ATC120515: Report on Strategic Plan of the 2012/13 – 2015/16 period & Budget Vote No. 29, 15 May 2012





1. Introduction


1.1. Subject of the report


The subject of this report is to report back to the National Assembly (NA) on the Portfolio Committee on Energy’s findings after evaluating the Strategic Plan and assessing the Budget Vote No 29 of the Department of Energy.


1.2. Background


Strategic Plans identify strategically important outcomes orientated goals and objectives against which public institutions’ medium-term results can be measured and evaluated by Parliament, provincial legislatures and the public. Annual performance plans identify the performance indicators and targets that the institution will seek to achieve in the upcoming budget year. The annual budget sets out what funds an institution is allocated to deliver services. The Annual performance plan shows funded service-delivery targets or projections. The annual budget indicates the resource envelope for the year ahead, and sets indicative future budgets over the medium term expenditure framework (MTEF). The budget covers the current financial year and the following two years.


At the beginning of every year, the Minister of Finance tables before Parliament, amidst great expectation and anticipation by South Africans, a detailed outline of the State’s Budget: how much money will be or ought to be spent on what in that financial year.


Thereafter, various government departments present their budget votes before Parliament -specifying how they intend reconciling their resources with service delivery imperatives as outlined by the President of the Republic of South Africa in the State of the Nation Address. One of the main statutory functions of Parliament is to discuss, pass and oversee the State’s Budget. The Department of Energy’s Budget Vote No. 29 was referred to, for consideration and reporting, the Portfolio Committee on Energy (the Committee) on 07 March 2012.


In compliance with the referral by the National Assembly, the Committee held budget vote briefing on 20 March 2012 with the Department of Energy (the Department) to consider its Budget Vote and strategic plan.


In order for the Department to achieve its objectives, it is essential for the State Owned Institutions within the energy sector to be streamlined according to the departmental mandate. The Committee therefore also scheduled meetings with the entities who report to the Department. These entities thus briefed the Committee on their respective strategic plans over the MTEF. The entities with whom the Committee engaged with include the following:


  • National Nuclear Regulator (NNR);
  • National Energy Regulator of South Africa (NERSA);
  • South African Nuclear Energy Corporation of SA (NECSA);
  • South African National Energy Development Institute (SANEDI);
  • Central Energy Fund (CEF) and its respective subsidiaries, which include:
    • Strategic Fuel Fund (SFF);
    • SA Supplier Development Agency (SASDA);
    • Petroleum Agency of SA (PASA);
    • Oil Pollution Control SA (OPCSA) ;
    • Africa Exploration ;
    • Eta Energy ; and
    • Petroleum Oil and Gas Corporation (PetroSA)


1.3. Objectives


The objectives of the report are as follows:

  • To describe and analyze the key strategic priority areas of the Department of Energy over the MTEF;
  • To describe the key strategic priority areas of the entities that report to the Department of Energy; and the entities whom report to the Department; and:
  • To conclude on implications and make recommendations thereto.


1.4. Method


In order to obtain the necessary information, the Portfolio Committee on Energy conducted several interactions with the Department and its entities. These interactions included, receiving briefings by the Department on its Strategic Plan for the 2012/13 – 2015/16 period, Annual Performance Plan and Budget Vote. The Committee further scheduled briefings by the various entities on their strategic plans and annual performance plans.


1.4 Plan of development


The report begins by describing and analysing the strategic plans, annual performance plans and the Budget Vote No 29. Thereafter, the report describes and analyzes the strategic plans and annual performance plans of the entities that reports to the Department


2. Strategic Plan of the Department of Energy


2.1. Reasons for publishing a Revised Strategic Plan for the 2011/12 – 2015/16 period


The Framework for Strategic Plans and Annual Performance Plans determines that a strategic plan should cover a period of at least five years, linked to the identified outcomes of Government. The Department of Energy published a Strategic Plan for the 2010/11 – 2014/15 period. Government, however, adopted the Outcomes Based Approach in 2010 and the Presidency published the Guide to the Outcomes Approach in May 2010. Consequently, the Department of Energy adapted their Strategic Plan to the Outcomes Based Approach and published a new Strategic Plan for the 2011/12 – 2015/16 period.


In comparing the Strategic Plan for the 2011/12 – 2015/16 period with the requirements of the Framework for Strategic Plans and Annual Performance Plans, the Department found that they needed to publish a revised Strategic Plan. Prior the Strategic Plan for the 2011/12 – 2015/16 period, the Minister of Energy (the Minister) signed Delivery Agreements for Outcomes 2, 6 and 10 of the Government Plan of Action. Since then the Minister has also signed Delivery Agreements for outcomes 4 and 8.


An analysis of the additional delivery agreements indicated that the Department does not need to expand on its Strategic Outcome Oriented Goals but that it does need to illustrate the alignment of the Strategic Outcome Oriented Goals with the Delivery Agreements signed by the Minister.


The implementation of the Government-wide Monitoring and Evaluation System by the Department, furthermore indicated that there are a number of existing Strategic Objectives (Outputs) that were not provided for in the Strategic Plan for the 2011/12 – 2015/16 period. These can thus lead to, amongst others, a perceived misalignment between budgeting and planned outputs.


2.2. Revised Strategic Plan


The former Strategic Plan of the Department provided for three (3) programmes. These included:


  • Programme 1: Administration – The aim of this programme is to provide corporate, executive, financial, information, supply chain management, governance and compliance support to the Ministry, the Department and the Energy Sector.


  • Programme 2: Hydrocarbons and Energy Planning – The aim of this programme is to-
    • Develop, implement and review Hydrocarbon policies for improved energy regulation and competition;
    • Ensure evidence-based integrated planning and investment decisions in the energy sector; and
    • Ensure the optimum and orderly functioning of the petroleum industry.


  • Programme 3: Electricity, and Nuclear and Clean Energy – The aim of this programme is to –
    • Develop, implement and review Electricity policies for improved energy regulation and competition;
    • Govern the SA nuclear energy industry and control source and special materials in terms of nuclear legislation and policies in order to ensure peaceful use of nuclear energy; and
    • Manage and facilitate the development and implementation of clean and renewable energy initiatives.


Table 1 (below) provides the Annual Performance Plan for six programmes.


