ATC200604: Report of the Portfolio Committee on Mineral Resources and Energy on the Strategic Plan 2020 – 2025, Annual Performance Plan for 2020/2021and the Budget Vote No. 34 of the Department of Mineral Resources and Energy, dated 02 June 2020
Mineral Resources and Energy
Report of the Portfolio Committee on Mineral Resources and Energy on the Strategic Plan 2020 – 2025, Annual Performance Plan for 2020/2021and the Budget Vote No. 34 of the Department of Mineral Resources and Energy, dated 02 June 2020
The Portfolio Committee on Mineral Resources and Energy (PCMRE), having considered the 2020/2021 Annual Performance Plan (APP), Strategic Plan and Budget Vote 34: Department of Mineral Resources and Energy (DMRE), reports as follows:
- Introduction
The purpose of this report is to report to the National Assembly (NA) on the Portfolio Committee on Mineral Resources and Energy’s findings after evaluating and assessing the Annual Performance, Strategic Plan and Budget Vote No 34 of the DMRE.
Directed by the President of South Africa’s reconfiguration of Government, the Department of Energy (Budget Vote 26) merged with the Department of Mineral Resources (Budget Vote 29) in the sixth Parliament. Because they merged into one department in June of the previous financial year (two and a half months into the financial year), the departments presented two separate budgets. However, during the current financial year, the two departments are reporting as one, under Budget Vote 34.
Thus, this is the first Budget, APP and Strategic Pan of the newly established DMRE. The Department’s mandate is to ensure the transparent and efficient regulation of South Africa’s mineral resources and minerals industry, and the secure and sustainable provision of energy in support of socio-economic development.[1]
Government departments as well as public entities are required by legislation through the Public Finance Management Act, No 1 of 199 (PFMA), to develop a Strategic Plan that outlines the objectives to be pursued by the Department or entity over the Medium Term. According to the National Treasury Regulations, the Accounting Officer of an institution must prepare a strategic plan for the forthcoming Medium Term Expenditure Framework (MTEF) period for approval by the relevant executive. This plan should include measurable objectives for each main division with the department’s vote.
TheBudgetwastabledon26February2020and theAPP and Strategic PlanoftheDMRE,whichprovidesspecificperformancetargetsfor2020/21, was tabled on 05 May 2020.
2.Overview of the Strategic Plan [2020 – 2025] of the Department
The strategic priorities of the DMRE are informed by the challenges which confront the energy and mining sectors. Secondly, priorities are in line with the key government policies such as the National Development Plan (NDP), the Integrated Resource Plan and the Medium Term Strategic Framework (MTSF). For the period 2020 – 2025, the DMRE has set itself the following priorities:
- In line with the decisions espoused in the Integrated Resource Plan (IRP2019) for Electricity, the Department plans to commence with the procurement process of the Nuclear New Build (NNB) Programme. Decision 8 of the IRP2019 states that “Commence preparations for a nuclear build programme to the extent of 2 500 MW at a pace and scale that the country can afford because it is a no-regret option in the long term”.[2] In line with IRP2019 decision, the Department is considering Small Modular Reactors (SMRs) for the NNB Programme. Regarding nuclear, the IRP2019 provides for the extension of the Koeberg Nuclear Power Plant. Thus, during this period, the Department will develop a roadmap for the proposed 2 500 MW of the NNB Programme, as well the extension of Koeberg Nuclear Power Plant by another 20 years.
- Furthermore, Decision 4 of the IRP2019 calls “for coherent policy development in support of the development of a just transition plan, consolidate into a single team the various initiatives being undertaken on just transition”.[3] The Department commits to facilitate this process during the five year period.
- In improving the energy distribution industry, the Department intends to review the regulatory framework and industry structure, as well as introducing regulations to improve the National Energy Regulator of South Africa’s (NERSA) Regulatory oversight on infrastructure maintenance.
- Research in the mining and energy sectors is critical to support targeted outcomes, and the DMRE commits to pursue options to expand the mandates of the respective State Owned Enterprises (SOEs) to support this research.
- To create access to minerals for beneficiation, Section 50 of the Mineral and Petroleum Resources Development Act (MPRDA) will be revisited to help increase domestic beneficiation.
- Licensing turnaround times will be addressed by reviewing and strengthening relevant legislation.
- Concerning exploration activities, the Council for Geoscience (CGS) will fast-track the implementation of the Geoscience Technical Programme (GTP) by 2021, to catalyse investment in exploration. The goal is to ensure that long-term funding sustains the impact of the geosciences in South Africa.
- Regarding the concentration of petroleum and minerals, the Department commits to encourage partnerships between emerging junior miners, and conduct a review of the Petroleum Bill to encourage inclusive, equitable and competitive exploration. The requirement for an optimal legislative framework for petroleum will be addressed by expediting the legislative processing framework, specifically the process involving the National Council of Provinces (NCOP) and the National Assembly.
- Transformation will be addressed by enforcing compliance with relevant legislation. The DMRE is committed to ensuring regulatory and legislative certainty through several channels, including the development of comprehensive legal guidelines aligned with the objectives of the MPRDA (e.g. optimal exploration, and substantial and meaningful participation by historically disadvantaged South Africans).
- Concerning mine health and safety, a review of legislation, and DMRE-led facilitation between the mines and communities will be implemented. It is hoped that this will reduce the negative impacts of mining on communities.
- The security and safety of women in mining in relation to gender-based violence is a high priority, with a long-term timeline, and will be guided by the implementation of guidelines and directives to create a working environment conducive to women in mining.
- The development of the gas market as an alternative source of energy will be pursued to meet limited and depleting gas supplies.
- With regard to imported hydropower, South Africa has entered into a Treaty for the development of the Grand Inga Hydroelectric Project in the Democratic Republic of Congo (with some of the power intended for transmission to South Africa across DRC, Zambia, Zimbabwe and Botswana). South Africa will continue to support this regional project.
The priorities of the Department are in line with the Medium Term Strategic Framework (MTSF). The MTSF 2019-2024 is the manifestation of an implementation plan for the NDP Vision 2030 and for the implementation of the electoral mandate of the sixth administration of government. The MTSF 2019-2024 lays out the package of interventions and programmes that will achieve outcomes that ensure success in achieving Vision 2030 and the seven electoral priorities adopted by government. The seven MTSF priorities adopted by the Government are as follows:[4]
Table 1: MTSF2019-2024 priorities
|
Priority 1 |
Priority 2 |
Priority 3 |
Priority 4 |
Priority 5 |
Priority 6 |
Priority 7 |
|
Economic Transformation & Job Creation |
Education and Skills Development |
Consolidating the Social Wage through reliable & Quality Basic Service |
Spatial Integration, Human Settlements & Local Government |
Social Cohesion & and Safe Communities |
Building a capable, ethical & Developmental State |
A better Africa and World |
Source: Department of Planning, Monitoring and Evaluation (2020)
The DMRE contributes to the MTSF priorities. In line with the aforementioned MTSF priorities, the key initiatives and targets set for the DMRE for the five-year period are as follows:
Table 2: Key initiatives and targets that contributes to the MTSF priorities
|
MTSF Priority 2 – Economic Transformation and Job Creation |
||
|
Strategic outcome |
Interventions |
Targets |
|
SO1: Investing in Accelerated Inclusive Growth |
|
|
|
SO2: Industrialization , Localization and Exports Promotion |
|
|
|
SO3: Secure Supply of Energy
|
|
|
|
|
||
|
MTSF Priority 5 – Spatial Integration, Human Settlements and Local Government |
||
|
SO4: Green House Gas (GHG) Reduced |
|
|
|
SO5: State of Geological Infrastructure Improved |
|
|
|
|
||
|
MTSF Priority 6 - Social Cohesion and Safe Communities |
||
|
SO6: Improved capacity to deliver basic services ,quality infrastructure & integrated public transport to increase household access to basic services |
|
|
|
|
||
|
MTSF Priority 1 –Capable, Ethical and Developmental State |
||
|
SO7: Functional, Efficient and Integrated Government
|
|
|
|
|
||
|
MTSF Priority 2 –Economic Transformation and Job Creation |
||
|
SO8: Improved and Streamlined Regulatory, Service Delivery, Operational, Health and Safety Processes, and collaboration across Regulators and relevant role Players.
|
|
|
|
SO9: Strengthen the control of nuclear material and equipment
|
|
|
|
|
||
Source: PCDMRE Presentation, 07 May 2020
It is important to note that the above strategic priorities did not take into account the challenges associated with COVID19. This is because the Department had planned prior to the outbreak of the COVID19.
3.Overview of the Annual Performance Plan [2020 – 2021]
The Department’s strategic priorities as given above are implemented in its annual performance plan for 2020/21. The Department has six programme areas through which it discharges its mandate, namely; Programme 1: Administration; Programme 2: Minerals and Petroleum Regulation; Programme 3: Mining, Minerals and Energy Policy Development; Programme 4: Mine Health and Safety Inspectorate; Programme 5: Mineral and Energy Resources Programme and Projects; and Programme 6: Nuclear Energy Regulation and Management.
