ATC130510: Report of the Portfolio Committee on Energy on the Strategic Plan 2012/13 – 2016/17, Annual Performance Plan and Budget Vote No. 29 of the Department of Energy, dated 07 May 2013

REPORT OF THE PORTFOLIO COMMITTEE ON ENERGY ON THE STRATEGIC PLAN 2012/13 – 2016/17, ANNUAL PERFORMANCE PLAN AND BUDGET VOTE NO. 29 OF THE DEPARTMENT OF ENERGY, DATED 07 May 2013

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 outcome 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, to the Portfolio Committee on Energy (the Committee) on 28 March 2013.

In compliance with the referral by the National Assembly, the Committee held a budget vote briefing on 16 April 2013 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 Entities 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);
• Africa Exploration Mining and Finance Company;
• 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 – 2016/17 period, Annual Performance Plan and Budget Vote. The Committee further scheduled briefings by the various entities on their strategic plans and annual performance plans.

1.5. 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. Department of Energy

2.1. Strategic Plan

The strategic plan of the Department of Energy covers a period of five years and is done in terms of the Outcomes Based Approach which is adopted by government in 2010. The new strategic plan published by the DoE covers the period 2012/13 to 2016/17. The DoE implemented a Monitoring and Evaluation (M&E) system and M&E foundational documents had been created, which include included monitoring and evaluation frameworks, policies and procedures, quarterly reporting templates and improvement plan templates.

A Risk Management structure, which includes a fraud prevention strategy, in line with section 38 of the PFMA is put in place to ensure that an effective and efficient risk management system and good governance is maintained, monitored and evaluated on a regular basis. The Department reviewed its Strategic Plan to align it with frameworks to illustrate alignment of goals with agreements and provide for additional outputs. Cabinet had adopted an infrastructure plan consisting of 18 Strategic Integrated Projects (SIPs) of which the Minister of Energy chairs one of the projects; co-chairs two projects; participates in 10 projects; and has observer status in five projects.

Seven Strategic Outcomes-Oriented Goals

For the period under review, the DoE had the following strategic outcomes and goals:
Security of supply - to ensure that energy supply is secure and demand is well managed;

• In terms of infrastructure - to facilitate an efficient, competitive and responsive energy infrastructure network;
• Regulation and Competition - to ensure that there is improved energy regulation and competition.
  Universal access and transformation - to ensure that there is an efficient and diverse energy mix for universal access within a transformed energy sector;
• Environmental assets - to ensure that environmental assets and natural resources are protected and continually enhanced by cleaner energy technologies;
• Focus on climate change - to implement policies that adapt to and mitigate the effects of climate change; and
• Enhance corporate governance - to implement good corporate governance for effective and efficient service delivery.

The Acting COO of the DoE, Mr Lucas Mulaudzi, presented the Committee with the 2013/14 Budget Vote theme of the DoE. The briefing basically comprised of the DoE’s key and focus areas over the medium term and especially in 2013/14.

The DoE would focus on the implementation of the Integrated Resource Plan (IRP 2010) and in response to the National Development Plan, the DoE is going to ensure that SA had an adequate supply of electricity and liquid fuels by 2025 and that 98% of the population has access to grid and non-grid electricity.

Mr Mulaudzi said that gas and other renewable resources would make out 20 000 MW of the additional 45 000 MW needed by 2030. With the introduction of Independent Power Producers (IPPs), the proposed Independent System Market Operator (ISMO) Act is going to make a significant contribution in ensuring security of electricity supply as envisaged by the IRP 2010.

In line with DoE’s previous year’s commitments and Annual Performance Plan, the DoE had finalised the data collections and energy modelling which are essential elements of developing the Integrated Energy Plan (IEP). The Department would table the draft IEP Report in Cabinet at the end of 1st quarter of 2013/14 financial year. Once this is approved, DoE would release the document for public comments and consultation during the first three quarters of the financial year. The Department is to enhance the draft IEP by incorporating all comments before tabling the final IEP in Cabinet for adoption.

The Committee was informed that the second window of the Renewable Energy Independent Power Producer Programme (RE-IPPP) is to reach financial close at the end of April 2013 and it represented approximately 1200 MW of renewable energy capacity, an estimated investment value of R28 billion. Window Three which totalled about 1000 MW and is the last window of the DoE’s August 2011 renewable energy allocation of 3600 MW is now open for bidding, and is expected to close in August 2013. This would include a concentrating solar power allocation.

The focus over the medium term is to be on expanding the Integrated National Electrification Programme (INEP) to increase the number of household connections to the grid. DoE is to promote Energy Efficiency and Conservation through the expansion of the Solar Water Geyser Programme. The focus would be to increase access to modern energy sources implemented by Eskom and Municipalities, to reach a target of electrifying 645 000 households by 2015/16. The Department is also going to provide support to Local Government and Municipalities to address challenges experienced in the provision of electricity.

The technical studies for the Liquefied Natural Gas (LNG) Import Projects are expected to be completed during the financial year. The feasibility and front end engineering and design studies for the Mthombo Project are expected to be advanced during the year. The South African National Energy Development Institute (SANEDI) is to continue to ensure that effective internal systems and process are implemented to ensure energy efficiency in the South African economy. The implementation of the Shale Gas investigation work plan is to be started by SANEDI during the 2013/14 financial year. The South African Nuclear Energy Corporation (NECSA) is to continue with its programme to establish Low enriched Uranium fuel and target plate fabrication capabilities. Investigations for the replacement of the SAFARI-1 are expected to continue during the financial year.

With regard to international relations, the strategic focus would be on the promotion of energy security, securing of resources for human and technical support in the energy sector, capacity building in scarce and critical skills, technology transfer, industrialisation and job creation. The DoE would embark on a number of international engagements to find solutions to energy challenges and to explore funding opportunities that could be made available to South African investors in the energy sector. The DoE's engagement and participation in climate change would continue to direct and advocate for South Africa’s role in the SADC and the African Continent at large on issues of energy.

The Department stated that in order to achieve its developmental goal, the DoE is also going to continue to focus on its internal capacity, enabling it to carry out its mandate. One of these was to ensure that all funded and approved staff positions were supposed to have been filled by September 2012. The DoE would also commence operations based on the approved organisational structure in 2013.

2.2. Budget Vote No 29

The Departmental budget has decreased from R6.734 billion in 2012/13 to R6.598 billion in 2013/14 financial year.

The substantial share of this budget amounting to R3.9 billion is appropriated to the Electrification and Energy Management Programme. This is followed by the Clean Energy Programme with R1.6 billion. The Nuclear Energy Programme received an allocation of R710 million. Energy Regulation, Energy Policy and Planning as well as Administration Programmes received the lowest Departmental budget allocations of R50 million, R51 million and R221 million respectively. As can be seen in the table below, allocation to the energy policy and planning programme has decreased substantially (it has decreased by almost 97%). Similarly, allocation to the Administration programme has decreased by 14% in real terms. Reasons for the increase or decrease in the budget are articulated in programme analysis in section 2.3 below.

The Department’s focus over the medium term will be expansion of the electrification programme, with ninety three percent of the Department’s budget transferred to the implementing Municipalities, agencies and the state owned company, Eskom.

Table 1: Budget Allocations – Energy

Programme	Budget				Nominal Rand change	Real Rand change	Nominal % change		Real % change
R million	2012/13	2013/14	2014/15	2015/16	2012/13-2013/14		2012/13-2013/14
Administration	242.4	221.0	230.4	239.6	- 21.4	- 33.1	-8.83 per cent	-13.66 per cent
Energy Policy & Planning	1 570.2	51.2	53.4	51.5	- 1 519.0	- 1 521.7	-96.74 per cent	-96.91 per cent
Energy Regulation	18.5	49.7	52.0	47.0	31.2	28.6	168.65 per cent	154.40 per cent
Electrification & Energy Programme Management	3 170.0	3 942.8	4 224.5	5 916.9	772.8	563.7	24.38 per cent	17.78 per cent
Nuclear Energy	643.0	710.0	657.0	679.5	67.0	29.3	10.42 per cent	4.56 per cent
Clean Energy	1 090.3	1 623.6	1 997.3	1 036.0	533.3	447.2	48.91 per cent	41.02 per cent
TOTAL	6 734.4	6 598.3	7 214.6	7 970.5	- 136.1	- 486.0	-2.02 per cent	-7.22 per cent

Source: National Treasury (2013) – Vote 29 Energy.

2.3 Programme Analysis

In the 2012/13 financial year, the Department’s structure consisted of five programmes. However, in the 2013/14 financial year, the Department is composed of six programmes, namely; Administration, Energy Policy and Planning, Energy Regulation, Electrification and Energy Management Programme, Nuclear Energy and Clean Energy. It must be noted that the Clean Energy Programme, which is a sub-programme of the ‘Energy Regulation Programme’, has been added as a stand-alone Programme, hence six programmes in the 2013/14 financial year.

Programme 1: Administration

The Administration programme provides strategic support and management services to the Ministry and the Department. The Administration programme is divided into six sub-programmes.

The budget decreased by R33.2 million (13.7 percent in real terms) from R242.4 million in 2012/13 to R221.0 million in the 2013/14 financial year. The reason for the decrease in expenditure is due to the once-off allocation for expenditure associated with the relocation of the Department in 2012/13, as well as lower legal and audit costs in the Finance Administration and Audit Services sub-programmes.

The largest share of the budget amounting to R73.3 million is appropriated to Corporate Services. However, the allocation has decreased from the previous year by almost 25 percent. There is also a large increase in allocation to the Departmental Management sub-programme, an increase of 29 percent when taking inflation into account. As can be seen in the table below, the allocation to other sub-programmes has decreased.

