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MINERALS AND ENERGY PORTFOLIO COMMITTEE
7 March 2007
CONVENTION ON THE PHYSICAL PROTECTION OF NUCLEAR MATERIAL: ADOPTION; PROGRESS AND CHALLENGES FOR TRANSFER OF MUNICIPAL ASSETS: NATIONAL TREASURY BRIEFING; ELECTRICITY DISTRIBUTION INDUSTRY RESTRUCTURING BILL: DEPARTMENT BRIEFING
Chairperson: Mr E Mthethwa (ANC)
Documents handed out:
Municipal Asset Transfer Framework and legislative reforms by the National Treasury impacting on EDI restructuring
Presentation by the Department of Minerals and Energy on the accession to the Convention on Physical Protection of Nuclear Material (CPPNM) by South Africa
Explanatory Memorandum on the Convention on the Physical Protection of Nuclear Material
EDI Restructuring Bill
Audio recording of the meeting
The Department of Minerals and Energy briefed the Committee on the Convention and the need for South Africa to accede to it. The Committee unanimously adopted the Convention and recommended that Parliament ratify it.
National Treasury briefed the Committee on its progress with developing a Municipal Asset Transfer Framework and the challenges facing it, particularly regarding the Electricity Distribution Industry, the roles and responsibilities in terms of the Constitution of municipal authorities to provide basic services to communities and exclusions such as compensation and funding, staff transfers and national and provincial entities.
The Department also briefed the Committee on the Electricity Distribution Industry Restructuring Bill dealing with background, the content framework and policy decisions still to be finalised.
The Committee expressed concern about the slowness with which the asset transfer development programme was progressing, as it was holding up other projects such as Electricity Distribution Industry restructuring and the establishment of Regional Electricity Distributors, which should already be in place. The Committee felt the asset transfer programme and establishment of the distributors should be happening in parallel.
Accession to the Convention on Physical Protection of Nuclear Material (CPPNM) by South Africa: Presentation by Department of Minerals and Energy (DME)
Ms Elsie Monale (Director: Nuclear Proliferation) explained the role of the CPPNM as a nuclear security Convention, which obliges State Parties to implement specific protection measures for nuclear material and was the only international legally binding undertaking in the area of security of nuclear material. This included all levels of material used for peaceful purposes on their territories, ships and aircraft during domestic use, storage and international nuclear transport. The objectives were to prevent unlawful use of nuclear material, ensuring protection levels as per the Convention and establish measures related to the prevention, detection and punishment of offences relating to nuclear material. The Department in terms of its mandate had already implemented most of the provisions of the Convention. These included amending legislation regarding the Convention related to Section 34 and 56 of the Nuclear Energy (NEA) Act, 1999 regarding prohibitions, offences and penalties. Section 56 (1)(h) held that a person was guilty of an offence upon performing any act prohibited under section 34A related to nuclear material. Punishment listed under Section 56(2)(d) was that any person liable and convicted under Section 34(A) was liable to a fine or life imprisonment.
Section 34A(2)(a) stated that no person may intentionally and without lawful authority, receive, possess, use, transfer, alter, dispose of or disperse nuclear material which causes or is likely to cause death or serious bodily harm to any person or substantial damage to property. Clause b pertained to intentionally obtaining nuclear material through robbery or theft and Clause c to obtaining it through embezzlement or fraud. Clauses d to g expanded on these prohibitions.
Ms Monale said that although the original Convention had been signed, it still had to gain Parliamentary approval in terms of Section 231 of the Constitution. The Department would be responsible for the implementation of the Convention requirements. The need for accession by South African was driven by a commitment to multilateral agreements with other countries. The Convention was considered one of the 13 counter-terrorism conventions ratified by the United Nations Security Council under Resolution 1317. Only 12 of these conventions had been approved by Parliament. In addition future South African expansion of its nuclear industry had to be taken into consideration.
In conclusion the Department advised that the ratification of the original CPPNM would not have a detrimental effect on the country and encouraged proper nuclear security measures.
Municipal Asset Transfer Framework and legislative reforms by the National Treasury impacting on Electricity Distribution Industry (EDI) restructuring: Presentation by National Treasury
Mr Lungisa Fuzile (Deputy Director General: Intergovernmental Relations, National Treasury) gave the parameters of the Asset Transfer Framework and addressed the roles and responsibilities of local government under Sections 214 and 229 of the Municipal Finance Management Act (MFMA), 2003. In relation to Section 216 of the MFMA, pertaining to asset transfer, Section 177(3) recognised the need for the restructuring of the electricity industry. The DME knew that the framework legislation had to be in place, but the latter Section allowed it to go ahead with restructuring without the framework.
Ms Wendy Fanoe (Director: Local Government Finance Policy) outlined the roles and responsibilities of municipalities in terms of the Constitution and highlighted that in certain municipalities, particularly those in rural areas, there were large backlogs in service delivery. Municipalities needed to prioritise their responsibilities in terms of service delivery. An electricity surcharge was an accepted practice by municipalities, but is often abused and the asset transfer framework was designed to stop this abuse. There were 283 municipal areas in the country, six of which are metropoles, where two-thirds of the population resided. These had big budgets that were not reliant on transfers from the fiscus as they could cross-subsidise services.
Mr TV Pillay (Chief Director: Intergovernmental Relations) said that the MFMA had identified the need to provide a framework for the transfer of capital assets to another municipality, entity or national or provincial organs of state. This Act was being phased in, but it needed to be understood that the framework development was generic and not directed at specific sectors. The primary aims and challenges were to safeguard the financial affairs of municipalities, alienation, letting and disposal of assets. In terms of drafting the framework, the Treasury had studied international norms and best practices. Disposal of assets owned by a municipality was one of the challenges faced, particularly if there was a loan against the asset in regard to the entity responsible for the debt. One of the primary aims was to ensure continuity of services.