3.1 Programme 1: Administration
The aim of this programme is to provide strategic leadership, management and support services to the Department. For the 2020/21 financial year, this programme aims to achieve the following planned targets:
- 100% elimination of wasteful and fruitless expenditure
- 100 % reduction of irregular expenditure
- 100 % reduction of qualified audits
- 95% resolution of reported incidents of corruption
- Establish ethics committees and adhere to terms of reference
- Shareholder compact updated, plans approved, and performance monitored
- Strategic Plan Approved
- Annual Performance Plan approved
- 4 Quarterly Performance Reports produced
- Annual report tabled in parliament
- 4 quarterly reports which detail the implementation of the 2019 2024 MTSF Priorities
- 80% implementation of Public/Stakeholder Participatory Plan
- 100 % approved invoices from service providers paid within 30 days of receipt
3.2 Programme 2: Minerals and Petroleum Regulation
This programme regulates the mining, minerals and petroleum sectors to promote economic growth, employment, transformation and sustainable development. The planned targets for the current financial in this programme are as follows:
- 1500 Retail Site Compliance Inspections conducted
- 1 080 Fuel Samples tested
- 50% of license applications approved have a minimum of 50% HDSA ownership
- 8 500 of direct jobs created per investment
- 120 of SLP development projects completed
- 10% of black industrialists created through procurement
- 100% of contribution to economic development through joined-up plans
- Strategy and plan on liquid fuels reviewed and updated
- Feasibility study on new oil refinery completed
- 500 of Mining Economics (MWP/PWP) inspections conducted
- 1 275 of Environmental Inspections conducted
- 100% Compliance monitoring audit of the Broad Based Black Economic Empowerment (BBBEE) Act in the petroleum sector to be done every second year (charter sector code)
- 120 of rights and permits granted and/ or issued to HDSA controlled entities
- 212 of SLP inspections conducted
3.3 Programme 3: Mining, Minerals and Energy Policy Development
This programme formulates, maintains and implements integrated minerals and energy policies to promote and encourage investment in the mining and energy industry. Planned targets for the 2020/21 financial year in this programme are as follows:
- Framework for a just transition to a low carbon economy developed
- Greenhouse Gas (GHG) reporting and assessment framework developed
- 4 Approved and listed carbon offsets projects
- 1 Report on energy-related climate change response measures monitored, quantified and reported
- 2 Clean Development Mechanism projects finalised
- 10 Investment promotion events held
- 25 Publications and Economic Reports supporting investment and sustainable resource use
- Chrome Beneficiation Strategy submitted to Cabinet for approval
- 20 Existing Agreements Implemented
- 1 of new Bilateral agreements concluded
- 10 Multilateral Strategic Partnerships Implemented
- Mining Masterplans developed
- 2 legislative instruments developed/ reviewed or amended
- National Nuclear Regulator Amendment Bill submitted to Cabinet for public consultation
- Radioactive Waste Management Fund Bill Submitted to Cabinet
- Draft Regulations on the long term operation of nuclear installations published for public comments
- National Energy Regulator Amendment Bill certified by State Law Advisor
- Electricity Pricing Policy reviewed and submitted to Cabinet
- Gas Amendment Bill submitted to Cabinet
- Draft Gas Master Infrastructure Plan submitted to Cabinet for public comments
- Draft Integrated Energy Plan submitted to Cabinet for public comments
- Adam Framework submitted to Cabinet for approval
3.4 Programme 4: Mine Health and Safety Inspectorate
The aim of this programme is to ensure the health and safety of employees in the mining sector. The planned targets for the current financial in this programme are as follows:
- 10% reduction in occupational fatalities.
- 5% reduction in occupational injuries.
- 10% reduction in occupational diseases (including tuberculosis (TB).
- 80% of investigations completed (initiated vs Completed).
- 80% of inquiries completed (Initiated v/s completed).
- 8000of qualitative inspections conducted (cumulative).
3.5 Programme 5: Mineral and Energy Resources Programme and Projects
The programme manages, coordinate and monitor programmes and projects focused on access to mineral and energy resources.
- Emergency Power Contracting (Power Purchase Agreements in place)
- 1 Strategy developed for Acid Mine Drainage (AMD) Mitigation
- 1 Mine water wastewater management plans implemented.
- 4 Quarterly Reports on the allocation of funding and the monitoring of implementation of grid electrification of additional households by Eskom and Municipalities
- 15 000 additional households electrified through non grid electricity
- 0.5 terawatt-hour (TWh) savings realised and verified from Energy Efficiency and Demand Side Management (EEDSM) projects
- 4 Quarterly report on Energy consumption baselines from 15 additional municipalities
- developed
- Final Draft 2015 National Energy Efficiency Strategy (NEES) submitted for Cabinet consideration.
- Report on installation of 87 000 procured Solar Water Heater (SWH) baseline systems in 18 municipalities.
- Renewable Energy (Sector Master Plan finalised)
- 1 Verified Wind Atlas for South Africa (3 Results Report developed, i.e. observationalwind atlas 50)
3.6 Nuclear Energy Regulation and Management
The aim of this programme is to manage the South African nuclear energy industry and control nuclear materials in terms of international obligations, nuclear legislation and policies to ensure the peaceful use of nuclear energy. Planned targets for the current financial year in this programme are as follows:
- Roadmap for implementation of the 2500 MW nuclear programme developed.
- Quarterly Monitoring of Koeberg s Plant Life Extension Plan through an establishedTechnical Oversight Committee Meetings
- Pre-feasibility Report submitted to Cabinet for approval to establish the Centralised Interim Storage Facility (CISF).
- Pre-feasibility study on Multi-Purpose Reactor submitted for approval.
- 70 of nuclear authorisation applications processed within the 8-week time period
- Submission of the draft regulations on Physical Protective measures for nuclear materialto the Minister for Public consultation.
4. Overview of the budget [2020 – 2021]
This section provides analysis of the overall budget allocation for the DMRE for the 2020/21 financial year.
Table 3: Overall Budget of the Department of Mineral Resources andEnergy
|
Programme |
Budget |
|
2020/21 (R million) |
|
|
Administration |
642,3 |
|
Minerals & Petroleum Regulations |
574,7 |
|
Mining, Minerals & Energy Policy development |
993,1 |
|
Mine Health & Safety Inspectorate |
232,7 |
|
Mineral & Energy Resources Programmes & Projects |
5 798,1 |
|
Nuclear Energy Regulation & Management |
1 096,1 |
|
TOTAL |
9 337,0 |
Source:National Treasury, (2020)
As evident in the above table, the overall budget of the DMRE is R9.3 billion for the 2020/21 financial year.
In the previous financial year, 2019/20, the erstwhile Department of Energy had a total adjusted budget of R7.1 billion, whilst that of the Mineral Resources had a total adjusted budget of R2.0 billion. Thus, the combined allocation for the two Departments would have been R9.1 billion. When looking at the current allocation of R9.3 billion, it is clear that budget allocation for the Mineral Resources and Energy did not increase significantly. In fact, in real terms, the budget decreased by 2.6 per cent.
In the current financial year, 2020/21, subsidies and transfers are allocated R7.6 billion of the total budget; the remainder of the budget is for Departmental operations. The bulk of transfers and subsidies is allocated to Eskom and Municipalities for the implementation of the Integrated National Electrification Programme (INEP), and to some of the entities reporting to the Department. The table below show budget allocated to the entities.
Table 4: Allocations for Entities
|
Entity |
Budget |
|
2020/21(R million) |
|
|
South African Nuclear Energy Corporation (NECSA)) |
R 939 419 |
|
National Nuclear Regulator (NNR) |
R 45 467 |
|
National Radioactive Waste Disposal Institute (NRWDI) |
R 49 397 |
|
South African National Energy Development Institute (SANEDI) |
R 78 215 |
|
Mintek |
R 435 137 |
|
Council for Geoscience (CGS) |
R 520 925 |
|
South African Diamond and Precious Metals Regulator (SADPMR) |
R 63 630 |
|
Petroleum Agency South Africa (PetroSA) |
R 134 532 |
|
State Diamond Trader (SDT) |
|
|
Mine Health and Safety Council (MHSC) |
R 344 000 |
|
Mining Qualifications Authority (MQA) |
R 2 104 |
|
TOTAL |
R 2 269 170 |
Source: Department of Mineral Resources and Energy, (2020)
5. Overview of the Entities Reporting to the Department
There are eleven entities reporting to the DMRE, some of which are listed in table 2 above. However, for the purposes of this section, the eleven entities reporting to the Department are the Central Energy Fund (and its subsidiaries), National Energy Regulator of South Africa (NERSA), Mintek, SANational Development Institute (SANEDI), Council for Geoscience (GCS), SADiamond and Precious Metals Regulator (SADPMR), National Nuclear Regulator (NNR), SA Nuclear Energy Corporation (NECSA) (and its subsidiaries), Mine Health and Safety Council (MHSC), National Radio-active Waste Disposal Institute (NRWDI and the State Diamond Trade (SDT). This section provides an overview of what each entity plans to achieve in the medium term.
5.1. Central Energy Fund (CEF)
The Central Energy Fund is listed in schedule 2 of the Public Finance Management Act (1999), and is governed by the Central Energy Fund Act (1977) and the Companies Act (2008). Its mandate is to research, finance, develop and exploit appropriate energy solutions to contribute to South Africa’s security of energy supply. Through its subsidiaries, the fund is also mandated to finance and promote the acquisition of coal; exploit coal deposits; manufacture liquid fuel, oil and other products from coal; market these products; and acquire, generate, manufacture, market, distribute or research any other form of energy.
Total expenditure is expected to increase from R15.7 billion in 2019/20 to R16.9 billion in 2022/23 at an average annual rate of 2.4 per cent, mainly driven by the planned increase in production at the African Exploration Mining Finance Corporation and the Petroleum Oil and Gas Corporation of South Africa. Research and development costs and consulting fees are also expected to increase as the fund embarks on certain commercial projects.[5]
As a schedule 2 Entity, the Fund generates revenue almost entirely through commercial activities. Total revenue is expected to increase from R16.9 billion in 2019/20 to R17.3 billion in 2022/23 at an average annual rate of 0.9 per cent, driven mainly by the expected increase in sales for the Petroleum Oil and Gas Corporation of South Africa and the African Exploration Mining Finance Corporation, as well as increased income from dividends and interest.[6]
Key strategic focus areas for the Central Energy Fund Group during the period under review are as follows:
- Over the medium term, the Fund will focus on sustaining and improving its liquidity and solvency in its efforts to return to commercial viability. Initiatives expected to improve profitability include new business development and expansions for revenue growth, and the optimisation of feedstock for the gas‐to‐liquid facility. The fund will also aim to reduce operating costs, improve liquidity through working capital management, and dispose of non‐core assets.
- Execution of the PetroSA turnaround strategy. CEF plans to focus on dealing with the challenges facing PetroSA. The CEF is exploring three scenarios for PetroSA. CEF could either maintain the status quo at a price tag of R25 million. Should this option be chosen it would lead to the total collapse of the CEF Group. The second option was to close down PetroSA. This would cost about R13 billion and would impact the Southern Cape economy and jobs. The third option entailed the restructure of PetroSA. Expected costs are about R15 billion to preserve jobs and would position PetroSA for long-term growth.
5.2 Mintek
Mintek derives its mandate from the Mineral Technology Act No. 30 of 1989. According to the Act, Mintek was established to meet a national imperative “to promote mineral technology; and to foster the establishment and expansion of industries in the field of minerals and products derived therefrom” through research, development and technology transfer.
The strategic priorities of Mintek during the medium term are as follows:
- Develop state-of-the-art manufacturing infrastructure and facilities to manufacture and supply high value diagnostic products
- Beneficiation of platinum group metals through their use in catalysts, hydrogen powered fuel cells and energy storage
- Developing a hydrogen and fuel cell economy
- Energy storage as an enabler of a just energy transition
- Revive the declining ferroalloys sector – ferrochrome and ferromanganese
- Develop a Rare Earth Element (REE) mining and manufacturing industry in South Africa
- Unlocking the Bushveld Complex’s titaniferous magnetite
- Revitalisation of the Iron ore industry in South Africa
- Coal as a sustainable resource of the future.
