building of new power plants. There were still 3.4 million households without access to electricity. There was a national target for universal access to electricity by 2012.
Much of the refurbishment had been done, but there were many municipalities where inadequate investment had been made into maintenance. It was necessary to increase the number of household connections to 415 000 per annum and to target 2 500 schools and 100 clinics per annum, as well as build five new substations each year.
DME’s projects relating to fuel included short, medium and long term petrol supply options, fuel supply, upgrading of pipelines, storage tanks and import terminals, better transport plans and the planning of a new refinery. Import and export guidelines had been reviewed to enable previously disadvantaged individuals (PDIs) to import finished products. Cleaner vehicle fuels were introduced.
On the mining side, DME’s achievements included a 16% reduction in the number of fatalities in mines, and an increase in involvement of PDIs. Legislation had been a priority. The database for derelict mines had almost been completed.
The grant would increase by 23.2% over the Medium-Term Expenditure Framework (MTEF), totalling R5.6 billion. During the past year the appropriation was R2.25 billion, with expenditure of R2.17 billion. There was 96.45% spending, with a variance of R79 million. The bulk of that was due to municipal transfers and subsidies being withheld owing to non-compliance by municipalities with the Public Finance Management Act (PFMA). Subsidies could not be transferred until there was full compliance. R10 million had been under spent on electrification, due to challenges relating to service providers and non-grid electrification, where technologies were sourced from abroad.
The appropriation for the current year was R2.5 billion. Over and above that DME had been granted a rollover of R11 million. The rollovers represented projects not yet completed, so that invoices could not be paid at the end of the financial year. Some were attributable to renewable energy generators and acquisition of new generator capacity. Expenditure between April and September had amounted to R1.1 billion. Under spending was attributed to delays in transfers and subsidies. The estimated expenditure for 2007/8 was R2.7 billion and for 2008/9 was R2.9 billion.
DME’s planned outputs were tabled, but were not discussed.
Ms R Mashigo (ANC, NA) asked for clarification on the R10 million and the services secured abroad.
Adv Nogxina stated that this related to non-grid supplies. Tenders had been invited on a solar system for the non-grid. These tenders had resulted in delays and the technology was eventually sourced in Germany, as there were no local manufacturers of solar systems. Although the project had been approved it was not possible to spend any funds before the year end, as there had been no actual delivery.
Mr G Schneemann (ANC, NA) asked if DME was being proactive enough in encouraging local manufacture of solar products to avoid overseas spending.
Mr Z Kolweni (ANC, NCOP) asked for an indication of the future of non-grid electricity in South Africa. He asked how readily accessible it was.
Mr T Ralane (ANC, NCOP) mentioned that he had previously raised with DME the question of municipal suppliers. On the one hand the municipalities were under spending and funds were not allocated from DME, but on the other they were applying to Development Bank of South Africa and other commercial banks for loans for electrification programmes. The Committee had found this situation during its recent oversight visit in North West province. He asked how DME addressed the capacity problems in municipalities, and stressed that he would like to hear how many had been assisted.
Adv Nogxina stated that he too was unhappy with the under spending but reiterated that he was not prepared to release funds without full compliance by municipalities with the PFMA. DME had embarked on an initiative that it hoped would achieve a better balance. Whereas previously the energy divisions had been located at Head Office, DME had now created regional offices in each province and had sent officials out to deal directly with municipalities. An office had been set up in Port Elizabeth, which had achieved good successes in the O. Tambo region and had set up satellite offices in Bizana and Umtata. Training was being given on how to access the funding and how to work with the PFMA provisions.
Mr Kolweni was pleased to hear of this and asked that he be advised of the location of the offices in North West.
Co Chairperson Mr Mkhaliphi pointed out that the Division of Revenue Act stated that DME must ensure that Eskom electrification plans were in line with municipal plans. This clearly indicated the need to get involved in the integrated development plans. It would entail cooperation between all three spheres of government.
Ms A Mchunu (ANC, NCOP) referred to the R37.2 million that could not be transferred to municipalities for lack of compliance with the PFMA and noted that electrification would be one way to alleviate poverty. She asked whether DME had taken active steps to discover what the problems were. She was concerned about the rollovers as promises were being made each year, but were not fulfilled.
