The Budgetary Review
and Recommendation Report of the Portfolio Committee on Energy, 08 November
2011.
The Portfolio Committee on Energy, having assessed the
performance of the Department of Energy, reports as follows:
1. Introduction
1.1.
The role of the Committee
The mandate
of the Portfolio Committee on Energy) is underpinned by the provisions of the
Constitution of the
·
Conduct
oversight on behalf of the National Assembly, over the Minister of Energy to
ensure executive accountability for the delivery of services to the people of
·
·
Oversee
and review all matters of public interest relating to the public sector and energy
to ensure service delivery;
·
·
Ensure
compliance by the Minister and entities under
his/her charge to relevant legislation (financial and other); and
·
·
Monitor
the expenditure of the Budget Vote of the Department and its entities and
ensure regular reporting to the Committee, within the scope of accountability
and transparency.
According to Section 5 of the Money Bills Amendment
Procedure and Related Matters Act, the National Assembly, through its
committees, must annually assess the performance of each national department.
The Committee must submit an annual Budgetary Review and Recommendations Report
(BRRR) for each department that falls under its oversight responsibilities for
tabling in the National Assembly.
These should be considered by the Committee on
Appropriations when it is considering and reporting on the Medium Term Budget
Policy Statement (MTBPS) to the House.
1.2.
Processes in compiling the Budgetary
Review and Recommendations Report 2011
The committee, in undertaking the process of compiling this
report, has considered the following source documents and engagements:
·
Strategic
Plan briefings, in terms of the Money Bills Procedures Act by both the
Department of Energy (DoE) and its entities.
·
·
Annual
Report briefings, in terms of Section 65 of the Public Finance Management Act,
No. 1 of 1999, which requires that Ministers table the annual reports and
financial statements for the department and public entities to Parliament
·
·
Section
32 reports - third and fourth Quarter Performance Reports (2010/11)
·
·
Briefing
by the Financial and Fiscal Commission on its energy-sector related
recommendations made by the Commission in the past
·
·
Overview
by the National Planning Commission (NPC) regarding the findings of its Diagnostic
report focusing on energy issues.
·
·
Overview
of the progress made by the Department of Energy with respect to commitments to
the outcomes as articulated in the Service Delivery Agreement with the Ministry
·
The
committee further identified and included findings and recommendations in its
oversight visit and study tour reports undertaken during the period of review.
1.3. The Department
1.3.1. Department of Energy’s (DoE) mandate
To ensure secure and sustainable provision of energy for
socio-economic development.
1.3.2. DoE’s Vision 2014
A transformed and sustainable energy sector with universal
access to modern energy carriers for all by 2014.
1.3.3. DoE’s mission statement
To regulate and transform the sector for the provision of
secure, sustainable and affordable energy.
2. Department’s
Strategic Priorities and Measurable Objectives
2.1 Strategic Plan of
the Department
The Department’s strategic plan seeks to deliver results
along eight strategic objectives that include promoting energy security through
reliable, clean, and affordable sources; universal access to energy sources,
transformation of the energy sector, and strengthening the operations and
management of the Department.
1.
Ensure
energy security – creating and maintaining a balance between energy supply and
energy demand, develop strategic partnerships, improve co-ordination in the
sector and ensure reliable delivery and logistics.
1.
2.
Achieve
universal access and transform the energy sector – diversify energy mix,
improve access and connectivity, provision of quality and affordable energy,
promote safe use of energy and transform the energy sector.
3.
Regulate
the energy sector – develop effective legislation, policies and guidelines,
encourage investment in the energy sector, ensure compliance with legislation.
4.
Effective
and efficient service delivery – understands and improves stakeholder needs and
improves turn – around times.
5.
Optimal
utilization of energy resources – develop enabling policies, encourage energy
efficient technologies.
5.
6.
Ensure
sustainable development – promote clean energy alternatives, encourage economic
development, promote job creation.
6.
7.
Enhance
Department of Energy culture systems and people – attract, develop and retain
appropriate skills, promote good organizational culture, make the Department an
employer of choice.