Regarding performance for the current financial year, 2020/21, Mintek set itself the following targets:
Table 5: Mintek Performance Indicators
|
Strategic outcome oriented goal |
Key Performance Indicators |
Baseline 2019/2020* |
Target 2020/2021 |
|
Conduct relevant, applied research & technological innovation |
# of journal papers |
24 |
30 |
|
# of conference papers |
61 |
70 |
|
|
# of book chapters |
5 |
4 |
|
|
# of books |
0 |
0 |
|
|
# of invention disclosures |
14 |
18 |
|
|
# of patents |
6 |
4 |
|
|
# of trademarks |
6 |
8 |
|
|
Foster industry establishment and expansion |
# of prototypes, processes and/or models demonstrated/validated in a relevant environment |
20 |
16 |
|
Income from the sale of products & services, royalties and licences, (Rm) |
94.09 |
74.7 |
|
|
# of IP Licences |
1 |
2 |
|
|
Develop a capable workforce |
Total number of SET employees |
203 |
215 |
|
% of Black SET staff |
78% |
79% |
|
|
% of Female SET staff |
48% |
50% |
|
|
Total number of SET staff with doctoral degrees |
23 |
33 |
|
|
% of SET staff with doctoral degrees |
11% |
15% |
|
|
Total number of SET staff with masters degrees |
41 |
54 |
|
|
% of SET staff with masters degrees |
20% |
25% |
|
|
Total number of SET staff at middle and senior levels (SP, MP and SE) |
99 |
111 |
|
|
% of Black SET staff at middle and senior levels (SP, MP and SE) |
64% |
68% |
|
|
Develop and maintain world-class RDI capacity |
Total investment in plant, property and equipment, (Rm) |
48.8 |
50.3 |
|
Total investment in human capital, (Rm) |
11.8 |
13.8 |
|
|
Lost Time Injury Frequency Rate |
<1 |
<1 |
|
|
Disabling Injury Frequency Rate |
<1 |
<1 |
|
|
Client Satisfaction Rate |
90% |
90% |
|
|
Safety, Health, Environment and Quality |
ISO Accredited |
Maintain Accreditation |
|
|
Ensure Financial Sustainability |
Total income, (Rm) |
542.3 |
568.3 |
|
Net result, (Rm) |
-18 |
5.9 |
|
|
Contract R&D Income, (Rm) |
62.2 |
52.9 |
|
|
BEE Spend as % of Procurement Spend |
80% |
85% |
|
|
Audit opinion. |
Unqualified |
Unqualified |
Source: Mintek presentation 19 may 2020
Mintek’s financial position, 2020/21 projection
- Total income decreased by 10%, from projected R558 million in 2019/20 to R504 million in 2020/21 - this is mainly due to an increase in conditional grant funding and the baseline allocation.
- BEE procurement for the year was 96% of total spend - this was a result of increased focus on strategic spending.
- Total income decreased by 10%, from projected R558 million in 2019/20 to R504 million in 2020/21. This is mainly due to an increase in conditional grant funding and the baseline allocation.
- BEE procurement for the year was 96% of total spend - This was a result of increased focus on strategic spending.
5.3 Council for Geoscience (CGS)
The mandate of the CGS includes, amongst others:
- The systematic onshore and offshore geoscientific mapping of South Africa
- Collection and curation of all geoscience data
- Compilation and development of comprehensive and integrated geoscience knowledge.
- Bring to the notice of the Minister any information in relation to prospecting for and mining mineral resources
- Study the use of the surface and subsurface of the land and the seabed.
- Develop and maintain the National Geoscience Library, the National Geoscience Information Centre, the National Borehole Core Depository, the Museum, the National Seismological Network and the National Geoscience Analytical Facility.
- Render geoscience knowledge and services and advice to the State.
To execute its mandate, for the currently financial year, CGS received a government grant of R520.9 million and this include an additional Baseline grant funding of R345.8 million has been allocated for Geological mapping for exploration of mining over the MTEF. An amount of R66.6 million has been reallocated for the Derelict and Ownerless (D&O) research portion over the Medium Term Strategic Framework (MTEF).
Table 6: CGS Expenditure
Expenditure FY2020/21 – FY2022/23
|
Expenditure (Rands) |
2020/21 Budget x 1000 |
2021/22 Budget x 1000 |
2022/23 Budget x 1000 |
|
Personnel costs |
336 594 |
318 253 |
343 713 |
|
Bursaries |
4 074 |
4 481 |
4 930 |
|
Commercial project costs |
13 177 |
14 495 |
15 944 |
|
Overheads and operating costs |
184 934 |
*77 515 |
90 842 |
|
SUBTOTAL - B |
538 779 |
414 744 |
455 429 |
|
Surplus Before Capital Expenditure (A-B) |
15 500 |
15 500 |
15 500 |
|
* This is huge decrease of R107million. |
|||
Expenditure FY2020/21 – FY2022/23, continued
|
Application of Surplus |
2020/21 Budget x 1000 |
2021/22 Budget x 1000 |
2022/23 Budget x 1000 |
|
Capital Expenditure |
|||
|
Vehicles & Aircrafts |
3 500 |
3 500 |
3 500 |
|
Equipment |
12 000 |
12 000 |
12 000 |
|
Subtotal |
15 500 |
15 500 |
15 500 |
|
TOTAL EXPENDITURE |
554 279 |
430 244 |
470 929 |
|
SURPLUS (LOSS) |
- |
- |
- |
Source: CGS presentation 12 May 2020
Table 7: CGS Analysis of Government Grant Allocations from FY2019/20 to FY2022/23
|
ITEM |
2019/20 |
2020/21 |
2021/22 |
2022/23 |
|
Baseline allocation |
R198.6m |
R208.4m |
R220.8m |
R229.4m |
|
Water Ingress Project |
R27.5m |
R29.0m |
R30.6m |
R31.8m |
|
Rehabilitation of D&O Mines (Research Portion) |
__ |
R21.1m |
R22.3m |
R23.2m |
|
Economic Competitiveness and Support Package (ECSP) |
R188.0m |
R198.3m |
__ |
__ |
|
Analytical and Research work for the Geoscience Laboratory |
R188.0m |
R198.3m |
__ |
__ |
|
Total Indicative Government Grant (2020 MTEF DMRE adjusted Indicative allocation 15 January 2020) |
R414.1m |
R456.8m |
R273.7m |
R284.4m |
|
Baseline Increase : Geological Mapping for Exploration of Mining |
__ |
R70.0m |
R128.0m |
R147.8m |
|
Baseline Reduction : Current Transfers (Operational) |
__ |
(R5.9m) |
(R7.9m) |
(R1.2m) |
|
Total Government Grant (2020 MTEF DMRE adjusted Indicative allocation 15 January 2020) |
R414.1m |
R520.9m |
R393.8m |
R431.0m |
Source: CGS presentation 12 May 2020
During the period under review, the strategic priorities of CGS are as follows:
- Secure minimum of 5 percent share of the global exploration budget
- Implementation of the integrated and multidisciplinary geoscience mapping programme (IMMP)
- Prioritisation of mineral assessment and drilling mineral targets. The minerals targeted include rare earth metals, base metals, fluorspar deposits, phosphates and precious metals.
- Publication of Geoscience Act Regulations for public comments. The finalisation of the Geoscience Act Regulations will result in the full implementation of the Geoscience Act; the geoscience data and information policy as well as availing geoscientific data and information to relevant stakeholders in order to grow the economy.
- Another focus area is the Just Transition (Molteno-Indwe Coalfield Project). The project assesses the quality and quantity of the coal resources in the Molteno-Indwe Coalfields. The project has the potential to add generate about R122 billion in revenue.
- CGS is mindful of South Africa’s responsibilities towards the Paris Agreement on Climate Change and thus it will continue to focus on the Carbon Capture, Utilization and Storage (CCUS) project designed to capture carbon. South Africa has collaborated with the World Bank on this project.
- Securing a sustainable funding mode for the Council.
- Provide support for the extension of Koeberg operating licence. An updated seismic hazard analysis is one of the critical requirements for renewal. The CGS is executing a Probabilistic Seismic Hazard Analysis (PSHA) in support of Eskom’s renewal.
- Infrastructure and Land Use Projects: CGS will intensify comprehensive seismic hazard mapping and risk based ground stability assessments in shallow mining areas, dolomitic and non-dolomitic areas to avoid expenditure on infrastructure development on susceptible ground (and possibly save lives).
5.4. National Radioactive Waste Disposal Institute (NRWDI)
The National Radioactive Waste Disposal Institute (NRWDI) is an independent entity established by the National Radioactive Waste Disposal Act (Act 53 of 2008) and is listed as a Schedule 3A national public entity. NRWDI is dedicated to professional nuclear waste management and disposal services in terms of the NRWDI Act, 2008.
The NRWDI’s activities are funded by the provision of a budget from funds voted annually to the DMRE. For the current financial year, NRWDI has been allocated R49.7 million – a transfer from the DMRE budget.
The key focus areas for the next five years will be the following:
- The finalisation of Section 30 of the National Radioactive Waste Disposal Institute Act, (Act 53 of 2008) in respect of the Vaalputs nuclear installation licence and Vaalputs functional shift. The functional shift entails the transfer of staff and assets of the Vaalputs Radioactive Waste Disposal Facility from Necsa to NRWDI. It is envisaged that the functional shift will be completed in late 2020.
- The development and maintenance of a responsive radioactive waste management and disposal regime that does not compromise public safety and national security.
- The establishment and roll-out of the Centralised Interim Storage Facility (CISF) for high level waste, in particular spent nuclear fuel.
- Ensuring that public perceptions, concerns and expectations are adequately addressed and that public education, participation and communication activities in respect of radioactive waste management and disposal issues are placed at the centre-stage and us on research and development as well as management and disposal technologies for all classes of radioactive waste.
- Populating and maintaining a national radioactive waste database and publish a report on the inventory and location of all radioactive waste in the Republic.
- The 2020/21 financial year will also see the Radioactive Waste Management Fund (RWMF) Bill making its way through the legislative processes. This will assist in contributing to the sustainability of the NRWDI, thereby making a positive contribution to the successful delivery of its legislative and functional mandate, thus reinforcing the fact that financial sustainability is critical for the survival of any organisation.