Adv Nogxina replied that these questions involved a number of issues. The municipalities were not prevented from applying for loans. The Constitution had given them power to reticulate and supply electricity as part of the basic services. It was up to the individual municipalities to decide how this should be done. If they would prefer to borrow money rather than comply with the PFMA then they were free to do so. As the accountable person at DME, Adv Nogxina was not prepared to release funds when he was not satisfied that sufficient internal controls were in place to ensure proper spending. The PFMA cast duties on both DME and the municipalities and each must comply. There should be cooperation between all three tiers of government, but it was a practical problem.
Mr Z Kolweni (ANC, NCOP) asked what exactly was being done by DME to make the municipalities aware of the shortcomings and to train them in the processes to be followed. He stated that the DME could surely interact with the Department of Provincial and Local Government.
Mr Ralane asked if DME believed that the R5.6 billion was sufficient to address the needs of electrification. The Co-chairperson added that this should not be seen as an invitation to argue for more funding.
Adv Nogxina replied that DME was fairly satisfied with the current allocation. It had managed to increase electrification and support had been given to the South African Nuclear Energy Corporation (NECSA). This support was needed as there was always the danger that skilled scientists would be recruited away by rogue states. Whilst DME accepted that this was the funding it must work with, it still wished to engage with National Treasury for additional money in order to ensure that the 2012 targets were met..
Mr Ralane noted that DME had previously stated that it would not electrify in areas where there were no houses. However, in Taung municipality, despite houses having been built, there was still no electricity and the Department had now been asked for a list of places where electrification had not taken place. He was worried that local communities were being given expectations that were not fulfilled by departments.
Ms Nelisiwe Magubane, Deputy Director General, Electricity and Nuclear, DME, stated that she would have to check the position in Taung. Sometimes there was no electrification simply because the place concerned had not been reflected in the plans.
Mr Ralane also questioned the targets for electrification of schools and clinics and queried if these were achievable. He was concerned about the remark that the data on the numbers of schools and clinics was unreliable.
Mr Botha (ANC, NCOP) echoed these concerns and asked how it was possible that Departments did not know of the numbers of institutions under their control. He felt that households could get by without electricity but that schools and clinics could not.
Ms Magubane confirmed that the data was not always reliable. Private institutions were not covered and some schools and clinics fell under provincial rather than local government. Allocations were made according to the funds available. If DME decided to electrify more schools, then they would have to reduce the figures for households. Each municipality would have its own priorities. DME now insisted that the Municipal Manager must sign off plans and include DME in integrated planning. DME would insist that the plans were adhered to. The problem remained that some of the schools were very remote and connection caused problems.
Ms B Dambuza (ANC, NA) commented that in rural areas the electricity supply was often weak and unreliable. She queried whether consumers were receiving value for money.
Adv Nogxina stated that when the process of electrification had started, it had focused on household connection rather than on infrastructure, as the infrastructure sustained apartheid plans and provided electricity to only a few selected areas. Electrification had been expanded, but there had not been correlating expansion of the infrastructure. DME was attempting to improve the power and capacity of the rural substations so they could cater for more connections.
Ms Magubane noted, in answer to a further question from the Co-Chairperson, that DME also did undertake technical audits of supplies by municipalities and Eskom and were satisfied that value for money was being received as far as possible.
Ms Dambuza noted that there was no mention of skills development in the budget and asked what was being done to address this issue. She was concerned to note that there had been savings due to vacant posts not having been filled. She asked what had been done to fill then, and questioned how DME was managing to accomplish its objectives if there was a lack of skilled staff.
Adv Nogxina replied that DME was one of the most knowledge-intensive departments in the public service and employed a number of scarce skills. These were widely varied, and included deep sea divers. There was a wide range of scientists on the staff. Unfortunately the DME was the victim of government policy, which called upon the private sector to employ PDIs. The staff at the Department, having been well trained, and being well versed in policy and national issues, as well as being paid lower salaries than the private sector could offer, were head hunted and poached by the private sector. DME had now begun an internship programme, taking graduates straight from university and training them. It had also drawn up a scarce skills recruitment and retention strategy, which was currently under consideration by the Department of Public Service and Administration (DPSA).
Mr Schneemann (ANC, NA) noted that the strategy was being checked by DPSA but queried what was being done in the meantime to ensure that programmes were not negatively affected through shortage of staff.
Adv Nogxina stated that consultants were being employed in the short term.
Ms Dambuza asked what was being done about poverty alleviation.