Table 2: Administration sub-programmes

Sub-Programme	Budget		Nominal Increase / Decrease in 2013/14	Real Increase / Decrease in 2013/14	Nominal Percent change in 2013/14	Real Percent change in 2013/14
R million	2012/13	2013/14
Ministry	21 926.0	23 827.0	1 901.0	637.4	8.67 per cent	2.91 per cent
Departmental Management	33 242.0	45 375.0	12 133.0	9 726.8	36.50 per cent	29.26 per cent
Finance Administration	49 573.0	37 014.0	- 12 559.0	- 14 521.9	-25.33 per cent	-29.29 per cent
Audit Services	9 444.0	5 364.0	- 4 080.0	- 4 364.5	-43.20 per cent	-46.21 per cent
Corporate Services	92 325.0	73 369.0	- 18 956.0	- 22 846.8	-20.53 per cent	-24.75 per cent
Office Accommodation	35 927.0	36 009.0	82.0	- 1 827.6	0.23 per cent	-5.09 per cent
TOTAL	242 447.0	220 958.0	- 21 489.0	- 33 206.5	-8.9 per cent	-13.70 per cent

Source: National Treasury (2013) – Vote 29 Energy.

Programme 2: Energy Policy and Planning

The objective of the Energy Policy and Planning programme is to ensure evidence based planning, policy setting and investment decisions in the energy sector to improve security of energy supply, regulation and competition. The programme is divided into four sub-programmes.

The budget for this programme decreased by R 1.521 billion (97 percent in real terms) from R1.570 billion in 2012/13 to R51.1 million in the 2013/14 financial year. The decrease in expenditure in this programme can be attributed to the fact that the construction of the National Multi-Products Pipeline by Transnet is close to completion. The pipeline will secure the supply of petroleum products to the inland markets over the long term. Expenditure in the Hydrocarbon Policy sub-programme has decreased by 99 percent in real terms, as a result of the discontinuation of transfers to Transnet.

The largest share of the budget amounting to R22.5 million is appropriated to the Energy Planning sub-programme. Allocation to other programmes has decreased in the 2013/14 financial year.

Table 3: Energy Policy and Planning sub-programmes

Sub-Programme	Budget		Nominal Increase / Decrease in 2013/14	Real Increase / Decrease in 2013/14	Nominal Percent change in 2013/14	Real Percent change in 2013/14
R million	2012/13	2013/14
Policy Analysis and Research	15 365.0	8 596.0	- 6 769.0	- 7 224.8	-44.05 per cent	-47.02 per cent
Energy Planning	15 640.0	22 556.0	6 916.0	5 719.8	44.22 per cent	36.57 per cent
Hydrocarbon Policy	1 529 980.0	12 691.0	-1 517 289.0	-1 517 962.0	-99.17 per cent	-99.21 per cent
Electricity and Alternative Energy Policy	9 188.0	7 313.0	- 1 875.0	- 2 262.8	-20.41 per cent	-24.63 per cent
TOTAL	1 570 173.0	51 156.0	-1 519 017.0	-1 521 729.8	-96.7 per cent	-96.91 per cent

Source: National Treasury (2013) – Vote 29 Energy.

Programme 3: Energy Regulation

The Energy Regulation programme manages the regulation of petroleum and petroleum products to ensure the optimum and orderly functioning of the petroleum industry to achieve government’s development goals. The programme is divided into three sub-programmes.

The budget for this programme increased from R18.5 million in 2012/13 to R49. 7 million in the 2013/14 financial year. The reason for the increase can be attributed to the fact that the sub-programme has been newly established and its personal capacity still needs to be built. The Petroleum Pricing sub-programme received the biggest share of the budget, from R2.4 million in 2012/13 to R21.3 million in the 2013/14 financial year. Expenditure in the Petroleum Compliance sub-programme has also increased from R2.6 million in 2012/13 to R14.8 million in the 2013/14 financial year. This increased spending will go towards, amongst other things, strengthening monitoring to ensure compliance with the Petroleum and Liquids Fuels Charter and with the relevant legislation.

Table 4: Energy Regulation sub-programmes

Sub-Programme	Budget		Nominal Increase / Decrease in 2013/14	Real Increase / Decrease in 2013/14	Nominal Percent change in 2013/14	Real Percent change in 2013/14
R million	2012/13	2013/14
Petroleum Compliance	2 697.0	14 876.0	12 179.0	11 390.1	451.58 per cent	422.33 per cent
Petroleum Licensing and Permitting	13 423.0	13 517.0	94.0	- 622.8	0.70 per cent	-4.64 per cent
Petroleum Pricing	2 429.0	21 330.0	18 901.0	17 769.9	778.14 per cent	731.57 per cent
TOTAL	18 549.0	49 723.0	31 174.0	28 537.2	168.1 per cent	153.85 per cent

Source: National Treasury (2013) – Vote 29 Energy.

Programme 4: Electrification and Energy Programmme Management

The Electrification and Energy Management Programme manages, coordinate and monitor programmes and projects focused on access to energy. The programme is divided into five sub-programmes. This programme has received the largest share of the Departmental budget.

The budget allocation for this programme has increased from R3.1 billion in 2012/13 to R3.9 billion in the 2013/14 financial year. The programme is divided into five sub-programmes. As can be seen in the table below, there is a significant increase in budget allocation in all sub-programmes. Some of the reasons cited for the increase in budget allocation in this programme are as follows:

• The expansion of the electrification programmes being implemented by Eskom and Municipalities,
• The establishment of the programme and projects management office and the Independent Power Producers unit within the Electricity Infrastructure/industry Transformation sub-programme. As a result, this programme is committed to electrify 645 000 households by 2014/15 and support 9 Municipalities facing serious electricity provision challenges.

Table 5: Electrification and Energy Programme Management sub-programmes

Sub-Programme	Budget		Nominal Increase/ Decrease in 2013/14	Real Increase/ Decrease in 2013/14	Nominal Percent change in 2013/14	Real Percent change in 2013/14
R million	2012/13	2013/14
Integrated National Electrification	3 145 451.0	3 890 235.0	744 784.0	538 483.7	23.68 per cent	17.12 per cent
Energy Regional Office	17 981.0	25 995.0	8 014.0	6 635.5	44.57 per cent	36.90 per cent
Programme and Projects Management Office	2 743.0	13 882.0	11 139.0	10 402.8	406.09 per cent	379.25 per cent
Electricity infrastructure/Industry Transformation	0.0	7 685.0	7 685.0	7 277.5	0	0
Community Upliftment Programme and Projects	3 808.0	4 972.0	1 164.0	900.3	30.57 per cent	23.64 per cent
TOTAL	3 169 983.0	3 942 769.0	772 786.0	563 699.8	24.4 per cent	17.78 per cent

Source: National Treasury (2013) – Vote 29 Energy.

Programme 5: Nuclear Energy

Nuclear Energy manages the South African nuclear energy industry and control source and special materials in terms of international obligations, nuclear legislation and policies to ensure the peaceful use of nuclear energy.

The budget allocation for this programme has increased by R29.3 million (5 percent in real terms) from R642. 9 million in 2012/13 to R709. 9 million in the 2013/14 financial year. As can be seen in the table below, there is a significant percentage increase in budget allocation in all sub-programmes, apart from the Nuclear Safety and Technology which just keeps pace with inflation. Some of the reasons cited for the increase in budget allocation in this programme are as follows:

• Establishment of the National Radioactive Waste Disposal Institute in 2013/14
• Payment of International Atomic Energy Agency membership fees

Spending in this programme is dominated by transfers to the nuclear Departmental agencies, such as the South African Nuclear Energy Corporation and the National Nuclear Regulator. The South African Nuclear Energy Corporation receives an additional allocation of R14.2 million in 2013/14, bringing its annual transfer to R502.7 million for current expenditure. This increase, however, is not enough to keep pace with inflation. The National Nuclear Regulator receives R116.9 million over the medium term, which includes a once-off allocation of R17 million to cater for the emergency preparedness centre, as well as an ICT infrastructure upgrade.

Table 6: Nuclear Energy sub-programmes

Sub-Programme	Budget		Nominal Increase / Decrease in 2013/14	Real Increase / Decrease in 2013/14	Nominal Percent change in 2013/14	Real Percent change in 2013/14
R million	2012/13	2013/14
Nuclear Safety and Technology	637 624.0	693 280.0	55 656.0	18 891.2	8.73 per cent	2.96 per cent
Nuclear Non-proliferation and Radiation and Security	3 284.0	7 874.0	4 590.0	4 172.4	139.77 per cent	127.05 per cent
Nuclear Policy	2 070.0	8 838.0	6 768.0	6 299.3	326.96 per cent	304.31 per cent
TOTAL	642 978.0	709 992.0	67 014.0	29 362.9	10.4 per cent	4.57 per cent

Source: National Treasury (2013) – Vote 29 Energy.

Programme 6: Clean Energy

Clean Energy programme manages and facilitates the development and implementation of clean and renewable energy initiatives as well as energy efficiency and demand side management initiatives. This programme is divided into three sub-programmes. As indicated earlier, this is a new programme; it was a sub-programme under Energy Regulation Programme.

The budget for this programme increased from R1 billion in 2012/13 to R1.6 billion in the 2013/14 financial year. Energy Efficiency and Renewable Energy sub-programmes received a biggest share of the budget, R1.4 billion and R140.7 million respectively. Climate Change and Designated National Authorities sub-programme received R3.3 million.

Table 7: Clean Energy sub-programmes

Sub-Programme	Budget		Nominal Increase / Decrease in 2013/14	Real Increase / Decrease in 2013/14	Nominal Percent change in 2013/14	Real Percent change in 2013/14
R million	2012/13	2013/14
Energy Efficiency	1 025 753.0	1 478 285.0	452 532.0	374 138.1	44.12 per cent	36.47 per cent
Renewable Energy	61 217.0	140 786.0	79 569.0	72 103.1	129.98 per cent	117.78 per cent
Climate Change and Designated National Authorities	3 378.0	4 503.0	1 125.0	886.2	33.30 per cent	26.23 per cent
TOTAL	1 090 348.0	1 623 574.0	533 226.0	447 127.4	48.9 per cent	41.01 per cent

Source: National Treasury (2013) – Vote 29 Energy.