5.5. National Nuclear Regulator (NNR)
The NNR is a public entity which is established and governed in terms of section 3 of the National Nuclear Regulator Act, (Act No. 47 of 1999). The fundamental objective of the NNR is to provide for the protection of persons, property and the environment against nuclear damage through the establishment of safety standards and regulatory practices suited for South Africa. To this end, the NNR provides oversight and assurance that activities related to peaceful use of nuclear energy in South Africa are carried out in a safe manner and in accordance with international principles and best practices. To execute this mandate, Government has allocated an amount of R45.4 million to the NNR for the 2020/21 financial year.
The NNR has set itself the following strategic priorities for the 2020/21 financial year:
- The NNR remains poised to successfully achieve its key strategic regulatory goals, particularly towards key future milestones, including the planning of the Long- Term Operation (LTO) or life extension of Koeberg Nuclear Power Plant.
- Secondly, industry discussions regarding Small Modular Reactors (SMR) aimed at increasing an estimated 2.5 gigawatts (GW) are of interest to the NNR. This will mean capacitating the Regulator to ensure an adequate regulatory framework to address these new industry developments.
- The presence of Radon in dwellings and contaminated sites remains a concern for the NNR, and all the relevant regulatory considerations will be explored further during the current financial year. The Regulator plans to conduct a benchmarking exercise on the Regulatory Framework for Radon in dwellings. This will assist in the development of relevant policies and regulatory instruments for South Africa.
- The organisation aims to remain financially viable, despite the current national financial crisis. Authorisation fees and fiscal constraints will remain a tight rope to tread as the Regulator strives to maintain a balance between meeting its set targets, and complying with austerity measures as pronounced by the Government.
5.6. MHSC
The legislative mandate of the MHSC entails advising the Minister on all occupational health and safety issues in the mining industry including legislation, research and promotion. Review and develop legislation for recommendation to the Minister (Focus on Regulations).Oversee research in relation to health and safety in the mining industry. Liaise with other bodies concerned with health and safety issues (MQA, State Departments and various Stakeholders), and Promote health and safety culture in the mining industry.
The MHSC generate its own revenue through the levies it collects from the industry and a grant allocation from the Government. During the year under review, the MHSC received R344 000 from the Government (see more details on the budget below).
Table 8: MHSC Budget
Sources: MHSC Presentation 19 May 2020
In the past MHSC has consistently been collecting above 90 percent target. The revenue from levies islikely to be negatively impacted as result of the following:
- COVID19 which will have a negative impact in achieving the 90 percent target as a result of possible mine closures and this is the worst scenario as MHSC will be able to collect from larger mines.
- Based on predictions, MHSC is likely to collect 65 percent of levies which amounts to R59 million compared to R90.6 million in the previous year.
For the current financial year, the MHSC has set itself the following strategic priorities:
Table9: MHSC Strategic Priorities
|
Strategic Priorities 2020/21 |
Initiatives |
|
Provide Advice to the Minister on Health and Safety Matters in the South African MiningIndustry and Communities Affected by Mining. |
|
|
Promote a Culture of Health and Safety in the SAMI through Engagement, Communication, Participation and Dissemination of OHS Best Practices. |
|
|
Liaise with Statutory Bodies, Strategic Partners and Stakeholders on Matters Relating to OHS. |
|
|
Ensure best Human Capital Management Practices that will Support the Achievement of Highly Skilled, Motivated and Capable MHSC Employees, Council Advisory Committees and Council. |
|
|
To Improve MHSC Compliance and Implementation of Good Corporate Governance |
|
|
Leverage on the Fourth Industrial Revolution (4IR) for Improvement of OHS in the SAMI and Internal Effectiveness. |
|
|
Ensure Financial Sustainability of MHSC. |
|
|
Ensure Efficient and Effective Financial Management
|
|
Source: MHSC Presentation 19 May 2020
5.7. SANEDI
The National Energy Act, 2008 (Act No. 34 of 2008), Section 7 (2) gave effect to SANEDI’s existence and provides for its primary mandate and specific responsibilities. The Act provides for SANEDI to direct, monitor and conduct energy research and development, promote energy research and technology innovation as well as undertake measures to promote energy efficiency throughout the economy.
During the current financial year, SANEDI plans to achieve the following:
Table 10: Annual Performance programmes
|
Programme 1: Administration |
|||||||||||
|
Outcome e |
Interventions |
2019-20 Target |
2020-21 Target |
||||||||
|
Internal Operational effectiveness and efficiency |
Unqualified audits |
Unqualified audit opinion |
Unqualified audit opinion |
||||||||
|
Adherence to employment equity targets |
<5% |
<5% |
|||||||||
|
Filled funded positions |
<5% |
<5% |
|||||||||
|
A capacitated, effective and efficient operational environment (within which SANEDI will discharge its mandate) – internal compliance |
Personnel trained as per Workforce Skills Plan (WSP) |
80% |
80% |
||||||||
|
Programme 2: Applied Energy Research
|
|||||||||||
|
Outcomes |
Outputs |
Interventions |
2019/20 |
2020/21 |
|||||||
|
1. Reduction of GHG emissions in line with national commitments
|
Proof of concept of CCUS in South Africa |
Energy solutions assessed (advisory notes, feasibility reports, complete study reports, case studies, technology |
3 |
3 |
|||||||
|
Smart public facilities (Renewable Energy SANEDI driven initiative contributing towards GHG reduction) |
Energy solutions assessed (advisory notes, feasibility reports, complete study reports, case studies, technology roadmaps and operational demonstration facilities) |
5 |
13 |
||||||||
|
Create an awareness for the technologies to be used in the transition process |
Awareness of and adoption/application of CFF fuel technologies for Business, researchers, academia and society at large. |
Energy-related knowledge sharing events / platforms engaged in (own hosted, attended, knowledge presented, supported) |
0 |
1 |
|||||||
|
Stakeholder awareness of RE technologies and of adoption/application of RE technologies.
|
Energy-related knowledge sharing events / platforms engaged in (own hosted, attended, knowledge presented, supported) |
7 |
12 |
||||||||
|
Evidence based planning, resource allocation and decision making enabled by accurate and timely information, datasets and data analytics |
Information and data made available for policy development |
Number of energy solutions assessed (advisory notes, feasibility reports, complete study reports, case studies, technology roadmaps and operational demonstration facilities)
|
7 |
7 |
|||||||
|
Accessible and high-quality data: Maintain energy-related datasets |
Minimum number of energy-related datasets maintained per annum
|
6 |
8 |
||||||||
|
Energy transition expertise and competence building enabled |
Training modules and programmes relevant to the current environment |
Policy support instruments (industry roadmaps, sector development plans and industry support tools, etc.)
|
0 |
5 |
|||||||
|
Training programmes as well as trained, skilled participants |
Recipients of energy-related training facilitated
|
739 |
472 |
||||||||
|
Energy Research students and researchers supported |
Number of energy-related research students / contracted researchers supported (e.g. bursaries, non-bursaries, contract opportunities, infrastructure support, etc.)
|
2 |
5 |
||||||||
|
Smart city (visibility and control, CO2 mitigation, energy diversity, interconnection)
|
Smart grid: the development of a business case for municipal smart grid (revenue, asset management) roll-out, visibility and control, DMRE priority areas (enhanced revenue management, smart asset management)
|
Energy solutions assessed (advisory notes, feasibility reports, complete study reports, case studies, technology roadmaps and operational demonstration facilities) |
1 |
3 |
|||||||
|
Greened municipal fleet, cleaner transport massification
|
Energy solutions assessed (advisory notes, feasibility reports, complete study reports, case studies, technology roadmaps and operational demonstration facilities)
|
1 |
1 |
||||||||
|
Programme 3: Energy Efficiency |
|||||||||||
|
Outcome |
Output |
Intervention |
2019/20 |
2020/21 |
|||||||
|
Evidence based planning, resource allocation and decision making |
Administration of 12i and 12l tax incentives |
EE energy-related datasets maintained per annum |
1 |
1 |
|||||||
|
|
Register of energy performance certificates for commercial buildings |
EE energy-related datasets maintained per annum |
New indicator |
1 |
|||||||
|
Demonstrated GHG emissions mitigation potential in support of national commitments |
Processed 12L tax applications |
Number of EE solutions implemented
|
1 |
1 |
|||||||
|
Smart public facilities (and any other SANEDI driven initiative contributing towards GHG reduction) |
Number of EE solutions Assessed
|
56 |
6
|
||||||||
Source: SANEDI presentation 19 May 2020
Table 11: SANEDI Budget Allocation
Source: SANEDI Presentation (May 2020)
Expenditure on goods and services is projected to increase by 73,3% over the MTEF mainly as a result of World Bank funded carbon Capture and Storage Pilot and the two Energy Efficiency.
Cost containment measures will continue to be implemented to contain expenditure. Administrative expenditure related to programme 1, governance and administration will in expected to increase by 20,5% over the remainder of the medium term.
- Focus on improving control efficiencies and automation of processes of data management processes.
- New business development will also be our core focus as well as implementation of the organisational review recommendations. Core mandate expenditure relating to programme 2 and 3, that is Applied Energy
Research and Energy Efficiency, will increase by 79,5% in the future periods with the Carbon Capture and Storage Pilot being the largest contributor to the expenditure estimates
5.8. NECSA
The NECSA mandate are as follows:
- To undertake and promote research and development in the field of nuclear energy and radiation sciences and technology and to make these generally available.
- To process source material, special nuclear material and restricted material and to reprocess and enrich source material and nuclear material.
- To co-operate with any person or institution in matters falling within these functions.
- Also: Execute institutional responsibilities on behalf of government, e.g. operation and utilisation of SAFARI-1, decommissioning and waste management, international obligations.
Over the next 12 months, the group’s objectives included Necsa subsidiary commercial company NTP Radioisotopes (NTP) regaining its 20% share in the global market for Molybdenum-99 (Mo-99) medical radioisotopes, and increasing its range of medical radioisotopes from three to four. Another objective was to refurbish the plants of the group’s other subsidiary commercial company, specialty chemical manufacturer Pelchem (the only producer of fluorochemicals in the entire southern hemisphere), thereby increasing its revenues by R78-million.
Necsa also sought to establish itself as the preferred supplier of very high quality components to other State-owned companies, especially Eskom, gain income of R20-million from contract research and development (R&D), and improve the balance sheet and cash flow by optimizing and monetizing various assets. It further sought to optimize its decommissioning and decontamination (D&D) activities and decrease its current nuclear liability by 10%.