Ms A Mchunu (ANC, NCOP) noted that the presentation had made mention of closing the gap between the first and second economies but had not directly addressed the third economy.
Ms Dambuza referred to page 181 of the National Treasury report and asked for further clarification on the savings arising from a shifting of functions. She asked if savings meant that nothing had been done in that area.
Adv Nogxina clarified that there had been a moving of R20.1 million from one programme to another. The reason for the delays was that this was a research programme with a number of stakeholders, including the Council for Scientific and Industrial Research, the Council for Geoscience and Mintek. The figure was also mistakenly described; it in fact related to current expenditure. This was a three-year programme, and all contracts had now been concluded.
Ms Mchunu stated that in 1986 an electrification programme had begun in Kwazulu Natal, under the Joint Services Board. However, this had been delayed, and then there seemed to be changes in the programme. The person in charge had said that he had been told to wait for further instructions. Posts had been erected but no lines had been connected. There was something very wrong if the area managers were given no written indication of what was happening. Oral communication would place them in a difficult position because the community suspected that they were simply waiting for bribes before supplying electricity.
Adv Nogxina noted that often the DME had found that people in rural areas were completely unaware of the electrification plans. It was clear that DME needed to work on an information strategy. The national electrification plan was predetermined, with set time frames, and could not be changed at the whim of any official.
Ms Magubane (Deputy Director General, Electricity and Nuclear, DME) stated that around one third of the budget was allocated to Kwazulu Natal. DME was very much aware of the backlog and plans had been presented two weeks previously to the provincial Cabinet that focused on each district, setting out how, where and at what cost the electricity would be provided. She undertook to make this information available to the Committee.
Dr P Rabie (DA, NA) referred to page 182 of the National Treasury Report, giving figures for the various projects. He noted that the power cuts in the Western Cape had caused a great deal of loss to businesses. He asked if there were plans to use the rollover to prevent further power outages.
Adv Nogxina stressed that there was no link between the energy failures in the Western Cape and the rollovers. DME had now designed systems that would enable it to improve on the bulk infrastructure of the country. It was busy adjudicating a tender for procurement of new generation capacity. It was unfortunate that during the years that there was surplus electricity, nothing was done to upgrade for the future as economic growth was now necessitating urgent infrastructural development, as well as refurbishment.
Dr Rabie asked if the nuclear programmes were on schedule.
Ms Magubane stated that DME was not involved in any procurement programmes and dealt merely with policy issues. DME had ensured that all the necessary legislation and international treaties were in place so that if Eskom decided to pursue programmes, they would be done under an existing framework. DME had completed a radio active voice management programme and had signed treaties.
Mr Botha asked whether the Department would achieve its goals. He stressed the importance of security of supply for the 2010 World Cup. He asked if it would be possible to guarantee that there would be no outages after 2012.
Ms Magubane stated that there were a number of different reasons for power blackouts and brownouts. Those in Cape Town had resulted from shortage of generating power, whilst those in Johannesburg had resulted from poorly maintained infrastructure. DME was working with Eskom to try to ensure adequate capacity and had formulated a twenty-year plan, with specific timelines. This had been approved by Cabinet and update plans would be submitted each year, covering both the generation and the maintenance of the infrastructure. Additional funding from National Treasury would cater for the rehabilitation of infrastructure. Provision had been made to assist Municipalities who had failed to maintain their infrastructure and ensure upgrades. The needs for 2010 and 2012 had been factored into the plans. In addition, the Gautrain project had been included.
Mr Botha referred to the fact that 4.3 million households had been connected but 3.4 million remained to be connected. He asked if this figure included growth or was a backlog figure only.
Adv Nogxina stated the figure of 3.4 million was the backlog and had not factored in the growth rate, which was estimated at around 2.5% per annum.
Mr G Schneemann (ANC, NA) asked whether DME undertook joint planning with the Department of Housing, since the Breaking New Ground project of 2004 had intended that all new housing developments must be simultaneously built and serviced. He asked whether electrification would include street lighting.
Adv Nogxina replied that the N2 project had included a joint approach that was driven by the Department of Housing. He pointed out that whether people were being relocated on a permanent or temporary basis, it was necessary to connect all services. Not all the plans had worked successfully. The projects were completely new and would take a little time to settle. He confirmed that street lighting was included as part of the programmes since it was linked to safety issues.