2.4. Observations and findings

• The Department established an Independent Power Producers (IPP) Unit within the Department. The IPP unit seeks to assist the Minister to ensure that procurement processes is transparent and credible and especially on issues of risk mitigation.
• Various other countries are involved in the Grand Inga Project, i.e. Zambia, Angola, Zimbabwe and South Africa, and collaboration between the different countries will be crucial for the project’s success. The DoE is currently working on a treaty to ensure that there is a transmission network. The cost of the contract is around R200 billion.
• On internal capacity, the Department indicated that this was also an issue which the Auditor-general raised as a concern, however the Department had several engagements with the National Treasury to ensure that maximum impact and capacity is realized.
• The Integrated Energy Plan (IEP) looks at the total energy sector, including, liquid fuels master plan, gas master plan, infrastructure plan and Integrated Resource Plan (IRP) etc. The IEP will be finalised by the end of the year.
• Municipalities which lack the necessary resources are unable to provide the services required by the communities. The Department is planning to work closely with Municipalities and where needed, the assistance of external consultants will be sought e.g. Institute of Directors to assist with this.
• Refineries produce different chemicals that are used in other industries, hence the need to maintain the refinery industry of SA.
• On the Regulatory accounting system, the process has started some time ago and it will be completed this year. The Regulatory accounts were formed and the technical principles and framework was discussed. The DoE was trying to ensure that there was no cross subsidization between retail, wholesale and other parts of the value chain.
• The Department received more than 11 000 applications for licensing as service stations change hands often. When somebody applies not all the information is supplied and this slows down the process.
• With regard to deregulation of fuel, the White Paper on energy policy highlights milestones, but what will be crucial is whether or not this will benefit SA.
• For SA to replace electricity with Liquid Petroleum Gas (LPG), it will not be viable at this stage as SA has limited gas, and the alternative would be to import.
• The Department was looking at the national response to climate change and the National Development Plan (NDP) to inform the IRP and the Integrated Energy Plan (IEP).
• The Department acknowledged that they are moving slowly with regard to the SA Renewables Initiative (SARi) due to issues relating to the Industrial Policy Action Plan (IPAP) and PFMA. National Treasury is also in the process of finalizing the financial model. Countries have their own conditions and these have to be addressed. Localization is also on the table. Once the finance model is agreed upon, the Department can proceed with which projects to undertake.
• There is a backlog of 3.4 million households which do not have electricity.
• R933 million is available to businesses offering services in the energy sector. It is open to all businesses operating within the energy sector.
• The Department has created a forum with the different SOEs (who report to the Department) where issues of training initiatives is identified, but this is still work in progress.
• The Department of Energy is represented on the boards of both the Energy SETA and the CHIETA.
• On the nuclear built programme, the Department highlighted that the only decisions currently expected from Cabinet had to do with what kind of procurement framework would be used and how was it going to be finalised.
• The Committee emphasized that the energy sector requires a lot of long-term planning.
• Members pointed out that private sector participation need to be looked into and some research into how the participation could be improved need to be assessed.
• Members notes how the Strategic Plan of the Department had taken an outcomes based approach, which is actually enhancing the oversight work of the Committee

3. National Nuclear Regulator (NNR)

3.1. Background

According to the NNR, they adhere to the New Growth Path through advancing the transformation agenda by capacitating & employing young nuclear scientists and engineers from previously disadvantaged groups. Also, central to the new growth path is a massive investment in infrastructure as a critical driver of jobs across the economy; and one of the ways that the NNR is making investments in communication technologies is through the upgrade of the Emergency Control Center that will enable real-time communication, monitoring and coordinating of national processes in times of nuclear emergencies.

Due to its mandate, the NNR’s contribution to the Industrial Policy Action Plan (IPAP) is in ensuring a safe and responsible implementation of the action plan, particularly in areas that relate to operations that potentially pose nuclear and radioactive waste hazards.

The NNR’s strategic outcome objectives entail the following:

• 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
• Ensure effective Human Capital Management

3.2. Risk Management

A risk assessment is conducted on an annual basis on the strategy and all aspects of operations. The organisational risk level was determined to be at level 3, which is a level higher than what was anticipated. This is a positive observation as it reflects that the NNR continues to monitor and manage this risk. Having stated that, there are specific areas of risk that are worth monitoring more keenly.

3.3. Financial Viability and sustainability

The NNR faces a risk of 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 financial model has been revised to counteract this risk with the expectation that it will serve as an effective mitigation.

3.4. Business Revenue

The authorisation fees of the Regulator has been growing at an average of 4% over the past 4 years and it is expected to increase from R102 million (2012/13) to R141 million (2015/16) at an average rate12% per annum. The Regulator has embarked on a process of developing an adequate funding model and the draft as approved by the Board, proposes that the State contributes 32% for the Regulator’s operations while the industry carries the remaining 68%. The final model would determine the future funding trajectory of the Regulator.

3.5. Government grant

The government grant has been on the decline by about 29% per annum until 2011/12 financial year where the continuous operations of the Regulator were threatened by the lack of funding. The allocation is projected to grow by an average of 2% in the next three financial years. This growth is boosted by an additional funding of R17 million that was allocated to capital projects for the 2013/14 financial years. The projects involve the establishment of a fully-fledged Emergency Control Centre and provision of adequate accommodation at the NNR’s Cape Town offices.

3.6. Head quarters building

The move of the Regulator Head Quarters to the new building during the past financial year is starting to yield marginal savings on facilities maintenance costs as was envisaged in the conception of the project. The process of purchasing the building was completed during the 2012/13 financial year and the NNR is servicing the bond acquired to finance the property. This will save the state from rental costs over the long term period.

3.7. Nuclear industry growth

Overall, the NNR is projecting an average growth of 9% on total revenue over the MTEF period from R149 million (2012/13) to R176 million in 2015/16 financial period. The National Nuclear Regulator is in the process of gazetting the authorisation fees for 2013/14 financial year and through this process proposals will be tabled to ensure adequate funding for the Nuclear New Build programme, Eskom Steam Generator Replacement and capacity enhancement for the current operations.

3.8. Funding model

The funding model as approved by the Board emphasizes the recovery of Regulatory costs from the operators in recognition of the Regulatory efforts. It proposes that the state contributes 32% of the Regulatory costs while the operators make good of the remaining 68%. The proposal further clarifies the need for settlement of the state contribution in the beginning of the financial year the same way that operators are expected to in terms of the Act. This would greatly enhance the efficiencies in the execution of operations.

The entity endeavors to continue observing the principles of prudent financial administration and maximum fiscal discipline. Timely collection of all money due to the organization is one of the top priorities of the finance division while the entire executive is tasked with ensuring optimal efficiency and devising ways of generating savings within their areas of responsibility without compromising quality.

3.9. Observations and findings

• The term of the old NNR Board ended on 30 November 2012 and the new NNR Board came in place on 1 December 2012 and the Board consists of representatives from labour, civil society, Government and independent members.
• There are currently no vacancies on the new Board as it is duly constituted in accordance with the provisions of the NNR Act.
• According to the NNR their budget allocation is insufficient to carry out its mandate, and with that they will not be in position what the budget should be, prior to the finalisation and clarity of what the nuclear built programme would entail. This would thus make it possible for the NNR to know the scope of its regulation as it would be able to determine the activity of the licence holder and how much would be required to carry out its Regulatory activities.
• The R12 million for the Emergency Control Centre is not sufficient but it will at least be sufficient for the star-up costs of the program and that the capacity and activities would be increased progressively, depending on SA nuclear expansion plans, which will require more funding in the future.
• On the issue of the NNR as a going concern the new funding model would enable the NNR to cover the bulk of the expenses it incurs and also recruit the skills that it need.
• The Acting CEO, in response to the loss of the two electrical engineers said that these engineers were working on a key project of migrating analogue to digital as associated to nuclear power plants for the future. Leaving the project at 25 per cent created a concern that NNR addressed through support from technical support organisations.
• The NNR had a talent management framework in place that considered the whole chain of talent management right from recruitment to retention with bias towards the young, women and people with disabilities. NNR was also in partnership with Universities producing scientists through an internship programme that would address the issue ageing scientists.
• NNR confirmed that they have sufficient number of inspectors to fulfil its inspections for the nuclear power plant, Necsa facilities, as well as the mines. The inspections planned are based on the current capacity of the NNR, in the inspection Department and includes financial considerations.
• Given the importance of nuclear safety, the NNR developed the Nuclear Security Regulations that will determine how inspections should be conducted.
• The IAEA self assessment was applicable to all Regulators worldwide and the results were made public.
• The 17 mines mentioned are classified as special case mines following inspections because of their potential to exceed the dose limits set although they had not yet exceeded them. There are strict compliance controls in place like engineering controls and administrative controls (movement of people from highly concentrated areas to lowly concentration areas as per the projection graph changes). The main aim is to ensure that the exposure levels of the people working in those areas are not exceeding the dose limit.
• The NNR had public safety information forums for the Koeberg Nuclear Power Station, Necsa facilities and the Vaalputs. NNR had also established a forum for engaging NGOs four times a year in Gauteng, Cape Town, Pelindaba and Vaalputs responding to questions directly within NNR’s mandate.
• With regard to the Tudor Shaft issue, the NNR indicated reach a stage where the mine dump was going to be relocated, only to be stopped by the courts that they were to stop as the NGO’s have asked the courts to interdict them to move the mine dump. This created confusion for the NNR as the NGOs initially indicated that action needs to be taken to address the community’s concerns.

