ATC210514: Report of the Portfolio Committee on Mineral Resources and Energy on the Annual Performance Plan and Budget Vote No. 34 for 2021/22 Financial Yearof the Department of Mineral Resources and Energy and its entities, dated 14 May 2021

Mineral Resources and Energy

Report of the Portfolio Committee on Mineral Resources and Energy on the Annual Performance Plan and Budget Vote No. 34 for 2021/22 Financial Yearof the Department of Mineral Resources and Energy and its entities, dated 14 May 2021.

 

The Portfolio Committee on Mineral Resources and Energy (hereafter, the PCMRE or Committee), having considered the 2021/22 Annual Performance Plan (APP)and Budget Vote 34: Department of Mineral Resources and Energy (DMRE) and its entities, reports as follows:

 

1. Background

 

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 and Budget Vote No 34 of the DMRE and its entities.

 

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.

 

As part of the policy development process to achieve better service delivery for the South African people, government identifies broad strategic outcomes which require high quality planning to accomplish. Government has the responsibility to ensure responsible spending, given the limited nature of public funds. Thus the costs of initiatives must be linked with results to ensure value for money.

 

Annual Performance Plans identify the performance indicators and targets that the institution will seek to achieve in the upcoming budget year. It is important that these performance indicators and targets are aligned across an institution’s annual plans, budgets, in-year and annual reports. In addition, the process for the production of the Annual Performance Plan should be aligned to the budget process.

 

1. Introduction

 

This is the second year since the merger of the former departments of Energy and Mineral Resources. The DMRE was established on 29 May 2019 to better equip and acapacitate DMRE to respond to the strategic objectives derived from the NDP and MTSF and ERRP as they relate to the regulation and transformation of the energy and mining sectors in the following regard:

• Provisioning of secure, sustainable and affordable energy and
• The promotion and regulation of minerals and mining

 

The PCMRE on the other hand, through Parliament, is entrusted with the responsibility ofensuring that the Department delivers on its mandate. However, for the Department toeffectively deliver on its mandate and vision, adequate financial support is essential. TheDepartment’s budget and APP has been tabled at a time wherethe country has been battling with the COVID-19 pandemic, which has exacerbated weakeconomic growth and further strained the national budget. Therefore, the Department’sbudget and APP should be viewed against this backdrop.

 

In compiling this report, the Committee had meetings with the DMRE and all its entities, where they briefed the Committee on their respective APPs and budgets for 2021/21.

 

Two entities of the Department, namely the South African Nuclear Energy Corporation (Necsa) and the Central Energy Fund (CEF) did not present their performance plans for the year under review. The reason for not presenting is that the Necsa and CEF are schedule 2 State Owned Entities, classified as such in terms of the Public Finance Management Act 1 of 1999. In light of the aforementioned, the Necsa and CEF do not table Annual Performance Plans, but submit Corporate Plans to the Department for Ministerial approval.

 

 

3.Overview of the Annual Performance Plan [2021 – 2022] of the DMRE

 

3.1.       General

 

On 15 March 2020, the President of South Africa declared a national state of disaster in terms of the Disaster Management Act of 2002 after the World Health Organisation (WHO) declared COVID-19 a global pandemic.

 

The COVID-19 pandemic has had a serious impact on societies and has had an immeasurable impact on economies and industries around the world. The mining and energy industries, being industries that operate on a global scale and rely heavily on people employed, were not spared from this pandemic.

 

An effective and efficient response to the pandemic, in the form of lockdown restrictions aimed at flattening the curve, has resulted in an economic halt that will have to be revived after the lockdown.

 

The government, through the National Command Council, resolved to re-open the economy in a risk-adjusted approach. It became imperative that the complex initiatives of the DMRE, which were aimed at stimulating the economy, fit into this framework, as they deal with the Department’s operational readiness, the South African mining industry’s health and safety readiness, as well as interventions and responses within the broader mining and energy sectors.

 

The Department’s complex initiatives and responses during the economy re-openingwhich   according to a risk-adjusted approach, recognized that the minerals and energy sectors would be operating in an environment which is characterized by the following:

 

• Possibility of a reduced global demand for commodities,
• Global shrinking of the major economies who are trading partners,
•  The sector is sub-optimally contributing to the GDP of the country’s gross domestic product (GDP),
• Major companies not being as elastic as they should be, and thus unable to absorb losses on a sustained basis,
• Possible closure of operations by large mining companies,
• Large mining companies scaling down on operations, resulting in job losses because of reduced commodity demand,
• Sector being unattractive for new investments as the cost- of- financing by financial institutions will be high, given the country’s junk status, as such no major new major projects will take- off in the short to medium term,
• Social Mining rights holders reneging or defaulting on their mining rights commitments, which impacts on Social and Labour Plans (SLPs)
• Reneging/defaulting by Mining right holders on their mining rights commitments,
• A risk of mining operations increasing production (ramping up) to capture lost production and thus possibly putting the health and safety of employees at risk, 

 

Energy forms an integral part of the economy, and the energy sector is a key enabler for the attainment of national policy imperatives such as those expressed in the National Development Plan (NDP), the Medium-term Strategic Framework (MTSF) and the Reconstruction and Recovery Plan. South Africa needs to grow its energy supply to support economic expansion and, in so doing, alleviate supply bottlenecks and supply or demand deficits in energy-dependent industries such as mining and manufacturing. This will increase the contribution of industry sectors and enable them to create economic benefits for the country, i.e. accelerated growth and job creation.

 

In recent years, the South African economy has seen the challenge of electricity demand and load shedding due to constrained generation capacity because of the existing lower availability factor of Eskom’s existing power-generation plants. Load shedding has had a negative impact on energy-intensive industries and the economy at large.

 

Electricity prices in South Africa have roughly tripled in real terms over the past decade. The cost of electricity had also been increasing at rates above inflation, thus increasing the cost of doing business in the country. This has resulted in energy-intensive users such as smelters closing their local operations and moving to other countries to remain competitive. This has contributed to job losses and the undermining of the NDP as it envisages mineral beneficiation as a key economic driver of growth. 

 

High electricity prices, load shedding and technology advancement are driving electricity consumers to alternative power supply options. An increasing number of consumers is therefore generating its own power or is planning to do so in the future. This will place further financial strain on Eskom.

 

President Cyril Ramaphosa, in his State of the Nation Address (SoNA) on 13 February 2021, outlined government’s main objectives and priorities for 2021. The SoNA focused on the COVID-19 pandemic, accelerating economic recovery, creating jobs and promoting inclusive economic growth, including maintaining black economic empowerment (BEE). Eskom plans to increase its power-generation capacity, fight corruption and strengthen state-owned entities. This annual performance plan will provide the DMRE’s response to the President’s SoNA commitments

 

The mining industry is committed to supporting the national COVID-19 vaccine roll-out. There is no doubt that access to an effective vaccine and the significant roll-out of a vaccination programme is crucial in the fight against COVID-19, which will help re-open the economy and save lives and livelihoods.

 

The Department plans to increase mining exploration activities with the aim of attracting a minimum of 3% of the total global exploration expenditure. According to the Department, an exploration strategy for the country will be tabled in Cabinet in this financial year. It is envisaged that implementation of this strategy will ultimately increase the contribution of mining to the Gross Domestic Product (GDP). The Department contends that it will furthermore ensure a 50% reduction in the current timeframes for the issuing of mining licenses and permits and support efforts to invest in green jobs to improve efficiencies through the One Environmental System that will integrate different aspects of the environment. The Department also aims to deal with confidence-boosting measures, including land rights, digital migration, mineral rights, market tools, local beneficiation and products with export potential, such as ash, gypsum, slag and biomass.

 

Economic Reconstruction and Recovery Plan

 

As pronounced by the President in the 2021 SONA, the Department has finalised the procurement of 2,000 megawatts under the Risk Mitigation Independent Power Producer ProcurementProgramme (RMIPPPP). The Department plansto also launch the procurement of an additional 11,800 megawatts of power from renewable energy, natural gas, battery storage and coal in line with the Integrated Resource Plan 2019.

 

The DMRE in this financial year aims to issue a Request for Proposals (RFP) for 2,600 megawatts from wind and solar energy as part of Bid Window 5. This, according to the Department, will be followed by another bid window in the 3rd quarter of the 2021/22 financial year. The DMREcommits toamend Schedule 2 of the Electricity Regulation Act in the 1st quarter of 2021/22 to increase the licensing threshold for embedded generation. This will include consultation with key stakeholders on the level at which the new threshold should be set and the finalisation of the necessary enabling frameworks.

 

 

The Department commits to implement a Framework for the procurement of the 2500MW nuclear energy in this financial year to ensure security of energy supply in a long-term in line with Decision 8 of IRP2019 and support Economic Reconstruction and Recovery Plan. Looking ahead, the DMRE have considered the feasibility of natural gas for economic use in the South African market, which includes accelerating the exploration of the country’s natural gas for domestic gas feedstock.

 

Investment in infrastructure to import Liquefied Natural Gas (LNG) is critical. Therefore, urgently processing the tabled Gas Amendment Bill is critical.

 

Pre-Covid-19, the Department was in the process of consulting stakeholders on the Upstream Petroleum Resources Development Bill. Community consultations were however, foiled by the lockdown restrictions. Relaxation of restrictions on gatherings enabled the Department to restart consultations. Finalisation of the Bill will unlock the country’s untapped potential in the upstream oil and gas reserves.

Government is focused to renew investment in exploration, which is the lifeblood of mining. It is anticipated that this will further promote diversification of the economy. The mining sector will be actively engaged in facilitating renewed investment through a policy framework that provides certainty, investment protection and transformation.

 

The Department are also giving effect to the DMRE commitment to reduce timeframes for mining and prospecting licenses.

 

The Department has committed that formalising of artisanal mining will be accelerated, thereby creating an avenue to mine sterilised deposits. Saving Our Lives Saving Our Livelihoods is a social compact between Government, the social actors and society, which is core to the Economic Reconstruction and Recovery Plan. This is reminiscent of the country’s ability to overcome the worst, do the unimaginable, when we hold hands and act together.

 

The Department aims to pay particular attention to the local processing of mineral resources, prioritising the mining value chain, which includes mineral beneficiation. This will not only increase the revenue gained from the exploitation of resources, but will also significantly increase the job creation capacity of the industry and ultimately the continent.

 

The Department has identified several interventions as part of the Economic Reconstruction and Recovery Plan to ensure that our economy recovers as quickly as possible following the devastating effects of COVID-19.

 

Mineral Resources

 

The Department will advance localization through mineral beneficiation. This it will do through the implementation of the ferrochrome smelters interventions approved by Cabinet in 2020. This will not only increase the revenue gained from the exploitation of resources, but will also significantly increase job creation. This industrialisation initiative will be rolled out to other mineral commodities.

 

The Department has identified several interventions as part of the Economic Reconstruction and Recovery Plan to ensure that South Africa’s economy recovers as quickly as possible following the devastating effects of COVID-19. One such intervention is recognising the crucial role that exploration plays in the development and sustainability of the sector.

 

The Department is committed to promoting greater exploration in minerals and upstream petroleum activities. In this regard, funds will be allocated for the geoscience research library and geological mapping for the exploration of mining. To support this, the quality of geoscience information available for investors is being improved upon and a comprehensive exploration implementation plan is being developed.

 

In support of the critical attributes that support junior mining exploration activities, the Department would like to encourage junior minors to work with the Council for Geoscience (CGS). These include activities such as regulatory certainty, transparency in the licensing system, significant investment in precompetitive geology and tackling the barrier of access to funding.

 

The Department has resolved the longstanding regulatory uncertainty in respect of the Mining Charter, with Black Economic Empowerment (BEE) ownership omitted at the exploration phase. Secondly, the Department recognises that requisite details of geological information at a scale of 1:50 000 has been grossly insufficient. The CGS is focused on this activity to identify anomalies and drill the latter to a stage of inferred resources.