Five years from now Necsa objectives included NTP increasing its global market share to 24% and increasing its range of medical radioisotopes from four to six. For Pelchem, the aim was for it to obtain extra revenues and a 0.025% market share through the production of high purity specialized products, increase its fluorochemicals production by 5 000%, and develop (through partnerships) a 30 000 t/y commercial hydrogen fluoride plant (the Thuthukani project).
Necsa also expected its Ketlaphela project (being developed with minerals beneficiation technology science council Mintek) to produce antiretroviral drugs (ARVs) to achieve a 35% share in the local ARV market and be earning revenues of R721-million. The group would continue to be the preferred supplier of very high quality components to Eskom and other State-owned companies, continue to maximize and monetize various project assets to continue to improve the balance sheet, increase its market share in life extension projects to 30% by means of products and services, earn net income of R192-million from impact area R&D projects, and further optimize its D&D activities and cut its current nuclear liability by 50%.
Table 12: NECSA’s key financial objectives
|
Key Financial Objectives |
|||
|
Objective (R bn) |
12 Months |
5 Years |
10 Years |
|
Revenue |
3,121 |
5,186 |
7,914 |
|
Expenses |
3,156 |
4,560 |
6,408 |
|
Net Profit / Loss |
(0,061) |
0,551 |
1,412 |
Source: NECSA presentation 19 May 2020
- Although the Group will make a turnover of more than R2bn in the 2021FY, there will be a projected net loss of R61m in that year. For year-5, the Group projects about R551m net profit and in year-10 a R1.4bn net profit.
- The key financial objective of the Group in the short term is to reduce losses and to rehabilitate the Balance Sheet to enable the Group to fund its Growth and Expansion strategy.
Table 13: NECSA Budget allocation
Source: NECSA presentation 19 May 2020
The R61m budget loss reflected in the previous Table for 2021FY budget is a significant improvement from the 2020FY budget loss of R203m for the group (and R237m budget loss for Necsa Company). It should also be noted that in the 2020FY the R63.9m projected loss at year-end (for Necsa Company), against a R239m budget loss, was achieved mainly through savings and austerity measures in 2020FY, which are expected to be carried over in the 2021FY, albeit with difficulty.
5.9. NERSA
In developing this Annual Performance Plan NERSA take cognisance of the developments, trends and challenges within the global energy environment. The global energy system is undergoing unprecedented change, driven by forces such as technological innovation, changes in consumption patterns, supply dynamics and policy shifts. The geopolitical landscape of energy is quickly shifting and environmental concerns poses a serious challenge. The economics of competing energy sources have changed, and the advent of Fourth Industrial Revolution technologies have enabled new business models, while making others obsolete.
The Government, through the National Development Plan, envisages that, by 2030, South Africa will have an energy sector that -
- provides reliable and efficient energy service at competitive rates;
- that is socially equitable through expanded access to energy at affordable tariffs; and
- is environmentally sustainable through reduced emissions and pollution.
In carrying out its mandate, NERSA endeavours to facilitate the availability of reliable, affordable and clean energy which will lead to sustainable economic and social development. Therefore, contributing to the economic growth of our country through the effective and efficient regulation is a priority for the Energy Regulator.
A critical factor that affects the economy of a country is the cost of energy. In the case of South Africa, where electricity is the main source of energy, the cost of electricity is paramount. NERSA therefore have to, in collaboration with key stakeholders, consider the best way to provide affordable electricity.
Another priority for NERSA is the availability of secure, adequate and reliable energy supply. The challenges South Africa experienced in the last few years with load shedding and unplanned power outages accentuated the importance of the reliable supply of energy, because it severely affected all sectors of society. NERSA is committed to collaborate with Government and all stakeholders to address this challenge, within the parameters of its mandate.
The Annual Performance Plan sets the path for NERSA to ensure the orderly development in the energy sector, mainly through licensing and registration, setting and approving of prices and tariffs, compliance monitoring and enforcement, and dispute resolution in the electricity, piped-gas and petroleum pipelines industries.
NERSA also commenced with a process to contribute towards the transformation of the energy industry, within the ambit of its mandate.
The development of this Annual Performance Plan was informed by the Strategic Plan for the 2020/21 to 2024/25 planning period.
The targets identified in this Plan provides the basis for NERSA’s strategic focus for the next financial year and for the forthcoming medium-term period, which is in line with and in support of two of the key government priorities, namely Economic Transformation and Job Creation; and a Capable, Ethical and Developmental State. These targets aim to -
- contribute to the economic growth of the country through the effective, efficient and transparent regulation;
- facilitate availability of secure, adequate and reliable energy supply;
- facilitate access to affordable energy supply; and
- participate in the development of an appropriate regulatory framework required for an energy industry that contribute to economic growth in South Africa by providing regulatory certainty which facilitates investment.
The identified regulatory targets will contribute to the achievement of the outcomes as stated in the Strategic Plan for 2020/21 to 2024/25, through the following regulator action:
- Set and/or approve tariffs and prices in order to ensure a fair balance between the needs of the customer and the regulated entity;
- Ensure the orderly development of the energy industry and to ensure that all activities related to all operations are licensed and registered as required by the Electricity Regulation Act, 2006, Gas Act, 2001 and the Petroleum Pipelines Act, 2003;
- Ensure that all licensees in the three regulated industries fully comply with their licence conditions, including those relating to health, safety, security and environmental standards and requirements, as well as any other standards and requirements prescribed by the relevant industry-specific legislation;
- Manage disputes and complaints between licensees or between licensees and customers or end-users managed effectively
- Set appropriate rules, guidelines and codes of best practices in the quest to promote uniformity and standardise practices in the regulation of the three energy industries. This will facilitate the creation of investor confidence and lessen the regulatory burden on licensees
- Ensure that systems, processes, procedures and resources are in place that will put NERSA in the position to appropriately advise policy makers on any matter relating to the effective and efficient regulation of the electricity, piped-gas and petroleum pipelines industries, thereby contributing towards the broader government objectives aimed at the economic development of the country.
The identified organisational targets will contribute to the achievement of the outcomes as stated in the Strategic Plan for 2020/21 to 2024/25, through the following regulator action:
- Facilitate the development to skills, both internally and externally, in energy regulation;
- Partnership creation to position NERSA as a recognised regulator nationally, regionally and internationally; and
- Continued enhancement of organisational processes, procedures and systems to ensure effective functioning of NERSA.
Table 14: NERSA Budget
|
STATEMENT OF FINANCIAL PERFORMANCE |
C |
E |
1 |
|
|
DESCRIPTION |
NOTES |
APPROVED BUDGET |
CONSOLIDATED BUDGET |
% Variance (C E) |
|
2019/20 |
2020/21 |
|||
|
TOTAL INCOME |
356 503 644 |
362 470 475 |
1,7% |
|
|
License fees from Electricity Industry |
1 |
205 154 173 |
207 909 620 |
1,3% |
|
Levies from Piped-Gas Industry |
2 |
73 902 240 |
77 964 905 |
5,5% |
|
Levies from Petroleum Pipeline Industry |
3 |
68 356 705 |
70 638 400 |
3,3% |
|
Interest received |
4 |
9 023 910 |
5 865 542 |
(35,0%) |
|
Rental Income |
66 616 |
72 009 |
8,1% |
|
|
Registration fees |
5 |
- |
20 000 |
100,0% |
|
Other Income * |
- |
- |
0,0% |
|
|
TOTAL OPERATING EXPENDITURE |
363 363 120 |
373 685 238 |
2,8% |
|
|
Advertising, Promotion and Communication |
5 |
13 475 550 |
11 920 000 |
(11,5%) |
|
Employment cost |
7 |
254 405 567 |
265 723 554 |
4,4% |
|
Facilities Maintenance |
8 |
11 824 000 |
10 548 424 |
(10,8%) |
|
Office Administration |
9 |
12 180 057 |
12 258 879 |
0,6% |
|
Professional fees |
10 |
35 615 433 |
36 810 085 |
3,4% |
|
Travel, Accommodation and Training |
11 |
29 291 542 |
30 676 796 |
4,7% |
|
Other Expenses |
12 |
6 570 971 |
5 747 500 |
(12,5%) |
|
NET SURPLUS/ (DEFICIT) |
(6 859 476) |
(11 214 763) |
(123,5%) |
Source: NERSA presentation 20 May 2020
5.10. SADPMR
SADPMR is a schedule 3A public entity in terms of Public Finance Management Act, 1999. The mandate of the SADPMR is to regulate both diamonds and precious metals industries on beneficiation, buying, selling, importing and exporting of rough diamonds and manufacturing of precious metals.
For the current financial year, the SADPMR received a Government grant to the tune of R63.6 million. It is important to note that SADPMR also generate its own revenue, see budget details below.
Table15: MTEF Budget Allocations
|
Income |
MTEF |
||
|
2020/21 |
2021/22 |
2022/23 |
|
|
|
|
|
|
|
Grand Allocation |
R63,630 |
R67,131 |
R69,626 |
|
Internally Generated Revenue |
R56,597 |
R59,992 |
R63,592 |
|
Total Income |
R120,227 |
R127,123 |
R133,218 |
|
|
|
|
|
|
Total Expenditure |
R119,422 |
R123,992 |
R128,860 |
|
|
|
|
|
|
Surplus |
R805 |
R3,131 |
R4,358 |
Source: SADPMR Presentation20 May 2020
The key strategic objectives of the SADPMR for the period under review are as follows;
- Job creation, skills development and value addition to the diamond and precious metals industries
- To transform the diamond and precious metals sector
- To enforce compliance with the legislative requirements; and
- An effective, efficient and development orientated regulator
The above strategic outcomes are informed by the President State of the Nation Address, NDP, Seven Priorities of Government, DMRE Minister’s Budget Vote, DMRE Strategic Plan, National Beneficiation Strategy, Internal and External Audit Reports, other directives and legislations.
5.11. State Diamond Trader (SDT)
The mandate of SDT is to buy and sell rough diamonds and to promote equitable access to and local beneficiation of the country’s diamond resources with the intention to grow the country’s diamond cutting and polishing industry.
On the Budget, SDT is expecting revenue to decline significantly in 2021 and 2022 due to a decrease in demand because of the negative impact of COVID19. Declining diamond prices and a general tough trading conditions in the diamond industry will also contribute to the revenue decline over the budget period. The SDT anticipates that the diamonds market will recover gradually from 2022. Revenue is expected to increase by 30 percent year on year from 2022 to 2025.