4. South African National Nuclear Corporation (NECSA)

4.1. Key objectives of the NECSA Group

Nuclear Power Cluster

• To establish the Nuclear Manufacturing Centre as a viable entity.
• To implement Pelchem’s strategy for growth and sustainability, including an increase of income from R203.5m (2012/13 forecast) to R376.1m by 2016/17.
• To assess the viability of a future nuclear fuel cycle (front end) services industry in South Africa and to progress towards the development or demonstration of required processes and technologies.

Radiation Science and Applications Cluster

• To maintain full operational capability of SAFARI-1 and implement the reactor’s ageing management programme.
• To expand SAFARI-1 based R&D facilities and outputs.
• To achieve the project targets for the establishment of an LEU fuel and target plate manufacturing plant.
• To continue with the feasibility study on a multipurpose research reactor to replace SAFARI-1 at the end of its operational lifetime.
• To grow NTP Group income from R952.5m (2012/13 forecast) to R1563.9m by 2016/17.

Necsa as Host of Nuclear Programmes Cluster

• To increase Necsa’s research, development and innovation outputs.
• Maintain and improve the Necsa Group safety culture, SHEQ processes and procedures, audit and reporting practices to ensure full compliance with all Regulatory and best practice requirements.
• To achieve a reduced but sustainable salary bill within existing funding constraints.
• To maintain infrastructure at a suitable level.

4.2. Risks

Key risks for the NECSA group include: Growing financial constraints experienced by Necsa Corporation. The fixed cost base which increased at a higher rate than the government grant and self-generated income; Ageing equipment and infrastructure as well as production plant availability; Business sustainability challenges and extremely tough global market conditions experienced by both the NTP Group and the Pelchem Group, which are being addressed though a range of interventions aimed at the restoration of Pelchem’s financial viability and removing some constraints among offshore subsidiaries of NTP;

4.3. Human Resources

The Human Resources Department plays a key support role in Necsa to ensure availability of personnel that meet nuclear industry requirements and standards, as well as affordability and sustainability in terms of the corporate resources.

The implementation of the new organizational structure, stabilization of the HR environment, transformation and the implementation of the business plan for the Nuclear Learning Academy (NLA) are the key priorities for the financial year.

4.4. NECSA Learning Academy

The Academy provides for apprenticeships and learnerships, where the Nuclear Skills Development Centre (NSD) aims to train 218 at its facilities. The NSD was accredited as the preferred training provider to train the Master Tooling artisans for Industry (DTI project). The first 46 students are enrolled and the number will be extended to 96 during the year. Due to the need to train quality Coded Welders for industry, NSD has extended its welding division to accommodate Coded Welding which will be launched in August. The project is funded by Alstom.

4.5. Observations and findings

• The Pressurised Water Reactor (PWR) is the technology currently being used at Koeberg and this technology would also be used for any other nuclear plants that South Africa builds.
• With regard to the decrease in expenditure the capital expenditure of selected projects over the MTEF period will decrease. Less money will be spent in the future on the programs that are presently receiving much focus but reaching completion.
• Thorium 100 is a potential fuel that cannot be ignored. Necsa envisages collaborating with the University of North West and other companies that are pursuing this.
• On the safety of the Smelter, Necsa decontaminates buildings, equipment and vessels but in some metals, there is remnant contamination. Such metals could not be given to the scrap metal merchant because of the remnant contamination. The role of the smelter is to dispose such material while safeguarding the safety of the public.
• With regard to the ageing infrastructure and 3 per cent maintenance expense, NECSA does not have the financial resources, and the result thereof is that only critical infrastructure is being maintained.
• NECSA has been allocated R13 million to upgrade security around the facilities.
• With regards to the loss of skills, Necsa lost staff due to uncertainty (possibility of people losing their jobs).
• Until December 2012, NECSA’s stand point was that there will be zero salary increment for the entire staff because of the fear of contravening the PMFA by spending what it did not have.
• Necsa had to find ways of bringing in young talent which explained the internships that are increasing due to partnerships with various institutions.
• Safety and security learnerships are funded by the SETA’s.

5. National Energy Regulator of South Africa (NERSA)

Ms Phindile Nzimande, CEO of NERSA, explained that NERSA is a Schedule 3A Public Entity, established on 1 October 2005 in terms of the National Energy Regulator Act, 2004 to regulate the electricity industry, the piped-gas industry and the petroleum pipelines industry.

5.1. Achievements in 2012/13

For the year 2012/13 NERSA boasted about their high level achievement. In Electricity Industry Regulation, they approved an average annual increase of 8% in the revenue requirements for Eskom for the next five years; and received 183 out of 186 (98%) municipal and private distributor tariffs applications for 2012/13 and approved all for implementation. They had approved 47 Renewable Energy Generation licences within 90 days from application, instead of the originally legislated 120 days. NERSA had approved seven licences under the Short Term Power Purchase Programme (STPPP) as part of the short term mitigation programme during maintenance of Eskom generation fleet. Nine distribution licences were issued for connection facilities between Eskom delivery point and Independent Power Producer generation facilities.

In Piped-Gas Industry Regulation; NERSA approved the maximum prices of piped-gas for Sasol Gas in terms of section 21(1)(p) of the Gas Act, for the period 26 March 2014 to 30 June 2017 for various customer categories and classes; approved preliminary tariff assessment for Transnet Pipelines’ gas multi-year tariff determination for the Lilly Pipeline for 2013/14, 2014/15 and 2015/16. Five licences for the construction of gas distribution facilities were granted, two licences for trading in gas and one licence for the operation of a gas facility. It also amended five gas trading licences and five licences for the operation of gas facilities.

The approved price for Sasol Gas is significant in that there is a set price to use their pipeline, unlike before where they price discriminated on any grounds that they felt they necessary.

In the Petroleum Pipelines Industry, they approved an increase of 8.53% - as opposed to the 22% - in allowable revenue for Transnet Petroleum Pipelines for the period 2013/14, and made decisions on 60 storage and loading facilities. Eight construction licences and three operational licences were approved. Seven construction and storage licences were amended and 13 storage licences were revoked. 67 suspected unlicensed activities were investigated – only four of these did not require a licence. All the others indicated that they would apply for a licence

5.2. Strategic Plan (2012/13 – 2016/17)

The strategic outcome oriented goals of NERSA are in tune with its mandate and it is shown how these are reflected the 12 National Outcomes. Other Government Strategies are not completed at the time of finalisation of the Strategic Plan (2012/13 – 2016/17), these include the National Development Plan (NDP), Industrial Policy Action Plan (IPAP) and the Strategic Infrastructure Programme (SIP), however they would be taken into consideration in the new planning cycle starting in June 2013.

NERSA will deliver on its objectives via these six programmes that cut across all three regulated sectors:

• 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.

When the organisation reports amongst themselves and with the Department; they plan, budget and report according to the above mentioned six programmes according to the three sectors.

5.3. Challenges, NERSA’s Response and Links to Programmes

Across all three industries there are challenges. For the Electricity Industry Regulation, the challenges are: Demand and Supply, Transport and reliability , Distribution and reticulation and Access, affordability and investments. For the Piped-Gas Industry Regulation, the challenges are: Lack of credible gas anchor customers , Ensure that prices are equitable and competitive for all categories / classes of customers, Entry to and competition within the gas market , Loss of credibility and Regulatory reputation can deter development of the gas market . For Petroleum Pipelines Industry Regulation: Construction delays have resulted in increased capital costs which will attract higher tariffs , Tariff increases may incentivise other modes of transport (road and rail) when pipelines need higher volumes, Security of supply of petroleum to the inland areas, Applicants for storage construction licenses need to find areas of low/no competition to remain competitive , Promotion of third party access .

The Regulator had to be responsive to and establish programmes to deal with these challenges. It went through each of these challenges and stated how NERSA had responded and what programmes it had instituted. It also looked at cross-cutting regulation and organisational challenges.

5.4. Annual Performance Plan (2013/14 – 2015/16)

Ms Phindile Nzimande outlined the Key Performance Indicators (KPIs) and targets for each of the six programmes for the three sectors and for cross-cutting regulation and the organisation for 2013/14.

5.5. Budget and Funding

According to Section 13 of the National Energy Regulator Act, all accounts for the three regulated industries have to be ring-fenced. The common costs allocation ratio for electricity, piped-gas and petroleum pipelines industries is 58%:21%:21% . The budget per programme and per sector is provided.

In conclusion, Ms Nzimande said that NERSA is conscious of the Regulatory burden it imposes; it is striving for Regulatory certainty to create a conducive environment for attracting orderly investment; filling legislative gaps is a priority; and its Regulatory challenge is to balance the interests of suppliers and customers.

5.6. Observations and Findings

• Members highlighted the importance and significance of regulation in the energy sector. Regulation in the energy sector is fundamental not only to ensure compliance but also to have a very strong facilitative element.
• Members commended NERSA for its handling of the tariff determination for Eskom particularly well, with regard to its processes undertaken especially the public hearings throughout the country.
• With regard to price determinations it is better to have longer control periods than shorter ones (NERSA); it creates certainty and sends firmer price signals. With longer control periods inevitably, comes the possibility of the reopening of these types of determinations, however, instances of reopening have very clear rules for Multi-Year Price Determination (MYPD) and once those are triggered, the Regulator has to reopen the process. It could be reopened on application by an operator or the Regulator could move to do so.
• With regard to storage tariffs, the methodology utilised to determine the tariffs is a methodology to allow operators to recover their investment with reasonable returns.
• The Regulator is looking into issues of energy efficiency in relation to Municipalities and they are in discussions with the Department of Energy (DoE) to ensure that Municipalities are incentivised to encourage energy efficiency interventions.
• The Chevron pipeline application relates to two pipelines, the one from Saldanha and another one from Cape Town harbour to the refinery. Members commended Chevron in investing so much money in improving capacity on the pipelines.
• Members thanked NERSA for the Techno Girl programme and its success in Limpopo and encouraged them to keep up the good work, especial in rural areas.
• With regard to the storage facility in Ladysmith, oil companies are now using another route; the new route bypasses the Ladysmith facility and hence is no longer required. However there are new applications along the route of the new pipeline
• Relating to the security of supply inland, NERSA strengthened their monitoring strategies to ensure that there are no shortages. The crisis is due to a lack of storage capacity inland.
• There are discussions with the Department about the regulations that would facilitate the formation of consumer forums by Municipalities. The Director General recently instructed her team to ensure that the regulations are finalised. Until the regulations are in place to allow NERSA to enforce the formation of consumer forums, the Regulator can only persuade Municipalities to establish consumer forums.
• ADAM and the transmission development plan fitted into and complemented one another.
• Members raised concern that entities could withhold information. Members’ concern is how accurate energy planning can be done without the necessary information submitted.
• There were weak provisions in the Gas Act and the Regulator addressed these with the Department and suggested how they could be improved on.
• Members commended the Regulator on its role as a facilitator, the forward thinking on the gas pricing process and the gas pricing compliance to enforce certainty.
  
