PARLIAMENT

PORTFOLIO COMMI1TEES ON MINING AND ENERGY

Report on [Joint] Budget Vote 28: Minerals and Energy; dated 23 June 2009

The Portfolio Committees on Mining and Energy, having considered Budget Vote 28 of 2009/10, jointly report as follows;

1. Introduction

Due to the re-alignment of departments and ministries, the 4th Parliament of the Republic of South Africa decided to hold joint meetings to consider Budget Vote 28: Mining and Energy. Whilst the departments undergo the process of re-alignment, Budget Vote 28 (for this financial year) is to be debated and approved by Parliament as a single vote, Parliament constituted its portfolio committees as per Cabinet's re-alignment. This thus entailed the establishment of two portfolio committees - one of mining and the other on energy.

Hereafter, the Departments are thus referred to as [one] Department of Minerals and Energy.

2. Terms of Reference

On 9 and 10 June 2009, joint meetings of the Portfolio Committees on Mining and Energy were constituted. The objectives of the briefing were to:

1. Determine whether policy developments take place in accordance with the key objectives and aims as stated in the Departments' strategic plan;

2. Fulfill their mandate of overseeing the Departments of Mining and Energy; and statutory bodies that fall within its portfolio;

3. Establish how allocated funds and transfers to statutory bodies were to be spent;

4. Monitor the achievement of targets, and whether funds allocated meet those targets;

5. Monitor progress made and establish problems encountered;.

6. Determine whether policy developments take place in accordance with government's priorities of poverty alleviation, job creation Black Economic Empowerment (BEE), human resource development and growing the economy;

7. Monitor compliance with the Public Finance Management Act (PFMA).

3. Estimates of National Expenditure: Department of Minerals and Energy

3.1 Budget Summary

The Department of Minerals and Energy presented to the meeting its 2009/1 a Medium Term Expenditure Framework (MTEF) Strategic Plan, with it the budget allocations for each of the seven identified programmes. The total MTEF allocation for the financial year amounts to R4647 196 000 000, 00. The Auditor-General has, over the past four years given the department unqualified audit reports.

3.2 Related Matters

The Committee was taken through a list of the ten State-owned Enterprises and their mandates. The Department also presented the key focus areas that have been identified as part of the financial year's Strategic Plan. These are; the promotion of health and safety at mines; beneficiation; small scale mining; universal access to energy; security of energy supply and transformation. A comprehensive strategy map was also laid out.

In the next few months, there will be two departments emanating from the current Department of Minerals and Energy. Each of the new departments will contain functional branches that logically fit into that particular department, as well as their own support services. Each Department will further manage its own regional offices in line with the approved structures. The Minister and the current Director General will appoint an Acting Director General of Energy and other critical appointments to set up the new Department. The current Director General remains the hosting Accounting Officer (Department of Mining).

4. MINING

The Committee would like to highlight a few issues of concern that were raised during its deliberations and also make some proposals:

4.1 Mine Health and Safety

The shortcomings in dealing with illegal mining need to be addressed. Underground security patrols should be encouraged, including the return of the specialized police units. Security should be increased at functioning mines including search procedures to prevent the theft and smuggling of equipments and explosives. The Committee also noted the reported lack of security at derelict and ownerless mines. This is of concern to the Committee. The finalization to the strategy to rehabilitate these mines is encouraging. Labour related issues, raised by ex-miners, should be investigated and addressed.

The increase in the number of mine related fatalities, questions whether proper mine health and safety is adhered to. The introduction of the Mine Health and Safety Inspectorate, to investigate and enforce compliance to the Mine Health and Safety Act (1966), will, hopefully, result in reducing occupational injuries and ill-health.

4.2 Presidential Audit

The Committee will engage the Department on the recently completed Presidential Audit, as the reported 66% compliance to health and safety measures by mine houses, is unacceptable and therefore of concern.

4.3 Transformation

Resistance and reluctance to meaningful transformation by the mining industry, is noted by the Committee. The need to strengthen existing legislation to advance transformation, in particular to benefit communities will be investigated.

4.4 Beneficiation

The Committee would like a full detailed report from the Department on beneficiation, and whether it has contributed to job creation.