Table 1: Programmes of the Department



Programme Purpose


Budget Programme

1. Administration

To provide corporate, executive, financial management and accounting, information and communication technology, supply chain and asset management support to the development;


And ensure good corporate governance and compliance by the Department and/or the Energy sector




7. Corporate Governance




1. Administration

2. Energy, Policy and Planning

To ensure evidence-based integrated planning, policy setting and investment decisions in the energy sector to improve security of energy supply, energy regulation and competition





2. Security of supply


3. Regulation and Competition

2. Energy Policy and Planning (excluding Nuclear)



3. Petroleum Regulation

To ensure the optimum and orderly functioning of the petroleum industry

3. Energy Regulation

4. Nuclear Energy

To govern the South African nuclear energy industry and control source and special materials in terms of international obligations, nuclear legislation and policies to ensure peaceful use of nuclear energy

2. Energy Policy and Planning

5. Nuclear Energy and Regulation

5. Clean Energy

To manage and facilitate the development and implementation of clean and renewable energy as well as energyefficiency and demand side management initiatives

5. Environmental Access and Transformation


6. Climate Change

2. Energy Policy and Planning (Nuclear policy)

3. Nuclear Energy and Regulation

6. Programmes and Projects

To manage, coordinate, monitor and report on energy related programmes and projects

1. Universal Access and Transformation


2. Infrastructure

3. Energy Regulation

4. National Electrification programme

Source: Presentation document by the Department on 20 March 2012


The Strategic Outcome Orientated Goals of the Department are provided in Table 2 below:


Table 2: Strategic outcome orientated goals




Government outcome


Goal statement


Millennium development goals


1. Universal Access and Transformation

Outcome 2 – A long and healthy life for all South Africans;

Outcome 7 – Vibrant, equitable and sustainable rural communities and food security for all; and

Outcome 8 – Sustainable human settlement and improved quality of household life.


Efficient and diverse energy mix for universal access within a transformed energy sector.

MDG 1. Eradicate extreme Poverty and Hunger – Focus on energy poverty eradication.

2. Security of Supply






Outcome 4 – Decent employment through inclusive economic growth.


Energy supply is secure and demand is well managed.





MDG 3. Promote Gender and Equality and Empower Woman - Promotion of participation in energy sector.

3. Regulation and Competition


Improved energy regulation and competition.

4. Infrastructure


Outcome 6 – An efficient, competitive and responsive economic infrastructure network.

An efficient, competitive and responsive energy infrastructure network

5. Environmental Assets





Outcome 10 – Environmental assets and natural resources that are well protected and continually enhanced

Environmental assets and natural resources protected and continually enhanced by cleaner energy technologies

MDG 7. Ensure Environmental Sustainability – energy efficiency, demand side management, clean and renewable energy initiatives.

6. Climate Change

Mitigation against and adaptation to, the impacts of climate change.

7. Corporate Governance

Outcome 12 - An efficient, effective and development oriented public service and an empowered, fair and inclusive citizenship.

Good corporate governance for effective and efficient service delivery.

MDG 8. Develop Global Partnerships for Development – international cooperation and collaboration at multilateral, bilateral and trilateral relations.

Source: Presentation document by the Department on 20 March 2012



2.2. Budget Vote


The Department of Energy’s updated budget is divided into five programmes namely, Administration; Energy Policy and Planning; Energy Regulation, National Electricity Programme, and Nuclear Energy and Regulation. The Departmental budget has increased by R 604 million (9.76 per cent) from R6.201 billion in the 2011/2012 financial year to R6.806 billion in the 2012/13 financial year. The largest share of the budget amounting to R3.136 billion (46.08 per cent of the budget) is appropriated to the National Electrification Programme. The second largest allocation goes to Programme 2: Energy Policy and Planning. This programme receives an allocation of R1.542 billion, this amount to 22.65 per cent to the Department’s total budget. As can be seen from the Table 3 below, even though the Department received an increase of 9.76 per cent for the 2012/13 financial year, four of the five programmes allocations decreased in real terms.


2.2.1. Total Budget


Table 3 (below) presents the total budget allocation for the Department


Table 3: Total budget allocation for the Department of Energy



Nominal Rand change

Real Rand change

Nominal % change

Real % change

R million










2011/12 - 2012/13


2011/12 – 2012/13









3.06 percent

-2.68 percent

Energy Policy and Planning


1 541,5





-0.21 percent

-5.77 percent

Energy Regulation



2 067,2

2 375.3



135.44 percent

122.32 percent

National Electrification Programme

3 264,6

3 136,3

3 410,1

3 706,1



-3.93 percent

-9.28 percent

Nuclear Energy and Regulation







-7.10 percent

-12.28 percent

Source: Estimate of National Expenditure (ENE) 2012, Vote 29: Energy


2.2.2. Programme 1: Administration


Table 4 (below) presents the budget for Administration


Table 4: Administration budget of the Department






Nominal Increase/



Real Increase/



Nominal Percent change


Real Percent

R million



















1.86 percent

-3.81 percent






5.57 percent

-0.31 percent

Audit Services





-3.45 percent

-8.83 percent

Corporate Services





-2.32 percent

-7.76 percent

Financial Management





-34.99 percent

-38.61 percent

Office Accommodation





378.67 percent














3.1 percent

-2.68 percent

Source: ENE 2012, Vote 29: Energy


Programme 1 is divided into six sub-programmes. The budget for this programme is increased by R5.4 million (3.1 per cent), from R176.3 million in the 2011/2012 financial year to R181.7 million in the 2012/13 financial year. The largest share of the budget amounting to R46.3 million is appropriated to the Corporate Services Sub-programme. There is a large increase in allocation to the Office Accommodation sub-programme. As can be seen from the Table 4 above, even though the programme received an increase of 3.1 per cent in nominal terms for the 2012/13 financial year, there was a real decrease when taking inflation into consideration.











2.2.3. Programme 2: Energy Policy and Planning


Table 5 (below) presents the budget for Energy Policy and Planning


Table 5: Energy Policy and Planning budget of the Department






Nominal Increase/



Real Increase/



Nominal Percent change


Real Percent

R million














Electricity Policy





-0.67 percent

-6.21 percent

Hydrocarbons Policy

1 513.9

1 509.3



-0.30 percent

-5.86 percent

Nuclear Policy





0.00 percent

-5.57 percent

Energy Planning and Research





10.87 percent

4.69 percent









1 544.7

1 541.5



-0.2 percent

-5.77 percent

Source: ENE 2012, Vote 29: Energy


Programme 2 is divided into four sub-programmes. The budget for this programme decreased by R3.2 million (0.2 per cent), from R1.5447 billion in the 2011/2012 financial year to R1.5415 billion in the 2012/13 financial year. The largest share of the budget amounting to R1.509 billion is appropriated to the Hydrocarbons Policy Sub-programme.


2.2.4. Programme 3: Energy Regulation


Table 6 (below) presents the budget for Energy Regulation


Table 6: Budget of Energy Regulation






Nominal Increase/



Real Increase/



Nominal Percent change


Real Percent

R million














Petroleum Licensing and Monitoring





0.00 percent

-5.57 percent

Hydrocarbons Operations





42.86 percent

34.90 percent

Clean Energy


1 253.3



151.21 percent

137.22 percent

Public Entity Oversight





57.05 percent

48.30 percent










1 350.0



135.4 percent

122.32 percent

Source: ENE 2012, Vote 29: Energy


Programme 3 is divided into four sub-programmes. The budget for this programme increased by R776.6 million (135.4 per cent), from R573.4 million in the 2011/2012 financial year to R1.350 billion in the 2012/13 financial year. The largest share of the budget amounting to R1.253 billion is appropriated to the Clean Energy Sub-programme. There are large increases in allocation to three of the four sub-programmes as can be seen on the Table 6 above. This is clearly a priority programme within the Department.