  

6. South African National Development Institute (SANEDI)

Mr Kadri Nassiep SANEDI CEO, said that SANEDI had the specific mandate to foster and support the transition to a low-carbon future in SA. There are existing strategic outcomes and programmes in place for this purpose.

6.1. Strategic outcome orientated goals

There are three main strategic outcome-orientated goals, the first of which is critical to decision-making at the highest level in the country. This first goal is to enable well-informed and high confidence energy planning, decision-making and policy development, which required access to data. Data gave access to appropriate planning tools, which empowered policy-makers to produce effective strategies and policies. The second goal is to support accelerated transformation to a less energy and carbon intensive economy. This is in line with SA's commitment to reducing its CO ₂ emissions, and SANEDI addressed this in its Climate Change Response White Paper. In the context of moving SA to a less energy intensive framework, he referenced the media “debacle” of Eskom's contract with BHP Billiton and said that SA should be looking at less energy intensive industries and better pricing regimes. The third goal is to foster a culture of greater efficiency and a more rational use of energy and natural resources. The conservation of energy and energy efficiency (less units of input to achieve the same units of output) are important. These three strategic outcomes are the foundation of SANEDI's strategic plan.

6.2. Programmes and portfolios

SANEDI's programmes are derived from its strategic outcome goals. The first programme dealt with corporate governance and administration, including the overhead administration of SANEDI's management. The second programme is the heart of SANEDI's operations and talked to the applied energy research and demonstration portfolios. This programme covered carbon capture, fracking and a road map dealing with the sustainable use of coal and gas in the future.

In terms of the Clean Energy Solutions portfolio, SANEDI had the Renewable Energy Centre of Research and Development (RECORD), which coordinated research and development (R&D) undertaken at SANEDI's tertiary institutions, other international research bodies and private sector R&D institutions. RECORD looked at producing tangible solutions, training and human capital in the area of renewable energy. SANEDI's Smart Grid Initiative (SASGI) also ran a comprehensive programme which combined the work of Eskom and the major metropolitan areas to decide what would constitute a Smart Grid in SA. This programme aimed to identify gaps in knowledge and to decide how to introduce Smart Grids into SA over the next few years.

6.3. Technology development

SANEDI managed resources located at research bodies like the Council for Scientific and Industrial Research (CSIR) or universities -- for example, the Energy Efficiency Hub at the University of Pretoria which had already produced over 100 Masters and PhD graduates capable of working on energy efficiency. Other centres existed around the country to build the proficiency and skills of students to deliver high-quality research.

6.4. Carbon capture and storage (CCS)

SANEDI housed the South African Centre for Carbon Capture and Storage (SACCCS) and most of its R&D capacity. Various parties are responsible for the management and funding of the centre, including SASOL, the Norwegian Embassy and ESKOM, as well as other industry partners. These main players are very important in making CSS a tool for mitigating against carbon dioxide emissions. The funding allocation is a priority, and Treasury had increased its allocation to CCS and given them R69m in 2013, R103m for 2014 and R35m for 2015. The amount tapered off in 2015 because by then SANEDI should be ready with its commercial partners for the pilot injection phase. In this phase, SANEDI had to identify a suitable on-shore site which would house tens of thousands of tons of CO². This project involved injecting carbon dioxide underground, and SANEDI expected there to be some sensitivity from the public. SANEDI is also trying to access additional funding through the World Bank with the support of the UK government, which had been a direct funder of SACCCS. The UK government had nationalised its Official Development Assistance (ODA) support, and SANEDI is working with the UK government to ensure its continued support via a different funding route.

This year, CCS activities had two focuses. First is the appointment of appropriate human resources to support the pilot injection phase, beginning with an international advisory body that would be put in place in 2013. CCS also needed the appropriate engineering, procurement and construction contractors and stakeholder engagement officers (already appointed). These officers would be operating in the Zululand and Algoa basins, which are the two prime destinations for the storage sites. Once specific sites had been identified, SANEDI would have to go in and do the explorations, along with the necessary seismic work. By the end of 2013, SANEDI would have a good idea of which sites would be suitable for the pilot injection phase. CCS also had to source CO ₂ . Although SASOL and ESKOM gave off lots of CO ₂ , it is difficult to transport that gas to the appropriate sites. An off-shore site would be prohibitively expensive, so the CCS sites would be on-shore. ESKOM's flue gas contained about 13% CO ₂ , but the CO ₂ would have to be separated out from the other flue gases. SASOL gave off about 95% CO ₂ , but the gas would have to be transported to the sites on the coast. During the course of 2013, CCS's engineering team would resolve this dilemma

6.5. Working for Energy

Working for Energy is a critical programme for SANEDI. However, the programme had no funding for the 2013/14 financial year. In terms of solutions involving renewable energy, low income housing and energy-efficient building materials could and should be manufactured domestically, and should also contribute to job creation. Renewable energy and energy efficiency encourage growth and job opportunities in micro-economies. SANEDI provided energy but also an end use for that energy to help people become economically active. SANEDI concentrated on biomass production and the converting of waste into energy. In KwaMashu, SANEDI had a pilot project aimed at converting sewage into electricity. Once the plant is commissioned, it would produce 2 megawatts of electricity from sewage. This would be in conjunction with invasive vegetation used for coal-firing. The plant would be commissioned once the city of eThekwini had agreed to the public partnership. Background work had been done, and a fluidised bed reactor had been put in on site. All that is needed are the power generation equipment and feedstock for coal-firing. This would be a good project under Working for Energy.

6.6. Smart Grids

As above, SANEDI had renewable energy on hand to inject into the grids, which meant that the grids had to be able to accommodate those kinds of energy. The smart grids would also give customers the ability to choose suppliers and to understand and influence their own consumption. SANEDI had established the SA Smart Grid Initiative (SASGI), which brought together the Municipalities, ESKOM distribution businesses and the service providers and their representative associations. SASGI is in place to understand the Smart Grid vision, the technology requirements and the relevant gaps. It also had to develop a business case and an implementation plan for rolling out Smart Grids over a set timeframe. The Department of Energy and European funders had put together a programme for smart meters in SA. The pilot project for smart meters would start in 2013. Ten to fifteen thousand smart meters would be installed in one or two metropolitan areas, which would be selected by the Department in the coming weeks and months. This project would need to be accompanied by an education and awareness campaign to inform consumers. Mr Nassiep suggested that the meters could be linked to e-learning.

6.7. Green Transport

This centre had been in Midrand for the past four years, and had been relocated to CESAR. In partnership with CESAR, Green Transport is developing an incubation, or soft-start, facility which would allow industry to benefit from SANEDI's R&D exposure and funding support. Green Transport had worked with Gauteng Province and the taxi industry, converting vehicles to run on a combination of liquefied petroleum gas (LPG) and petrol or compressed natural gas (CNG) and petrol. There had been notable successes. Buses in Gauteng are running on CNG and refuelling stations had been put in place. It is hoped that this could be rolled out to other areas where CNG could be sourced.

6.8. Renewable energy

SANEDI had worked with government to establish the Renewable Energy Centre of Research and Development (RECORD). A collaborative effort between SANEDI and the universities, it is launched last year. The governments of Germany, the UK, Norway and Denmark had all supported this initiative. RECORD pulled together all the research in the country on renewable energy. SANEDI represented South Africa at the International Energy Agency (IEA) with regard to implementing agreements on renewable energy. This brought international exposure to domestic partners. SANEDI supported local wave energy conversion technology using the exposure gained via the ocean energy systems implementing agreement. The Wind Atlas of SA (WASA) is one project linked to RECORD. The universities of Stellenbosch and Cape Town, SA Weather Services, the Danish government and others are involved with ISA, which accurately mapped out the wind resources in SA. Microscaling for more accurate prediction of wind speeds would be part of the project's next phase. The DoE is working towards a five gigawatt solar park in the Northern Cape, in the Prieska area. SANEDI would support CEF in its efforts. SANEDI aimed to establish a station within the solar park that would gather data and allow for the testing of new technology. SANEDI worked closely with the IEA, where the bulk of international energy research is being consolidated.

6.9. Energy efficiency

SANEDI is involved with the National Treasury and the Department of Trade and Industry with regard to the Income Tax Amendment Act, (pending), which talked to incentives for energy efficiency in the industry. SANEDI had certified certain projects and contributed to the measurement and verification (M&V) programme. To get the benefits of the tax incentive, a company had to have its baseline measured. Additionally, every year an M&V practitioner would have to verify the project's savings. SANEDI's current M&V centre involved only academics, and the skills-base would be broadened in future. The Energy Hub at the University of Pretoria is especially prolific in publishing R&D in the energy efficiency field. SANEDI intended to increase funding to the Energy Hub accordingly.