Furthermore, the SDT has budgeted a decline in cash flows from 2021 to 2025. This is mainly due to the anticipation that cash reserves will be utilized as diamonds trading will decline. The Industrial Development Corporation credit facility and other funding sources will be utilized to ensure financials sustainability for the next five years.
In line with Government Outcomes, the NDP, the MTSF and DMRE priorities, SDT has set itself the following strategic priorities during the period under review:
Table16: SDT Strategic Priorities
|
Strategic Outcomes |
Performance Measure/Indicator |
|
A transformed and inclusive diamond beneficiation industry that ensures an increased black ownership and participation in the sector. |
|
|
A capable workforce and developmental industry |
|
|
A knowledge based and innovative organization. |
|
|
Improved corporate performance, accountability and transparency. |
|
|
A financially viable and sustainable entity. |
|
|
A coordinated regional development, achieving a universal rule based and equitable trading system that is fair, open and benefits all |
|
Source: SDT Presentation20 May 2020
6. Findings and observations
The Portfolio Committee of Mineral Resources and Energy, having assessed the APP, Strategic Plan and Budget of the DMRE and its entities made the following findings and observations:
6.1. Department of Mineral Resources and Energy
- As part of the Department’s reconfiguration since the amalgamation between the Department of Mineral Resources and the Department of Energy, in 2019, the Department of Mineral Resources and Energy, has reduced its structure from eleven branches to six. These branches now comprise Corporate Services; Mining, Minerals and Energy Policy Development; Minerals and Petroleum Regulation; Energy Programmes and Projects; Nuclear Energy Regulation and Management; and Mine Health and Safety Inspectorate.
- The Department’s strategic outline for the next five years envisions a continued role for nuclear power, and therefore intends to commence with the development of a roadmap for a 2 500 MW Nuclear New Build Programme in the form of Small Modular Reactors.They intend issueing an expression of interest in this regard, to test the market. This according to the department will enable them to assess the pace and scale at which the nuclear build will proceed.
- The Department’s strategic outline for the next five years envisions a continued role for nuclear power, including extending the life of the Koeberg plant beyond 2024.
- On the Grand Inga Hydro Power Project, South Africa will be continuing with its participation in the project. The Minister further stated that the other Director-General in the department, has been given the mandate to develop a strategy for the Grand Inga Project. The Minister further reminded the committee that SA is one of the expected consumers of the energy of the Grand Inga project; and is thus proceeding.
- The Department assured the Committee that the various IRP 2019 technologies will be implemented and further confirmed that priority will be given in updating regulatory frameworks to enable these interventions.
- Government is considering the purchasing of additional oil during the current period of low oil prices to bolster its strategic oil stock. According to the Department, the country has available storage of between four million and five million barrels, and would want to use that available capacity.
- On the sale of the strategic fuel stock, the Minister stated that the deliberations between government and those who bought the stock is still underway and that there is general agreement on how to settle the matter. The Minister further assured Members that the fuel has not left SA. The Strategic fuel is still in Saldana Bay., and thus never left South African shores.
- The Department remain cognisant of the major disruptive developments that impacted on the mining industry, which include, the impact of Covid-19-related lockdown measures on the economy, the oil price, the currency exchange rates and downgrades by the ratings agencies of South Africa’s sovereign rating.
- According to the department, generation capacity with short lead times and self-generation options will be enabled through systematic regulation. For medium- and long-term outcomes, the various IRP2019 technologies will be implemented, while the updating and processing of the DMRE’s regulatory frameworks will be accelerated to enable these interventions.
- The Department pointed out that to create access to minerals for beneficiation, the necessary licensing conditions need to be created. Section 50 of the Mineral and Petroleum Resources Development Act will be revisited to help increase domestic beneficiation.
- On the issue of the Department still having two (2) Director-Generals, the Minister pointed out that currently the Department only has one (1) Director-General, Mr T Mokoena. The “other” Director-General has been tasked with developing strategies relating to the Grand Inga Hydro Power project.
- With regard to the Solar Water Heating programme, the Minister stated that there are currently 87 000 units in storage. According to the Minister, the aim is to install these, and the process of installing them is currently underway. The minister further indicated that the programme does have a budget allocation as it is in progress, which means it was provided for in prior allocations.
- With regard to nuclear waste at Koeberg Power station, the Department stated that the International Atomic Energy Agency (IAEA) is supervising the process.
- On the Koeberg Nuclear Power station the department stated that its life extension programme is currently underway.
- According to the Minister, the department is in the process of exploring the consolidation of a number of entities in the energy and minerals sector, i.e. iGas, PetroSA and the SFF, into one entity. The Minister stated that same applies to the Council for Geoscience (CGS), Petroleum Agency of SA (PASA) and the SA National Energy Development Institute (SANEDI). The Minister stated that NECSA for example, respective entities do not need separate boards i.e. Pelchem and NTP. According to the Minister these are issues which are currently on the table, where the department is looking at the rationalisation of entities.
- According to the Minister communities living near mining activities are benefiting.
- According to the Department, 6 400 MW has already been procured from IPPs – 6 000MW thereof is already operational and on the grid. Total investments in the IPP equates to R198million.
- According to the department, mining houses are required to do screening and testing relating to the covid-19 pandemic. The department stated that some mines are outsourcing this service to service providers. Mining houses are also expected to quarantine those infected with the virus.
- On corruption cases in the Department, the Department stated that there are four (4) current cases: two (2) cases of which are currently before the Labour Court, one (1) is with the South African Police Services (SAPS) and the other one (1) is not finalised.
6.2. Council for Geoscience (CGS)
- The Committee welcomed measures put in place by the CGS to prevent the spread of the coronavirus in the workplace, considering that the entity is permitted, in terms of level 4 regulations of the national lockdown, to intensify monitoring and conduct impact assessment on seismicity.
- The Committee is further pleased that pre-screening is conducted regularly, tools of trade are provided to workers who work from home and personal protective equipment is provided to those members of staff who reported back to work on 4 May 2020.
- Members commended the CGS for the significant increase in women representation in the institution.
- With regard to developments relating to the Molteno project, the CGS stated that in terms of the work of the CGS, they have now assessed and quantified the quality of coal in that part of the Eastern Cape. This information has been handed over to the Department, as the custodian of all mineral resources in the country. the Minister and the DG have confirmed that the identified coal resources have a potential.
- The CGS further noted that there is already a mine in the area, called Indwe. According to CGS this will not mean further exporting of minerals for foreign market consumption, currently all of Indwe’s coal output are destined for exports to Europe, India and Brazil.
- The CGS has 122 seismic stations country wide, where they constantly measure seismic activity at any time in the country. The CGS has also partnered with the Mine Health and Safety Council (MHSC) where they have installed a bigger cluster of seismic stations around the deep mining areas.
- On exploration, the CGS stated that S&P Global made the following information available: in 2016, South Africa accounted for $35m of global exploration expenditure by 2019, SA was responsible for $97,5m. According to the CGS this is a signal of hope and more work need to be done in enhancing the quality of the country’s geo-scientific information. The ultimate aim is to ramp up exploration to reach $500m.
- According to the CGS there are 3 attributes which attract exploration, i.e. regulatory space(environment), geological information and access to finance.
- The CGS has been allocated an additional R345m over the MTEF, and according to CGS, the Minister of Finance has not announced any changes which might have an impact on CGS.
- With regard to the increase of support to core staff ratio (40:60), the CGS stated that previously services for cleaners and security services were outsourced, but the CGS decided to in-source these services.
- The CGS will focus on the following mineral resources: rare earth elements, base metals, fluorspar, phosphates, precious metals. According to the CGS, nothing precludes them from looking at other elements as well. The committee believes that the move is commendable, and that it will help to attract investments in the mining sector.
6.3. Central Energy Fund (CEF)
- The CEF experienced a “turbulent period” in fulfilling its mandate over the years while a number of executives were in acting CEO roles. This caused several strategic initiatives to be delayed, resulting in the CEF losing market share and experiencing revenue decline. The appointments were made at a turbulent time on the market, brought about by the slump in fuel demand coupled with global oversupply.
- The Committee commended the board for the permanent appointments of Chief Executive Officers at the CEF Group and its entities. The appointments include:
- Mr Ishmael Poolo, has been appointed as CEF group CEO.
- Mr Pragasen Naidoo, has been appointed as CEO at PetroSA.
- Mr Godfrey Moagi, has been appointed as CEO of the Strategic Fuel Fund
- Ms Phindile Masangane, has been appointed CEO of PASA.
The CEF stated the appointments will lay a solid foundation to address the challenges in the security of SA’s energy future to create shareholder value and address the challenge of unemployment, inequality and energy poverty.
- The Committee is encouraged by the CEF Group Board Chairperson, who despite his company being counted amongst those in need of a government bailout, reassured the committee that the CEF Group is not in the business of bailouts. The Chairperson of the board told the committee that the company has started, gradually, to forge partnerships with the private sector in order to raise funds.
- CEF denied that their requests amounted to a “bail-out” and said the main objective was to secure support for a plan to rationalise and consolidate the various commercial entities in the group to form a diversified and commercially sustainable energy company under CEF.
- The CEF has outlined an extensive list of support measures – including access to a portion of the fuel levy and carbon-tax proceeds.
- According to CEF, reserves had fallen from R24billion in revenues to less than Rlbillion currently. CEF attributed the problem to the duplication of services that threatened to bring the state owned company to its knees.
- The performance of CEF had been undermined primarily by PetroSA, which mines gas and produces fuels and chemicals at its gas-to-liquids refinery in Mossel Bay, in the Western Cape.
- PetroSA had incurred R20-billion-worth of losses since 2014 and is currently producing at a rate of only 6 000 bbl/d, owing primarily to a shortage of gas. PetroSA’s headcount, however, remained at the same level as what it was when it was producing at a daily rate of 18 000 bbl. PetroSA accounts for a large portion of CEF's 1 800 employees.
- A concern for Members is that PetroSA’s gas sources will be depleted by December 2020 and the CEF reported that no sustainable techno-economic solution had yet been found for the refinery.
- CEF highlighted that they face three choices on PetroSA: do nothing, which would lead to the collapse of the group; close down the company at an associated cost of R13billion and an impact on the regional economy; or restructure the entity, for which R15 billionis required.
- According to the CEF, closure is not being considered as an option and that a decision had been made to rather restructure and reposition PetroSA at a cost of R15-billion. Neither the turnaround plan, nor the funding plan, however, had been finalised.
- Restructuring PetroSA will involve inviting strategic partners to assist with refinery operations, divesting from upstream blocks and investing in downstream activities, according to the CEF.