 

The Department has drafted the Artisanal and Small-Scale Mining Policy; this policy will provide a focused regulatory regime for this segment of the sector. Further to this, it will create space for the coexistence of large scale mining together with artisanal and small-scale mining thus ensuring optimal exploitation of the country’s mineral resources

 

Mineral beneficiation is a strategic objective for the country following the adoption of the mineral beneficiation policy articulated in the White Paper: Mining and Minerals Policy for South Africa. The Department also aims to maximise the value derived from extractive industries. The Department calls on all stakeholders in the mining industry to prioritise the health and safety of all persons at mines. In this regard, the Department will intensify its monitoring and evaluation of the mine health and safety management systems through ongoing inspections and audits. Africa is home to a vast majority of the world’s mineral wealth and many parts of our country remain an untapped market. Regional and international partnerships will also be strengthened to ensure that economic growth and development continues.

 

Security of energysupply

 

Energy security in the context of the IRP 2019 is defined as South Africa developing adequate generation capacity to meet its demand for electricity under both the current low-growth economic environment and when the economy turns. Generation capacity must accordingly be paced to restore the necessary reserve margin and to be ahead of the economic growth curve at the least possible cost. As articulated in the IRP 2019, the Department will continue to pursue a diversified energy mix that reduces reliance on a single or a few primary energy sources. The extent of decommissioning theexisting coal fleet due to the end of its design life could provide space for a completely different energy mix relative to the current mix.

 

The DMRE will implement the Nuclear New Build Programme at the scale and pace that the country can afford to ensure the security of supply in line with IRP2019. The DMRE have issued a Section 34 determination for procurement of 2500MW nuclear energy to NERSA for concurrence, and the public hearings commenced in the last financial year.  A non-bindingRFP for the Nuclear New Build Programme was successfully concluded by the Department, and showed interest to participate in this programme by the investors, industry and reactor suppliers. This showed that the DMREison the right track to achieve the target of additional 2500 MW nuclear energy to be procured by 2024.

 

Eskom is in the process of preparing for Long Term Operation (LTO) of Koeberg Nuclear Power Plant. In May 2020, Eskom submitted a letter of intent to operate Koeberg beyond the 40-year design life to the National Nuclear Regulator. Three out of six Steam Generators for the first unit arrived in September 2020 from the manufacturers in China. The DMREis looking forward to early engagement risk mitigation strategies to unlock potential challenges amongst the stakeholders involved to ensure the success of this project.

 

The Department will continue to create an enabling environment through regulations and exercise oversight to monitor progress with Eskom on a regular basis on matters relating to the long-term operation of Koeberg through the Technical Oversight Committee meetings.

 

Replacement of SAFARI-1 Research Reactor with Multi-Purpose Reactor (MPR) is in process. The new Multi-Purpose Reactor consultation concluded at theForum of South African Directors-General(FOSAD) Cluster and will be submitted to Cabinet in the 2021/22 financial year. Investment for the success of this project is critical for the long-term sustainability and growth of South Africa’s world leading capability in the fields of nuclear research and development and nuclear medicine, where South Africa is one of the leading medical isotope suppliers in the world.

 

In the case of management of nuclear spent fuel, the Ministerial Task Team finalised the review of the pre-feasibility study for the Centralised Interim Storage Facility (CISF) to be delivered by the National Radioactive Waste Disposal Institute (NRWDI). The facility is intended to enhance management of spent fuel away from the reactor sites in line with international convention and best practice, as well as create jobs and stimulate the economy. The DMRE with NRWDI will continue to work towards the full feasibility study in the development of the CISF including its regulatory approvals for siting and construction.

 

The National Liaison Office (NLO) in the Department provides the strategic interface between South Africa and International Atomic Energy Agency (IAEA) to promote peaceful applications of nuclear technology.  In terms of increased use of nuclear technology, the NLO facilitated capacity building to enhance the technical and operational capability of professionals in the industry.

 

The Department, during the year under review, plans to finalise the process of acceding to the African Regional Cooperative Agreement for Research, Development and Training related nuclear science and technology.

 

Oil and gas

The lockdown measures that were intended to slow down the spread of the virus knocked global and national economies hard; hence the decline in economic activity worldwide, notably the decreased demand for energy in the oil sector. This, in turn, depressed the prices of crude oil and petroleum products. The crude oil-exporting countries bore the brunt of the low oil prices, while the importing countries benefitted from lower refined product prices. The low oil prices have resulted in a review of several planned upstream and midstream investments in the oil and gas sector. A number of international oil companies are now announcing lay-offs of several workers. The unconventional oil and gas sector is following suit.

 

The DMREefforts to diversify our energy sources in terms of the IRP are afoot. To this extent, through CGS and PASA, the shale gas research project in the Karoo is at an advanced stage with the ultra-deep drilling 3500meters vertical borehole being drilled. As at the end of February 2021, the 2325meter mark had been reach. This drilling programme is scheduled to be completed in September 2021. A significant highlight from the latest reports indicate a new area for the Lower Ecca shale gas play in this basin.

 

In October 2020, Total South Africa announced a significant gas condensate discovery on the Luiperd prospect, located on Block 11B/12B in the Outeniqua Basin, 175 kilometers off the Southern Coast of South Africa. This discovery follows the adjacent play opening Brulpadda discovery in 2019, which proved a significant new petroleum province in the region. The Luiperd well was drilled to a total depth of about 3,400 meters and encountered 73 meters of net gas condensate pay in well-developed good quality Lower Cretaceous reservoirs. The DMREiscontinuing engagements with Total and other players on the development of this gas field.

 

As the country seeks to restore its economies, the Department has had to reimagine the future, adapt and adjust the programmes to create policy certainty, attract investment and save livelihoods. Following the nationwide lockdown, South Africa allowed the petroleum energy sector to operate at full capacity. However, the decreased demand for petroleum products forced some refineries to close. Further relaxation of lockdown regulations has led to a rapid increase in demand, which has resulted in shortages in some energy products, especially petroleum products.

 

The Department has heeded the call for the provision of regulatory certainty and is taking decisive action to provide such certainty to its investors and potential investors. To this end, the Regulations to Geo Science Act, the Clean Fuels Regulations and the Biofuels Regulations were gazetted in March 2021. The Upstream Petroleum Bill will be tabled in Parliament while the Gas Amendment Bill has already been tabled in Parliament. The Nuclear Regulator Amendment Bill, the National Energy Regulator Amendment Bill, the Nuclear Waste Fund Management Bill and the Electricity Regulation Bill will be gazetted for public comments in this financial year. Following the consideration of all comments, these will be processed further for tabling in Parliament.

 

The Department will be repositioning South Africa to be a serious player in the global gas market. It will promote the development of a domestic and regional gas market, and will continue to advance its gas-to-power projects, with the Coega Special Economic Zone (SEZ) identified as the first LNG import terminal. This lays a foundation for gas-to-power plants and converting existing power plants from diesel to gas.

 

Present and future gas discoveries in the country should find their way to its power plants and other petrochemical facilities. This will reduce the importation of beneficiated hydrocarbons. To this end, a Technical Working Group has been established that will produce a commercial business plan for the development of the LNG import-export facilities across various ports of the country.

 

Rationalisation of State Owned Entities

 

The President announced that the mandates of all state-owned entities (SOEs) should be re-evaluated to ensure that they are responsive to the country’s needs and the implementation of the NDP. In line with the SoNA announcement on 13 February 2021, the Department has approved the establishment of a single governance structure for the Necsa Group of Companies, starting from March 2020. This process involves the rationalization and repurposing of the Necsa Group as a commercial and sustainable State-Owned Company that is able to meet government developmental objectives.

 

The new business model will transition Necsa from the current incoherent quasi-holding operating model, which is dependent on a government grant, to a fully-fledged new Necsa business. It is important to note that any changes within the Necsa Group are being done in a manner that ensures that Necsa’s core mandate will be delivered and supported through commercial objectives to ensure the future sustainability of the organization.

 

To resolve the country’s energy challenges, the Department contends that it will identify opportunities and exploit them. These efforts should lead to ensuring that the poor and marginalised are included in policy making processes and in economic growth and development initiatives in the energy sector.

 

In May 2020, the Department announced the planned merger of iGAS, the Strategic Fuel Fund (SFF) and PetroSA to form a single entity that will form the nucleus of an integrated national oil champion, which will be known as the National Petroleum Company (NPC). On 10 June 2020, Cabinet approved the request to merge these three subsidiaries of the CEF Group. The CEF Board was mandated to manage the process and ensure the establishment of the NPC within six months.The merger started on 15 September 2020 and a consortium, led by AT Kearny, has been appointed to assist the CEF Group in implementing the project. Over the past MTEF period, the Department has achieved significant progress across the key areas of the rationalization of SOEs reporting to the Department.

 

3.2.       Structure and planned targets

 

The Department execute its mandate through its six programme areas, 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;Programme5: Mineral and Energy Resources Programme and Projects; andProgramme 6: Nuclear Energy Regulation and Management. The section below indicates the Department’s planned performance targets per programme for the 2021/22 financial year.

 

3.2.1. Programme 1: Administration

• 100% elimination of wasteful and fruitless expenditure
• 100 % reduction of irregular expenditure
• Unqualified audit opinion for year under review
• 95% resolution of reported incidents of corruption
• Four reports with detailed implementation of the DMRE Fraud Prevention Plan
• Annual Performance Plan approved
• 4 Quarterly Performance Reports produced
• Annual report tabled in parliament
• Approved shareholder compacts/ corporate plans Strategic Plan Approved
• Approved Schedule 3A SOEs Annual Performance Plans tabled in Parliament
• SOEs’ quarterly performance reports produced
• SOEs’ annual reports tabled in Parliament
• 4 quarterly reports which detail the implementation of the 2019 2024 MTSF Priorities
• 100% approved invoices from service providers paid within 30 days of receipt

 

3.2.2. Programme 2: Minerals and Petroleum Regulation

 

• 1500 Retail Site Compliance Inspections conducted
• 1 080 Fuel Samples tested
• 50% of license applications approved have a minimum of 50% HDSA ownership
• 4000 jobs to be created through the issuing of mining rights and petroleum licences
• 120 of SLP development projects completed
• 10 of black industrialists created through procurement
• 100% participation in district planning forums
• 500 of Mining Economics (MWP/PWP) inspections conducted
• 1 275of Environmental Inspections conducted (charter sector code)
• 120 of rights and permits granted and/ or issued to HDSA controlled entities
• 212 of SLP inspections conducted
• 150 legal compliance inspections (mineral laws) conducted

 

3.2.3. Programme 3: Mining, Minerals and Energy Policy Development;

 

• Clean Fuels 2 Regulations developed for promulgation
• Biofuels Mandatory Blending Regulations developed for promulgation
• LPG Strategy approved
• Community Relocation Guidelines developed for promulgation
• Draft Upstream Petroleum Resources Development Bill tabled in Parliament
• Draft Mine Health and Safety Amendment Bill tabled in Parliament
• Draft National Petroleum Company Bill developed and submitted to Cabinet for approval
• 4 Economic reports on analysis and support for Bojanala District Model
• 4 Economic models of the mining and energy sectors
• Report on economic viability of shale gas exploration in South Africa submitted to Cabinet for approval
• Beneficiation Master Plan approved
• 3 investment promotion initiatives implemented and reported on
• 9 investment promotion conferences and exhibitions participated in
• National Nuclear Regulator Amendment Bill submitted to Cabinet for tabling in Parliament for promulgation
• Radioactive Waste Management Fund Bill submitted to Cabinet for tabling in Parliament for promulgation
• Two quarterly progress reports on cost update study on high-level waste for Radioactive Waste Management Fund
• Gas Master Plan submitted to Cabinet
• National Energy Regulator Amendment (NERA) Bill submitted to Cabinet
• Electricity Regulation Act Amended (ERA) Bill submitted to Cabinet
• Just energy transition plan approved
• Greenhouse gas assessment and reporting framework approved by Minister
• Four carbon offset projects approve
• Report on energy- related climate change response measures monitored, and quantified initiatives submitted
• Two approved Clean Development Mechanism (CDM) projects
• 12 Monthly minerals and energy performance economic reports (GDP)
• 8 quality mineral publications published
•  4 Energy statistics reports published
• 10 progress reports produced on existing agreements implemented
• 10 progress reports produced on multilateral strategic partnerships implemented