6.10. Challenges

Funding had been a challenge in previous years, but the increase from the Treasury in 2013/14 had been welcome. However, there are still funding shortfalls in some areas. With implementation came the need for human resources, but there is a shortage of the necessary skills in the marketplace. This is a problem for the energy industry generally. SANEDI needed clarity on its energy efficiency mandate (in terms of the National Energy Efficiency Act) as well as to the expectations of Parliament and stakeholders such as the DoE. The Green Transport programme is not funded at all. The Department of Transport had committed an allocation of R10m per annum to the programme for the next three years, but that had not materialised yet. Working for Energy's three-year allocation of funding from the Treasury had come to an end. Energy Efficiency also lacked funding for its programmes. SANEDI is aware of ESKOM's funding under Multi-Year Price Determination 3 (MYPD3), and noted that funding for Demand Side Management (DSM) had dropped from R13 billion to R5 billion over a five-year period, thus reducing ESKOM's support for energy efficiency. In order to take up slack in this space, SANEDI needed a workable funding solution (involving Treasury, MYPD or a carbon tax).

6.11. Observations and findings

• The loss of institutional memory is a problem that has affected the energy sector. ESKOM instituted its own knowledge management system, using a tool called Hyperwave to map out and manage every aspect of a power station.
• With regard to Carbon Capture Storage, stakeholder engagement will be key in this area. The public had to be sensitized as to how CO ₂ storage actually works. At the depths that CO ₂ was injected underground (between 3 and 5 km down), the pressure was so great that the CO ₂ gas liquefies and blends into the substrate.
• On the issue of Green Transport, cost-effectiveness depends on the type of solution to be introduced. SANEDI worked with the taxi industry and converted the vehicles to hybrids that ran on LPG and petrol. The cost of conversion per vehicle is between R18 000 and R20 000, with the payback being about one year.
• Ethanol gel was not succeeding for a number of reasons. In the past, ethanol gel did not adhere to appropriate standards. Suppliers blended the gel with water, which resulted in a very inefficient product that could not compete with paraffin. Paraffin was also much more widely distributed than ethanol gel. Ethanol gel is cleaner than paraffin.
• The contribution to CCS from the Norwegian government is about R1m per year and the industry contribution is R6,9m to R7m. Major contributors are SASOL, ESKOM, PetroSA, Anglo American and Xstrata's contributions
• SANEDI will be working with PetroSA on fracking. SANEDI's interest here was not commercial, but it had to work with other companies who have a commercial interest.
• The issue of bio-digesters is a primary focus for SANEDI, which had been working with rural schools in Kwa-Zulu Natal (KZN).
• With regard to smart grids vis a vis e-learning an interface is necessary for owners of a smart meter to understand how their meters are operating. In this context a low-income tablet like a cost-effective version of an iPad is needed. Learners in rural areas could have all their textbooks loaded onto this interface and, in Wi-Fi-enabled areas; Learners could access web-based classes. With the necessary backing from the Department of Basic Education, SANEDI hoped to pioneer this project within the course of 2013.
• In 2008, the Government Communication and Information System (GCIS) were appointed as SA's energy efficiency campaign leader until 2011. The GCIS's report indicated a range of energy efficiency recommendations.
• SANEDI is assisting the National Regulator for Compulsory Specifications (NRCS) on the comparison between solar water-heaters and heat pumps. Huge strides have been made in testing solar water-heaters, but labelling them in terms of energy efficiency is a challenge.

7. Central Energy Fund (CEF) and its subsidiaries

To follow is the vision, mandate and strategic intent of the CEF:

Vision

To be the leader in Africa in Energy

Mandate

To finance and promote the acquisition, exploitation, manufacture and marketing of energy

Strategic Intent

To provide energy resources for national energy security whilst minimising environmental impact and in pursuit of the government policies

7.1. Central Energy Fund (CEF)

Mr Sizwe Mncwango, Chief Executive Officer, Central Energy Fund (CEF), outlined the various entities that falls under the CEF Group. The CEO explained that the mandate of CEF is to deal with financing and promoting the acquisition, exploration, manufacturing and marketing of energy. The strategic intent of CEF is to provide energy resources for national energy security, whilst minimising the environmental impact and pursuing government policies. The vision is to be the leader in Africa in energy.

CEF had reviewed its strategic and mandate issues at a number of strategic workshops. The review led to a review and rationalisation of the group structure, the CEF’s own organisational structure and the need to strengthen the holding company function of CEF. The strategic objectives of the group had been redefined and now provide a platform for activities and investments for all entities.

The CEF group objectives include the following:

• To build and maintain appropriate human capital (HC),

o Implementing a HC strategy and plan that supports the Group objectives

o By aligning Group strategic objectives with skills requirements

o Through continuing training and education of staff

o By employing and retaining high integrity and committed individuals whilst ensuring transformation targets are achieved

o Through on-going succession planning

o By developing and implementing an appropriate change management strategy

• To ensure effective group oversight and coordinated planning,

o Ensure that appropriate and holistic strategic Group planning is done and is effective in supporting the mandate of the entire Group.

o •By reviewing Group governance structures to improve compliance with applicable legislation and regulations

• To build financial sustainability, to ensure that safety,

o Effective Group financial management, solvency and liquidity through proactive oversight of activities that could impact on the financial position of the Group

o By developing and implementing a Group Project Portfolio and Financing policy that will include the pre-assessment of projects to ensure that they are feasible, meet mandate requirements and can be funded

o By managing the Group finances so as to ensure Group financial sustainability

• health and environmental quality control (SHEQ) is a priority for the group,

o Developing and maintaining a Group culture of compliance with SHEQ

o Ensuring a safe and healthy working environment for all employees

o Meeting sustainability, environmental and climate change obligations and responsibilities

o To produce a benchmark Group Sustainability report during the 2013-14 financial year from which a pragmatic Sustainability strategy can be developed and implemented across the Group

• to contribute to national security of energy supply.

o By establishing innovative means to effect security of supply on an on-going basis

o Through providing target volumes and quality of defined energy products

o Through maintaining and expanding identified infrastructure

o By comply with and responding to strategic stock requirements

o Through licensing and conducting exploration activities appropriate to the mandate of specific subsidiaries

o By pursuing new sources of energy and energy efficiency

o By actively intervening and interacting with Government on matters relating to security of supply

The group structure as at April 2013 consisted of CEF, the holding company, and other subsidiaries such as SFF, Petro SA, SASDA and PASA, as well as other divisions such as CED which is responsible for solar park and other clean energy projects. The main strategic approach for 2013/14 includes good governance, fossil energy, which deals with strengthening of core business, and renewable energy. Stabilisation would include cost containment, and would improve efficiencies and filling EXCO vacancies. The CEF's main growth areas are described as taking place on Project Mmthumbo, Project Irene, Folkhwezi feedstock and upstream and Sabre.

In concluding, Mr Mncwango said that CEF is in the process of restructuring for growth, but challenges will remain in the immediate future, where CEF would take greater control of the group as the holding company, and that projects proposed by subsidiaries and requires CEF funding would be robustly scrutinised. The CEF undertook the process of identifying new projects in the renewable and clean energy space. He noted that staff vacancies are filled to provide the necessary skills needed.

Clean Energy Division (CED)

Miss Phindile Masangane, General Manager, CEF, noted that the Clean Energy Division (CED) is the operating arm of CEF that is responsible for developing and implementing renewable and clean projects. CEF is undergoing a restructuring as required by its project portfolio.

The Solar Park had been an important project within CED. The mission of CEF is to develop and invest in renewable energy, energy efficiency and low smoke fuel projects.

CED's objectives include growth in solar park feasibility, and here the geo-technical work and feasibility studies had been finalised.

Agreements for solar water heaters (SWH),in cooperation with the Department of Human Settlements (DHS) and Department of Energy (DOE) had been signed, and the second phase of the SWH programme is about to start. In relation to energy efficiency for public facilities, the CED highlighted that a co-operation agreement with the Department of Public Works (DPW) and Municipalities was signed. Photovoltaic (PV) manufacturing is one of the CED objectives, and the final decision on investment on a PV manufacturing plant had been taken.

The CED further reported that social projects such as Basa Njengo Magogo had been rolled out in the Gauteng province, and that solar powered lights had been distributed to rural schools in Limpopo, Kwazulu Natal and the Eastern Cape.

7.2. Strategic Fuel Fund (SFF)

Mr Bheki Gila, Chief Executive Officer, Strategic Fuel Fund, pointed out that the purpose of the SFF is to manage strategic stocks and storage facilities and assets on behalf of government, to store and manage third party crude oil on a commercial basis, in order to fund its mandate, and lastly to manage the oil pollution prevention and control activities at the Saldanha Bay, Milnerton and Ogies facilities.

SFF’s operational functions include the provision of environmental services related to mining, operating the ChevronSA, and management of three facilities at Saldanha, Milnerton, and Ogies. He said that growth and challenges experienced by SFF will be affected by fluctuating crude oil markets, adverse weather berthing during winter, worldwide increased storage requirements, encroaching human habitation and environmental protection, and high cargo dues charges in Saldanha Bay, compared to lower or no charges in other international ports).

The SFF indicated that Saldanha terminals managed strategic crude oil stock on behalf of the shareholder, and rented unused storage capacity to third parties. Milnerton terminals had only two tanks currently in use for crude storage, and Ogies terminal is for environmental services for mining companies in the area, through water level monitoring in the mines.

Oil pollution service provides for loading and discharging of environmental services to all vessels calling at the Saldanha Bay terminals, and commercial trading is about leasing of Saldanha and Milnerton tanks to third parties on a commercial basis in order to fund the entity’s mandate.

Major projects this year include office refurbishment at Milnerton Tank Farm, perimeter detection and CCTV security system to comply with national key point standards. Future projects would be the upgrading of security system to national key point standards, sourcing of land for additional strategic stock tanks, refurbishment of tanks at the Milnerton Tank Farm, and investment projects.

