ATC090619: Joint on Report: Budget Vote 28
Joint Report of the Portfolio Committees on Mining and Energy on Budget Vote 28: Minerals and Energy; dated 23 June 2009
The Portfolio Committees on Mining and Energy, having considered Budget Vote 28 for 2009/10, jointly report as follows;
Due to the re-alignment of departments and ministries, the National Assembly referred Budget Vote 28 to the Portfolio Committee on Mining and the Portfolio Committee on Energy to consider jointly and report. 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 the mandates of the Committees in 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 2009/10 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 R4 647 196 000 000, 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). The Committee raised its concern on the adequacy of the budget to support this process.
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 Committee 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 Committee expressed its concern on the increased mine related fatalities, from 200 in 2006 to 220 in 2007. The strengthening of the Mine Health and Safety Inspectorate, through the amendment in 2008 to the Mine Health and Safety Act, to investigate and enforce compliance to the Act, will, hopefully, result in reducing occupational injuries and ill-health.
4.2 Illegal Mining
The shortcomings in dealing with illegal mining need to be addressed. Underground security patrols should be encouraged. Security should be increased at functioning mines including search procedures to prevent the theft and smuggling of equipment and explosives.
The Committee will consider conducting oversight visits to the affected areas, particularly in the Welkom and Barberton area, as well as other areas in Northern KwaZulu Natal. The Acting Director-General of the Department will be consulted so as to solicit more information on other areas which may be relevant. The Committee agreed that these visits would be well-timed if conducted just after the Budget Vote is debated by the National Assembly. Public hearings with affected parties (mining houses, trade unions, communities etc.) may also be desirable.
4.3 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.
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.
The Committee would like a full detailed report from the Department on beneficiation, and whether it has contributed to job creation.
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 play a 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 (CDM). CDM 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.
The meeting deliberated on the following;
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. The Committee agreed that the Department needs to come back and brief it on the state of PBMR, at an agreeable time.
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 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
The Committee expressed concern that the looming increase in electricity tariffs would be a burden on the nation, especially during this difficult economic period.
It is the wish of the Committee to engage the leadership of Eskom at a later stage on this issue. The nature of the engagement will be informed by the outcome of the recent application by Eskom to the National Energy Regulator of South Africa (NERSA) to increase the tariffs.
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.
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 unanimously adopted the report on Budget Vote 28 and the Strategic Plan as tabled by the Department of Minerals and Energy.
Report to be considered.
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