 

3.2.4. Programme 4: Mine Health and Safety Inspectorate;

 

• 10 % reduction in occupational fatalities
• 5 % reduction in occupational injuries
• 10% reduction in occupational diseases (Including TB)
• 80% of investigations completed (Initiated vs Completed)
• 80% of inquiries completed (Initiated v/s completed)
• 8 396 of qualitative inspections conducted (cumulative)

 

3.2.5. Programme 5: Mineral and Energy Resources Programme and Projects

 

• Power purchase agreements between Eskom and successful bidders concluded for 2 000 MW under Risk Mitigation Independent Power Producer Programme
• Procure 6 800 MW from renewable energy
• Issue RFP for 3 000 MW from gas
• Issue RFP for 1 500 MW from coal
• Issue RFP for 513 MW from storage
• 15 000 additional households electrified through non-grid technology
• Four reports on the monitoring and verification of the implementation of the grid electrification of an additional 180 000 households by Eskom and contracted municipalities
• One ingress measure implemented
• Three derelict and ownerless mine sites rehabilitated
• 40 shafts sealed off
• Renewable Energy Sector Master Plan report
• 0.5 TWh savings realised and verified from EEDSM projects
• 0.0194 TWh savings by EEDSM grant participating municipalities

 

3.2.6. Programme 6: Nuclear Energy Regulation and Management.

 

• Procurement framework for the 2 500 MW Nuclear Programme developed
• Four monitoring reports of Koeberg’ s Plant Life Extension Plan through established Technical Oversight Committee meetings
• Feasibility report for the establishment of the CISF submitted to Cabinet for approval
• Feasibility study on MPR completed and submitted for gateway review
• 70% of nuclear authorisation applications processed within the 8-week time period
• 20 nuclear safeguard compliance reports approved
• 12 nuclear security compliance reports on inspections conducted

 

 

 

 

 

 

 

1. Summary of Budget Expenditure for the 2021/22 Financial year

 

Table 1: Overall Budget Allocation, 2021/22 – 2023/24

Programme Name	BASELINE
	2021/22	2022/23	2023/24	TOTAL MTEF
	R’000	R’000	R’000	R’000
Administration	623,768	631,871	633,585	1,889,224
Minerals and Petroleum Regulation	542,762	548,886	549,737	1,641,385
Mining, Minerals and Energy Policy Development	834,566	875,489	870,814	2,580,869
Mine Health and Safety Inspectorate	237,668	238,817	238,861	715,346
Mineral and Energy Resources Programmes and Projects	5,830,806	6,770,161	7,010,158	19,611,125
Nuclear Energy Regulation and Management	1,111,194	1,139,547	1,133,301	3,384,042
TOTAL	9,180,764	10,204,771	10,436,456	29,821,991

Source: DMRE presentation on 04 May 2021

 

As evident in the above table, the overall budget of the DMRE is R9.1 billion for the 2021/22 financial year. In the previous financial year, 2020/21, the Department had a total adjusted budget of R7.5 billion. In nominal terms (without inflation), the Department’s budget increases by 21.3 percent from the previous financial year, and it increases by 16.4 percent when one takes cognisance of inflation (real terms). Table 2 below provides budget breakdown per economic classification.

 

 

 

 

 

 

 

Table 2: 2021/22MTEF –Detailed Economic Classification

+

Source: DMRE presentation on 04 May 2021

 

Compensation of employees (CoE)

• Compensation to employees is the third largest cost driver, amounting to R3.1 billion over the MTEF period however, the budget ceiling remains constant at R1.04 billion in each year of the MTEF period against inflation related adjustments on certain benefits (housing allowance/ medical aid contributions) and pay progression (1.5 percent) for all employees.
• Providing for these inflation related adjustments calls for reprioritization of CoE budget and a downward head count management in order to remain within the set ceiling.

 

 

 

 

 

 

 

 

Table 3: 2021 MTEF – transfer payments schedule

 

Source: DMRE presentation on 04 May 2021

 

The Transfers and subsidies classification accounts for 83.2 percent (R24.82 billion) of total Departmental budget, earmarked for transfer to public entities, municipalities and various projects.  The balance of R5.0 billion is allocated to current expenditure (CoE and Goods amd Services and payments for capital assets.

• Transfer payments are expected to increase at an average annual rate of 13.3 percent from R7.49 billion in 2021/22 to R8.80 billion in 2023/24 mainly due to a relatively low base in 2020/21 as a result of one-off reductions effected on electrification programmes.
• The national electrification programme continues to be the Department’s largest spending area with a total of R17.3 billion expected to be spent on INEP-Eskom (R10.28 billion), INEP-Municipalities (R6.3 billion) and INEP Non-grid (R719.8 million) grants in order to extend the nation’s access to electricity through connections to the grid, building and upgrading of sub-stations as well as the provision of Solar Home systems.
• The Department’s second largest spending area is funding public entities.  In this regard, R6.6 billion over the medium term will be received by entities to fund operations as well as for implementing specific projects on behalf of the Department. 
• The Nuclear Branch follows with an average of 11.35% mainly for funding the South African Nuclear Energy Corporation (NECSA) inclusive of funds for the decommissioning and decontamination of past strategic nuclear facilities as well as nuclear waste, the National Nuclear Regulator (NNR) and for the payment of international membership fees to the IAEA. In 2021/22, R20 million is earmarked for preparatory work to procure a multipurpose reactor to replace the ageing SAFARI-1 research reactor.

 

Entities will receive funding as follows:

• South African Nuclear Energy Corporation (NECSA) – R2.9 billion of which R626.6 million is earmarked for the Decommissioning and decontamination of old strategic nuclear facilities and a once-off allocation of R20 million in 2021/22 for preparatory work for the new multipurpose reactor.
• Mintek – R1.3 billion with R366.5 million earmarked for the Rehabilitation of derelict and ownerless mines and R8.4 million for implementing the Expanded public works programme.
• Council for Geoscience (CGS) – R1.2 billion inclusive of R61.2 million to conduct Research for the rehabilitation of derelict and ownerless mines.
• Petroleum Agency South Africa (PASA) – R416.6 million operational funding;
• South African National Energy Development Institute (SANEDI) – R237.6 million operational funding;
• South African Diamond and Precious Metals Regulator (SADPMR) – R188.1 million operational funds;
• National Radioactive Waste Disposal Institute (NRWDI) – R150 million of operational funds;
• National Nuclear Regulator (NNR) – R140.3 million operational funding and
• Mine Health and Safety Council – R14 million of operational funds.

 

 

 

 

 

 

 

 

Table 4: 2021 MTEF – Transfer payments schedule - continued

 

Source: DMRE presentation on 04 May 2021

 

• The energy efficiency and demand-side management (EEDSM) grant will receive R684.2 million over the medium term to enable municipalities to undertake initiatives to upgrade municipal infrastructure to be energy efficient.
• In facilitating the promotion of small scale mining in the country, the IDC as the implementing agent, will receive a total of R81 million over the MTEF period towards the Small Scale Mining.
• The remaining Transfer payments budget will mainly be paid to multilateral organizations for annual membership fees.

 

Table 5: Allocations per Programme and Economic Classification

Programme Name	2021/22
	Compensation of Employees	Goods & Services	Transfers & Subsidies	Capital Assets	TOTAL[SM1]
	R’000	R’000	R’000	R’000	R’000
Administration	327,769	274,079	3,551	18,369	623,768
Minerals and Petroleum Regulation	278,846	62,305	201,564	47	542,762
Mining, Minerals and Energy Policy Development	106,245	54,257	673,960	104	834,566
Mine Health and Safety Inspectorate	194,995	35,084	6,732	857	237,668
Mineral and Energy Resources Programmes and Projects	101,235	194,628	5,534,856	87	5,830,806
Nuclear Energy Regulation and Management	28,034	11,071	1,072,089	-	1,111,194
Total	1,037,124	631,424	7,492,752	19,464	9,180,764

Source: DMRE presentation on 04 May 2021

 

The DMRE’s main appropriation in the 2021/22 financial year is R9.2 billion, transfers accounts for 82% (R7.5billion) while operational costs, inclusive of Compensation of Employees, goods & services and capital assets, accounts for R1.7 billion or 18.4%.  

 

5.         Entities Reporting to the DMRE

 

5.1.       National Energy Regulator of South Africa (NERSA)

 

5.1.1.    Context for the development of the Annual Performance Plan 2021/22

 

The APP for NERSA was informed by the Strategic Plan for 2020/21 – 2024/25 to ensure alignment with the strategic outcomes.

 

NERSA developed its APP for 2021/22 to 2023/24 against the backdrop of key developments globally, continentally, regionally and nationally:

• The unprecedented global impact of the COVID-19 Pandemic– especially on the energy sector.
• South Africa’s strained economy.
• Developments in the energy sector related to the timely transition towards a more inclusive, sustainable, affordable and secure global energy system that provides solutions to global energy­ related challenges, while creating value for business and society.

 

5.1.2.    Regulatory activities in the Annual Performance Plan for 2021/22

 

            NERSA’s regulatory activities are grouped in the following programmes:

• Programme 1: Setting and/or approval of tariffs and prices
• Programme 2: Licensing and registration
• Programme 3: Compliance monitoring and enforcement
• Programme 4: Dispute resolution, including mediation, arbitration and handling of complaints                                                                        
• Programme 5: Setting of rules, guidelines and codes for the regulation of the three energy industries           
• Programme 6: Establishing NERSA as an efficient and effective regulator

 

Table 6: Programmes NERSA

Programmes				Envisaged Impact
Setting and/or approval of tariffs and prices				Economic growth through affordable prices tariffs; Fair balance between the needs of the customer (end user) and the regulated entity contributing towards security of energy supply and affordable energy prices
Outcomes:  - Accessible and cost reflective electricity that is equitably distributed                        for consumption                      - Equitable access to affordable gas services and petroleum products,                         services and  infrastructure at competitive prices
MTSF Priority 2: Economic transformation and job creation
Programmes			Envisaged Impact
Licensing and registration			Increasing energy capacity in the country; Orderly development of the energy industry Access to more energy from new/alternative suppliers Transformation of the regulated industries, in line with the BBBEE Act
Outcomes:  -  Diverse energy supply that is certain and secure for current and future                                user needs                      -  Conducive regulatory environment that results in regulatory certainty                          and increased investment in the electricity industry                       - Efficient, sustainable, equitable and orderly development of a                         transformed, competitive and accessible piped gas industry and                         petroleum pipelines industry
MTSF Priority 2: Economic transformation and job creation
Programmes					Envisaged Impact
Compliance monitoring and enforcement					Security of supply; Reliable supply of energy Safe, efficient and environmentally friendly operation of regulated energy facilities, including the transportation of energy
Outcomes:  - Diverse energy supply that is certain and secure for current and                        future user needs                      - Efficient, sustainable, equitable and orderly development of a                        transformed, competitive and accessible piped gas industry and                        petroleum pipelines industry
MTSF Priority 2: Economic transformation and job creation
Programmes		Envisaged Impact
Dispute resolution, including mediation, arbitration and handling of complaints		Improved understanding of the regulation of the energy sector between licensees, or between licensees and customers or end-users; Sustainable, safe and reliable operation of regulated energy facilities – contributing towards security of energy supply
Outcomes:  - Conducive regulatory environment that results in regulatory                        certainty and increased investment in the electricity industry                      - Efficient, sustainable, equitable and orderly development of a                        transformed, competitive and accessible piped gas industry and                        petroleum pipelines industry
MTSF Priority 2: Economic transformation and job creation
Programmes	Envisaged Impact
Setting of rules, guidelines and codes for the regulation of the three energy industries	Investor confidence and lessening the regulatory burden on licensees; Regulatory certainty  Infrastructure investments
Outcomes:  - A conducive regulatory environment that results in regulatory                        certainty and increased investment in the electricity, piped-gas                        and petroleum pipeline industries
MTSF Priority 2: Economic transformation and job creation
Programmes						Envisaged Impact
Establishing NERSA as an efficient and effective regulator						Effective and efficient regulation Regional integration and harmonisation of regulatory processes, methodologies and procedure
Outcomes:  - Security of Supply                      - A conducive regulatory environment that results in regulatory                        certainty and increased investment in the piped-gas and                                                      petroleum pipeline industries
MTSF Priority 2: Economic transformation and job creation
Programmes			Envisaged Impact
Establishing NERSA as an efficient and effective regulator			Effective and efficient regulation supported by appropriate systems, processes, procedures and resources; Regional integration and harmonisation of regulatory processes, methodologies and procedure Appropriate skills for energy regulation Contributing to South Africa’s skills base
Outcomes:  - Creation of an enabling environment for internal and external                         stakeholders through proactive, dynamic and data-driven advisory,                         advocacy and decision making
MTSF Priority 1: A Capable, Ethical and Developmental State MTSF Priority 2: Education, Skills and Health MTSF Priority 7: A better Africa and the World