7.
8.
Promote
corporate governance – optimal utilization of resources, manage budget
effectively, implement fraud and risk management, and ensure compliance with
relevant prescripts.
2.2. Measurable
Objectives of the Department
·
Ensure
supply is secure and demand is well managed.
·
·
An
efficient, competitive and responsive energy infrastructure network
·
·
Improved
energy regulation and competition.
·
·
Efficient
and diverse energy mix for universal access within a transformed energy sector.
·
·
Environmental
assets and natural resources protected and continually enhanced by cleaner
energy technologies
·
·
Mitigation
against, and adaptation to, the impacts of climate change
·
·
Good
corporate governance for effective and efficient service delivery
3. Analysis of the
Department’s Prevailing Strategic and Operational Plan
The key strategic policies of the Department hinge on the
following key objectives:
·
Attain
universal access to energy by 2014;
·
Ensure
accessible, affordable and reliable energy, especially for the poor;
·
Diversify
primary energy sources and reducing dependency on coal;
·
Practice
good governance, which must also facilitate and encourage private-sector
investments in the energy sector and provide environmentally sensitive energy.
·
·
Ensuring
acceleration of universal access to electricity by building key bulk
infrastructure. Eskom build programme will invest R150 billion over the next
five years. R23 billion is reserved for independent power-producer entrants.
·
Demand
Side Management and Energy Efficiency initiatives are still the cornerstone of
energy policies as they are regarded to have an effect of reducing energy
demand on the electricity grid, delay the need for additional power stations to
be built, keep electricity costs down and create opportunities for the
introduction of the creation and funding of incentives for new projects and
products.
·
Rural
electrification. The Department continues to lead in the process of
electrification with specific emphasis on rural electrification and
implementing Free Basic Electricity Framework policy in order to protect poor rural
customers.
·
·
The
above three priorities have always received larger proportion of budget in the
past three financial years, and also in the current MTEF. This trend, is by and
large, caused by the fact that Eskom build programme has been put high in the
sector priorities over past three years to guard against power outages, and
integrated rural electrification programme that has a greater share in the
budget because of its quest to attain universal access to electricity.
·
·
Energy
Efficiency Initiatives in electricity sector assist in reducing environmental
damages. Using electricity effectively and efficiently means that less
electricity has to be generated, greenhouse gas emissions are reduced and the
sustainable use of electricity is achieved. The National Energy Efficiency
Agency was established mainly to coordinate national campaign to conserve
energy in all sectors of the economy. The energy efficiency programme include
activities such as, rolling out of compact fluorescent lights, subsidization of
solar water heaters, promotion of clean development mechanism, fuel switching,
traffic lights and public lighting, etc. The Department of Energy is also the
main supporting department in the “Green” and energy saving industries as
contained in the Industrial Policy Action Plan 2010/11-2012/13. In support of the Renewable Energy White
Paper goal of 10, 000 GWh, the Minister of Energy has made a commitment to
install one million Solar Water Heaters (SWHs) by 2014. It is anticipated this
target will be increased to 5.6 million SWHs by 2020.
·
Promoting
clean and renewable energy sources. Promoting the development and usage of
clean energy resources remains a key priority for the Department. The renewable
energy feed-in tariffs (REFIT) that incentivize producers to invest in
renewable energy have been developed.
·
The
Programme: Electricity, Nuclear and Clean Energy earmarked a budget to
undertake energy efficiency, promotion of clean and renewable energy sources
priorities, and also assist in development, and monitoring of electricity
policies and programmes.
·
National
Strategic fuel stocks policy and liquid fuel sector. The Energy Security Master
Plan for liquid fuels identified a number of challenges and constraints in
meeting energy demand. This Policy set out the framework for the storage of
fuel stocks by Government as well as industries, to guide the necessary
investment decisions within liquid fuel sector.
·
Nuclear
energy. The Department continues to implement Nuclear Energy Policy of 2008 and
a nuclear energy implementation committee was established in March 2009 to
review the Country’s readiness to implement or expand its nuclear programme.