2.2.5. Programme 4: National Electrification Programme


Table 7(below) presents the budget for the Electrification Programme


Table 7: National Electrification Programme budget of the Department






Nominal Increase/



Real Increase/



Nominal Percent change


Real Percent

R million














Business Planning





-93.68 percent

-94.03 percent

Grant Management and Monitoring

2 962.3

3 117.2



5.23 percent










3 264.6

3 136.3



-3.9 percent

-9.28 percent

Source: ENE 2012, Vote 29: Energy


Programme 4 is divided into two sub-programmes. The budget for this programme decreased by R 128.3 million (3.9 per cent), from R3.265 billion in the 2011/2012 financial year to R3.126 billion in the 2012/13 financial year. This was mainly due to a 93.68 per cent decrease in the Business Planning Sub-programme.


2.2.6. Programme 5: Nuclear Energy and Regulation


Table 8 (below) presents the budget for the Energy and Regulation


Table 8: Energy and Regulation budget of the Department






Nominal Increase/



Real Increase/



Nominal Percent change


Real Percent

R million














Nuclear safety and Regulation





-56.65 percent

-59.06 percent

Nuclear Non-proliferation and Radiation Security





6.45 percent

0.52 percent

Public Entity Oversight





-5.79 percent

-11.04 percent













-7.1 percent

-12.28 percent

Source: ENE 2012, Vote 29: Energy


Programme 5 is divided into three sub-programmes. The budget decreased by R45.6 million (7.1 per cent), from R641.9 million in the 2011/2012 financial year to R596.3 million in the 2012/13 financial year. The largest share of the budget amounting to R585.3 million is allocated to the Public Entity Sub-programme. There is a large decrease in allocation to the Nuclear Safety and Regulation sub-programme (56.65 per cent).


2.3. Observations and findings


  • The Department highlighted that, when the former Department of Mineral Resources and Energy was split into the two departments of Energy and Mineral Resources, the new Department of Energy (the Department) had an incorrect baseline. As a result, work was done to match the new structure to the available budget. This, according to the Department, warranted the need for an interim measure as there was not possible to implement the approved structure -seeing that the interim structure itself was not fully funded.
  • The revised strategic plan of the Department talks of inter alia e xpanding its constitutional mandate; expanding its legislative mandate; expanding its policy mandates etc. The Committee therefore is extremely concerned that the expansion of these mandates, with the already limited budget, might adversely affect the performance of the Department.
  • Members raised concerns that budget allocation to the National Nuclear Regulator is declining, which is disturbing because it would be difficult for the Nuclear Regulator to enforce its mandate.
  • The National Radioactive Waste Disposal Institute has been established, whereas funding to the National Nuclear Regulator is declining.
  • Members highlighted that there are loopholes in the Petroleum Products Amendment Act and pointed out to the Department that the legislation must be reviewed with an aim of amending certain sections in order to close all known loopholes, as a matter of urgency.
  • Members raised concerns that they have not been invited by the Department to participate in the Department’s public participation programmes.
  • With regard to the free basic electricity policy, the Department highlighted that there is difficulty in “identifying” the poor, so as to only devolve benefit to them.
  • The Department highlighted that there are no independently verified energy savings, however, some savings are being achieved. There is an engagement with the South African Revenue Services to provide tax breaks with companies that comply and to ensure that savings occur.
  • Members pointed out that there is a need to move away from stating items which highlights what the Department plans to do towards a statement of what the Department has done or managed to do, referring to issues that were re-occurring without any resolutions. In other words the execution and continuity of plans on what has not been done.
  • On the issue of the centralised collection of energy data and other related issues, there were data management systems that need to be revised to establish a better data collection system.
  • Members emphasised that it would be critical that the Committee be informed and briefed on the regulations of all energy legislation.
  • The Committee is very eager to be informed of the revised Liquid Fuels Storage Policy.
  • Members noted that several community awareness programmes have been initiated, but very little has been said about solar energy.
  • Members raised concern that the Inclining Block Tariff’s (IBT) unintended challenges need to be addressed.
  • The committee is keen to be briefed on the restructuring of the Central Energy Fund.
  • Members emphasised that the various applicable Sector Education and Training Authorities (SETAs) be more proactively used for skills development initiatives.
  • With regard to tender processes in the Department, the Departmental Bid Adjudication Committee, has very little operational monies; therefore not many tenders were being allocated. The one big tender that DoE did adjudicate was the Independent Power Producer Project. According to the Department, the process was properly audited and the process did in fact go through the proper adjudication trail. Members on the Bid Adjudication Committee were properly trained and there was also a legal aspect to deal with legal issues.


3. National Nuclear Regulator


3.1. Strategic Outcome Orientated Goals


The strategic outcome orientated goals of the National Nuclear Regulator (NNR) are as follows:

  • Effective Regulatory oversight and framework to assure Nuclear Safety and Security;
  • Strengthen stakeholder relations and enhance corporate image;
  • Create a high performance culture;
  • Ensure financial viability and sustainability of the organisation;
  • Develop and maintain sound organizational infrastructure;
  • Enhance good governance; and
  • Ensure effective Human Capital Management.


3.2. Strategy Risk Management


At the time of developing the strategic plan, the NNR identified the following as key corporate risks, which are being addressed. These include:


3.2.1. Financial Viability and Sustainability


The following are related to financial viability and sustainability:

  • The NNR faces a risk of underperforming due to insufficient funding. This is caused by, amongst others, the diminishing state allocation coupled with delays in the approval and gazetting of authorisation fees; difficulties in economic conditions and non-payment of authorisation fees by some authorisation holders. The current financial model does not adequately address to the full extent the activities of the NNR.To address these challenges, the NNR will strive to maintain adequate funding and is therefore in a process of reviewing its funding model with a view to ensuring sustainability.
  • The NNR is currently developing a comprehensive regulatory framework while reviewing the capacity requirements in line with the strategy and structure. The resulting resource requirements will be submitted to DoE and the National Treasury.
  • In order to strengthening of stakeholder relations and enhance the corporate image of the NNR , the NNR has developed and is implementing a comprehensive Communication Strategy
  • ICT governance structures and policies are developed and implemented to address a number of previously identified risks. Some of the strategies implemented include the following:
    • The development of a three-year ICT strategy; and
    • The ICT infrastructure Turnkey project was implemented. The purpose of the project was to refresh the ICT infrastructure of the NNR. The project included upgrading the servers, communication and telephonic infrastructure of the organisation. Phase II  of the project included skills transfer and the training of ICT staff on the new technologies which is on going.
  • –In response to scarce nuclear skills and related capacity constraints in the sector and particularly to the NNR,the NNR has addressed the risk of maintaining an effective human capital through the development and implementation of a succession plan and knowledge management strategies


3.2.2. Budget variances


There are two categories that have contributed to a bigger than expected variance. The categories are Compensation of Employees and Goods and Services.


Compensation of Employees

  • Additional Staff and new positions - Additional staff is necessitated by the two critical projects that the NNR has to embark upon. The Steam Generator Replacement for Koeberg and the New Nuclear Build. The number of resources (additional staff) required is ten (10) resources at an average of R700 000 per annum. The remaining R2 million relates to the new positions for the laboratory resources. The NNR is in the process of establishing its own laboratory. The number of resources needed is four (4). The remaining outer years were treated on the same basis of the 6% cost of living adjustment and the average 3.5% incentive bonus.
  • Goods and services - These are expenses that directly relate to the costing of the strategic objectives to enable the NNR to perform its regulatory mandate. It is inclusive of our fixed costs, consulting fees and administration costs.