Source: NERSA presentation on 05 May 2021

 

5.1.3NERSA Budget for 2021/22

Table 7: NERSA Budget 2021/22

DESCRIPTION	PROVISIONAL  ACTUAL	APPROVED BUDGET	APPROVED BUDGET	% Variance
	2020/21	2020/21	2021/22
	R 000	R 000	R 000
TOTAL INCOME	319 065 495	362 470 476	334 559 068	(7,7%)
License fees from Electricity Industry	184 286 295	207 909 620	190 915 910	(8,2%)
Levies from Piped-Gas Industry	74 302 738	77 964 905	72 907 903	(6,5%)
Levies from Petroleum Pipeline Industry	51 659 351	70 638 400	56 870 706	(19,5%)
Interest received	8 472 445	5 865 542	13 786 164	135,0%
Rental Income	55 605	72 009	58 385	(18,9%)
Registration fees	27 600	20 000	20 000	0,0%
Other Income	261 461	-	-	0,0%
TOTAL OPERATING EXPENDITURE	317 005 380	373 685 242	384 481 428	2,9%
Advertising, Promotion and Communication	9 409 637	11 920 000	13 122 000	10,1%
Employment cost	248 930 521	265 723 555	268 851 561	1,2%
Facilities Maintenance	9 918 731	10 728 424	10 125 000	(5,6%)
Office Administration	11 911 496	12 078 879	17 069 885	41,3%
Professional fees	30 449 194	36 810 085	37 472 970	1,8%
Travel, Accommodation and Training	3 820 482	30 676 799	30 752 201	0,2%
Other Expenses	2 565 318	5 747 500	7 087 812	23,3%
Depreciation	4 796 349	-	-	0,0%
NET SURPLUS/ (DEFICIT) for the period	(2 736 234)	(11 214 767)	(49 922 361)	(345,1%)

Source: Presentation on 05 May 2021

 

Revenue

 

• Projected Revenue for the 2021/22 financial year amounts to R335 million, which is 7.7% lower than the R362 million of 2020/21.
• The decline in revenue is as a result of declining volumes across all three industries experienced during 2020 due to the Covid-19 lockdown restrictions and this trend is expected to continue in 2021 as the economy slowly recovers.

 

 

 

Operating Expenditure

 

• Operating expenditure for the 2021/22 financial year amounts to R384 million, which is 2.9% higher than the R374 million of 2020/21.  The total funding requirement was completed after taking into account the effects of refunds to the industries.
• In order to refund the regulated industries and to smooth out levy increases over the three-year MTEF period, NERSA is budgeting for losses/(deficit) over this period. The projected deficit of R49,9 million for 2021/22 will be covered from NERSA’s accumulated surpluses over the years.
• Capital expenditure for the 2021/22 financial year amounts to R14.0 million, which is 3.7% higher than the R13.5 million for 2020/21 due to a replacement of the vehicles as well as continued investments in computer software to improve regulatory processes.

 

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.

 

5.2.1.          Mintek strategic focus areas for 2021/22

 

For the 2021/22 financial year, key strategic focus areas for Mintek are as follows:

• Establishing a local rare earth element mining and manufacturing industry:
• Developing and manufacturing nanotechnology-based diagnostic products

• Transforming the energy mix in the energy-intensive ferroalloys industry
• Developing a hydrogen and platinum-based fuel-cell economy in South Africa
• Energy storage as an enabler of a just energy transition
• Developing clean coal technologies
• Revitalising South Africa’s iron ore industry
• Unlocking the Bushveld Complex’s titaniferous magnetite
• Point of care diagnostic test kits and production of antigens and antibodies
• Fuel Cell catalyst manufacturing incubating the industry
• Energy storage The Battery Precursor Development
• Investing in a REE opportunity powered by South African minerals and Mintek Technology
• Investing in a world class ferrochrome furnace development opportunity enabled byMintek’s smelting technology
• Investing in an integrated development for the production of vanadium, iron and titanium from the Bushveld Complex
• Revitalizing South Africa’s iron ore industry
• Waste coal gasification

 

5.2.2     Mintek budget allocations

 

Regarding the budget, the total expected income is R568 million, with the state grant contributing 62% of the total budget. Baseline funding remains the biggest contributor to the revenue budget of the organisation. A fundamental shift in the state grant is the absorption of MTEF funding previously earmarked for the Titaniferous Magnetite. Table 8below depicts Mintek’s consolidated budget for 2021/22 – 2023/24.

 

Table 8: Mintek Income and Expenditure

Income R 000
State	244,915	282,598	292,697	297,679
Contract Work	134,273	138,088	138,755	129,526
Research	9,706	14,676	15,480	16,254
Products & Services	97,363	108,777	118,229	118,398
Investment Income	15,172	20,257	20,663	20,869
Sundry Income	7,611	4,256	4,341	4,384
Total	509,039	568,653	590,165	587,110

Source: Mintek Shareholder Compact, 2021

 

5.3.       National Radioactive Waste Disposal Institute (NRWDI)

 

The National Radioactive Waste Disposal Institute (NRWDI) is an independent entity established by the National Radioactive Waste Disposal Institute Act (Act 53 of 2008) and is listed as a Schedule 3A national public entity. The NRWDI plays a pivotal role in the safe and responsible management of radioactive waste disposal on a national basis.

 

5.3.1. Strategic objectives of the NRWDI

 

According to NRWDI, its focus during the 2021/22 financial year will include, amongst others;

 

• Working in co-operation with the National Nuclear Energy Regulator in finalising NRWDI’s Nuclear Installation Licence application, improving NRWDI’s readiness to take over the management and operation of Vaalputs from the South African Nuclear Energy Corporation (NECSA), ensuring a smooth transition and proper engagement with all participating stakeholders;
• Working closely with the Shareholder Department in maintaining the momentum on the discussions regarding the enacting of the Radioactive Waste Management Fund Bill. Urgent finalisation of this process cannot be over-emphasised; and
• Finding practical and effective ways of keeping communication channels with stakeholders (especially the public) open in the light of the Covid19 pandemic. NRWDI’s communication going forward will ensure that engagements not only address the Vaalputs-transition but also continue providing practical platforms for sharing other critical information in dispelling myths associated with radioactive waste management and disposal.

• 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.
• Focus on research and development as well as management and disposal technologies for all classes of radioactive waste.
• Disposal of large components such as the Original Steam Generators (OSG’s) stemming from the Koeberg Nuclear Power Plant life extension.
• Implementation of talent management and knowledge management strategies.
• The positioning of NRWDI as a high performing and respected waste disposal organisation. According to NRWDI, this will be achieved through continued efforts to forge networks and partnerships with the government, private sector, local and international research performing agencies, including other stakeholders. These networks and partnerships will be grounded on the principle of strategic partnerships as an essential element of delivery on the mandate of NRWDI.

 

5.3.2     Budget allocations of the NRWDI

 

Regarding the budget, the NRWDI’s activities are funded by the provision of a budget from funds voted annually to the DMRE. For the 2021/22 financial year, NRWDI received an allocated budget of R50.9 million, see table below.

 

Table 9: NRWDI Budget for 2021/22 Financial Year (FY) to FY 2023/24

Expenditure (excl. Vaalputs)	2021/22 Budget R 000	2022/23 Budget R 000	2023/24 Budget R 000	MTEF Total R 000	Average % over the MTEF
Compensation of employees	R 41, 240	R42, 448	R 43, 177	R 126, 865	82%
Goods and Services	R 8, 948	R 8, 877	R 8, 331	R 26, 157	17%
Depreciation	R 703	R 703	R 707	R 2, 109	1%
Total Expenditure	R 50, 891	R 52, 029	R 52, 211	R 155, 131	100%

Source: NRWDI Presentation, 05 May 2021

 

As can be seen in Table 9above, the expenditure of NRWDI (excluding the Vaalputs operations) is expected to increase from R 50 891 million in 2021/22 to R 52 215 million in 2023/24. Compensation of Employees contributes 82% of the total budget, whilst Goods and Services contributes 17% and Depreciation contributes 1%. The NRWDI MTEF budget currently excludes the Vaalputs operations as this function is currently performed by NECSA, and will be transferred to NRWDI upon the obtaining of the nuclear installation licence. The majority of NRWDI’s expenditure will be associated with the Vaalputs functional shift, Vaalputs Nuclear Installation License, setting up of internal processes and systems, research and development activities. The number of personnel inclusive of the 19 Vaalputs staff is 51 and this is expected to remain constant over the medium term.

 

A large portion of the budget is spent on Programme 1: Administration (67%), followed by Programme 4: Radwaste Compliance (17%), see Table 2 below.

 

Table 10: Budget Trends Analysis

Expenditure by Programme  (excl. Vaalputs)	2021/22 Budget R 000	2022/23 Budget R 000	2023/24 Budget R 000	MTEF Total R 000	Average % over the MTEF
Administration	R 34, 050	R 34, 695	R 35 105	R 103, 850	67%
Radwaste Operations	R 2, 797	R 2 , 875	R 2, 833	R 8, 505	5%
Science, Engineering & Technology	R 5, 272	R 5, 428	R 5, 360	R 16, 060	10%
Radwaste Compliance	R 8, 772	R 9, 031	R 8, 913	R  26, 716	17%
Total Expenditure	R 50, 891	R52, 029	R 52 211	R  155, 131	100%

Source: NRWDI Presentation, 05 May 2021

 

 

5.4.       National Nuclear Regulator (NNR)

 

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.