Department of Minerals and Energy (DME) Briefing on EDI Restructuring Bill
Mr Oompie Aphane (Chief Director: Electricity) said that in October 2006 Cabinet had given the go ahead for EDI restructuring, which approved six wall-to-wall Regional Electricity Distributors (REDs), established as public entities and regulated in accordance with the Public Finance Management Act (PFMA) and the Electricity Regulation Act. In terms of governance REDs would be established as companies under the Companies Act and Eskom would remain a short-term shareholder. It was noted that EDI Restructuring legislation would be introduced as a legislative instrument for the creation of REDs. A meeting was scheduled for next week among all stakeholders to resolve outstanding issues and the Department promised to deliver its findings to the Committee by the end of the first quarter of 2007.
The Chair said that the Committee would only concern itself with the original CPPNM, but asked why the amendment proposals seemed to be lagging behind.
Mr Tseliso Maqubela (Chief Director: Nuclear, DME) said that Parliament had approved the international Convention on terrorism only last year. The Department had determined that the amendment could not be acceded to before the original was ratified. Only 7 countries had acceded to the amendment, namely those with limited nuclear capabilities. Other countries were looking at the implications of amendment.
Mr L Mahlaba (ANC) asked what the current status was regarding uranium enrichment, as it was not part of the country’s agenda.
Mr Maqubela replied there were no prerequisites in the Convention as any country could go ahead with uranium enrichment for peaceful purposes. The Department had to look at the viability of following an enrichment programme as studies done internationally on the rate at which nuclear power plants were being built pointed towards a potential shortage of enriched material. The Department had to ensure that Koeberg had enough fuel to sustain its life expectancy and enrichment was an option.
Prof I Mohamed (ANC) queried the penalties related to nuclear safety. He pointed out that there had been a incident at Koeberg were locks had been fitted upside down to nuclear material storage facilities and anyone had access to them. Someone should be held responsible for this. He asked about provisions made for nuclear waste storage, as, in his view, the waste storage pools at Koeberg must almost be full.
Mr Maqubela replied that the Department was happy with the nuclear protection measures in place at Koeberg. It had been visited by the International Atomic Energy Agency (IAEA) and would be working with it to ensure protection of facilities for 2010. The spent fuel pool capacity at Koeberg had been increased to meet the lifespan of the station and Eskom had brought in dry storage casks in case of emergency. Where the nuclear programme was concerned, reclamation of uranium from spent fuel had to be considered, given that uranium prices had gone up substantially, and 96% of used fuel could be reused. The National Nuclear Regulator (NNR) dealt with safety issues at Koeberg and would have investigated the lock situation.
Prof Mohamed said he was not happy with the response as his question related to penalties the State could incur for contravening the CPPNM. He was aware of open trenches, which anyone had access to, and leakage where spent nuclear material was stored.
Mr Maqubela said the Act covered incidences such as leakage. In terms of state penalties, any state exporting material had to be satisfied that the protection measures in the import country for storage were adequate. For example, South Africa was importing fuel from France and if safety precautions in South Africa were not up to standard, France would be held responsible.
Mr Mahlaba asked the National Treasury why the framework legislation was taking so long, as the first RED should already be in place. Did the Treasury have a dedicated in-house team to facilitate the framework and was there no possibility of the REDs being established parallel to the development of the framework?
Mr Fuzile replied that the Treasury could not be certain when the draft framework would be presented to Parliament, as it still needed legal review. Only once the financial framework had been signed by the Minister of Finance could it proceed. It was hoped that the draft framework would be available for debate by the Committee in May or June.
Mr C Morkel (PIM) asked that the budgets and statistics be made available to the Committee.
Mr Pillay said there was a document available in printed form and on the Treasury’s website.
Mr Morkel said compensation for transfer of assets needed to be clearly laid out. In relation to debt succession, the new owner should acquire the loan.
Mr Fuzile said that the framework could not dictate the value of a transferred asset and this was provided for in the EDI blueprint.
Mr E Lucas (IFP) said that he was of the opinion that given the presentation, it was clear that municipalities were overcharging for services.
Adv H Schmidt (DA) said there did not appear to be any cooperation between various Departments and this was unacceptable.
Mr Pillay replied that there was inter-departmental cooperation, and the Treasury was not operating in isolation. Given the short timespan, it was important that the framework be constructed well and not rushed.
Adv Schmidt asked how local government would deliver its Constitutional obligations in terms of the framework if it had no control of the asset in the case where the RED did not fulfil its function.
Ms Jo-Ann Ferreira (Chief Director: Public Entities Governance Unit) said this was one of the challenges facing the framework in terms of facilitating a public entity, but preserving municipal Constitutional obligations.
Mr Lucas asked the DME why there had been delays in the implementation of the EDI Restructuring Bill.
Mr Aphane replied that the Department had only been given the mandate to proceed with the drafting in October 2006, and quite a lot had been done. He reiterated that the draft would be available by the end of the first quarter.
Adv Schmidt asked if membership of REDs was compulsory for local government in relation to asset sharing.
Mr Aphane replied that it could not be in terms of the Constitution, but certain incentives had been offered to entice richer municipalities into the frame.
The Committee approved the proposal on the original CPPNM without objection and recommended that Parliament ratify it.
The meeting was adjourned.
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