4. Analysis of Section
32 Expenditure Reports
The Department of Energy (DoE) briefed the committee on the
following section 32 reports (quarterly performance reports):
4.1. Third Quarter
financial performance report of 2010/11
Table 1: 2010/11 – 3rd
quarter financial performance
|
10/11 Total Budget R’000 |
YTD Budget R’000 |
YTD Actual R’000 |
YTD VAR R’000 |
% of Total 10/11 Budget expended |
Total Energy |
5,648,664 |
4,303,783 |
4,083,630 |
220,153 |
72.3% |
Compensation of Employees |
143,256 |
103,705 |
103,544 |
161 |
72.3% |
Goods & Services |
105,505 |
55,619 |
61,255 |
-5,636 |
58.1% |
Transfers & Subsidies |
5,394,689 |
4,141,038 |
3,916,624 |
224,414 |
72.6% |
Payments for Capital Assets |
5,214 |
3,421 |
2,207 |
1,214 |
42.3% |
Table 1 above shows the 2010/11 - 3rd quarter financial
performance of the DoE. At the end of the third quarter, the Department had
disbursed a total of R4.1 billion or 72.3% of the total budget allocation for
the 2010/11 financial year. This total disbursement of R4.1 billion was R220.1
million less than the available benchmark drawing of R4.3 billion from the
National Revenue Fund, mainly due to the performance within the Transfer
payments classification.
With regard to transfer payments the department had a total
of R4.1 billion available to transfer to entities or implementing agents and an
actual of R3.9 billion was transferred, resulting in a variance of R224
million. This variance is attributable to the delay in the transfer of funds to
Transnet for the petroleum pipeline.
This delay was due to the department implementing progress reviews. The
amount delayed amounted to R300 million.
The results reflected within the Goods and Services economic
classification showed a R5.6 million year-to-date over spend mainly due to
membership fees paid to international bodies.
4.2. Fourth Quarter
financial Performance Report of 2010/11
Table 2: DoE’s
expenditure per programme
Expenditure per
appropriation Act 2010 ('000) |
Appropriated Budget |
Total additional
appropriation |
Available Budget |
Year-to-date actual
expenditure |
Percentage of budget
expended |
1. Administration |
104,205 |
22,811 |
127,016.00 |
121,308 |
95.5 |
2. Hydrocarbons and energy planning |
1,558,608 |
11,450 |
1,570,058 |
1,556,376 |
99.1 |
3. Electricity, Nuclear and Clean Energy |
408,817 |
18,013 |
426,830.00 |
408,671 |
95.7 |
4. Associated services |
3,463,760 |
61,000 |
3,524,760.00 |
3,403,880 |
96.6 |
Total for vote |
5,535,390 |
113,274 |
5,648,664.00 |
5,490,235 |
97.2 |
Table 3: 2010/11 – 4th
Quarter Financial Performance
|
10/11 Total Budget R’000 |
YTD Budget R’000 |
YTD Actual R’000 |
YTD VAR R’000 |
% of Total 10/11 Budget expended |
Total Energy |
5,648,664 |
5,648,664 |
5,505,380 |
143,284 |
97.5% |
Compensation of Employees |
143,256 |
143,256 |
142,825 |
431 |
99.7% |
Goods & Services |
105,505 |
105,505 |
91,019 |
14,486 |
86.3% |
Transfers & Subsidies |
5,394,689 |
5,394,689 |
5,268,206 |
126,483 |
97.7% |
Payments for Capital Assets |
5,214 |
5,214 |
3,330 |
1,884 |
63.9% |
Table 3 above shows the 2010/11 – 4th quarter
financial performance of the DoE. The Department has seen an increase in
spending within the quarter under review. This was mainly due to the Department
closing of all commitments and open orders in preparation for the year end
process. The Department disbursed an additional R1.4 billion in the current
quarter increasing the overall disbursement to a total of R5.5 billion or 97.5%
of the total 2010/11 financial year’s budget.