3.3. Observations and findings


The Committee has made the following observations:

  • The NNR faces a risk of underperforming due to insufficient funding.
  • The National Nuclear Regulator has been experiencing non-payment by various entities for authorisation fees, which include mining houses. According to the NNR, these affected operations. Mechanisms to recoup the monies include: cold calling and inspectors engaging with the debtors. According to the NNR, they are continuously monitoring and “chasing” the debtors for payment.
  • Members raised concern that public education and awareness initiatives and programmes of the NNR are going to be limited as the entity is experiencing financial problems.
  • The NNR does not have a structured relationship with the mines, but they do have a cooperative agreement with the Department of Mineral Resources on matters of mutual interests.
  • The life span of the Koeberg Nuclear Power Station is 30 to 40 years, but a project is underway to extend this.
  • The NNR highlighted that if the figures in the original submission are not granted, the following would be done:
    • The organization will move into a deficit as reflected on the Adjusted Budget Table .
    • The organization will not fulfill its mandate since the costs to achieve the strategic objectives will be reduced. Amongst others is the number of inspections to be performed which would be severely impacted.
  • According to the NNR, in order to breakeven or to fund the deficit the organization may require to make one or a combination of the following:
    • Increase authorization fees;
    • Reduce goods and services; and
    • Reduce compensation of employees.
  • The NNR has not been invited to prepare itself for the New Nuclear Build Programme. This is a cause of concern to the members.

4. South African National Nuclear Corporation


4.1. Key objectives of the NECSA Group


4.1.1. Nuclear Power Cluster


Regarding the Nuclear Power Cluster (PWR), the objectives are as follows:

  • To progress with preparations for the development or demonstration of required nuclear fuel cycle processes and technologies.
  • To achieve the necessary project targets for establishment of PWR fuel fabrication capabilities.
  • To implement Pelchem’s strategy for growth and sustainability, including an increase of sales from R194 million (2011/12 estimate) to R333 million by the 2014/15 financial year.


4.1.2. Radiation Science and Applications Cluster


Regarding the Radiation Science and Applications Cluster, the objectives are as follows:

  • To maintain full operational capability of SAFARI-1 and implement the reactor’s ageing management programme.
  • To perform a feasibility study on a multipurpose research reactor to replace SAFARI-1 at the end of its operational lifetime.
  • To achieve the project targets for the establishment of an LEU fuel and Mo-99 target plate manufacturing plant.
  • To grow NTP Group sales from approximately R851 million (2011/12) to R1068 million by the 2014/15 financial year.


4.1.3. Necsa as Host of Nuclear Programmes Cluster

  • To increase Necsa’s research, development and innovation outputs.
  • To constantly improve SHEQ management performance.
  • To achieve a sustainable salary bill within existing funding constraints.
  • To maintain infrastructure at a suitable level.


4.2. Key risks for the NECSA Group

  • Misalignment between available funding and the role Necsa has to play in terms of its mandate;
  • The unavailability of an appropriate skills mix to execute and expand Necsa’s core technical programmes;
  • Ageing equipment and infrastructure as well as production plant availability; and
  • Business sustainability and challenging global market conditions.

4.4. Observations and findings


  • The reducing trend of the Government grant allocated to NECSA over the past three MTEF budget processes, together with more challenging market conditions for its commercial subsidiaries, has increased the risk that NECSA will not be able to fully meet its core legislative and policy mandate.
  • The baseline budget for the period 2012/13 was R486 million and was expected to increase over the next three years. There had been a decrease when compared to that of last year which amounted to R517 million. Personnel and personnel related costs were on the up while government grants were on the decline.
  • According to NECSA the continued reduction of government grant allocation to NECSA over the past three years together with more challenging market conditions for its commercial subsidiaries had increased the risk that NECSA would not be able to fully meet its core legislative and policy mandate, and the salary increases of the entity were below Public Service wage agreement levels for the past three years.
  • In terms of its mandate the NECSA is playing a role in the nuclear fuel cycle In terms of nuclear energy policy it is expected to expand its wings in that area, as well as to play a role in uranium enrichment.
  • Comprehensive feasibility studies relating to the re-establishment of nuclear fuel cycle programmes in South Africa were completed during 2011. Excellent relationships with major international suppliers of fuel cycle technologies and products were developed; and significant capital investment was required if the vision of a future local fuel supply to the power reactor fleet was to be achieved.
  • Because the Canadian government is subsidising the production of isotopes the NECSA has to some extent find it difficult to compete with them.
  • With regard to NECSA’s role in the Nuclear Build Programme includes human resource skills development. NECSA is a repository of nuclear skills in the country. Its role is to provide advice to government on turnkey projects and the appropriate technology to be employed.
  • NECSA had contributed to a range of policy-making and public participation processes relating to the energy planning, nuclear energy research and development and related topics, and maintained participation in national and international collaborative programmes in the field of nuclear research and development
  • The Nuclear Skills Development Centre received accreditation from various SETAs and recognition as a Decentralised Trade Test centre for the final trade testing of apprentices is currently in strong demand.
  • The NECSA Visitor Centre was opened to the public in February 2011 and is a big success in improving public understanding of nuclear science and technology.
  • NECSA finds it difficult to attract professional personnel like engineers and scientists, because of the budgetary constraints.
  • NECSA had concluded an agreement with the United States on nuclear security training and to build a nuclear security academy. A feasibility study was being developed.


5. National Energy Regulator of South Africa


5.1. National Energy Regulator of South Africa ’s Strategic Outcome Oriented Goals


The strategic outcome oriented goals of the National Energy Regulator of South Africa ( NERSA) are cascaded from the mandate and reflect the 12 National outcomes as well as those of the Department of Energy. These goals attest to NERSA’s role in facilitating the achievement of the national socio-economic and socio-political development agenda. The strategic outcome oriented goals are:

  • To facilitate Security of Supply in order to support sustainable economic development in South Africa ;
  • To facilitate investment in infrastructure in the energy industry to support sustainable economic development in South Africa ;
  • To promote competitive and efficient functioning of the energy industry in order to sustain economic development in South Africa ;
  • To facilitate affordability and accessibility in the energy industry to balance economic interests of all stakeholders in support of economic development of South Africa and a better life for all;
  • To position and establish NERSA as a credible and reliable regulator in order to create regulatory certainty .


5.2. NERSA’s Strategic Objectives


The strategic objectives of NERSA, expressed as the desired end state of the energy industry are stated as follows:

  • A Regulatory environment that facilitates investment in energy infrastructure;
  • Ensuring energy supply that is certain and secure for current and future user needs;
  • Ensure that fair competition exists within the energy industry;
  • Ensure that regulatory certainty exists within the energy industry;
  • Ensure that energy is accessible and affordable for all citizens; and
  • Ensure that NERSA is established and positioned as a credible and reliable regulator.