7.3. South African Supplier Development Agency (SASDA)

Mr Lunga Saki, Acting Chief Executive Officer, South African Supplier Development Agency, outlined that SASDA concentrates on mentoring and coaching, providing technical support, skills training, supplier assessments, facilitated access to raw materials, project management, and facilitate financial support.

Its current supplier development projects include supplier development oil companies, refineries managers’ project, and Turner and Townsend project. The future projects would be provided by PetroSA, SITA, Eskom, and Turner and Townsend project

SASDA’s objectives include:

• Contribute to national security of energy supply through the continued development of black suppliers in the energy sector. This will be done:
• Through capacity building (SHEQ, business management, mentoring and skills development)
• Assist suppliers to access procurement opportunities
• Facilitating access to finance (NEF, IDC, DBSA)
• Assist energy sector with their supplier development initiatives (with special focus on localization)
• Interacting with Government, black suppliers and other development agencies on matters relating to supplier development(Seda, the DTI, UNIDO)

• Its activities would meet safety, health, environmental and quality targets appropriate to the operating environment and this will include a focus on:
• Developing and maintaining a culture of compliance with SHEQ
• Ensuring a safe and healthy working environment for all employees
• Meeting sustainability, environmental and climate change obligations and responsibilities
• To produce a benchmark sustainability report during the 2013-14 financial year from which a pragmatic sustainability strategy can be developed and implemented

• effectively manage its operating expenditure and projects costs,
• Expenditure to be within the +-10% variance limit and no fruitless and wasteful expenditure.
• Projects to be managed within budget and on time

• ensure that human capital is correct and effective to support its planned activities,
• Implementing a HC strategy and plan that supports SASDA’s objectives
• By aligning SASDA’s strategic objectives with skills requirements
• Through continuing training and education of staff
• By employing and retaining appropriately skilled individuals whilst ensuring employment equity targets are achieved

• Comply with government legislative requirements and effective oversight.
• Compliance with all statutory requirements and applicable legislation and regulations.

SASDA highlighted that the Shareholders mandate of developing suppliers has not changed, however oil companies and energy related entities are still struggling with supplier development. SASDA further indicated that the small pockets of success by the participating companies have not helped accelerate empowerment of black suppliers – this is confirmed by the oil industry audit. According to SASDA Development of suppliers and transformation of the energy sector is paramount to the economic growth of the country so development must take place.

With regard to its funding, SASDA is funded through a sub-ordinate loan via a Ministerial directive by CEF. With dwindling cash reserves and no dividend flows from subsidiaries this has put tremendous pressure on the Chef’s group’s sustainability, therefore funding of SASDA has become untenable. The CEF loan over the past 4 yrs has created a going concern problem for SASDA where liabilities exceed assets – insolvency and reckless trading.

SASDA is currently engaged with the CEF to recapitalize SASDA by writing off the loan, thereby averting a possible qualification, which is not an option for CEF. SASDA and CEF have also engaged with the SAPIA “Big Oil Companies” to re-assess their commitment to support SASDA. The Oil Industry still deliberating on the matter. The CEF group will also approach DoE on future of SASDA . There is the possible SASDA shutdown\liquidation as directors are not willing to carry burden of reckless trading.

7.4. Africa Exploration Mining and Finance Company (AEMFC)

Mr Sizwe Madondo, Chief Executive Officer of the African Exploration Mining and Finance Corporation SOC Ltd, said that the long and medium term strategic objectives of AEMFC requires funding for growth, acquiring and training of staff, profitability and a positive cash flow management.

AEMFC’s short term objectives include:

• To produce and sell of 1.5 MT of coal
• To achieve zero fatality during the year
• Complete pre-feasibility on the Vlakfontein Mine extension
• Complete 3 desktop studies
• Achieve budgeted profitability, cash flow and liquidity ratios
• Complete the AEMFC hiving off from CEF by June 2013
• Corporate governance

AEMFC reported the organisational structure and employee complement. AEMFC currently has 82 employees and 236 contractors, and intend, in 2013/14 to raise this to 98 employees, with no contractors.

AEMFC reported on the capital expenditure programme, and items such as computer software, exploration assets, property plant and equipment and the Pan African Minerals Development Corporation (PAMDC). AEMFC reported that it would drive PAMDC’s exploration programme. Investments shareholding still remains at 33.3 percent for AEMFC, at PAMDC company level. AEMFC is a 49 percent participant at project level, and this is guided by signed agreements with milestones.

Progress with regard to the AEMFC’s exit plan (hiving off from CEF) include:

• The implementation agents have been appointed.
• The CEF loan restructuring and repayment terms are in progress
• Search for 3 ^rd party funding including from CEF is in progress, where various presentations have been made to CEF.
• Presentations was also made to National Treasury in March for its guidance
• Engagements have been taking place with DMR are continuing and look positive
• It is also necessary that the AEMFC own its support services, which have been secured (e.g. IT systems, finance personnel etc)

7.5. Petroleum Agency of South Africa (PASA)

Mr David Van Der Spuy, Acting General Manager: Promotion, Petroleum Agency South Africa, said that the strategic role and mandate of PASA is to contribute to the energy resources of South Africa by promoting and regulating the exploration and production of the country’s natural resources.

PASA must promote onshore and offshore exploration and production of petroleum, monitor and report regularly to the Minister in respect of compliance with such permit or rights, perform any other function, in respect of petroleum, which the Minister may determine from time to time, and collect the prescribed fees and considerations in respect of reconnaissance permits, technical co-operation permits, exploration rights and production rights

Ms Oliva Mans, Chief Financial Officer, Petroleum Agency South Africa, outlined the PASA’s income statement and cash flows. Income statement indicated the incomes from permit, exploration rentals, personal costs, travel costs and other costs. The cash flows indicated cash flows from operating activities, interest received, and cash flows from investing activities. Current challenges faced by PASA include: future funding, capacity, the requirements of the MPRDA draft Amendment Bill and its location (either energy or minerals)

7.6. Observations and Findings

• Historically PASA received production revenues directly and now they are receiving funding from the fiscus. The MPRDA makes allowance for the PASA to be funded by the fiscus.
• With regard to the strategy/model to be implemented going forward, the PASA will not be in the business of making a profit.
• With regard to hiving off of PASA from CEF to the DMR, PASA staff did initially experience panic and a loss of morale. However there is open communication with the staff, where they are continually informed of the processes.
• A skills retention strategy has been implemented at PASA to retain staff and its skills.
• The AEMFC has exploration rights in the Waterberg region and they are also looking at acquisitions in the region.
• Even if the SASDA loan is converted into equity, it will not address the structural issues which SASDA is struggling to address, but the conversion will only be a temporary solution.
• The SFF has no influence over the single buoy mooring (SBM) at Saldana as it belongs to the National Ports Authority.
• The financial figures of the CEF are driven by moving activities in the PetroSA, and that affected incomes and balance sheets.
• With regard to the Solar Parks, the CEF operates as an enabler for investor interested in investing in solar projects.
• On the issues of environmental liability, there are still various subsidiaries that need to come on board. Some Wits University students have been employed to work with the AEMFC in the mines.
• Gauteng was selected for the Basa Njengo Magogo because the pilot study was conducted there; however, the aim is to penetrate into other provinces.
• The partnership with DHS is mainly to assist the low income houses with solar water heaters, and local Municipalities had welcomed the partnership. The working relationship with service providers has been good, and CEF would continue working with some service providers in order to achieve its mandate.
• The plan for solar water heaters is in place and it is about to be completed. Phase 2 of SWH programme would be rolled out at the end of the current financial year.
• Members confirmed that the CEF needs to be supported in terms of its activities.
• Members emphasised that the CEF is an implementation agency.

8. PetroSA

8.1 Background

Ms Nosizwe Nokwe, CEO of PetroSA, stated that PetroSA's plan for 2013-17 supports government policy, including the NDP. The NDP stated that in the short term, there should be exploratory drilling for economically recoverable shale gas reserves, the development of offshore gas, the promotion of investments in LNG (liquefied natural gas) infrastructure and the introduction of clean fuels in the country, In the medium term, LNG structures would be in place to power the first CCGTs (combined-cycle gas turbines), and a decision will be made on whether SA would continue with imports or invest in a new refinery. The strategic plan would detail PetroSA's response to that mandate.

PetroSA's plans and mandate are aligned to that of the shareholder. The specific intent of the CEF (Central Energy Fund) is to provide energy resources for national energy security and to minimize the environmental impact in pursuit of government policies, and the Department of Energy (DoE) mandate is to secure sustainable provision of energy for socioeconomic development. PetroSA's vision for 2020 focuses on sustainability, security of supply and transformation.

Ms Nokwe said that since PetroSA's last presentation to the Committee, the company continued to operate safely and profitably despite challenging conditions, including declining indigenous feedstock and rising feedstock costs. Progress is made with PetroSA's Mossel Bay refinery and the Ikhwezi offshore indigenous gas drilling project. Ikhwezi is expected to produce its first gas during the second half of 2013. Rand capital costs were high. The Mthombo refinery project is gathering momentum since the signing of an agreement with Sinopec (27 March 2013). Mthombo is recognised as part of the Strategic Integrated Projects (SIP), specifically SIP 3 (see National Infrastructure Plan). The Department of Environmental Affairs accepted the Environmental Impact Assessment (EIA) of PetroSA's LNG project. PetroSA acquired a stake in Ghanaian oil reserves to supplement depleted indigenous feedstock. Finally, PetroSA built and handed over its first Integrated Energy Centre (IEC) in Mbizana, Eastern Cape. The IEC offered other services apart from the provision of energy, including a convenience store and a training centre. A cooperative is running the IEC.