Transfer payments increased by 36% from R3.9 billion in the
last quarter to R5.3 billion in the current quarter. The oversight issues which
delayed transfers to Transnet for the construction of the petroleum pipelines
were resolved in the last quarter. A
total of R1.5 billion was transferred, as per the plan. By the end of this
quarter, the Department had transferred R5.3 billion or 97.7% of the total
2010/11 Transfer payments budget.
The unspent total was R126.5m, a portion of which, 62%, was
committed and a motivation for a roll-over to the 2011/12 financial year was
submitted to the National Treasury for approval. The INEP non-grid project, was
entirely accountable for the balance of the unspent and uncommitted funds,
approximately R48 million.
Spending on Goods & Services increased from R61.2 million
in the last quarter to R91 million in the current quarter. Although the Department’s financial records
reflected an unspent budget total of R14.5 million within this classification,
the entire balance was committed and motivated for a roll-over. In addition to
the R14.5 million requested as a roll-over, the Department had an additional
R7.2 million of committed expenditure which were motivated for inclusion into
the 2011/12 rolled over funds.
Although spending on Capital assets increased from R2.2 million
in the last quarter to R3.3 million in the current quarter, this performance
was still below the Department’s initial plan and resulted in an under spend of
R1.9 million. The Department had
anticipated moving to a new office building.
The costs associated with this move, e.g. ICT costs, were catered for
within this category. The move was
delayed due to the approval of the new building by the Department of Public
works.
Table 4: 2011/12
Rollover overview
|
Unspent Funds R’000 |
Roll-over Requested R’000 |
Roll-over Approved R’000 |
VAR (Requested & Approved) |
Total Energy |
143,284 |
100,212 |
88,216 |
-12% |
Compensation of Employees |
431 |
- |
- |
- |
Goods & Services |
14,486 |
21,702 |
11,025 |
-49% |
Transfers & Subsidies |
126,483 |
78,489 |
77,191 |
-2% |
Payments for Capital Assets |
1,884 |
21 |
- |
- |
Table 4 above highlights the rollover review of the DoE.
Although the Department only had R14.5 million left from its 2010/11 budget
allocation in Goods and Services, a Roll-over request was submitted to the
National Treasury for a total of R21.7 million.
The additional funds were required in order to meet the department’s
obligation. A total of R10.7 million was not approved, and this is the amount
related to NERT PMO.
With regard to transfer payments, the Department requested a
Roll-over total of R78.5 million and approval was granted for R77.2
million. The R1.3 million not approved
is a portion requested under the Non-grid programme.
5. Analysis of the
Department’s Annual Report and Financial Statements
5.1. Programme
Performance overview
The Department of Energy consists of four programmes that
are reflected in table 6 below. Some of the programmes are sector specific like
Hydrocarbons and Energy Planning; and Electricity, Nuclear and Clean Energy.
Administration and Associated Services programmes are over arching programmes
providing services to both sectors.
Table 5: Summary of
expenditure per programme
Expenditure per
appropriation Act 2010 ('000) |
Appropriated Budget |
Total additional
appropriation |
Final Appropriation |
Year-to-date actual
expenditure |
Percentage of budget
expended |
1. Administration |
104,205 |
23,301 |
127,506 |
121,602 |
95.3 |
2. Hydrocarbons and energy planning |
1,558,608 |
6,050 |
1,564,658 |
1,556,402 |
99.4 |
3. Electricity, Nuclear and Clean Energy |
408,817 |
22,923 |
431,740 |
408,642 |
94.7 |
4. Associated services |
3,463,760 |
61,000 |
3,524,760 |
3,418,740 |
96.9 |
Total for vote |
5,535,390 |
113,274 |
5,648,664 |
5,505,386 |
96.5 |
Source: Department of Energy-Annual Report 2010/2011
5.2. Administration
The programme operated with a higher vacancy rate for the
better part of last year in until the latter in 2010, when it received funds
which were misallocated to the Department of Minerals Resources (DMR). The poor
state of affairs required that most employees in the support function had to
perform the duties of two or more people. Most of the predetermined objectives
were achieved despite operating at high vacancy rate for the better part of the
year. The Departmental capacity increased from 41 percent at the beginning of
the year to 52 percent at the end of year. The average vacancy rate for the
year was 10.6 percent caused by lack of funding.