 

5.4.1     Annual Performance Plan for 2021/22

 

Table 10: NNR – APP for 2021/22

	Output Indicator	Annual Target
Provide an independent radio- analytical verification capability and capacity.	RM1: SANAS Accreditation Gamma Spec: (Soil/Sediment) ISO/IEC 17025:2017	SANAS Accreditation Report
Provide and implement an effective approach towards compliance assurance.	RM2: Updated process for developing the CAP	Approved process for the development of the Compliance Assurance Programme (CAP)
Maintain the implementation of regulatory programmes to assure effective nuclear and radiation safety	RM3a: Number of  inspections conducted (NORM, NTWP and NPP)	199 inspections conducted
Maintain the implementation of regulatory programmes to assure effective nuclear and radiation safety.	RM3b: % Implementation of  reviews and assessments undertaken (NORM, NTWP and NPP)	100% reviews and assessments undertaken per programme
Maintain the implementation of regulatory programmes to assure effective nuclear and radiation safety.	RM3c: Indoor radon regulatory framework	Approved indoor radon regulatory framework
Provide an effective oversight of the Long Term Operation (LTO).	RM4: % Training plan implemented	100% of training plan
Ensure readiness to regulate SMRs	RM5: Benchmarking study on SMRs regulation	Benchmark Report on SMRs regulation
Ensure the long-term sustainability of the CNSS.	RM6: CNSS sustainability strategy	Approved sustainability strategy
Provide a framework for securing and managing information and intellectual property emanating from CNSS activities	RM7: Framework for CNSS intellectual property	Approved framework on management of information and intellectual property
Promote nuclear safety awareness (role of the NNR).	RM8: Implementation of activities as per the nuclear safety awareness programme	100% Implementation of planned activities as per the nuclear safety awareness programme
Develop and implement a stakeholder relationship management plan.	RM9: % Implementation of the stakeholder relationship management plan	100% Implementation of planned activities as per stakeholder relationship management plan
Adequate funding for execution of NNR mandate.	FM1: % Funding of NNR planned activities	100% Funding of NNR planned activities
Financial sustainability of the CNSS.	FM2: Approved funding model of the CNSS	Approved funding model of the CNSS
Inclusion of previously disadvantaged individuals in economic activities.	FM3: % Procurement spent on designated groups	70% of procurement spent on designated groups
Develop and implement an ISO: 27001 aligned ICT Security Plan	PM1: % Implementation of the activities as per the ISO: 27001 plan	100% Implementation of planned ISO: 27001 activities
Develop and implement a Protection of Personal Information Act (POPIA) compliance plan.	PM2: % Implementation of the activities as per POPIA plan	100% Implementation of planned activities as per POPIA plan
Ensure proactive management of potential litigation.	PM3:  Number of Legislative Compliance Reports	4 Legislative Compliance Reports
Provision of adequate and safe facilities for the site office.	PM4: % Implementation of the Cape Town Office construction project plan	100% Implementation of planned activities as per project plan

Source: NNR presentation on 05 May 2021

 

 

 

 

 

 

 

 

 

 

5.4.2     Budget allocations for the NNR 2021

 

Table 10: NNR Budget 2021/22

 

Source: NNR presentation on 0 may 2021

 

The NNR revenue is composed of Authorization Fees, Application Fees, Government Grant and Other Incomeof which each contribute an average of 75%,10%,13% and 2% respectively.The total revenue is projected to increase at 3,6% over the MTEF period

 

Expenditure is projected to increase by 3,33% over the MTEF period. Average expenditure per programme over the MTEF period is projected as follows: Administration - 38%, Nuclear Power Plants (NPP) – 21%, Nuclear Technology & NORM (NTN) – 18% and Regulatory Improvement & Technical Services (RITS) – 24%.

 

Compensation of Employees (CoE) accounts for the major share of the total expenditure at 66% on average while goods and services' portion is 29%.The remaining 5% is allocated to all other activities including capital expenditure.

 

 

 

 

5.5.South African National Energy Development Institute (SANEDI)

 

5.5.1.          Annual Performance Plan for 2021/22

                 

Programme 1: Administration - Enabling internal control environment to execute its mandate.

 

Table 11: Programmes Administration            

No	Indicator	Actual 2020/21	Target 2021/22
1.	Percentage critical business risk factors managed as per Risk Management Plan.	>90%	>90%
2.	Percentage implementation of Corporate Stakeholder Engagement Plan (CESP).	55%	85%
3.	Percentage implementation of Corporate ICT Plan.	80%	80%
4.	Unqualified audit achieved.	Unqualified audit report	Unqualified audit report
5.	Percentage of personnel trained as per Workplace Skills Plan (WSP).	80%	80%
6.	Vacancy rate of funded positions.	<5%	<5%
7.	Percentage deviation fromemployment equity targets.	<5%	<5%

Source: SANEDI presentation on 05 May 2021

 

Programme 2: Applied Energy research, development and innovation

• Undertaking/Support energy research, development and innovation
• Capacity building/Skills development initiatives
• Policy support initiatives
• DE -risking investment
• Market development/uptake for Energy

 

Table 12 : Programme 2: Applied Energy Research

		Actual 2020/21	Target 2021/22
	Number of energy solutions assessed (advisory notes, feasibility reports, complete study reports, case studies, technology roadmaps and operational demonstration facilities).
	Number of energy-related knowledge sharing events / platforms engaged in (own hosted, attended, knowledge presented, supported).
	Number of recipients of energy-related training .
	Number of annual Energy industry status reports (insights, trends, international and national collaboration decisions, interfacing and forums).
	Minimum number of energy-related datasetsmaintained per annum.
	Number of policy support instruments (industry roadmaps, sector development plans and industry support tools, etc).
	Number of energy-related research students  contracted researchers supported (e.g.bursaries, non-bursaries, contract opportunities, infrastructure support, etc).
	Fully functional Data and Knowledge Management (DKM) facility in-house within SANEDI.
	Number of national energy programmes for which data is available / captured.

Source: SANEDI presentation on 05 May 2021

 

 

Programme 3: Energy Efficiency - Energy efficiency intervention for a resource efficient economy and Maximizing GDP per KWh produced/utilized

 

Table 13: Energy Efficiency

		Actual 2020/21	Target 2021/22
	Number of EE solutions implemented.
	GHG emissions reduced (tonnes CO 2).		1.5 tonnes
	Number of EE solutions assessed.		1 000 000 m 2 - leading to 0.5
	Area coated (m 2 ) and GHG emissions reduced (tonnes CO 2 ).
	Number of EE energy-related datasets maintained per annum.
	Number of EE performance certificates issued.
	Functional database.

Source: SANEDI presentation on 05 May 2021

 

 

5.5.2     Budget allocation for the SANEDI

 

• SANEDI derives its revenue through transfers from the department and through donor funding.
•  The MTEF allocation is utilized to leverage and generate revenue from donors to support the programmes.
• Baseline adjustments can potentially impact SANEDI’s ability to secure additional revenue required when entering into donor funding agreements.
• Due to the impact of COVID-19 and the economic impact the pandemic had globally and locally,  it is anticipated that donor revenue will dwindle further, also as South Africa is perceived as an emerging economy.
• Based on the above SANEDI will need to focus on narrowing down projects within the existing programmes whilst ensuring that its impact is more focused on job creation and  will have to have an increased focus on sourcing alternative sources of funding.

 

Table 14: Budget 2021/22

Medium-term estimate
	R'000
	2021/22	2022/23	2023/24
Interest, dividends and rent on land	1 000	4 672	4 882
Transfers received	90 905	81 072	81 383
Total revenue	91 905	85 744	86 265
Current expenses	91 905	85 744	86 265
Compensation of employees	43 139	45 001	46 881
Goods and services	45 792	36 717	35 178
Depreciation	2 974	4 026	4 207
Total expenses	91 905	85 744	86 265
Surplus/(Deficit)	–	–	–

Source: SANEDI presentation on 05 May 2021

 

• The entity has a budget allocation estimated at R90million, coming from the MTEF and will also be receiving donor funding of R13.50 million through the general budget support for projects which are implemented by the department in collaboration with SANEDI towards improving the energy performance of government buildings and achieving a net-zero energy wastewater treatments plants.
• The 2021/22 budget expenditure will be spent towards the Compensation of Employees and goods and services 47% and 53% respectively.
• Expenditure is expected to reduce by more than 4% from 2019/20 due to budget reprioritisations, the transfer of Carbon Capture and Storage, and a reduction of spending on goods and services.
• Cost containment measures will continue to be implemented to contain expenditure especially in programme 1 relating to operational expenditure.
• New business development will also be our core focus as well as implementation of the Organisational review recommendations.
• Alignment to government priorities of job creation and commercialisation in order to improve cash flows.
• Core mandate expenditure relating to programme 2 and 3, that is applied Energy Research and Energy Efficiency, will see an increased focused on more self-sustainable projects and reprioritisation within project that’s is mainly focused on developing innovative clean energy solutions.

 

5.6Council for Geoscience (CGS)

 

5.6.1. Overview of strategic focus

 

            Programme 1: Financial sustainability

Purpose: To ensure effective and efficient delivery of financial management services, to secure funding from the exploitation of collaborative activities and partnerships as well as to generate grant funding.

Outcome	MTSF Priorities	Outputs	Output indicators	Estimated performance	MTEF period
				2020/21	2021/22	2022/23	2023/24
Effective and efficient financial resources management	1. A Capable, ethical and developmental state	Audited financial reports	1. Percentage of overhead costs to total costs	≤66%	≤66%	≤66%	≤66%
		Audited financial reports	2. Percentage of personnel costs to total costs	≤70%	≤70%	≤70%	≤70%
		Audited financial reports	3. Revenue from collaborative activities/partnerships	R30m	R33m	R36m	R39m
		Audited financial reports	4. Grant revenue	R502.2m	R373.2m	R408.1m	R409.6m

 

Table 16: Programme 1

 

 

 

 

 

 

 

Programme 2: Organisational effectiveness and efficiency

Purpose:To develop and implement effective and compliant policies, procedures and business processes in support of the CGS integrated service- delivery model, adhere to best practice to achieve sustainable governance as well as to provide and operate flexible, expandable and secure ICT solutions.

 

Outcome		Outputs	Output indicators	Estimated performance	MTEF period
				2020/21	2021/22	2022/23	2023/24
Effective and efficient financial resources management   and   Compliance with governance protocols/regulations	1. A Capable, ethical and developmental state	Audited annual report	5. Number of audit qualifications	0	0	0	0
		Audited annual report	6. Percentage of total Procurement spend on goods and services from Small, Medium and Micro Enterprises (QSE and EME’s) in terms of PPPFA of 2017	≥30%	≥30%	≥30%	≥30%
		Availability report	7. Availability of key enterprise services	≥99%	≥99%	≥99%	≥99%

Source: Presentation on 07 May 2021

 

 

 

 

Programme 3: An empowered, transformed, motivated and capacitated workforce

Purpose:To attract and retain highly skilled scientific personnel in the geoscience industry, To build capacity in respect of geoscientific, administrative and managerial/leadership skills while also developing innovative products, systems and services, To promote and invest in human resources transformation and diversity.

Table 17: Programme 3

Outcome		Outputs	Output indicators	Estimated performance	MTEF period
				2020/21	2021/22	2022/23	2023/24
Capable human capital	1. A Capable, ethical and developmental state 3. Education, skills and health	Human Resources Reports	8. Percentage of scientific staff with Masters or Doctoral degrees	≥35%	≥35%	≥35%	≥35%
		Human Resources Reports	9. Percentage of training expenditure to leviable amount of payroll	≥1%	≥1%	≥1%	≥1%
		Human Resources Reports	10. Staff turnover rate	≤10%	≤10%	≤10%	≤10%
		Human Resources Reports	11. Percentage of staff living with disability	≥1.5%	≥1.5%	≥1.5%	≥1.5%
		Human Resources Reports	12. EE Stats, Scientific cohort (Female representation)	≤49:≥51	44%	46%	48%
		Human Resources Reports	13. EE Stats, EXCO (Female representation)	≤20:≥80	20%	40%	40%

Source: Presentation on 07 May 2021

 

 

 

 

 

Programme 4: Delivery of the mandate

Table 18: Programme 4 Purpose:Execute the integrated and multidisciplinary geoscience mapping programme

Outcome	MTSF Priorities	Outputs	Output indicators	Estimated performance	MTEF period
				2020/21	2021/22	2022/23	2023/24
Enhanced applications of geoscience information and knowledge and to secure a minimum of 5% share of the global exploration expenditure   and   Enhanced geoscience diplomacy	2. Economic transformation and job creation 5. Spatial integration, human settlements and local government   6. Social cohesion and safe communities     7. A better Africa and World	Onshore geoscience maps	14. Onshore geoscience map coverage	9%	9.5%	11%	12%
		Offshore geoscience maps	15. Offshore geoscience map coverage	0.1%	0.3%	0.4%	0.5%
		Value-added geoscience outputs such as integrated reports, 3D models, innovative solutions, mineral systems and emplacement models.	16. Applied geoscience outputs for minerals and energy	6	4	4	4
		Value-added geoscience outputs such as integrated reports and 3D models, innovative solutions.	17. Applied geoscience outputs for infrastructure, land use, health, groundwater and the environment	6	5	5	5

 

 

 

Programme 5: Advisory, stakeholder engagement and knowledge management

Table 19: Programme 5.