According to the CEO, PetroSA is facing increasing future challenges. Project Ikhwezi’s aim it to address declining feedstock. Deep water access to hydrocarbons locally and internationally is more expensive than on-land access, which poses a challenge to the national oil industry. Competition with more established, better resourced companies is also a challenge. These factors are included into PetroSA's risk profile for mitigation. PetroSA is moving into full project execution mode and this will cause pressure on the company's financial results.

Ms Nokwe explained again that declining feedstock led to reduced revenues, and that the cash PetroSA had on hand would be used to build the company's sustainability and impact.
To carry out its plan, PetroSA will require strong partnerships, shareholder support, an enabling Regulatory environment, good governance and a well-resourced and capacitated organisation.

The plan aims to diversify PetroSA's income, create longer-term revenue flows, add new refining capacity and cleaner fuels, establish PetroSA's presence in the downstream arena, create an LNG import facility for gas to liquids (GTL) and power generation, promote the addition of gas to the energy mix in the country, move SA towards a greener economy, and advance equity and organisational capacity.

In future, PetroSA would play a key role in the development of shale gas in SA, as well as the development of additional refineries.

In terms of the Ikhwezi project, PetroSA intended to drill five wells, a process that would take two to three years. At least 1 600 temporary jobs had been created. Once gas is being produced, the plant's production would be extended to 2018/19, at a cost of about US$1.2 billion.

8.2. Growth: Upstream

PetroSA's acquisition in Ghana is currently producing 110 000 barrels per day. In Equatorial New Guinea, PetroSA is de-risking its petroleum and assets. Funding options are being explored for the Venezuela Project. The aim is to make an asset acquisition by 2016.

8.3. Project Mthombo

PetroSA has not made a decision about the equity partner question, but finalised the framework agreement with Sinopec and is also conducting a feasibility study with the IDC (Industrial Development Corporation). Project Mthombo is part of SIP 3. Infrastructure requirements are aligned with the stakeholders, including the Coega Development Corporation (CDC), Transnet and Eskom. PetroSA is also participating in the CDC-led Industrial Development Zone (IDZ) infrastructure development network. After the feasibility study conducted with the IDC, PetroSA will have a better idea of what is needed in terms of funding.

Ms Nokwe said that the CDC is the Coega Development Corporation. She said that SIP 3 covered the south-eastern node and corridor development, and promoted rural development through a new dam at Umzimvubu with irrigation systems. SIP 3 plans included a N2-Wild Coast highway which would improve access into KwaZulu-Natal and national supply chains; a manganese rail capacity from Northern Cape to strengthen economic development in Port Elizabeth; a manganese sinter (Northern Cape) and smelter (Eastern Cape); and the Mthombo refinery (Coega) and transhipment hub at Ngqura and port and rail upgrades to improve industrial capacity and performance of the automotive sector. (See National Infrastructure Plan, SIP 3.)

8.4. Transformation

With all of PetroSA's new projects, new opportunities will be created. There is a focus on small, BEE businesses in terms of Enterprise and Supplier Development (ESD). Ms Nokwe said that the company hoped to draw on the practical experience gained in Mossel Bay in future. Employment equity continues to be promoted. PetroSA is developing talent pipelines in partnership with universities. PetroSA has specific requirements for its employees, because it is the only company in SA involved with the upstream sector. PetroSA will continue its partnership with the Synthetic Fuels Innovation Centre at the University of the Western Cape (UWC).

The many projects would put pressure on PetroSA's profitability profile. Ms Nokwe said that the company would have to spend the money it had in order to become a national oil company (NOC) of standing in SA.

8.5. Observations and findings

• Globally, Regulatory mechanisms are skewed towards local access to hydrocarbons, for example. The regulations usually ensure that National Oil Companies (NOCs) are partners in the exploratory area.
• Downstream activities are a primary concern of PetroSA, and the company is putting as much as it could towards this effort.
• PetroSA operates independently in terms of funding. It generates resources from its GTL plant and pumps them back into the projects to grow the company.
• Around 2020/2025, there would be a demand in SA for a refinery big enough to produce 250 000-300 000 barrels per day, depending on the growth rate. Thus, Mthombo had to come online at some point between 2018 and 2024 to provide additional refinery capacity. This was calculated on the assumption that no other refinery would shut down or fail to meet the specifications required during that time. Building one's own refinery was a massive project for a country, but the economic returns were considerable. Without its own refineries, SA would be under enormous pressure. It would have to import all its finished product and face huge financial challenges (PetroSA).
• PetroSA started looking at ways to integrate FETs into its learning and development approach. PetroSA is considering internships and other ways to close the gap between FETs and universities.
• Members applauded the construction of the new IEC in Mbizana and its additional facilities.
• The employees of the Mbizana IEC were offered training at PetroSA's expense in Johannesburg, as were members of the cooperative who functioned as a board of trustees. There was cooperation from the municipal mayor and from the municipality generally. There was some instability on the ground. Stability within the cooperative was not as settled as it should have been.
• PetroSA keeps a close eye on its level of inventory and they managed these levels very cautiously.
• With regard to the Accelerated Development Programme the programme is currently under way. 30 out of 91 employees on the Leadership Development Programme are women. The programme would be completed in 2013.
• PetroSA's study assistance and bursary programmes also aims to ensure sufficient female representation. The company's numbers as to gender equity are respectable -- in the order of 50 percent.
• With regard to people with disabilities, Mr PetroSA had challenges in this respect, but they took a targeted approach to identifying students living with disabilities to participate in the programmes and make progress through the ranks. This is partly the result of a partnership between PetroSA and the Cape Peninsula University of Technology (CPUT). PetroSA is also strengthening efforts to employ people with disabilities and partnering with providers who are specialists in this area in order to achieve the target set for the company.
• Members noted that PetroSA had aptly articulated its plans up to 2017/18, and that the Committee would be monitoring PetroSA's performance.

9. 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 policy requirements.

10. Recommendations

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

The Minister of Energy is requested, within the current financial year, to:

· Ensure progress on the following is included in quarterly reports:

• Strengthening of internal capacity;
• Progress on the strengthening of international capacity of the Department to enhance its performance and effectiveness;
• Improvement of control systems in supply chain management and financial management in particular, for itself and its entities;
• Participation of the Department in Strategic Infrastructure Projects (SIP), including directives from the President as per the State of the Nation Address (SONA) 2012;
• The Department's engagements with Municipalities;
• Focus on petrochemical downstream programmes in partnership with relevant Departments as well as State Owned Enterprises (SOEs);
• Progress on the implementation of the Regulatory Accounting System;
• Implementation of the SA Renewable Initiative (SARi) Programme and any revised plan in conjunction with National Treasury;

· Expose the PCE to the envisaged State Owned Enterprises (SOEs) Forum and its activities;

· Update the PCE on the overall energy planning in the following manner:

o The Integrated Energy Plan (IEP) immediately after it has been presented and endorsed by the Cabinet;

o Plans for the reviewal of the Integrated Resource Plan (IRP) as soon as the IEP has been finalized;

· Update the PCE on initiatives and plans to maintain the electricity distribution grids;

· Ensure that there is a clear implementation as well as a monitoring, evaluation and reviewable plan regarding electrification of the outstanding 3.4 million households, with specific reference to rural areas, including concessionaires;

· Update the PCE on progress regarding the Tudor Shaft and the seventeen (17) special case mines on radioactive waste issues;

· Brief the PCE on the International Atomic Energy Agency’s readiness assessment of South Africa;

· Ensure that the PCE is updated on the SA Nuclear Energy Corporation’s (NECSA’s) Generation IV technology programmes, including the fuel development project in conjunction with ESKOM and the Department of Public Enterprises;

· Brief the PCE on the Department's long term strategy regarding NERSA's transformation (assuming that such transformation is integral to the overall transformation in the energy sector);

· Update the PCE on regulations that would facilitate formation of consumer forums on electricity;

· Update the PCE on the overall transformation of the energy sector;

· Ensure regular updates on the progress of the following programmes:

• Renewable Energy Centre of Research and Development (RECORD);
• SANEDI’s Smart Grid Initiative (SASGI);
• SA Centre for Carbon Capture and Storage (SACCCS);
• Work for Energy;
• Centre for Energy Systems Analysis and Research (CESAR);
• Green Transport;

· Ensure consolidation of the drive in energy efficiency programmes especially funding of the Energy Efficiency Demand Side Management (EEDSM) in conjunction with ESKOM;

· Facilitate improvement on rebuilding institutional memory in the energy sector;

· Update the PCE on various energy technologies under research and development, including ethanol gel as well as commercialisation thereof;

· Apply special focus on developing programmes on bio-digesters for rural communities in particular;

· Expedite the transfer of the Petroleum Agency of SA (PASA) and the African Exploration Mining and Financing Corporation (AEMFC) from the Department of Energy to the Department of Mineral Resources;

· Enhance the turnaround of the SA Supplier development Agency (SASDA);

· Intensify and expand rolling out of the Basa Njengo Magogo Programme;

· Intensify the solar water heater (SWH) rollout plan in partnership with the Department of Human Settlements and Municipalities, as well as update the PCE on a regular basis with special emphasis on developments in rural areas;

· Brief the PCE on how the Central Energy Fund (CEF) plans to raise capital as well as resourcing of its post-restructuring programmes;

· Brief the PCE on the Department's overall strategy on how it intends supporting a restructured Central Energy Fund;

· Share the outcomes of the investigation into PetroSA with the PCE;

· Update the PCE on collaboration between the Department and various universities and Further Education and Training Colleges on energy initiatives;

· Update the PCE on the Department’s Broad Based Black Economic Empowerment (BBBEE) strategy including the finalisation of the Liquid Fuel Charter once the review of the BBBEE Codes of Practice (driven by DTI) is finalised;

· Ensure intensification of the Integrated Energy Centres (IECs) roll-out programme, particularly with Municipalities as a new strategic approach;

· Update the PCE on the Project Management approach, tools and monitoring mechanisms that the Department of Energy is employing to manage key projects in the Department.

Report to be considered