5.3. Hydrocarbons and
Energy Planning
In terms of service delivery achievements, the Department
has a draft LPG strategy with an objective of increasing LPG usage in the
households to 20 percent (1 million people). However, the current usage of LPG
is at 5 percent. The Department need to do a lot in the LPG sub sector in order
to achieve its target and this is evident from the briefings the Department had
with PC on Energy. There are still barriers that need to be unlocked such as
cylinder management, non compliance to pricing, possible collusion etc in
pursuit of greater uptake of LPG in
It is noted that Integrated Energy Plan was not completed as
it was initially envisaged due to the fact that there was need to revise some
of the Plausible Future Scenarios and IEP methodology. The scope and
availability of data to build model seem to have been a major impediment.
One of the departmental priorities as per strategic plan
2010/11 was the development of Biofuels Pricing Framework to guide investment
decisions and expanding the biofuels market as envisaged in the Biofuels
Industrial Strategy. This seem to have been not been achieved as per annual
report and it will stall the whole process of biofuels market creation because
without price signals the investors would not invest in this sub sector.
5.4. Electricity,
Nuclear and Clean Energy
The purpose of the programme is to monitor developments in
the electricity, nuclear and clean energy sectors. The programme has spent 94.7
percent of its budget. The actual unspent budget (under expenditure) totaled
R23 098 million for the period under review.
In terms of the Integrated National Electrification
Programme (INEP) which is aimed at achieving universal access to electricity,
the Department connected 195 000 households to the electricity and 10 000 to
the off grid system with an overall spend of R29 billion. More than 5 000 jobs
were created during electrification of households.
Huge chunks of departmental under-expenditure is from this
programme and reasons for the underspending as stated, are as follows:
5.5. Associated Services
The
purpose of the Associated Services programme is to provide related services in
support of the Department’s mandate through funded and non-funded statutory
bodies and organisations.
The
measurable objectives were to enhance the Department’s objectives through
policies and directives, promoting its legislative mandate and leading to the
creation of an environment conducive to sustainable development, investment and
the improvement of the quality of life of all South Africans.
The
greater percentage of the Departmental budget (62 per cent) was allocated to
this programme. The greater portion of the programme budget is for transfers
and subsidies. Funds are transferred from this programme to entities such as
EDIH, NNR and NECSA, while other entities have funded their own operations
through levies without grants from the Department.
6. Briefings by the entities on
their Annual Reports 2010/11
6.1. National Nuclear Regulator
(NNR)
The NNR’s
mission is to provide and maintain an effective and efficient national
regulatory framework for the protection of persons, property and the
environment against nuclear damage.
6.1.1. Highlights of the NNR during
the period under review:
6.1.2. Challenges faced by the NNR
The NNR faced a
number of challenges during the period under review, which include:
·
Reduction
in operating revenue and government grant
·
Inadequate
legislative framework to strengthen the Regulator’s enforcement mandate
·
Regulating
special case mines
·
Remediation
of legacy sites such as the Wonderfonteinspruit catchment area.
·
·6.1.3. Addressing the
challenges
The NNR has made
proposals to National Treasury on its financial sustainability, while
developing a comprehensive funding model for the future.
The Board of
Directors also approved amendments to legislation giving powers to the
Regulator for enforcement of its mandate. An on going monitoring programme has
been put in place to address the special case mines as well as focusing on the
remediation of the Wonderfonteinspruit catchment
6.1.4. The NNR’s financial highlights
6.1.5. Findings of the
Auditor-General
The NNR obtained an unqualified
audit opinion suggesting a generally acceptable level of internal controls.
However, the Auditor General raised
an emphasis of matter on the NNR financials which related to the restatement of
corresponding figures. The corresponding figures for 2010 were restated as a
result of an error discovered during 31 March 2011 in the financial statements
of the National Nuclear Regulator at, 31 March 2011. Another area of concern was the irregular
expenditure in relation to a few procurement transactions largely relating to
the tenant installation for the new building.