Outcome	MTSF Priorities	Outputs	Output indicators	Estimated performance	MTEF period
				2020/21	2021/22	2022/23	2023/24
Enhanced applications of geoscience information and knowledge and to secure a minimum of 5% share of the global exploration expenditure   and   Enhanced geoscience diplomacy	2. Economic transformation and job creation 5. Spatial integration, human settlements and local government   6. Social cohesion and safe communities     7. A better Africa and World	Media articles	18. Number of articles published on media platforms	24	24	24	24
		Stakeholder survey report	19. Stakeholder satisfaction level	≥70%	≥70%	≥70%	≥70%
		Peer-reviewed articles published in scientific journals, book chapters and edited volumes.	20. Number of peer-reviewed articles published	30	30	32	34
		Examples: memoirs, bulletins, books and atlases.	21. Number of CGS publications	7	8	8	10
		Examples: Conference Abstracts, extended abstracts, papers and keynotes.	22. Number of conference proceedings published	40	25	80	40

 

5.7.2 . Budgets for 2021/22 - CGS

Table 20: Budget FY2020/21 – FY2023/24

Income/Funding Model
Income (Rands)	2020/21 Budget x 1000	2021/22 Budget x 1000	2022/23 Budget x 1000	2023/24 Budget x 1000
Government grant - Baseline	202 388	212 800	228 209	238 478
Government grant – Baseline Increase Geological Mapping	70 000	128 000	147 815	154 468
National Treasury 2020 AENE and 2021 MTEF Budget Reductions	(18 695)	(16 696)	(22 930)	(40 757)
Government grant - MTEF	354 515	52 958	54 984	57 458
**CCUS Project	90 000	__	__	__
Sales and contracts	29 282	32 210	35 431	38 974
Sundry income	4 072	4 276	4 490	4 714
TOTAL INCOME - A	731 562	413 548	447 999	453 335
Budget fluctuations are resulting from  conditional grant  allocation (MTEF projects)

 

Expenditure (Rands)	2020/21 Budget x 1000	2021/22 Budget x 1000	2022/23 Budget x 1000	2023/24 Budget x 1000
Personnel costs	336 594	316 946	342 117	367 773
Bursaries	4 074	4 481	4 930	5 423
Commercial project costs	13 177	14 495	15 944	17 538
Overheads and operating costs	305 921	62 126	69 508	47 101
SUBTOTAL - B	659 766	398 048	432 499	437 835
SURPLUS(LOSS) A-B	-	-	-	-
Budgeted Capital Expenditure (vehicles; equipments;etc)	71 796	15 500	15 500	15 500
Total Expenditure	731 562	413 548	447 999	453 335
*Balance Sheet

Source: CGS presentation on 07 May 2021

Table 21: Analysis of Government Grant Allocations from FY2020/21 to FY2023/24

 

ITEM	2020/21	2021/22	2022/23	2023/24
Baseline allocation	R202.5m	R212.8m	R228.2m	R238.4m
Water Ingress Project	R29.0m	R30.7m	R31.8m	R33.2m
Rehabilitation of D&O Mines (Research Portion)	R21.1m	R22.3m	R23.2m	R24.2m
**CCUS Project	R90.0m
Economic Competitiveness and Support Package (ECSP)	R198.3m	__	__	__
Analytical and Research work for the Geoscience Laboratory	R198.3m	__	__	__
Baseline Increase : Geological Mapping for Exploration of Mining	R70.0m	R128.0m	R147.8m	R154.5m
Baseline Reduction : Current Transfers (Operational)	(R18.7m)	(R14.6m)	(R20.2m)	(R33.5m)
Baseline Reduction : Rehabilitation of D&O Mines	__	(R2.1m)	(R2.7m)	(R3.6m)
Baseline Reduction : Water Ingress Project	__	__	__	(R3.6m)
Total Government Grant (* 2021 MTEF DMR Final Allocation letter 5 February 2021)	R592.2m	R377.1m	R408.1m	R409.6m
*The Shale gas is no longer funded. ** Transfers from SANEDI were received as follows, R60m 28Aug20 and R30m 04Sep20.

Source: CGS presentation on 07 May 2021

Financial sustainability

• There has been no real growth in the baseline grant over the period. The marginal increase in the grant is meant to address inflation. Baseline revenue has increased with an average of 4 % over the period.
• An additional Baseline grant funding of R430.3m has been allocated for  Geological mapping for exploration of mining over the MTEF.
• An amount of R66.6m has been reallocated for the D&O research portion over the MTEF.
• R18.7m budget reduction in the 2020 AENE and R80.3m budget reductions in the 2021 MTEF
• CGS is implementing the Development of Carbon Capture Storage Project with the World Bank.
• There has been no real growth in the baseline grant over the period. The marginal increase in the grant is meant to address inflation. Baseline revenue has increased with an average of 4 % over the period.
• An additional Baseline grant funding of R430.3m has been allocated for  Geological mapping for exploration of mining over the MTEF.
• An amount of R66.6m has been reallocated for the D&O research portion over the MTEF.
• R18.7m budget reduction in the 2020 AENE and R80.3m budget reductions in the 2021 MTEF
• CGS is implementing the Development of Carbon Capture Storage Project with the World Bank.
• There has been no real growth in the baseline grant over the period. The marginal increase in the grant is meant to address inflation. Baseline revenue has increased with an average of 4 % over the period.
• An additional Baseline grant funding of R430.3m has been allocated for Geological mapping for exploration of mining over the MTEF.
• An amount of R66.6m has been reallocated for the D&O research portion over the MTEF.
• R18.7m budget reduction in the 2020 AENE and R80.3m budget reductions in the 2021 MTEF
• CGS is implementing the Development of Carbon Capture Storage Project with the World Bank.
• There has been no real growth in the baseline grant over the period. The marginal increase in the grant is meant to address inflation. Baseline revenue has increased with an average of 4 % over the period.
• An additional Baseline grant funding of R430.3m has been allocated for Geological mapping for exploration of mining over the MTEF.
• An amount of R66.6m has been reallocated for the D&O research portion over the MTEF.
• R18.7m budget reduction in the 2020 AENE and R80.3m budget reductions in the 2021 MTEF
• CGS is implementing the Development of Carbon Capture Storage Project with the World Bank.

 

 

 

 

 

5.8.       SA Diamond and Precious Metals Regulator (SADPMR)

 

The mandate of the South African Diamond and Precious Metals Regulator is to regulate both diamonds and precious metals industries on beneficiation, buying, selling, importing and exporting of rough diamonds and manufacturing of precious metals.

 

5.8.1     Overview of the SADPMR Annual Performance Plan

           

Table 22: Overview – SADPMR APP 2021/22

Outcome	Outcome indicator		APP Target 2021/22
Compliance with Precious Metals and Diamonds legislation	Number of compliance inspections conducted within the precious metals industries.		400
	Number of compliance inspections conducted within the diamonds industries.		500
	Number of precious metals joint inspections with law enforcement stakeholders		4
	Number of diamond joint inspections with law enforcement stakeholders		1
	Percentage of enforcement actions undertaken – Non-compliance notices		100%
Transformation in the diamond and precious metals industries	Number of licensees assessed against their commitments as per Mining Charter		120
Job creation, skills development and value addition to diamond and precious metal industries	Percentage of licences issued within 60 working days based on completeness of the license application (precious metal)		65%
	Percentage of licences issued within 60 working days based on completeness of the license application (diamonds)		65%
	Number of Export Approval applicants catering for local demands of unwrought/ semi- fabricated precious metals addressed		12
	Percentage of beneficiation licenses/permits issued from the applications received within the legislated timeframe (60 working days)		100%
	Number of inactive diamond businesses engaged		8
Job creation and Value addition to precious metals and diamonds	Number of skills initiatives facilitated for the industries		5
Compliance to legislation	Percentage of valuations conducted		100%
	Percentage of undisclosed synthetic diamonds subjected to detection		100%
	Number of HDP’s owned companies accessing DEEC		6
	Number of beneficiators accessing DEEC for the first time		3
	Percentage of compliance with the Kimberley Process Certification Scheme (KPCS)		100%
An effective, efficient and development orientated regulator	Number of contracts awarded to HDIs		5
	Percentage of rand value of procurement spend awarded to HDI (Level 1& 2)		70%
	Number of instances of non-compliance to PFMA (Irregular, Fruitless and Wasteful expenditure)		Nil
	Revenue strategy developed and implemented		Implementation of the strategy
	Identify and implement finance application modules to optimize utilization of enterprise resource planning (ERP)		Implementation of the approved application system renewal plan
An effective, efficient and development orientated regulator	Human Resources Development
	Percentage of compliance to the WSP requirements		100%
	Number of new bursaries awarded		4
	Number of young graduates recruited on the Internship Programme		8
Outcome	Outcome Indicator	APP Target 2021/22		MTEF target 2021/22 to 2023/24
An effective, efficient and development orientated Regulator	Organisational Development:
	Number of employee recognition events coordinated	1		3
	Number of organisational culture interventions implemented	1		5
	Number of leadership development programmes implemented	1		5
	Number of women and youth empowerment skills development, facilitated for internal staff	2		8
An effective, efficient and development orientated Regulator	Information and Communication Technology:
	Number of Disaster Recovery Tests implemented	2		6
	Phases of online application developed	Develop and Implement Licensing App Module		Develop & Implement application for Licensing, Diamond Inspectorate & DEEC
	Number of ICT Security Measures implemented	2		8
An effective, efficient and development orientated Regulator	Marketing & Communication:
	Number of Internal and External stakeholders’ engagements conducted	10		32
	Number of brand promotion activities implemented	8		30
	Number of Diamond and Precious Metal industry specific articles published about the services of the SADPMR	4		12
	Number of internal newsletter articles published	6		18
	Number of engagements uploads on digital media platforms	200		600
An effective, efficient and development orientated Regulator	Security Risk Management:
	Number of fraud and corruption prevention plan activities implemented	4		12
	Number of vetting files submitted to State Security Agency (SSA)	10		30
	Number of Occupational Health and Safety initiatives implemented	6		18
	Legal Services:
	Percentage of matters referred for legal advice and addressed within 30 days.	100%		100%
	Percentage of legal opinions obtained on behalf of the Regulator.	100%		100%
	Percentage of contracts and SLAs vetted within 30 days.	100%		100%

Source: SADPMR presentation on 07 May 2021

 

5.8.2 Budget of the SADPMR

 

Table 22: MTEF BUDGET CYCLE ALLOCATIONS

 

Source: SADPMR presentation on 07 May 2021

 

 

Table 23: PRELIMINARY BUDGET

 

Source: SADPMR presentation on 07 May 2021

 

The SADPMR was successful in obtaining a R14 000 000 cash injection to fund the relocation to the Gauteng Industrial Development Zone (GIDZ) and thereby ensuring sustainability of the entity. This was as a result of numerous engagements with relevant stakeholders.

• During the 2021/2022 financial year and outer years zero increases were effected to employee costs due to financial constraints and MTEF budget guidelines due to projected decreases in the grant allocation and revenue.
•  Office relocation expenditures will be funded from accumulated surplus as per the approval of the National Treasury and a ring fenced grant allocation received from the DMRE during the end of the 2020/2021 financial year.
• Projected inflation as per MTEF guidelines applied to expenditure budget items where applicable.

 

5.8.3 INTERVENTIONS POST COVID-19

 

Table 24: Interventions post-Covid-19

Challenges	Interventions	Support Required
VAT exemption on imports for industry on to free up much-needed cash.	No VAT on import of diamonds destined to South Africa.	Engagement with SARS
Export levy – Discourage exports in order to increase local beneficiation	Introduce export levies and service fees on precious metals exports and imports  Increase export levy on diamonds from the current 5%	Amendment of Diamonds Act, Precious Metals Act and Export Levy (Administration) Act
SADPMR Revenue is impacted by COVID-19 pandemic with no certainty on future revenue generation as per budget	Continuous monitoring of impact of revenue generation on the sustainability of the Regulator with regular feedback to the Oversight division at the DMRE Implementation of Revenue Strategy and stakeholder engagement	Regular meetings with DMRE Oversight division and National Treasury where relevant

Source: SADPMR presentation on 07 May 2021

 

5.9.       State Diamond Trader (SDT)

 

The SDT is categorized as a schedule 3B entity in terms of the Public Finance Management ACT 1 of 1999 (PFMA). A state owned entity established in 2007 in terms of section 14 of the Diamond Act 56 of 1986 to operate in the diamond industry to support and facilitate growth in local diamond beneficiation.