5.3. Programmes


In order to achieve its outcome oriented goals, NERSA will deliver on its strategic objectives through the following structured programmes:

  • Setting and/or approving tariffs and prices;
  • Licensing and registration;
  • Compliance monitoring and enforcement;
  • Dispute resolution including mediation, arbitration and the handling of complaints;
  • Setting of rules, guidelines and codes for the regulation of the three industries; and
  • Establishing NERSA as an efficient and effective regulator.


5.4. Observations and findings


  • Eskom is looking to move towards a longer term in terms of the Multi-Year Price Determination 2 (MYPD2). NERSA would like to proceed with caution as there are still challenges in establishing a longer term commitment.
  • The limitations that exist in terms of withdrawal of licenses in cases of non-compliance, and that for the regulator to do this, they would have to go to court. She noted that the regulator would therefore welcome any legislative amendments that would allow the regulator exert more power in ensuring compliance.
  • Members raised concern that historically disadvantaged individuals (HDIs) are not able to receive storage licenses.
  • In terms of the potential shortage of LPG and the suggested move to a review of methodology, members raised concern in whose favour this methodology would be reviewed.
  • With regard to operator regulation, members voiced concern as to these operators being the ones that dictate to the regulator, who they are to be regulated, noting this as being a point of concern.
  • In terms of the possible shortages of Liquid Petroleum Gas (LPGs), operators are tasked with keeping operating costs low, as well as only charging consumers prices that they can afford.
  • In terms of end-user forums, the Electricity Regulation Act requires all operators in the country to create end-user forums to ensure that operators interact with their customers.
  • In terms of the role of the regulator when municipalities enter into agreements with Independent Power Producers (IPPs), Power Purchase Agreements (PPAs) still need to be entered into and these have to be approved by NERSA.
  • In terms of the risk of the Euro debt default, it will have an effect on the cost of capital, and inevitably the tariffs would then have to be reviewed to cover the shortfall..
  • As far as the discovery of oil in Africa, there is no real effect on prices, rather just a benefit on the continent, but prices tend to stay in line with OPEC regulations.


6. South African National Development Institute


6.1. South African National Development Institute ’s strategic orientated goals


Three (3) strategic orientated goals have been identified for realising South African National Development Institute ’s vision:


6.1.1. Enable well Informed and high confidence energy planning, decision-making and policy development


  • Develop a technical knowledge base of cost effective, proven (low risk) alternative, clean energy solutions and technologies to (1) adequately inform energy planning, policy development and decision-making and (2) enable the country’s transition to a competitive, low carbon economy within the relevant planning horizon*.


6.1.2. Accelerated transformation to a less energy and carbon intensive economy


  • Actively stimulate ‘green’ energy industry development, capacity building, skills development and job creation to support the immediate concern of job scarcity and also support economic development and the critical transformation of the South African economic structure/activities to less energy and carbon intensive activities during the transition period identified by national commitments*.


6.1.3. Foster a culture of greater efficiency and more rational use of energy


  • Actively influence consumer consciousness and behaviour to improve the energy-efficiency of existing economic activity and energy consumption by 10% during the short-term (period of supply constraints) and to contribute to achieving a energy resource efficient society (described by energy intensity levels on par with international benchmarks) in the medium to long term (2020).


6.2. Thematic areas of the SANEDI


6.2.1. Working for Energy

The Working for Energy Programme, is the Energy Provision from a diversity of renewable energy sources, Skills Development in the new and renewable energy space and research into sustainable new and renewable energy options were key areas in the programme. The strategic outputs of the programme are: a demonstrated increase in employment levels within participating communities; rural clean energy production and provision and demonstrated energy management opportunities.


6.2.2. Energy Mobility and Green Transport

Mr Derek Batte, Senior Manager: SANEDI said that a new business development unit had been set up and SANEDI had developed a strong partnership with the IDC. A contract with the Korean Institute of Development Strategy existed, where they were helping to fund the knowledge transfer. Some of projects did not reach their full potential and puts finances at risk. SANEDI’s role include supporting the New Growth Path through the creation of sustainable green jobs in the energy sector; supporting the implementation of cleaner energy technologies as part of South Africa’s commitment to lower carbon in the future and ensuring the diversification of energy supply through implementation of programmes targeting decentralized energy systems.


6.2.3. Planning for Smart(er) Grid

SANEDI explained that an opportunity exists for South Africa to improve service delivery and address the performance and electricity distribution related infrastructure backlogs of the 174 municipalities and Eskom Distribution, in a standardized holistic manner. SANEDI clarified that a Smarter Grid is the integration of two infrastructures, the electrical infrastructure and the information and the telecommunications infrastructure. The key tradition grid challenges are in the areas of: operations transformation; participatory network; passive persistence and constrained choice. The secondary benefits of the Smarter Grid includes better budgeting, expenditure and cash-flow management of municipalities and better electricity prices over the long term.


6.2.4. Clean Energy Solutions

SANEDI outlined the case for renewables; the drivers for the use of Renewable Energy and the characteristics of Renewable Energy Technologies. The Renewable Energy resources are that: South Africa (SA) has a reasonable wind energy resource, geographically dispersed which allowed for security of supply; SA has a world-class wave energy resource; SA has one of the best solar regimes in the world; SA biomass and hydro energy resources are restricted due to limited water and energy from waste was more readily available and exploitable


6.2.5. Advanced Fossil Fuel Use: briefing

SANEDI said that South Africa (SA) is 70% reliant on Fossil Fuels and the principles behind the operation are to extract Carbon Dioxide (CO 2 ) from Fossil Fuel use and inject CO 2 back into geological formations. The coal road map, which is a joint venture with the Department of Energy looks at coal usage over the next three decades. Carbon capture storage and the reason for it were explained. The four stages of Carbon capture from the source were: CO 2 capture and separation plant; CO 2 compression unit; CO2 transport and CO 2 injection. The permanency stages of trapped CO 2 were: structural trapping; residual trapping; solubility trapping and mineral trapping.


6.2.6. Energy Efficiency

SANEDI said that energy efficiency is an intrinsic part of SANEDI’s overall contribution towards energy development in South Africa as it believes it could add value to this process by addressing the following strategic objectives: energy efficiency tax incentive; energy efficiency awareness; energy efficiency champion; energy efficiency in public buildings; energy efficiency technologies and the Energy Efficiency Research Innovation and Skills Development (EEDSM) Hub. There are increasing problems with liquid fuels and other energy carriers hence SANEDI decided to focus on diversification and conservation within those areas.


6.3. Observations and findings


  • Some members raised concern that they struggled to ascertain what SANEDI’s role should be as it is not so much about the demonstration projects, but about the need to mainstream the technology.
  • According to SANEDI, the Strategic Plans illustrates the technology developed value chain to overcome institutional barriers. There is a lot of expenditure by the public sector but more funding need to come from the private sector.
  • Members emphasised that problems has been identified but implementation is still a concern. Implementation should be jointly and this is why operations are more expensive. This is a time to start acting without being competitive.
  • Members enquired if opportunities exist for some commercialisation to make up for financial shortfalls.
  • Members noted that there is an understanding for the need for an interdepartmental task group around the Smart Grid and members further enquired when a broader forum would be constituted to ensure interaction between the different stakeholders involved with the Smart Grid.