Mr Schneemann referred to the diversification of energy sources mentioned in the presentation and asked whether sufficient resources had been allocated to such programmes. Solar powered street lights had been erected in his constituency, resulting in electricity savings. He wondered if sufficient emphasis was being placed on similar research and development projects.
Adv Nogxina stated that the diversification involved both the bulk supply to power stations and primary energy sources for household use. DME had looked at a number of technologies. Solar technology was still not well developed and there remained many issues about its efficiency. There were many challenges on the new standards. All new housing developments were to include solar water heaters in an attempt to reduce the national energy demand. The issues would need to be treated carefully.
Mr Schneemann stated that DME was always visible after mine accidents but wondered what it was doing to improve mine safety and avoid accidents.
Adv Nogxina replied that DME staff were at the mines on a daily basis, checking safety and standards. This had not been specifically included in the report as it was a routine operation rather than a specific project. He agreed that they were most often seen at the site of accidents, but there were proactive steps to try to reduce accidents and fatalities and improve safety.
Ms Mashigo asked if DME was being proactive enough to try to encourage local manufacture.
Adv Nogxina replied that Eskom were currently running a pilot project looking at large solar energy plants in the Northern Cape. Not a great deal of work had been done locally on these technologies. It was hoped that a new South African National Energy Research Institute could be established to look at alternative energy sources.
Mr Schneemann asked what was planned on liquid fuel transportation and whether there were joint initiatives with the existing companies.
Adv Nogxina confirmed that various projects were examining the extension of pipelines, and improvement of transport systems, as well as the upgrade of port facilities.
Co-Chairperson Ms L Mabe (ANC, NA) asked whether there was any joint planning between departments. Even in urban areas, schools were often built but no electricity was provided, making it impossible to run computer and science classes properly. In some areas, such as Rustenburg, further growth was being hampered by lack of supplies.
This question was answered together with the question on housing development.
Co-Chairperson Ms Mabe asked what DME was doing to promote science and maths.
Adv Nogxina stated that this was not within the jurisdiction of DME, who would only recruit scientists who had already graduated. The Department of Education set the standards and the curricula.
Co Chairperson Ms Mabe asked how many connections had been made in the past year.
Adv Nogxina stated that there had been 215 000 connections in the past year.
Mr Ralane made a proposal that the DME must hold an indaba with other Departments, involving the Directors General of National Treasury, Education, Water Affairs and Forestry, Public Works, and possible even Sports and Recreation. They should identify a project, such as a school, and follow a completely integrated model that provided all services. The Provincial Infrastructure Grants were currently not being used properly and could be available. Provinces had under spent R4.4 billion and these funds should be used.
Mr Kolweni noted that during August the NCOP had visited North West and the provincial legislature appealed that there should be interaction with national departments on issues of service. He was pleased that energy offices had been set up and asked DME to let him know where they were.
Briefing by Department of Environmental Affairs and Tourism (DEAT)
Ms Pam Yako (Director General: DEAT) reported that DEAT’s priorities had been set in line with ASGISA targets. It played a role in environmental impact assessments that spanned a number of projects, and also played a role in the second economy. DEAT had its own expanded public works programmes (EPWP) and covered a number of small, medium and micro enterprises in both the tourism and environmental sectors of its work.
DEAT was also responsible for the trans-frontier conservation areas, parks upgrades, and recapitalisation of the South African weather services. It dealt with the South African National Biodiversity Institute on research and development and also too responsibility for the botanical gardens. Research and development included work on the research vessels, particularly the Marion Island projects and other vessels that researched stock at sea and monitoring of marine species. Through the Environmental Impact Assessments (EIAs) it would develop departmental capacity and gave support to municipalities on air quality, water quality and waste management.
The key focus areas were the development of sustainable growth in the tourist industry, conservation and protection of the environment, the promotion of global sustainable development, transformation of the Department and public entities, and the growth of the tourism, environmental and fishing sectors.
In regard to tourism, DEAT reported that the number of international arrivals had increase 10.3% to 7.3 million visitors per annum. A plan had been developed to cater for 2010. A monitoring system had been developed to classify the numbers of tourists, their destinations, where they would visit and stay, and their spending. DEAT had trained a number of people in language skills, including Chinese, and supported several SMMEs, together with The Business Trust. A grading system had been established for accommodation, and steps had been taken to increase the number of black and female assessors.
In regard to the number of visitors, DEAT said that although it was currently at 7.3 million, this was due to rise to 8.2 million during the MTEF. DEAT could do far more if it had more money.