 

5.9.1.Summary of 2021/22 APP

 

• To increase our current purchase from 2% to 4,5%
• To increase number of HDSA sold to
• To enhance skills development
• To liaise with Non-compliance producers
• To continuous compliance with PFMA, Fraud and Prevention plan
• To obtain a favourable grant/credit facility for SDT
• To review the business case
• To review our EDP
• Collaborate in promotion, research and development
• Introduce and promote annual local diamond show

 

5.9.2.    SDT has identified the following key challenges:

 

Funding for SDT

• Financial model for operations while growing local diamond beneficiation industry

• Current revolving credit facility from IDC limits acquisition

 

Rough Diamonds

 

• SDT can only purchase run of mine which means all qualities and all sizes of a production

• Average of 15% of South African rough diamond production is desired by clients

 

Clients

 

• Many clients are hard hit by issues of economies of scale impacting on their buying power

• Clients do not provide suitable rough diamonds as a result of the run of mine provisions

• Lack of funding limit their ability to acquire tools and machinery

• Lack of start-up funding and no funding from commercial banks

 

Legislation

 

• 10% Rough diamonds
• 80% /20% Principle
• Taxation Alignment with other legislation

 

Synthetic Diamonds

 

• SDT legislation to deal with Natural (rough diamonds)
• Synthetic diamonds need to be managed as it affects viability of the SDT

 

Decline Production

 

• Industry experiencing a decline in production

• This threatens level of supply and growth of industry

• Unstable and shrinking markets

 

Diamond Prices

 

• Fair Market value not supportive of transformation agenda (mark-up)

• Producers always have upper hand over SDT

• SDT has to make margins to sustain its operations

 

 

5.9.3 SDT reported on the following strategies to deal with challenges

 

• Collaborate on research, training and development scheme
• To establish a hub (incubator) for new entrance, emerging business and trainees
• Invest in the latest technology
• Import of diamonds suitable for beneficiation from SADC and BRICS countries
• Investment in local and international marketing activities for clients
• Strengthen Enterprise Development Programme
• Lobby for start-up funding for diamond manufactures
• Develop and Implement Financial Mobilization Strategy
• Relocation to OR Tambo(GIDZ) in September 2021
• Collaboration strategy to market diamonds locally and internationally

 

5.9.4 Budget Allocation is outlined as follows

 

Table 25: SDT budget allocation

 

Source: SDT presentation on 07 May 2021

 

 

 

 

 

 

 

 

 

Table 26: Diamond purchases and sales

 

Source: SDT presentation on 07 May 2021

 

Table 27 : Annual overheads of SDT for 5 years

 

Source: SDT presentation on 07 May 2021

 

 

Table 28: Cash flow projections of the SDT

 

Source: SDT presentation on 07 May 2021

           

SDT has made the following Budget Assumption

• The revenue only consists of rough diamonds and the forecast is based on market conditions and production level from the producers.
• The revenue is expected to increase marginally over the next five years
• Gross profit margin percentage will remain stable at 3% over the budget period.
• Operating costs are expected to increase by 5% for the next five years.
• Finance expense relates interest incurred on credit facility
• The entity will make a minimum profit over the next five years.

 

 

 

 

 

6. Observations and findings

 

6.1 Department of Mineral Resources and Energy (DMRE)

1. The Committee note the letter from the departmentregarding the non-tabling of Annual Performance Plans of the NECSA and CEF Group, as they Schedule 2 entities according to the PFMA and therefore are not required to table to Parliament. Their APPs and proposed budgets. The Committee is seeking a legal opinion on this matter.
2. The Committee has noted and observed that the department has embarked on the implementation of the Nuclear New Build Programme at the scale and pace that the country can afford, so as to ensure that the security of supply is in line with the IRP2019.
3. The Committee noted that the Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP) has been finalised, where successful bidders have been announced and other work (e.g. environmental authorisation) is being done to implement the decision.The RMIPPPP remains a high priority matter on the Committee’s agenda, and therefore it is a matter that the Committee will continue to be seized with going forward.
4. The Committee note that the Department has resolved the longstanding regulatory uncertainty in respect of the Mining Charter, with Black Economic Empowerment (BEE) ownership a requirement at the exploration phase.
5. The Committee noted that Bid window 5 of the renewable energy programme has been gazetted and that Bid window 6 will be gazetted in August 2021 and Bid Window 7 in February 2022.
6. The Committee noted with concern progress on the implementation of the National Solar Water Heater Programme. It was reported that for the 2021/22 financial year, R73 million has been made available for the programme. Furthermore, the Committee noted with concern that thebudget for the SWH programmeis reported to be under Goods and Service instead of reflecting as astandalone programme.The department is more committed in ensuring that more SWH are on rooftops, irrespective of the available budgets, The Committee note that the SWH programme have been on the disastrous programmes in the department, though with good intentions. 
7. The Committee note that processes have been undertaken, to test the market for the 2 500 of the Nuclear New Build programme.
8. The Committee note that the Integrated National Electrification Programme was affected the most by the budget adjustments (due to COVID-19) of the previous financial year.
9. The Committee noted the progress made on the merger of the 3 entities (PetroSA, SFF and iGas). The process is currently at a Cabinet level, where Cabinet has to advise on the various options relating to the development of a structure for the merged entity.
10. The Committee was informed that the development of an artisanal and small scale mining policy, emanates from the premise that it has a role to play in the economy, i.e. job creation and the fiscus through taxes. There is thus a need to develop this sector. According to the department they have the necessary benchmarking relating to countries who are doing this, e.g. Nigeria, Ghana, Tanzania etc. They aim to consult communities soon on the draft the policy is developed and take it through the processes. According to the DMRE the draft policy will be gazetted to elicit inputs from broader stakeholders in parallel going to communities. The aim is to finalise it by the end of this fiscal year, where the policy will be approved for implementation.
11. The Committee note that SA are adhering to IMO compliance relating to clean fuels, where most of the refineries have converted their refineries to produce 15ppm diesel. However; two of the refineries lost their capacity to produce after their conversion, i.e. one caught fire and the other had an explosion. However, the import capacity has been increased to address this and there is sufficient storage at Cape Town and Durban. According to the DMRE there is no concern.
12. The Committee note that a clean fuels policy has been developed by the DMRE, which is currently out for public comment.
13. The Committee note the DMRE’s Black Industrialist programme, where the DMRE acknowledged that it need to relook and refine the Black Industrialist programme.
14. The Committee note that with the transfer of funds in the INEP are transferred to implementing entities, Eskom and licensed municipalities. On the INEP programme, the Committee was informed that various structures and forums exists, which include COGTA, SALGA and other provincial departments are part of various forums in the respective provinces. The DMRE also brief MinMECs on allocations.
15. On an overarching investment strategy, the Minister pointed out to the Committee that every SOE has a developmental and financial mandate and if one of these are failing, that specific entity is failing. The Minister reiterated that everything an entity does, must address these 2 issues.
16. The Committee note that entities do partner with private entities and encouraged the Minister to promote this initiative. As this will contribute to the public entities to become more commercially viable and financially sustainable.

 

6.2 Mine Health and Safety Council (MHSC)

 

1. On the issue of 4IR, the Committee noted that the MHSC’s ultimate goal is to achieve zero harm; and in an effort to achieve this; the use of technology will be critical and beneficial, e.g. use of drones and employee underground detection programme etc.
2. The Committee noted that the MHSC has received a number of complaints from communities relating to blasting close to communities. However, in addressing this, the options considered by the MHSC include, strengthening legislation and also considering new and improved blasting technologies.
3. The Committee noted that the MHSC has done research with the CSIR on the impact of blasting and they are now developing guidelines relating to safer mining blasting activities, which will be finalised by the end of this financial year.

 

 

6.3 Mintek

 

1. According to the Mintek, China dominates world Rare Earth Elements (REE) production and consumption, where they have more than 80% production, and less than 40% of world reserves. Bayan Obo is an enormous REE resource and set China up for world dominance
2. The Committee was informed that SA is a small player in the REE, but there is potential, even though these elements are not cheap to yield acceptable returns. According to Mintek the necessary funding is required to unlock beneficiation and the future is technology based and REE is what is needed.
3. Mintek stated that in order to be a player in the REE, the country need to look at resources in southern Africa. Mintek’s focus is to develop a technology that could take material from different resources.  Mintek pointed out that it takes long to develop appropriate technologies.
4. The Committee is cognizant that Mintek are not producing; i.e. they develop technology which is then transferred to people who will be producing (up scaling).
5. The Committee note that Mintek develops technology and then partner with the industry.
6. The Committee note that Mintek commercialise in different ways by inter alia transferring technology to industry, by selling products, by selling its know-how and expertise.
7. The Committee noted that Mintek have raised more than R100m from the sale of their products. They further stated that they operate in more than 42 countries with their products.
8. The Committee noted that the Mintek is building capacity in the area of antibody development and that they are producing in smaller numbers. They have also collaborated with other institutions e.g. SAHPRA, MRC, higher education institutions etc.

 

6.4 SANEDI

 

1. The DMRE confirmed that they are in the process of establishing the SANEDI Board. SANEDI, according to the DMRE has an acting CEO, and it was agreed that the appointment of a CEO should not be done by the previous Board, but that this process should be undertaken by the newly appointed Board.
2. The SANEDI explained that where the target for Green House emissions indicate “not applicable”, it means that it is new indicator in their strategy where they will start tracking and reporting on.
3. The Committee note progress relating to the mobile Plaswen Waste to energy plant, where SANEDI is in the process of developing the plant in collaboration with NECSA. The process had some challenges, but they are refining and addressing these. Once the plant becomes operational, the plan is to place it at one of the sites in collaboration with the relevant municipality and start generating some form of biogas. This, according to SANEDI might lead to job creation, in the waste management space.
4. SANEDI fund students where there is a gap, in other words it is specific in a sense, where they think the energy sector is going to. They further work closely with the Energy & Water SETA on a number of initiatives and also assist in identifying which skills are scarce in the country relating to the energy industry.
5. The SANEDI confirmed that they are not directly part of and do not participate in procurement processes of the RMIPPPP, but they do gather information and data, which they provide to the decision makers.
6. The Committee note that the SANEDI do collaborate with the Mintek on a number of initiatives. The SANEDI pointed out that going forward there are a number of initiatives where the SANEDI can collaborate with Mintek, which they will discuss with Mintek.
7. SANEDI stated that the cost allocation Compensation of employees includes remuneration of technical staff, who are directly involved in the work as well as administration. The SANEDI indicated that the funding provided is not sufficient to fund their mandate and also to fund the right operational structures to execute their mandate. SANEDI stated that the funding that they have, they utilize this to leverage external funding.
8. The Committee note the availability and accessibility of SANEDI information on their website, and SANEDI acknowledged that this is an area which they have identified as a weakness and one which need to be addressed and strengthened. They further acknowledged that they do have lots of information, but this is not accessible.