7. Central Energy Fund (CEF) and its subsidiaries


7.1. Central Energy Fund


CEF has reviewed its strategic and mandate issues at a number of strategic workshops. At these workshops the strategic intent for the CEF Group as well as an assessment of critical supporting pillars were defined. This led to a review and rationalisation of the Group and the CEF organisational structure. Structured and deep interventions to re-build the management team have been initiated and a detailed review of all past project activities & lessons learnt has been initiated and is nearing completion. The CEF found that it is necessary to balance social and sustainability issues in project selection and portfolio mix.


7.1.1. Progress on organisational review

• The high capital requirements of energy projects has been identified as a major challenge

• Interactions between CEF and subsidiaries is being strengthened to support sustainability of CEF

• Urgent action is being taken to attract skilled staff for a number of positions


7.1.2. Challenges

• Financial – calls on cash for projects over the next 2 years are high and will put stress on CEF’s cash balances.

• Projects – The focus will be on sustainable renewable energy projects.

• Projects – The solar water heater pilot (SWH) pilot rollout did not achieve the desired results– but currently progress is being made in enhancing the systems and sharpening financial viability of the project.

• Staff – A number of senior skilled staff departed at the end of April 2012

• CEF must establish a pragmatic balance on their dual mandate (developmental & commercial)

• Restructuring of some subsidiaries will result in a positiveimpact on the financial health of CEF


7.1.3. 2012/13 Objectives & KPI’s


Table 9 (below) summarises the objectives of the CEF


Table 9: Objectives of the CEF

To develop a portfolio of projects that will enhance the country’s energy security of supply


To collate and analyse data on hydrocarbons to support policy and strategy to enhance security of supply of hydrocarbon fuels


To develop a portfolio of clean energy and manufacturing projects


To develop education and training programmes that will help change energy utilization behaviours

To design and impelement a range of internal business processes, systems and structures to improve the management and effectiveness of theorganisation


To reorganize the CEF Group and improve accountability


To review past projects so as to develop and implement a robust project management system


To identify, develop and execute viable projects in pursuit of the CEF mandate


To complete an internal resource assessment (skills and funding) to support the development of a new resource allocation plan


To develop and implement guidelines and systems to improve treasury performance


To develop and implement processes and systems to improve oversight of the business

To develop and implement appropriate systems and planning to facilitate the long-term financial sustainability of CEF


Develop a robust 10 year cash flow plan that demonstrates long-term financial sustainability

Source: Presentation document to the PC on Energy, Tuesday 08 May 2012



7.1.4. Observations and findings


  • Members raised concern regarding the resignations of three (3) of the subsidiaries’ CEO’s resigning and the CFO of the CEF, even though CEF is in the process of filling 2 of these posts.
  • Members emphasized that in order for CEF to be successful; its activities need to be streamlined, where an overarching energy vision will be vital.
  • The Carbon Stream Africa (CSA) ended in February 2012.
  • The appropriate skills levels needed by CEF are a challenge.
  • A Project Finance Committee (sub-committee of the CEF Board) has been created to robustly review CEF projects and subsidiary projects requiring CEF funding


7.2. Strategic Fuel Fund


7.2.1. Background

SFF was established in 1965 before the CEF Act came into effect in 1977, where SFF was then brought under the control of the CEF Act as a subsidiary of CEF (SOE) Ltd and became a Section 21 company. The company has oil storage facilities at Milnerton – 39 tanks of 200 000 bbls each with total capacity of 7,8m bbls, and at Saldanha 6 Tanks of 7,5m bbls each with total capacity of 45m bbls.


7.2.2. Mandate and purpose

SFF’s mandate and purpose include the following:

  • To manage strategic crude oil stocks and facilities on behalf of the Government.
  • SFF also stores and manages third party crude oil on a commercial basis in order to fund its mandate.
  • In 2007 the Minister issued a directive to SFF confirming the strategic stockholdings requirements of 10,3millon barrels.
  • In line with the Ministerial directive, all the strategic stock is currently held in Saldanha.


7.2.3. Strategic goals

The strategic goals of the SFF include the follwing:

  • To provide for the country’s strategic crude oil needs as determined by the government from time to time.
  • To lease out storage space that is not utilised for strategic in order to fund SFF’s mandate.
  • To operate SFF in line with best international practice with regard to safety, product quality, protection of the environment and health of the people working in the company.
  • Achieve transformation on a continuous basis through implementation of Employment Equity and Black Economic Empowerment Policies.


7.2.4. Strategic objectives

The strategic objectives of the SFF include the following:

  • Maintenance of quality and quantity of stock stored in our facilities.
  • Maintenance and refurbishment of facilities. A strategy is in place to ensure that the Milnerton Tank Farm is optimally utilized.
  • Promotion of maintenance and safety standards.
  • Utilise best practise in our engagement with third parties.
  • Sound financial management.
  • SFF acknowledges geo-political changes world wide have led to changes in demand and availability of crude oil. As a result, SFF is exploring further growth of its infrastructure so that there is security of supply.
  • SFF is also exploring its capacity response to emergencies that may arise, including the need to increase the strategic stock.
  • As a result, SFF is exploring new sources of crude oil.


7.2.5. Challenges

Challenges include the following:

  • The funding of additional stock and infrastructure.
  • The optimal utilization of the Milnerton Tank Farm for storage.
  • To change the Saldanha – Milnerton pipeline to supply by installing a reverse pump.


7.2.6. Observations and findings

  • Members raised concern that no bitumen is stored by the SFF.
  • Discussions must expedited to address the issue of an additional single buoy mooring.
  • With the current processes of leasing the storage tanks from SFF, BBBEE companies will find it difficult to compete with the international oil companies.
  • SFF leases the space that is not used for strategic stock in the Saldanha Tank Farm to private companies. At the moment the tanks are on empty as the companies have sold their crude oil as a response to the backwardation market. SFF still invoices these companies for the space they have leased as long as their contracts have not expired.  This is in line with the terms of the respective storage contracts.


7.3. Oil Pollution Control South Africa – merged SFF


7.3.1. Overview

The Oil Pollution Control South Africa (OPCSA) provides oil pollution control services to various clients in Saldanha and to the SFF in Milnerton. The OPCSA also provides an environmental liability management service to SFF at Ogies. The OPCSA activities will be merged with SFF during the course of 2012.


7.3.2. Objectives for the 2012/13 financial year

The following are the objectives of the OPCSA for the 2012/13 financial year:

  • Manage SFF Environmental Liability in Ogies, Mpumalanga, by preventing pollution of the aquifers by oil seepage into the surrounding aquifers
  • Provide a Pollution Response Service to SFF
  • Provide a service to existing clients in Saldanha


7.3.3. OPCSA’s interaction with stakeholders


OPCSA’s interaction with its stakeholders include the following:


SFF - Saldanha

OPC has entered into a Service Level Agreement with SFF in terms of which OPC renders preventative pollution control measures to each vessel that loads or discharges its cargo. OPC recovers the full operating cost of Saldanha from SFF.