- CEF said that, unlike PetroSA, the CEF Group as a whole remain solvent with assets of R35-billion, of which R18-billion is in cash. To stabilise the group and position it for future growth the board and executive team agreed that the CEF Holding company should abandon its hands-off parenting strategy in favour of becoming a ‘strategic guide’, whereby group strategy, capital expenditure and funding will be centralised.
- According to the CEF, they are considering acquiring assets from petrochemicals giant Sasol to build its portfolio.
- Members raised a concern that the CEF has too many headquarters in its group. The CEF agreed with members that there are multiple headquarters in Johannesburg, Mossel Bay andCape Town.
- There is a view that the PASA should be a stand-alone entity as it is a regulatory entity as opposed to other entities within the organization which mainly focus on upstream activities.
- According to the CEF, most of the entities in its group are performing well e.g. Strategic Fuel Fund and iGas. The challenge is with PetroSA, which is currently running out of feedstock (reserves).
6.4. National Radio-active Waste Disposal Institute (NRWDI)
- Currently, spent fuel was not disposed of.About 5% of the spent fuel is stored under a reactor site. For example, it is stored in the Koeberg wet storage pool and dry storage cask. The same storage location applied to South African Nuclear Energy Corporation (Necsa).
- Regarding a strategy for spent fuel, NRWDI identified key critical projects, which include the centralised interim storage facility that needs to be built by 2025. NRWDI is also contemplating a deep geological repository that would normally be anything from 500 metres to 1-kilometre underground. NRWDI has not received any spent fuel but has identified key critical infrastructure for the long-term management of spent fuel.
- The Covid task team members consists of the Occupational and Health Manager, Health and safety reps and organised labour.
- Members raised concerns on the outcomes of public engagements which were downscaled from 4 to 2. It was explained that the number was reduced because of the lockdown and once lockdown is lifted the number public participation events will be scaled up back to 4. It was also emphasised that these public engagements are taking place in deep rural areas in the Northern Cape.
- It was acknowledged that KPI’s need to be improved. On the issue of sustainable funding, the organisation is looking for additional revenue coming from parliamentary appropriations, waste generator fees, provision of professional services to various SADC countries etc.
- With regards to the issue of the Acting CEO, the board Chairperson indicated they had made a recommendation to the Minister but there were challenges that arose and he assured the Committee that the process will restart after the Covid 19 situation.
6.5. National Nuclear Regulator (NNR)
- Members noted that there had been problems at the NTP of non-compliance to the requirements and subsequent breaching of their own operational technical certification. This forced the NNR to invoke part of itsmandate, which is compliance assurance and enforcement. The NTP had serious problems of relating to its safety culture which extended to a lack in leadership for safety or appreciation from the top echelon of the organisation.
- According to the NNR, to remain operational and profitable for a long time the NTP has to prioritise its safety culture. The NNR confirmed that they have observed improvement relating to safety issues at the NTP. These improvements had come about as a result of regulatory intervention as the NNR had emphasised on the NTP. The NTP had to make sure that they have a sustainable plan for returning to operation as was presented to the NNR.
- On the issue of how entities are to be assisted to ensure they adhere to regulations instead of shutting them down, the NNR did not take pleasure in shutting entities down but was transparent about its requirements and regulatory approach. Over the period of 18 months, the NNR had as much as possible changed its approach to the one that is more personal (meetings and workshops) instead of exchanging letters and emails.
- In terms of the audits that entities have had insofar as safety culture was concerned, the NNR had invited the IAEA to come and provide outcomes on the audit, and reflect how good or bad the entity was doing. The entities have taken this to heart and devised action plans to address those findings by the IAEA. The NNR hoped that the compliance would be maintained in the long run.
- With regards to financial viability and Covid-19, the NNR currently derived its income from two streams: government and authorisation fees. The biggest chunk of revenue comes from authorisation fees, which include Eskom, Necsa and the mines. The mines have been adversely affected by Covid-19 and the NNR is already concerned about how much they are going to claw back from the mines insofar as authorisation fees are concerned in the new financial year. The NNR did not want to pre-empt noncompliance, but it is expected that some of the licensees will not be able to honour the fees. The NNR may therefore have challenges on this revenue stream.
- Given the situation that could materialize with some license holders going bankrupt due to Covid-19, the NNR requested from the Committee that they get the government grant increased to make up for the shortfall that is to come.
- As far as the Covid-19 plans are concerned and how this affected the NNR operations as they were also working from home. Long before Covid-19, the NNR had a business continuity management system in place which had been tested from time to time. Some inspectors had been on a work-from-home for a period of four weeks, and the lockdown had been implemented just before the four weeks was completed. The NNR is very experienced in working from home and ensuring that they delivered on their mandate. However, in the situation where some of the facilities regulated may have been shut down, such as the mines, the NNR was unable to inspect those entities which affected their work. Since the mines are now back online despite not being at 100% capacity, the NNR has a plan to ensure that inspectors have the necessary Personal Protective Equipment (PPE) and only performed the very essential inspections. The NNR had not seen any lapse in compliance as a result of Covid-19.
6.6. Mine Health and Safety Council (MHSC)
- According to MHSC, last year was the best year in improvement on Occupational Health and fatalities.
- The MHSC, through the leadership of the Minister and DMRE, encouraged the mines to assist in responding to Covid-19. For example, in the last few weeks, the Minister had been to the North West Province Office where there were two hospitals made available by the sector to the province, to assist in terms of public health and Covid-19. Some of the mines had indicated that they were supporting communities with the provision of sanitisers and respective PPEs. In terms of how the MHSC ensured and prevented the spread of Covid-19 from the workers to the communities, and as the Minister had previously mentioned, in the guidelines there was a provision that required the mines to quarantine all the workers that came from epicentre areas. These were areas that had high levels of Covid-19. The regulations that were gazetted in terms of the Disaster Management Act also required mines to have quarantine facilities, and some of the mines had already quarantined workers who were found to have Covid-19.
- In terms of compliance, MHSC had been conducting unannounced visits to the mines. The MHSC started off by going to the coal mines which, at the time, had one reported incident. This was to ensure that the coal mines followed the directives and guiding principles that had been circulated. Generally, throughout the mining sector, through compliance visits, it was observed that the protocols are in place, e.g. clear markings of social distancing, PPEs are provided, and there is sanitising and screening every day. However, as previously raised, there needed to be more focus on testing.
- At the Marla mine, the 17 miners were asymptomatic before the testing, as indicated in the MHSC guidelines. In terms of what was done in cases of noncompliance, the MHSC followed the provisions of the law but this depended on the level of noncompliance – different instructions could be issued in terms of the law, depending on the level of compliance and the risk that workers might be exposed to.
- With regards to those employees who has other medical conditions, the guideline also has a section on how mines are to deal with vulnerable employees who has existing conditions. The MHSC encourages mines not to bring those people back, as their immune system might be impacted.
- According to the MHSC, one of the main reasons why biometric systems are used in the sector is to prevent Zama Zamas from accessing the mines. Significant work has been done by the operating mines to prevent Zama Zamas from going inside the mines.
- The MHSC is also concerned about fatalities at the platinum minesisAccording to the MHSC, since 2008 there has been a significant improvement. The gold and platinum mines were generally the major contributors to fatalities, mainly because they are labour intensive sectors in comparison to the other mines. Gold and platinum mines are also deep mines, hence the risk of falling ground and transport related accidents. This is also a matter of complacency. The MHSC has been engaging with the CEOs and Boards of those companies to improve on it.
- In terms of the protocols, the MHSC weighed the risk of a particular mine and did not just close the mine. This included weighing the risk of who had a high risk of being infected. The MHSC did perform the necessary inspections.
- The MHSC has started a process of advertising for members for the Social Ethics Committee and are at the point of conducting interviews. The MHSC has already appointed a Social Ethics Compliance Officer.
- On the point relating to the number of cases in the mine, the statistics received from the Minerals Council of South Africa (MCSA) relating to Covid-19; 168 000 employees had been screened and 1 466 employees had been tested. There were 41 confirmed cases and 2 deaths.
- The MHSC has not finalised the reprioritisation of the APP but are looking at moving money, especially when it comes to dissemination and promotional work. The MHSC will be reprioritising funds towards establishing infrastructure in terms of the virtual platform. In the event that the MHSC not being able to obtain funding from companies who are likely not able to pay,The MHSC would be looking into the surplus funds that they have. The MHSC is also looking into assisting these companies through the difficult period in terms of their payment terms. This, however, is not yet finalised yet but is currently being looked at.
- According to the MHSC all of the asbestos mines has been decommissioned for more than 20 years. The sites are being rehabilitated, especially those in close proximity to communities. There are programmes being run through entities like Mintek and the Council for Geoscience. The MHSC is working to ensure that there is no further exposure to communities.
- The MHCS confirmed that they have finalised the statistics for the previous year. In 2018 there had been 465 silicosis cases reported, which came down from 662 in 2017.
6.7. Mintek
- On why Mintek’s income has declined over the years, the Mintek stated that in 2009 its income was at its peak, i.e. during the “mining boom”, but after this there was a decline. The reason being that mining houses prior to 2009 invested in big pilot projects and after this their appetite for big projects declined. They were more interested in smaller projects and Mintek did not respond appropriately to this shift. The Mintek is thus repurposing its activities, building new capacity and modelling to respond quickly. With the decline in revenue, the Mintek has repositioned most of its activities to addressing this and aim to be a going concern in the foreseeable future.
- According to Mintek there is no facility in the country to validate test kits, even external test kits. Mintek received a license from the SA Health Products Regulatory Authority (SAHPRA) to manufacture test kits for Covid-19 and HIV. Mintek with the SAHPRA is now able to validate test kits in the country.
- Mintek, with Ketlaphela (state pharmaceutical company), will be setting up a company to manufacture test kits.
- Members are encouraged that Mintek has repurposed itself in the production of sanitiser, which adheres to the World Health Organisation guidelines.
- According to Mintek, sanitisers are being commercialised, e.g. providing 1 500L to the Department of Mineral Resources and Energy. Mintek pointed out that a challenge is the procurement of ethanol, but this has been addressed, where they have partnered with PetroSA who will be supplying this product.
- Mintek is currently producing 4 000L sanitisers per week and to commercialise this, Mintek has partnered with the local bottling company to bottle the product and provide the market with sanitisers.
- The challenge on test kits, according to the Mintek, is that antibodies and antigens had to be imported, and current lockdown impacted this, however they have received a consignment during the week of 11 May 2020 and will be receiving another consignment during the week of 19 May 2020. Therefore, Mintek is proposing that the country produce its own antibodies and antigens.