A Charter for Tourism had been established, a website had been set up and a Code of Good Practice for the industry drawn and submitted to Cabinet. A marketing campaign had been set in motion.
ASGISA had identified skills as one of the priority areas but in tourism the relevant Sector Training Authority and the industry could not agree on the skills that were needed, and therefore had not agreed on a training plan. An audit of skills had now been undertaken and a conference had been held on 19 and 20 October to try to finalise a skills plan. This was work in progress and it was hoped that by November the plan would have been finally agreed and started, in readiness for 2010.
DEAT had held meetings and had agreed an accommodation plan with the implementers of the World Cup. FIFA, for the first time, had agreed that accommodation other than hotels could be used, which would benefit SMMEs. DEAT would be holding workshops in the host cities in regard to the implementation of the plans and would be grading the establishments. Grading would be subsidised to those within a 30-kilometre radius of the cities. It had set up an information and booking portal. Challenges remained in getting the necessary information from the Departments of Home Affairs and Statistics South Africa.
DEAT was also working in the second economy. In the area of conservation it was working on the finalisation of the long term fishing rights. It was working with the Police Services and the Scorpions to identify and arrest poachers in an effort to preserve and maintain the fish industry. It was attempting to increase its enforcement capacity and to upgrade beaches to blue flag status, both from a safety and a tourism perspective. It had merged a number of parks, had managed to have two protected areas proclaimed, and five new marine protected areas. It was busy finalising some land claims and had managed to have five Heritage Sites declared, while working on another one. DEAT was promoting conservation through public awareness campaigns and was trying to get buy in from local communities. Work continued on transfrontier conservation as well.
The Chairperson indicated that the Committee was short of time and specifically requested the Department to address only certain issues. The allocation was now at R2.18 billion, and expenditure was fairly well on track, with 48% spending up to the end of August. Cash management systems were in place. Savings of 2% had been achieved. Rollovers had been requested and approved by National Treasury in the sum of R28 million. This related to the Marion Island Research Station, and resulted from the delays occasioned by the weather and having to wait until the ship was able to dock. However this rollover represented only a small portion of the previous budget. It was anticipated that this would be the last rollover as the project was nearing completion.
The proposed changes to the 2006 Appropriation Act were addressed. Adjustments to the baseline were requested in respect of the S A National Parks, and in respect of backlogs in the EIA processes. A financial contribution was requested for the first Climate Change meeting to be held in Africa. Some money had been moved from goods and services to transfer payments. The rollover mentioned before was also included.
The Chairperson requested Ms Yako to deal with the slides on achievements.
Ms Yako stated that the EPWP programme of DEAT, and the internal processes, had achieved good results in so far as transformation was concerned. 57% of spending was linked to BEE projects. 18 million temporary jobs had been created and 310 permanent jobs in the last year. In the following year both temporary and permanent jobs would be created and 150 000 training days implemented. Provincial programmes were to be upgraded to increase the potential for tourism. It was hoped to develop greater participation and establish a BEE scorecard and increase the number of protected areas. Challenges included the backlog in EIAs but also included the waste services backlog. Municipalities would deal with collection but DEAT issued landfill permits. Not all landfill sites were under permits, and therefore management of those sites was a challenge, as waste management had an impact also upon the environment and health, including water standards.
Co Chairperson Ms Mabe asked DEAT to clarify the backlogs in EIAs, as many Departments had raised this delay as one of the challenges hindering their work.
Ms Yako replied that the legislation required that before development could be done there needed to be an EIA. The time this would take had not been factored in to most developments. Many national and provincial offices were short of staff. More funding had been given for the impact assessments in some provinces to support them in clearing these backlogs. A large infrastructure exchange programme had been planned with state owned enterprises to plan and advise on EIA. It was hoped to continue with the support to provinces.
Co Chairperson Ms Mabe asked how old the backlogs were. She stated that Department of Correctional Services had raised these specifically as the reason why prisons were not being built.
Ms Yako replied that she did not have the exact figures with her, but about 7% of the EIAs did last for longer than two years. Around 45 000 applications were received. She was not sure on the Correctional Services applications. Some of the assessments were more complex than others, depending on the zoning and the type of activities in the area.
Mr Schneemann referred to the adjustments in expenditure arising from unfilled staff posts. He asked why they had not been fulfilled, and what impact this had on the effectiveness of the programmes.