Manage SFF Environmental Liability in Ogies by Preventing Pollution of the Aquifers by Oil Seepage into the Surrounding Aquifers. In terms of the Service Level Agreement SFF pays

OPC a management fee.



A pollution control agreement between OPC and ChevronSA is in place since September 2003. A revised tariff structure was however negotiated and Chevron is now paying OPC $0,039 per barrel and a minimum pollution control services fee of R134,520 for shipments less than 800 000 barrels.



Also since 1 April 2010, OPC has been providing services to Mercuria in Saldanha Bay on the same basis and under the same terms and conditions as negotiated with Chevron.


Morgan Stanley

As from 1 April 2010, OPC has also been providing services to Morgan Stanley in Saldanha Bay on the same basis and under the same terms and conditions as negotiated with Chevron.


Transnet National Ports Authority - Saldanha

There is an agreement between OPC and TNPA to provide a full time standby service within the port limits of the Saldanha port. TNPA pays OPC a monthly retainer of R170 137.30, excluding value added tax (VAT).


7.3.4. Observations and findings

  • OPCSA is currently in discussions with organisations supporting marine life in order to forge new relationships.
  • OPCSA was involved in handling an oil spill in Saldanha and at Robben Island. OPCSA's work had mostly been limited to Saldanha


7.4. South African Supplier Development Agency


7.4.1. South African Supplier Development Agency ’s mandate

The mandate of the South African Supplier Development Agency (SASDA) is to accelerate progress in the development of Black Suppliers in order to contribute meaningfully to Broad Based Black Economic Empowerment and Economic Growth within the participating Oil Companies and Energy-related State Owned Enterprises .


7.4.2. SASDA’s strategic goals

In executing its mandate, SASDA focuses on the following strategic goals:

  • Establishment of SASDA as the supplier development of choice
  • Development of existing and new black suppliers
  • Establishment of a sustainable Verification Unit
  • To conduct Enterprise Development initiatives as agreed with participating companies


7.4.3. Industry Performance against SLA

Engen, BP, Shell and Chevron have not contributed at all to transformation in the areas where SASDA is involved. Promises were made in terms of the signed SLA’s but nothing happened. SASDA’a attempts to get the companies on board even after engaging their respective CEO’s has proved fruitless.


7.4.3. Challenges

SASDA indicated that the following challenges exist:

  • The Liquid Fuels Charter (LFC) is inadequate for effecting transformation:
    • Makes broad statements of intent without specific indicators for measurement
    • There is no enforcement and/or alignment of the Charter or BB-BEE codes.
  • Charter review of February 2006, the Minister reminded industry that it is far from reaching the LFC target of 25 per cent.
  • In SAPIA’s Annual Report of 2008 :
    • The Minister in her foreword raised concerns that procurement still requires further attention and laments the inaccessibility of oil companies by HDSA’s SMMEs.
    • South African Petroleum Industry Association (SAPIA) Executive Director in his report highlighted meeting LFC procurement targets as a challenge for industry.
  • The Charter’s target of 25 per cent commenced in 2000 and it had to be implemented within 10 years (i.e. by November 2010 ).
    • The target will not be met.
    • Indication of industry’s apathy and possible contempt for the Charter.
  • LFC procurement has been premised on preferential transactions with companies that have 25 per cent ownership irrespective of other BB-BEE elements.
  • The oil industry has opted for narrow based empowerment at the expense of SMME and BB-BEE.
  • Company procurement processes a barrier for effecting the LFC procurement objectives.
  • Lack of a mandate and authority to enforce compliance.
  • Current economic environment has relegated supplier development to the back burner.


7.4.4. Conclusion

  • At the time of the LFC adoption, of the R103 billion spend by industry only R3.9 million (3.8 percent) was attributable to HDSA’s companies.
  • At least 25 percent (R25.7 billion) of total industry procurement spend should be earmarked for HDSA’s companies.
  • Over the 10-year period, the R25.7 billion translates to R257.5 billion that was spent on procurement.
  • It is very unlikely that industry has achieved this expenditure over the 10-year period to November 2010.


7.4.5. Observations and findings

  • SASDA highlighted that there are about 37 companies which they are assisting.
  • Oil companies identify the areas in which they feel there is no black representation and subsequently approach SASDA which in turn identifies companies from its database and then assists the BBBEE companies with the application process.


7.5. Petroleum Agency of South Africa


7.5.1. Strategic role of the Petroleum Agency

The strategic role of the Petroleum Agency of South Africa (PASA) is to contribute to the energy resources of the country by promoting and regulating the exploration and production of the country’s natural oil and gas resources.


7.5.2. Corporate objectives

In terms of PASA’s objectives there is a resource evaluation aspect as well as highlighting the regulating of the upstream petroleum industry to ensure that players complies with permit requirements. The third objective is the preservation of and the access to geo-technical upstream petroleum information, noting that PASA is the agency that possesses the data that various companies seek. PASA is also involved in the shale gas exploitation strategy, and is submitting a report for shale gas exploration that will be submitted to the Minister.


7.5.2. Financials

According to PASA there will be a drastic decrease in the income which is contributed to the ending of the income from permits and licences. PASA’s investment activity would basically be capital expenditure. According to PASA, if funds are not managed effectively, they might run out of funds by 2016.

7.5.3. Observations and findings

  • PASA was not legislatively established, but by ministerial directive.
  • PASA will be able to operate for the next three years out of reserves accumulated.
  • Due to the financial constraints, several projects could not be undertaken e.g. surveys which is very costly.
  • Members urged PASA to develop a funding model.


7.6. Africa Exploration Mining and Finance Company


7.6.1. Africa Exploration and the State’s commitment

The Africa Exploration, Mining and Finance Company (AEMFC) committed itself to supplying thermal coal to Eskom and to create jobs for local residents in particular. AEMFC also commits itself to set an example as a state owned entity in matters of environmental responsibility and labour practices and further to support the drive to promote skills.


7.6.2. Achievements

AEMFC highlighted some of its achievements, namely the sales revenue of R87.2 million at the end of the last financial year. AEMFC further made reference to the 200 people employed on the Vlakfontein mine to ensure that the local community is employed. The AEMFC pointed out He also noted that production volumes had been exceeded in eight months.


7.6.3. Challenges

AEMFC made reference to the challenges that arose as a result of the delay in signing the agreement with Eskom that led to AEMFC's not being able to sell enough coal. AEMFC also made reference to the challenge gender representation at board and senior management level, and assured the Committee that everything was being done to remedy the situation.


7.6.4. Observations and findings


  • Even though the AEMFC is still a subsidiary reporting to the Central Energy Fund, the aim is that they will, in the near future, be moving to the Department of Mineral Resources.
  • Members voiced their dissatisfaction to the fact that the AEMFC has only made available three bursaries.


7.7. PetroSA


7.7.1. PetroSA on the Outlook 2012 – 2016

PetroSA highlighted that their outlook was pursuant of the group’s growth objectives. PetroSA pointed out that the problem of a depleting feedstock as well as the constraints created by the size/market share, limits PetroSA’s role in industry transformation. PetroSA further plans to increase its market share of SA liquid fuels to 25%, with a sizeable gas and crude oil reserve base by 2020, amongst other goals, namely the commitment to being an environmentally responsible organisation.