5. ENERGY

The Committee was given an overview of the legislation promulgated over the years, which forms part of the energy legal framework. Further overviews of the public entities which report to the Minister, as well as that of other key players in the energy sector were given.

5.1 Energy Security Master Plan (Liquid Fuels)

The Energy Security Master Plan on liquid fuels was approved by Cabinet in September 2007. In the short term, the said plan focuses on developing supply chain solutions to South Africa's liquid fuels supply challenges, management of liquid fuels demand and emergency response tactics. In the medium to long term, the plan's approach is broader and begins to integrate supply, demand, macroeconomics, geopolitics and climate change.

The presentation further covered the status of the Energy Security Master Plan projects, as well as the challenges thereof. A brief review of the performance from the previous cycle was presented, as well as status quo in the sector. The Department reports that amongst other interventions, it is clear from its Long Term Mitigation Scenarios (adopted by Cabinet) that nuclear will playa central role in the supply of energy from 2015.

5.2 Energy Security Policy

The Energy White Paper position provides for diversification of energy mix, including coal, nuclear, gas and renewable energy. The Cabinet decision requires Eskom to do seventy (70) percent of new generation, and Independent Power Producers (IPP) to produce the difference.

The Nuclear Energy Policy was also approved by Cabinet, and it provides a framework for prospecting, mining, milling and use of nuclear materials for energy use. A radioactive waste management policy and strategy was approved, and it establishes the radioactive waste governance framework. A Cabinet Committee was established to oversee implementation.

5.3 Energy Efficiency

The Designated National Authority (DNA) is responsible for registering the Clean Development Mechanisms (COM). COM is an initiative under the United Nations Framework Convention on Climate Change. Fifteen (15) projects are currently registered under the initiative, and over a hundred and twenty (120) are in the pipeline. The Tradeable Renewable Energy Certificates (TRECs) implementation framework is being finalized, to enable benefits to be derived from climate change advantages associated with renewable energy sources.

The challenges and interventions of the plans were presented, and are further elaborated on under the discussions reported herein.

6. Deliberations

The meeting deliberated on a number of issues raised by Committee;

6.1 Independent Power Producers (IPPs)

The Committee enquired about the planning around this issue, whether any agreements had been made with possible key producers. Members also recommended that a regulatory environment that is conducive to do business be encouraged for the IPPs, as there have been complaints about the monopoly Eskom has in the sector.

6.2 The Pebble Bed Modular Reactor (Pty) Limited (PBMR)

Issues of concern were highlighted with regards to the PBMR. Enquiries were made on the status of the entity, as well as the costs implications to carry it forward. Members felt that the PBMR has not produced what it was expected to on its formation.

6.3 The governance of newly formed structures

There are a number of structures that have or will be formed as a result of promulgated legislation. The Committee felt that the governance of these structures was not clearly explained and requested a response with regards to the accountability mechanisms in place for these entities.

6.4 Renewable Energy

The Committee suggested that more be done by the Department now on this issue, as it has been on the cards for some time but lacked on clear, decisive implementation.

6.5 Energy Efficiency

Public education campaigns should be intensified on efficient use of energy in the country. The strategies employed for the 2010 Soccer World Cup host cities should be applied around the country for the promotion of tourism during this period.

6.6 Nuclear: costs and related matters

Members of the Committee enquired about the planned development of nuclear, cost implications, security and job creation that this project could bring about.

6.7 Electricity tariffs

A member of the Committee expressed concern that the looming increase in electricity tariffs would be a burden on the nation, especially during this difficult economic period.

6.8 Transportation of Liquid Fuels

The Committee enquired about the strategies to improve the country's rail efficiency as the transportation of liquid fuels is, of late, mostly done by road.

7. Conclusion

The Committee was satisfied with the responses given by the Department during the deliberations, but asked the Department officials to avail themselves for further engagement on the outstanding issues, after the Budget Vote has been concluded. The need for the Committees to engage the public entities reporting to the Department, as well as other stakeholder in both the sectors (mining and energy) was emphasised by the members.

The Committee recommends that the National Assembly adopts Budget Vote 28.