Ms Dambuza noted that the number of vacancies had also had an impact on the Employee Fund, yet adjustments had been made on the administrative side. She asked for an explanation between the funds moved from the employee side and the increased costs of the Department.
Ms Yako explained that this was contained on P 162 of the Report. It concerned an EPWP programme that comprised administrative costs and costs for implementation of the project. The performance of the programme was delayed and therefore the posts could not be filled immediately. The funding intended for posts had therefore been transferred across to households. The implementation was now on track, and would not be affected by this transfer.
Ms Yako noted that the “administration” expenses included the amounts paid in connection with the Kenyan environmental conference.
Mr Schneemann noted that certain funds had been moved between programmes. He asked for clarification and also asked why this had arisen, as he was concerned that perhaps it indicated a lack of proper budget planning.
Ms Yako stated that plans were indeed in place, but DEAT had not foreseen that the provinces would struggle to implement the EIAs. Now that DEAT knew of the problem, it was better able to rethink its plans and move forward.
Mr Tom Bouwer, Chief Financial Officer, DEAT, pointed out that the variance in spending represented less than 1% of the total budget .
Ms Dambuza referred to P 159 of Treasury’s report and noted that there had been a decline in the allocations for environmental quality protection. She asked what was represented in this category.
Ms Yako stated that the move between the programmes would be fully set out in the following year’s Annual Report. DEAT had had some debate with the Auditor General and National Treasury on the classification of payments. There was some dispute over what was classified as “goods and services” and what as “transfer payments” and this point was raised as a Matter of Emphasis in the Auditor’s report. This would be corrected in the following year.
Mr Bouwer added that Memorandums of Understanding, cost recovery agreements and so forth were all in place, and that DEAT had asked National Treasury to condone the errors so that the matter could be taken forward in the correct way..
Ms Mashigo referred to the problems of capacity that were slowing some of the EIAs and asked if any of the grants contained a portion for capacity building.
Ms Yako stated that an audit had been done after ASGISA was adopted, which showed that there was a backlog in EIAs in most provinces. However, the funding to complete the assessments was not available. The Minister had therefore, with the agreement of MinMec, agreed to reprioritise. After discussion whether it was better to wait for the MTEF when the provinces could request funding, the decision was taken to look at procurement instead of a grant, and therefore consultants were appointed to assist with the backlog. Therefore the allocation to goods and services at provincial level was shifted to a national function
Ms Mashigo asked for an explanation of the relationship between National Parks and Private Parks. She asked whether DEAT controlled private parks, in particular if there was likely to be any negative impact upon the local people.
Ms Yako replied that private parks were privately owned and managed and therefore DEAT had no control over them. DEAT had agreements with some of the parks that were adjacent to the National Parks, and had drawn composite park management plans, dealing with matters such as relationships with the neighbouring communities. The private ownership was one of the challenges facing the sector in its conservation attempts. The impact of Charter on private parks had not been determined.
Mr Sogoni asked why the skills training had been so long delayed, as ASGISA required that plans for training should already be in the implementation phases.
Ms Yako replied that there had not previously been a defined and agreed development plan, involving all stakeholders. The SETA had spent 97% of its budget on training, but the training had not been allied to the priorities of the industry and the Department. The recent conference was called in order to agree common goals and priorities of the Congress of South African Trade Unions (COSATU) representing the various trade unions, the Ministry, The Tourism Business Council of South Africa, and local communities and NGOs. It was important to have buy-in from all bodies. This sector was unique in that the majority of the employers in the sector were SMMEs and the SETA system was really not appropriate to them. There was a discretionary fund but clearly it could not cover the 70% SMME spread.
Mr Sogoni raised the question of the rollovers for the Marion base and asked whether these would recur.
Mr Bouwer replied that the Marion Base was controlled by the Department of Public Works but DEAT exerted some pressure to ensure that they proceeded with the project as fast as possible. It was hoped that the project would be finalised in the next financial year. The completion date was set at June 2007. It was hoped that there would be no further rollovers.
Mr Sogoni asked what level of oversight was exercised by DEAT to ensure that landfill sites were kept to standard.
Ms Yako stated that prior to January 2006 the landfill sites had been the responsibility of the Department of Water Affairs and Forestry. A date still had to be set for takeover by the provinces. DEAT would check standards but there was a challenge in resourcing and in ensuring full functionality. DEAT was aware too of the public health issues.