7.7.2. Strategic objectives

The group’s strategic objectives are to be sustainable, commercially competitive, fully integrated, be a National Oil Company that supplies at least 25 per cent of South Africa’s liquid fuel needs by 2020


PetroSA indicated that the group sees its role as a National Oil Company as being pivotal to the growth of not only the country, but also the region.

7.7.3. PetroSA’s Vision 2020

PetroSA stated that in terms of the group’s Vision 2020, PetroSA purports to be fully integrated by 2020 and be an internationally reputable oil company. PetroSA pointed out that the entry into the downstream market will be critical in increasing its productivity and bring PetroSA closer to their goal of being sustainable.


PetroSA further made reference to the introduction of Project Mthombo and the very positive effect that this is expected to have in ensuring optimal performance. The gas discoveries in Mozambique have also been noted as being a key factor in said objective and that there are plans to secure access to these reserves.


PetroSA, however voiced concern with the high reliance on importation to cover the deficit that the country will be under in future years. PetroSA highlighted the point that over-reliance on imports is that the country will lose out on the benefits of manufacturing of a barrel of oil that stem from the other spin-off industry gains. This lack of involvement in the value chains of these industries will be an injustice to the country and a limitation on job creation.

PetroSA reiterated the group’s desire to grow the company to a fully integrated and sustainable entity, and that underpinning this would be a commitment to transformation objectives. PetroSA stated that the oil industry has been a male dominated industry and that PetroSA is committing itself to changing this and ensuring that women enjoy more inclusion in this industry. In terms of women inclusion in the workforce of PetroSA, there is 79 percent black representation, and of that 29 per cent being women. She noted that there is a commitment of having 35 percent female representation in 5 years, noting the growth from 26 percent in 2010, to 29 percent in 2012.

PetroSA is committed to its transformation goals and noted that there are various initiatives that have been specially designed to attract females to the industry. PetroSA noted that currently 11 bursaries have been awarded to CPUT students that are disabled, in the hope to bridge the gap that exist in terms of representation in this regard, in the industry.

PetroSA, then made reference to its continued commitment to exploration, noting that the risks are high, however the returns are even greater. Steps are being taken to limit the risk being incurred by PetroSA by entering into partnerships for the purposes of exploration.


PetroSA also spoke about the desire to bring into the industry, LNG (Liquefied Natural Gas), to be a key player in the industry, and noted the future plans also to invest in Shale Gas. PetroSA highlighted that the income stream for Project Mthombo is expected to come in around 2020.


PetroSA pointed out that for the past 10 years; they have been a R1 billion profit company for the most part. The expected decrease in profits for the following financial year, is due to the depletion of PetroSA’s feedstock, as well as the planned shut-down which will have this effect as PetroSA has a single source of income. This financial year (2012/13) is also noted to be the year when Project Ikhwezi is expected to enter into the business of PetroSA. The subsequent financial years indicate an expected increase in profits that will be due to the returns that are expected from the said initiatives.

7.7.4 Observations and findings

  • Members noted that they are encouraged by the stance taken by PetroSA in terms of project Mthombo. Members commented on the need that exists in real investments in refineries as it helps to ensure that downstream opportunities are exploited.
  • Members voiced concern with the reliance on the Sasol pipeline in transporting natural gas from Mozambique
  • Ikhwezi project has several components to it; the drilling of 5 horizontal wells; the building of a 40 km pipeline offshore; minor modifications to the current FA platform offshore. The drilling was on a discovered field.
  • In terms of the gas market, members noted that gas will be a major player in the Southern African region.
  • R efinery capacity figures are very low and this is evidenced by the volumes being imported, therefore infrastructure development becomes necessary.
  • On the issue of storage, infrastructure thereof will be needed.
  • Members voiced concern as to the issue of transformation and that the figure of 35 percent is not satisfactory. However, members were satisfied that the transformation initiatives were focussing particularly on women.
  • Members requested PetroSA to be as comprehensive as possible when making presentations for the purposes of effective assessment.
  • Members noted that he anticipated that PetroSA would share with the committee their environmental plans and how they intend to reduce their carbon footprint.
  • The committee further raised concern regarding the high number of temporary employees.


8. Conclusion


The Portfolio Committee on Energy will continue to fulfil its Constitutional mandate. It is guided by the Parliamentary rules in conducting the oversight on the functioning of the Department of Energy. This is done to ensure proper and effective functioning and compliance with the legislation and policies requirements.


9. Recommendations


Having considered the strategic plan and Budget Vote of the Department and Energy and the strategic plans of the entities reporting to the Department of Energy, the Portfolio Committee on Energy recommends that the House supports the Budget Vote 29: Energy and further recommends as follows:


9.1. The Minister of Energy should consider discussing, with the Minister of Finance, the risk of reducing the budgets of the National Nuclear Regulator and the Nuclear Energy Corporation of South Africa in the face of the New Nuclear Build Programme.

9.2. The Minister of Energy should consider expediting the introduction of bills amending legislations such as the Electricity Regulation Act, the National Energy Regulator Act and the Petroleum Products Act to Parliament.

9.3. The Minister of Energy should consider initiating extensive engagements with the Minister of Cooperative Governance and Traditional Affairs, the Minister of Finance, and the South African Local Government Association to address the removal of obstacles to an enhanced rolling out of free basic electricity and free basic alternative energy.

9.4. The Minister of Energy should take reasonable steps to ensure that the mandate of the National Energy Regulator of South Africa is restructured such that it extends beyond regulating the electricity sector, petroleum pipeline and piped gas.

9.5. The Minister of Energy should, as a matter of urgency and in partnership with the relevant departments, address the growing challenges in the electricity distribution industry – particularly the electricity infrastructure which is deteriorating at a fast rate.

9.6. The Minister of Energy should take reasonable steps to ensure National Nuclear Regulator and the Nuclear Energy Corporation of South Africa are preparing for their roles and contribution on the New Nuclear Build Programme.

9.7. The Minister of Energy should address the pending retrenchment of staff in the Nuclear Energy Corporation of South Africa with the aim of averting it as much as is practically possible and as a matter of urgency.

9.8. The Minister of Energy should ensure that the reporting formats of entities are as uniform as possible.

9.9. The Minister of Energy should ensure that the National Energy Regulator of South Africa submits to Parliament a report on the activities of end-user forums within three months after the adoption of this Report by the House.

9.10. The Minister of Energy should explore possible commercialisation of some of the divisions or units of the South African National Energy Development Institute to compensate for financial shortfalls.

9.11. The Minister of Energy should ensure appropriate policy and legislative development to facilitate introduction of the Smart Grid.

9.12. The Minister of Energy should ensure that the National Energy Regulator of South Africa submits to Parliament a list of licensees who are non-compliant within three months after the adoption of this Report by the House.

9.13. The Minister of Energy should consider initiating legislative amendments such that the National Energy Regulator of South Africa will have requisite powers and authority to enforce compliance.



Report to be considered.



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