This will be strengthened going forward through rigorous monitoring of
all procurement transactions.
Another area of concern was on
performance information specifically relating to measures which could not be
quantifiable
6.1.6. Conclusion
The NNR has recently completed the restructuring process and
is now better positioned to meet its performance targets and enhance
efficiencies. The new nuclear build programme requires the NNR to be adequately
capacitated and resourced in order to address the regulatory aspects of this
massive programme.
Financial sustainability and viability of the NNR continues
to pose serious challenges to the NNR and the country’s ability to meet its
international nuclear regulation obligations.
A secure funding tenure is needed to ensure a funding
baseline for the NNR by National Treasury.
6.2. National Energy
Regulator of SA (NERSA)
6.2.1. Strategic
objectives of NERSA
6.2.2. Performance against
pre-determined objectives
6.2.3. Highlights of NERSA’s
performance
Electricity
Industry Regulation
Piped-gas industry regulation
Petroleum Pipelines Industry Regulation
6.2.4.
Lowlights of NERSA
6.2.5.
Financial Performance of NERSA
6.2.6. Financial Performance of
NERSA
Actual
levies collected amounted to R155 million, received from the following sources:
Electricity
industry – R87 million
Piped-Gas
industry – R28 million
Petroleum
Pipelines industry – R40 million
The
under recovery of the levies, compared to the budget is due to the actual
volumes being below the projected volumes.
The
actual expenditure for the period 1 April 2010 to 31 March 2011 amounted to
R163.7 million. This represents an underspending of 6% compared to the budgeted
amount of R177.2 million.
Expenditure
categories in relation to the other expenditure:
Operating
Expenses = 31%
Employment
Costs = 53%
Consultant
fees = 10%
Regulator
Members remuneration = 6%
Total
irregular expenditure at year end was R85 242.00 and fruitless and wasteful was
R5 797.00;
NERSA
received an unqualified audit opinion (with no emphasis of matter) from the
Auditor-General for the 2010/2011 financial year
6.3. Central Energy Fund (CEF)
6.3.1. Mandate of the CEF
The
Central Energy Fund Act of 1977 gave CEF a broad mandate to pursue interests in
fossil fuels, including coal and oil. The Renewable Energy Ministerial Directive
of 2003 gave CEF another broad mandate to pursue projects in renewable energy -
including hydro, bio energy, solar, wind energy, low smoke fuels and energy
efficiency.
The
various subsidiaries in the Group largely fall into two categories – the Fossil
Fuel cluster and the Renewable Energy cluster.
6.3.2. Highlights
6.3.3. Lowlights
6.3.4. Challenges going forward
6.3.5.
Financial Performance of the CEF
CEF experienced a net operating loss of R75 million
in 2010. This was due to PETROSA shutdown for maintenance and also caused by
oil price rand exchange rate while during 2010/11 the company recorded a profit
of R1.2 billion.
In terms of CEF financial position, the net assets
and liabilities amount to R7.4 billion and the total assets and liabilities
decreased by 2 percent.
Pertinent challenges during the year under review:
Overall Auditor’s General Report for CEF (Pty)
Limited
6.4. PetroSA
6.4.1. Overview of PetroSA
PetroSA was established in 2002 from: Mossgas (Pty)
Limited, Soekor E&P (Pty) Limited, and parts of the Strategic Fuel Fund
Association, and currently employees 1836 people. PetroSA owns the world’s
second largest fully operational Gas to Liquid (GTL) refinery. It produces 5
per cent of the RSA’s fuel needs and products include diesel, gasoline,
kerosene and specialty products. PetroSA has exploration acreage in
6.4.2.