Mr Sogoni asked whether DEAT would be seeking extra funds from National Treasury.
Ms Yako stated as a general comment that DEAT was not able to access sufficient funding to carry out all its work. Requests had been put through to National Treasury but had not always been met. DEAT was satisfied that it could meet the bulk of its obligations but Ms Yako indicated that with additional funding it could really do a great deal more, particularly on the tourism side. She was confident that additional funding would make it possible to increase the number of visitors to 10 million and this issue had been raised with National Treasury
Department of Public Service and Administration (DPSA) presentation
Prof Richard Levin (DPSA Director-General) highlighted the Millennium Development Goals that underpinned the Department’s efforts at employment and economic development. Various interventions had been planned to support the Joint Initiative for Priority Skills Acquisition initiative such as mentoring programmes and the recruitment of skilled immigrants. High unemployment was linked to economic growth. Certain constraints to economic growth had been identified such as the need to enhance state capacity. Particular skills such as engineering, finance and economics and education management were in urgent demand. Growth in public personnel expenditure was explained. Vacancy rates in the public sector were outlined. An upward movement in personnel expenditure was predicted. Personnel expenditure in the public sector had increased at rates that exceeded inflation. Increases in remuneration would be used as a strategy to retain scarce skills. Critical infrastructure development would be improved in all spheres of government. A new Public Service Remuneration Framework would be implemented. Dual career pathing would be introduced that allowed specialists to advance without management duties. Professional/specialist salary levels would be introduced. A total cost to employer remuneration system would be considered. A greater emphasis would be placed on performance-related pay. A co-operative agreement with India was in place. The small number of young graduates employed in the public sector remained a concern.
The Chairperson asked why the presentation made no reference to the cost implications of the proposed strategy.
Prof Levin responded that the presentation maintained a macro-economic focus highlighting a personnel expenditure review for the past five years. No costing on the strategy implications and principles to retain skilled personnel was available as yet.
The Chairperson indicated that the problem of vacancies had to be clearly explained. The Department’s Chief Financial Officer should be present in future to provide detail on cost implications.
Mr P Rabie (DA) asked for more detail on the dual career path scenario. He asked why the single public service project had been postponed and whether old retired civil servants would be recruited to augment the staff complement.
Mr Schneeman (ANC) asked how the drain of skilled public servants out of the sector could be curtailed to improve overall service delivery. Vacancies throughout the public sector had a negative impact on performance.
The Chairperson asked how the proposed framework would be funded and when the first phase of the project would be implemented. Other departments relied on the DPSA to assist them in resolving their particular capacity shortfalls.
Ms R Mashigo (ANC) referred to the practice of creating new posts without abolishing previously existing ones. The direct result of such a practice was an increase in personnel expenditure as the existing posts continued to receive a budgetary contribution. “Ghost posts” tended to be the direct result. Performance Management contracts had to be established to govern the process of bonus payments.
The Chairperson indicated that the problem of ghost posts could be linked to ghost employees. Ghost employees were a recurring problem in certain regions.
Prof Levin declared that the overall quality of human resource management in the public service remained a general concern. Personnel administration was an important component of the public sector and had to be improved. The introduction of a decentralised approach to human resource management had perhaps been too hasty. Various departments did approach the DPSA to assist in certain aspects of human resource management. Vacancies tended to include the phenomenon of ghost posts where existing posts were not discontinued. Therefore, the current vacancy rate as reflected in the system did not accurately portray the real situation. The lengthy process to fill vacancies contributed to the high number of vacant posts and added to the underspend figure. The public sector struggled to compete with the private sector in terms of remuneration and career prospects. However, many committed professionals existed within the public sector and proposed strategies to retain staff would be of benefit. New salary negotiations would commence early next year. The single public service project had not been delayed and contained various sub-projects such as the development of an E-Government framework that required additional focus.
Ms Collete Clark (Human Resource Management) stated that the Human Resource framework would be overhauled to address the real need. The Eastern Cape contained numerous ghost posts in the education sector. Educators were placed at different locations than originally planned in accordance with a specific need that impacted adversely on the vacancy rate. An extensive audit had been undertaken to consider the issue of ghost educators. The human resource management system had been proposed to oversee allocation and utilisation of personnel and the creation of new posts. Norms and standards would be developed to govern the process. The demand for job creation tended to place pressure on the public sector to appoint unskilled individuals. A centralised approach was required to facilitate better control over budget utilisation and post creation. Memorandums of understanding would be established with tertiary institutions to produce increased numbers of requisite skills. A link was needed between the various Sector Education and Training Authorities and the government’s human resource development strategy.