- On the test kits, Mintek’s plan is to produce a prototype within 2 months to be clinically validated
6.8. SA National Energy Development Institute (SANEDI)
- With regard to assisting in the IRP planning, the SANEDI stated that they are not directly involved in the process. Data that go into some of the models in the IRP is collected by SANEDI.
- SANEDI is actively involved in micro-grids. SANEDI has developed small grid vision document, a roadmap for municipalities and work on micro-grids. According to SANEDI some areas will be too expensive to electrify to the national grid, so alternative energy sources need to be explored and considered. SANEDI is collaborating with Eskom Research on micro-grids. SANEDI further pointed out that there is a working micro-grid demonstration facility in Ficksburg.
- SANEDI stated that smart-grids is a sub-sector of smart cities and they are actively working with the Department of Cooperative Governance and Traditional Affairs on smart cities.
- With regard to the solar water heater programme, the SANEDI confirmed that they are not involved in the programme, which is run by the department and the Central Energy Fund
- The SANEDI is working with Eskom on its emissions relating to carbon capture and storage (CCS).
- According to SANEDI they are looking at research focusing on cheaper energy, i.e. bio-energy, solar thermal etc.
- SANEDI confirmed that they have received the World Bank funding of R23m, it will be dispensed in tranches as projects are implemented.
- With regard to the retraction of the CCS tenders, the SANEDI stated this was due to the finalisation of the terms of reference with partners and the national lockdown has halted the process as well.
- On funding the SANEDI stated that for the next 5 years they will be able to manage, but they are constantly looking at funding, both internally and externally.
6.9. SA Nuclear Energy Corporation (NECSA)
- Members highlighted that they are encouraged by the plans presented by NECSA and noted that it seems that NECSA is on a path of “recovery”.
- With regard to the appointment of a permanent CEO, the NECSA stated that they are currently at the CCMA, with the previous CEO and once these processes are finalised, the board will be able to proceed on the appointment of a permanent CEO.
- According to NECSA, nothing in their current turnaround strategy rely on anything coming out of the nuclear new build programme.
- With regard to the relations between NECSA management and labour, NECSA stated that they have had discussions and a number of sessions with labour. One session was chaired by the CCMA, this was very successful and that they will continue with this and are working to improve relations.
- Members commended NECSA with regard to the production of sanitisers by Pelchem plants. NECSA confirmed that the production of sanitisers is a 3-way collaboration between NECSA, Mintek and Ketlaphela, which complies with WHO guidelines. According to NECSA there is a shortage of these sanitisers in the country and the region which complies with WHO guidelines.
- NECSA stated that the transformation of the entity is a continuous process but highlighted that it takes time to develop skills. NECSA does try to retain the knowledge, but acknowledged that it is a challenge to improve and strengthen their knowledge management system.
- The international pharmaceutical partner with Ketlaphela is an Indian company, which is currently the biggest producer and supplier of ARVs in the world. However, NECSA is awaiting concurrence from the Minister of Finance and the Minister of Health, respectively.
- With regard to the safety regulations as highlighted by the NNR, the NTP stated that they are working closely with NECSA to ensure that they adhere to the NNR safety regulations. The NTP has since November 2018 provided products to the market and that they have regained 80 percent of their customers and by July 2020 aim to recover 100 percent of their customers.
- According to the NTP, if Safari is run safely and the NTP facility is able to produce safely, the NTP will be able to regain the international market, but also that they have started to work on entering the African market.
- The NTP has during the lockdown been able to provide the American and European market with products.
6.10. National Energy Regulator of SA (NERSA)
- According to Nersa, the suspension of the CEO is ongoing and is still in its early phases. According to Nersa, the Minister received a whistle-blower report regarding the matter.
- With regard to developments on the current Regulatory Clearing Account (RCA), the Nersa confirmed that this does not relate to the current court case. The court case is still ongoing.
- Based on the information at its disposal and the analysis of Eskom’s Regulatory Clearing Account (RCA) application for the 2018/19 financial year, Nersa recently approved an RCA balance of R13 271m in Eskom’s favour.
- The RCA is a monitoring and tracking mechanism that compares certain uncontrollable costs and revenues assumed in the Multi-Year Price determination decision (made by Nersa) to actual costs and revenues incurred by the Eskom.
- The Nersa explained that the RCA process forms part of the regulatory processes and methodologies regarding tariffs.
- Members raised concern that some of the Nersa processes takes too long to make decisions. According to Nersa, work has been done to speed up some of the processes and changes will be made, and the result will also address cost savings.
- On the relationship between Eskom and Nersa and considering the needs of consumers Nersa stated that it needs to balance sometimes very conflicting needs of licensees (Eskom in this case) with those of the consumers on the other hand. Nersa needs to allow a price that facilitates investments in the sector but at the same is affordable to the consumers and ensures economic growth.
- Nersa stated that they believe that by virtue of the conflicting needs, disagreements between Nersa and licensees (Eskom) is inevitable. For instance, in the case of the recent Regulatory Clearing Account (RCA), Eskom applied for R27b and Nersa only granted R13 billion. All that stakeholders are asking for is for better stakeholder engagement, they want their position to be heard i.e. both consumers and suppliers alike. It is for that reason that Nersa’s primary actions will be directly engaging with all key stakeholders, starting with Eskom.
- The Gas Act of 2001 makes a clear distinction between a price and a tariff.A price is a charge for the molecule, the gas energy charge. It excludes any charges or costs associated with transportation of gas. Tariff – is a charge for gas service – these are services related to the transportation and storage of gas e.g. cost of service for transmission, distribution, storage etc.
6.11. State Diamond Trader (SDT)
- Members raised concern that the SDT does not have a board in place. According to the SDT they have communicated this to the department and that they have had a number of meetings. The SDT further highlighted that section 49 of the PFMA provides that in the case where there is no board, the CEO fulfils this role to ensure continuation of the entities’ mandate.
- With regard to legislative impediments, the SDT stated they have been in discussions for a while now with the regulator. They have also appointed a service provider to address these and the report will be forwarded to the department in due course.
- According to the SDT, the country does not have a proper strategy dealing with diamonds and contends that the department must take the lead in this process.
- The SDT highlighted that getting all the stakeholders together remains a challenge and requested that the department bring together all stakeholders in the diamond industry.
- According to the SDT, there is a decline in diamond production in the country and globally
- With regard to the new premises at the Gauteng IDZ, the SDT stated that they anticipated moving into the new premises in November 2020, but now it seems they will only be able to move next year.
- On the IDC credit facility, the SDT stated that this has been in place since its inception. The facility is only used when they have a shortage in order to purchase products from producers and then repay the IDC within 10 days. SDT further noted that they have never defaulted on payments to the IDC.
6.12. SA Diamond and Precious Metals Regulator
- The regulator is looking at various streams to increase its revenue; it will also approach Treasury to supplement its budget.
- Regarding the appointment of the new Board, the department is dealing with the issue.
- About 75 percent of the entity’s costs are compensation of employees such costs are fixed, hence there is no room for further cutting.
- According to the SADPMR, the entity might be experience challenges on revenue in the long term, and that they might require intervention from the department, if the situation does not improve, the entity is now tapping its reserves, which is not sustainable.
- Treasury has encouraged entities that are affected directly by Covid 19 to apply for funding, the regulator is simply responding to that call.
- The purpose is not to discourage exports, however, is to find a balance between exports and local beneficiation, currently 95 percent of locally produced diamonds are exported a concentrate.
- The SADPMR stated that the fees charged can be increased yearly, but they have requested the Minister to stop this process, as this will affect stakeholders negatively during this period, given the impact of Covid 19 on their operations.
- The SADPMR do not receive 100 percent government funding.
- During the lockdown the SADPMR have not been generating any revenue.
- According to the SADPMR, 75 percent of their expenses is on employee salaries and 25 percent on operational expenses, i.e. rent, equipment, licenses, board expenditure etc.
- Locals are being supported through internal training programmes on diamond cutting and polishing, there is also a forum consisting of various departments that is exploring means of assisting locals with technical and financial support.
7. Recommendations
Informed by its deliberations, the Committee recommends that the House, request that the Minister of Mineral Resources and Energy should:
- Ensure that the Department’s Annual Performance Plan 2020/21, is in line with the adjusted budget, when the Adjusted Budget is tabled by the Minister of Finance in June 2020, .and report back accordingly.
- Finalize the restructuring of its entities, in order to ensure that there is no duplication of services and eliminate unnecessary competition between entities, including the subsidiaries within the Central Energy Fund (CEF) Group
- Ensure that the Mine Health and Safety Council (MHSC) has alternative revenue streams, as the revenue from levies is likely to be negatively impacted as a result of mining closures due to the COVID-19 pandemic.
- Ensure that all entities have permanent appointments of senior executives and boards as a matter of urgency, to address governance issues and ensure administrative consistency.
- Ensure that all entities which will be required to utilize their reserves due to the effects of the COVID-19 pandemic, develop long term plans to replenish their reserves to pre-COVID-19 levels, and this should be done under strict protocol, procedures and time lines.
- Ensure that when the Department proceeds with the Nuclear New Build Programme, it is done at a pace and scale which the country can afford, and provide to the House, a detailed plan and budget.
- Expedite the exploration of various energy technologies as highlighted in the Integrated Resource Plan 2019, in order to ensure energy supply and security.
- Continuously enhance the quality of the country’s geo-scientific information, relating specifically to reliable exploration information, in order to increase the country’s exploration possibilities taking into account mining investments and the high costs of these activities.
- Explore and expedite the production of antibodies and antigens for the local manufacturing of test kits for COVID-19, tuberculosis and HIV/AIDS, as these are currently imported.
- Enhance collaboration between Pelchem, Mintek and Ketlaphela with the local production of sanitizers, since the sanitizers currently produced by Mintek adhere to the National Council of Infectious Diseases rules as well as the World Health Organisation’s procedures.
- Address the regulatory impediments hindering the ease of doing business in both the mining and energy sectors – specifically by reviewing the mineral rights regulatory environment and streamlining the licensing and registration process in the electricity generation sector for faster turnaround.
8. Conclusion
The Portfolio Committee on Mineral Resources and 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 Mineral Resources and Energy. This is done to ensure proper and effective functioning and compliance with the legislation and policy requirements.
Report to be considered.
[1]National Treasury, (2020)
[2] Department of Energy, (2019)
[3] Ibid
[4] Department of Planning, Monitoring and Evaluation, (2020)
[5]National Treasury, (2020)
[6]Ibid
Documents
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