 

 

 

 

6.5 National Energy Regulator of SA (NERSA)

 

1. The DMRE informed the Committee that the former NERSA Chairperson of the Board has resigned, therefore the NERSA’s Deputy Chairperson is now the Interim Chairperson of the Board.
2. The DMRE further indicated that the appointment of the NERSA CEO is at an advance stage.
3. The Committee notethe turnaround time of NERSA’s registration processes and the NERSA explained that the registration process takes about 60 working days once the application is received. After 2 days, acknowledgment of receipt should be forwarded, including what information is missing in the application.
4. On self-generation below 1MW, the process of registration, according to NERSA has been progressing well. However, it is those above 1MW, which have to undergo the licensing processes, which is lengthier as per the legislation.
5. To date, NERSA has registered around 270 Small-Scale Embedded Generation (SSEGs), with an installed capacity of 130MW.
6. The NERSA confirmed that they did make comments on the ERA Bill, but with recent changes, those comments have been revised and forwarded to the DMRE.
7. The Committee pointed out that a number of NERSA’s decisions are taken to court. NERSA reminded members that the current legislation provides for this, i.e. no alternatives. NERSA’s plea to the Committee is that the legislation be amended to provide for an alternative to disputes and not court based in the first instance.
8. On the increasing costs of electricity, the NERSA stated that when they receive an application from Eskom, this is based on their own budget and their estimated costs over a 3 or 5-year period. So what NERSA will do is looking at only efficiently incurred costs are included. The NERSA also highlighted the outdated legislation and electricity policy pricing (EPP) during these processes.
9. The Committee notethe view expressed by NERSA regarding the imposition of R2 million per day or 10% of the total revenue of licensees for not complying with licence conditions.  NERSA is of the opinion that this will be difficult to implement, taking into consideration that the law requires the sustainability of the licensees, and to impose these measures on for example a municipality, would negatively impact on their already strained finances. Based on this, the NERSA’s propose that there should rather be regulative measures implemented against the licensee, rather than punitive measures.
10. The Committee notethe NERSA for their job-shadowing, internship and learnership programmes. According to NERSA, they offer a job-shadowing programme to expose Grade 9 to 11 learners to the work environment and to generate interest in careers in the energy sector.  The intake for this programme is 10 annually of all races. A Service Provider has been appointed to assist them in this programme. NERSA also has an internship (12 people in this programme currently) and a learnership (12 people in this programme currently) programme.
11. The Gas Act of 2001 currently provides NERSA with a mandate to regulate, amongst others, gas pipelines. The scope of the mandate includes licensing the pipelines for construction and operational activities, and approving of tariffs (which is the charge paid by third parties to the facility owner for the transportation of gas through the pipelines).
12. With regard to distribution, the Gas Act only empowers NERSA to license the distribution pipelines but there is no provision for the Regulator to approve the tariff for the distribution of gas via those pipelines. This is a different case from gas transmission pipelines and storage because the Act empowers NERSA to license the infrastructure and approve the tariff that would be paid by third parties for utilising the transmission and storage infrastructure they do not own.
13. The impact of having the distribution tariff unregulated is that the distribution companies can charge whatever tariff they want, even if that tariff is too high to the detriment of end customers (because the ultimate goal is to make gas affordable) NERSA cannot intervene to control the tariff as it does not have the mandate to regulate it. Even if the affected customers come to the Regulator to complain, NERSA cannot intervene without the relevant powers.
14. Regarding the issue of third party access, gas pipelines are natural monopolies meaning that:
    1. the upfront capital required for the development of that infrastructure is high;
    2. the infrastructure cannot be easily duplicated in a specific geographic area for instance; and
    3. in order to ensure that services are efficiently provided in that specific geographic area, the number of distribution companies that can provide that service are limited to one or few however with conditions of third party access to the pipelines.
15. Currently the Gas Act allows for exclusive distribution of gas in a specific geographic area but makes no provisions for third party access. This does not mean the licensed distribution company cannot grant third party access to other interested parties who may want to distribute gas via the distributors’ pipelines. It simply means this kind of access is negotiated but not regulated third party access. It is important that NERSA regulates third party access to ensure that there is non-discrimination and equitable access to the distribution pipeline infrastructure.

 

6.6 National Radioactive Waste Disposal Institute (NRWDI)

 

1. The DMRE stated that the recruitment of a permanent CEO is at an advanced stage and that the recruitment process should be concluded within the next three months with the subsequent appointment of a permanent NRWDI CEO.
2. One of the projects to be undertaken by NRWDI relating to the Koeberg Nuclear Power Plant extension, is the replacement of key critical reactor components which will result in the disposal of large nuclear components such as Original Steam Generators (OSGs).
3. The NRWDI stated that based on scientific knowledge, it is envisaged that the old Steam Generators will be classified as Low Level Waste. Vaalputs is currently licensed to dispose Low Level waste and therefore the old Steam Generators will be disposed at Vaalputs on the condition that the old Steam Generator waste package meets all the requirements of the Vaalputs Waste Acceptance Criteria. Vaalputs is currently only authorised by the NNR to receive concrete waste packages and metal waste packages of up to 4 tonnes. An old steam generator has a mass of more than 300 tonnes and therefore NRWDI will submit a compelling safety case to the NNR to demonstrate that the Steam Generators waste package complies with the transport and handling requirements as prescribed by the IAEA.
4. NRWDI has developed and implemented a comprehensive stakeholder engagement and communication strategy and plan to address the risk of sub-optimal communication with stakeholders. NRWDI will use social media and other virtual platforms to engage and communicate to stakeholders in an open and transparent manner.
5. NRWDI has developed and implemented a comprehensive succession planning and retention programme to de-risk the loss of institutional knowledge.
6. The Committee note that the NRWDI will generate additional revenue in the form of (i) waste disposal fees from radioactive waste generators, in particular Necsa and Eskom; (ii) funding from the Radioactive Waste Management Fund and (iii) income from rendering advisory services to the AU and SADC countries on radioactive waste management and disposal. These new revenue streams will mitigate the financial sustainability risk of NRWDI.
7. With regard branding, the NRWDI has adopted its Branding manual and that is why they have started branding themselves.

 

6.7 National Nuclear Regulator (NNR)

 

1. Members note that the transfer of license from NECSA to NRWDI cannot just be transferred, as the process is legislated. Before a license can be transferred you need a new license coming in and certain requirements by the NNR have to be met. It is upon the new applicant to show the NNR that they have met the requirements then the license can be transferred.
2. The Committee was informed that the outstanding information from NRDWI regarding the transfer of the license include: The Public Information Document, which has been outstanding since the 30th of March 2021 after which there are public comments and questions which need to be responded to by NRWDI; and there is an issue of side security of tenure which needs to be resolved; and the issue of nuclear viability that the applicant need to demonstrate. These are requirements which are non-negotiable and need to be met. All these are currently in progress and discussions, and are at an advanced stage. The NNR indicated that the issue will be resolved soon.
3. The Committee note that the matter regarding the transfer will be addressed as the 2 entities confirmed that they will engage on matters affecting approval of the Vaalputs Nuclear Installation License in order to ensure the Vaalputs Nuclear Installation License approval is obtained as soon as possible, taking due cognisance of compliance with the NNR Act.
4. The Committee is note the NNR’s pro-activeness regarding the development of the small modular reactor policy. The NNR pointed out that they have recently joined the SMR Forum, which is made up of 15 member states of the IAEA, whom are either developing SMRs (Canada, USA, China, Russia) and those that aspire to procure SMRs (Kenya, Zambia).
5. The NNR stated that the IRP is clear, part of the 2 500MW to be considered must be a SMR, according to the NNR, this process is very proactive, so in the event that government goes that route a framework needs to be in place by which to assess the safety of these designs for licensing.
6. The NNR is mandated by the NNR Act, to provide an advisory role to the Minister on nuclear safety.
7. NNR play no role in procurement of nuclear, but advise on the liability and safety issues and any design – focusing on its licensing - which is put on the table for consideration for procurement

 

6.8 Council for Geoscience (CGS)

 

1. The Committee note that the CGS targets for mapping, are not ambitious as the outcome of mapping to a higher resolution is used to make informed investment decisions, which will contribute to the country’s development.
2. The CGS wanted to map the whole country within 10 years, at a cost of R20b.
3. According to the CGS SA’s mapping is at the lowest quintile, , in comparison with other countries.
4. The Committee note that the CGS is also assisting countries like Malawi and Namibia with mapping.
5. With regard to priority minerals, the CGS utilize various options, where they identify targeted minerals in for e.g. energy security, food security and health. The CGS has its its own internal ranking system.
6. An Exploration Plan has been developed with the DMRE and the Minerals Council.
7. On the feasibility and continuation of the Molteno project, the coal level of the project might be low in SA, but if compared to coal quality of other countries, it is of a superior quality.
8. The Committee note that the CGS does not have plans to rationalise staff, as all posts play a critical role in the institution and that you need baseline stability. The Committee is further pleased to be informed that the CGS would want to employ more scientists.
9. The Committee note the rationale by CGS relating to the readily accessibility and availability of information, as the CGS does collect data for 3rd parties. According to the CGS, some information by their counterparts in other countries is also treated with confidentiality and is not as easily accessible and available.
10. The Committee note the progress with regard to the regulations on the Geoscience Act regulations, which will be finalised soon. 
11. The Shale gas programme has been put in abeyance by government, but work on the programme continues, as SA does not have a legislative framework regarding shale gas. The programme was challenged in court and subsequently set aside, because of noncompliance to the NEMA Act, where the court confirmed that any legislation relating to environmental matters should be drafted by the Department of Environment, Fisheries and Forestry (DEFF). The DEFF is currently re-working the regulations, as per the court order, and the DMRE has been consulted as well. The regulations will be gazetted soon.
12. On their collaboration with the Housing Development Agency in Gauteng, relating to the Kgotsong project, the CGS stated that the process started last year and that it will be finalised in the next 6-8 months.
13. The Committee note that the CGS is currently implementing a programme, internally to address their financial sustainability. Some of these initiatives include collaborating with Mintek, CEF etc. and the aim is to expand this to outside the DMRE entities as well.

6.9 State Diamond Trade (SDT)

1. COVID-19 had a major impact on the operations of the SDT, however, it has steadily improved, to a point where it is beginning to realize positive cash flows.
2. In addressing the challenges and shortcomings of its operations e.g. no walk-in sales during the COVID-19 pandemic, the SDT has revised its Business Plan, where it aims to address these going forward.
3. On the revolving credit, as provided for by the IDC, the SDT use to make use of this facility where it had to make big purchases, as the available funding could not cover this. The SDT does not have this facility currently, due to the financial position they are currently in.
4. SDT currently has 78 local clients. Their current top 5 clients represent 50 percent of their sales.
5. The SDT has 14 producers, but they are looking at all producers in the country, in order to achieve the 10% runoff mine target.

 

6.10 South African Diamonds and Precious Metals Regulator (SADPMR)

1. Vat on imports is hampering business development for the SADPMR, where Vat clients wait for months to be refunded. The SDT has been engaging with the South African Revenue Services (SARS) on this matter.
2. The Committee note that the SADPMR has for quite some time not paid salary increases to its staff.
3. The SDT has done benchmarking studies on export levies and found that other countries encourage imports for beneficiation purposes.
4. In South Africa, the export levy was 15%, and was amended to 5%.

 

 

7.         Recommendations

 

Informed by its deliberations, the Committee recommends that the House, request that the Minister of Mineral Resources and Energy should:

 

1. Explore funding options for incentivising the prospecting, exploration, mining and beneficiation of RareEarths Elements.
2. Consider and explore an overarching investment strategy for the Department and entities.
3. Ensure the finalisation of the transfer license from NECSA to NRWDI, as a matter of urgency.
4. Expedite the raising of the licensing threshold for electricity generation to 50MW
5. Expedite the finalisation of the various legislation, which hinder the NERSA in executing its mandate effectively.
6. Address legislative and other impediments that impacts on the sustainable operations of the State Diamond Trader.
7. Review the Electricity Pricing Methodology
8. Provide an update to the Committee on the Council for Geoscience Kgotsong Project, by the 3rdquarter of 2021/22
9. Provide an update to the Committee on the development relating to artisanal and small scale mining policy, once the processes undertaken have been finalised.
10. Provide an update to the Committee on the Nuclear New Build Programme, including the development of the Small Modular Reactor policy, by the 3rd Quarter of 2021/22, with specific reference to the affordability, scale and pace of the programme
11. Provide an update to the Committee on the Solar Water Heater Programme, by the 3rd quarter of 2021/22.
12. The DMRE should ensure that the budget of the Solar Water Heater (SWH) programme be reflected as a standalone, as this is more a conditional grant from the National Treasury. It should not be included in the Goods and Services budget allocation.
13. Present an update on the status of its detailed finances of the SA Diamonds and Precious Metals Regulator during the 3 quarter of 2021/22
14. Present and update to the Committee on the Mining Charter, including the status of BEE at the exploration stage.
15. Update the Committee on progress made on the merger of PetroSA, IGAS and Strategic Fuel Fund, by the 3rd quarter of 2021/22.
16. Update the Committee on the various cases and the forensic investigations, relating to the strategic fuel stock, including consequence management action.
17. Update the Committee on the Karoo shale gas drilling programme, by the 3rd quarter of 2021/22 financial year.

 

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.

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