The Chairperson asked what steps could be taken to address the problem of ghost employees where salaries were issued to non-existent employees.
Ms Clark responded that disciplinary action would be taken against those individuals that defrauded the public sector. A disparate approach to creating and abolishing posts should be discontinued to prevent such practices.
Ms Dambuza noted that poor incentives existed in the rural areas to attract and retain skilled staff.
The Chairperson requested that the costing figures on the envisaged human resource strategy be provided to Members.
Department of Public Enterprises presentation
Mr Alec Erwin (Minister of Public Enterprises) stated that the objective of the Department was to facilitate economic growth by fostering efficient state-owned enterprises (SOEs) and play a leading role in implementing corporate governance in the overall economy. The main allocation adjustments related to the SOEs. The Department would also promote and arrange sector and regional economic development opportunities. Specific adjustment allocations were outlined. InfraCo would seek to enable a rapid increase in broad-band availability to stimulate overall economic activity by means of its fibre-optic cabling infrastructure. The state had decided to retain the particular assets as opposed to selling them to the second licensed operator. The capital allocation would be used to enhance South Africa’s capacity for broadcasting the 2010 World Cup. Eskom and Transnet would be paid for the communication infrastructure. International connectivity would be established. The allocation to the Pebble Bed Modular Reactor would be used to finance a Pilot Fuel Plant and a Demonstration Power Plant. Further allocations would be used to improve the performance of Alexkor. A settlement had been reached with the community in question and would be made an order of court. Municipal infrastructure would be established. Denel and the various defence-related industries would be positioned as strategic contributors to value-added manufacturing and job creation. Certain increases in Vote 9 would also occur over the MTEF period.
Mr Rabie asked when the Pebble Bed Modular Reactor (PBMR) would come into operation and whether the new facility would address the power shortages in the Western Cape.
The Chairperson declared that the decision not to privatise SOEs was a sound one that deserved support.
The Minister responded that the Environmental Impact Assessment for the PBMR still had to be completed. A change in design had necessitated the introduction of a new complex application. Certain issues still had to be resolved between the Department of Environmental Affairs and Tourism and the National Energy Regulator. Construction was likely to commence in early 2008. The capital goods market was problematic at the present juncture. Most of the indicated allocation would be to place orders for the plant machinery. The target for the completion of the PBMR was 2012. The problem in the Western Cape would be resolved next year as a result of the doubling of the local plant capacity. Peaking plants at Atlantis and Mossel Bay would be introduced with additional Megawatt capacity. The PBMR would make a dramatic improvement to electricity generation in South Africa. The plant could be placed at areas of greatest need. An increase in line capacity would also contribute to enhanced energy provision. States had to reconsider their strategic assets such as SOEs and ensure that they remained under state control to protect the national interest. For example, broadband fibre was of great strategic value. The main shareholder should have the national interest at heart. However, the private sector would not be excluded from activities and opportunities. The private sector telecommunications sector would flourish as a result of state investment in broadband. The State wanted to put more broadband capacity in place. Denel had to remain operative to facilitate the overall survival of the defence-related industry. Therefore, continued allocations were important.
Mr Schneemann asked whether the allocation to Denel was intended to foster enhanced levels of profitability.
Mr Erwin responded that capital had been supplied to enable partnerships with key subsidiaries such as Saab and Zeiss to be established. Strong subsidiaries would be developed through the capital injection by means of re-equipment. The partner would also provide capital to the subsidiary. Production facilities could be restructured and the needs of the South African National Defence Force would be meet with regard to the helicopter rotor-wing programme. Profitability would be attained in the medium-term given the right conditions.
The Chairperson asked whether the Department was satisfied with the MTEF allocations.
Mr Erwin responded that the increases to the Department itself were adequate. The allocations to the SOEs were separate and would be used to finance capital projects. The Department had to consider how much should be allocated to the SOEs. An envelope of R7 billion would be used to support SOEs. The largest amount would be allocated to the PBMR. The Department enjoyed a sound working relationship with National Treasury. The Department would ensure that the amounts allocated would result in dividends for the economy as a whole.
The meeting was adjourned.
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