Core business of PetroSA
6.4.3. Performance
against objectives
Objective |
Key Performance
Indicator |
Performance Result |
People |
Employment Equity |
Women representation remains a challenge, but there are interventions under way to
rectify |
Finance |
Profitability |
A turn-around to R831- million net profit vs R356 million
loss the previous year |
BB-BEE/Stakeholder |
Preferential Procurement BEE Sales |
53% of discretionary
spend 14% increase in sales |
Internal Business Processes |
Feedstock Solution New Crude Refinery |
Project Ikhwezi approved Business case review |
6.4.4. Skills Development
Bursary
Programme - The PetroSA Bursary Programme consists of 91 full-time students
selected from previously disadvantaged and vulnerable groups studying towards
qualifications in Engineering, Geosciences, Accounting and Economics.
Graduate-in-Training
Programme - Following completion of their qualifications, PetroSA graduates are
appointed on two--year Fixed Term Contracts within various divisions of the
organisation. The PetroSA Graduate-in-Training programme currently accommodates
35 GiTs; affording graduates supervised practical learning in the
workplace. In the 2010/11 period there were 23 GiTs.
Centre of
Excellence (COE) - At the COE 220 Learnerships at Levels 3 and 4 in Chemical
Electrician, Instrumentation Mechanic, Fitter, Welder, Rigger and Boilermaker
Learnerships for the chemical industry are offered and are CHIETA accredited.
Employee
Skills Development - Various skills development opportunities are created for
existing employees as part of personal development – for the period 2010/2011
1852 employees were trained, at a total cost of R36 million
Study
Assistance - PetroSA provides financial assistance to 263 permanent employees
who wish to advance themselves academically through part-time study.
6.4.5. Audit opinion
For the period under review PetroSA
received an unqualified audit opinion
6.5. Nuclear energy Corporation of
6.5.1. NECSA’s
Business
Necsa is a Public Company responsible for
undertaking and promoting research and development in the field of nuclear
energy and radiation sciences. It is also responsible for processing source
material, including uranium enrichment, and co-operating with other
institutions, locally and abroad, on nuclear and related matters.
The Company promotes the public understanding of
nuclear science and technology and facilitates regular communication with the
public and its stakeholders. Apart from its main activities at Pelindaba, which
include operation and utilization of the SAFARI-1 Research Reactor, Necsa also
manages and operates the Vaalputs National Radioactive Waste Disposal Facility
in the
Necsa engages in commercial business mainly through
its wholly owned commercial subsidiaries NTP Radioisotopes (Pty) Ltd (NTP),
which is responsible for a range of radiation-based products and services for
health care, life sciences and industry, and Pelchem (Pty) Ltd (Pelchem), which
supplies fluorine and fluorine-based products. Both subsidiaries supply local
and foreign markets, earning valuable foreign exchange for
6.5.2. Highlights for
2010/11
The planned expansion of
Necsa conducted further techno-economic
pre-feasibility studies on site selection options for a local nuclear fuel
production programme, the availability of uranium resources, options for the
establishment of a local uranium conversion and enrichment programme.
6.5.3.
Overview of commercial report
The main subsidiaries of NECSA are NTP
Radioisotopes (PTY) Ltd, Pelchem (PTY) Ltd and ARECSA. The first two also has
number of subsidiaries and affiliates under their operations. All NECSA
subsidiaries earned nearly one billion in foreign exchange for
NTP Radioisotopes is a wholly owned subsidiary of Necsa
and conducts its operations from the Pelindaba nuclear facility near
NTP and its subsidiaries manufacture and supply
isotope products, non-destructive testing equipment, Kodak film for X-ray and
gamma radiography, ultrasonic equipment and accessories, fluorodeoxyglucose
(FDG) for Positron Emission Tomography (PET) application and other nuclear and
radiopharmaceutical products and related services to the nuclear medicine
sector and to distributors in
Company sales were R711 million, which is 22
percent above budget and 8 percent better than the previous financial year.
Group sales of R869 million, some 13 percent more than budgeted.
Pelchem is a 100 percent subsidiary company of
Necsa Ltd with a business focus on the fluorochemical industry. It plays a
strategic role in supporting Necsa and government plans for a nuclear fuel
programme in the country.
Pelchem manufactures and markets anhydrous hydrogen
fluoride (AHF), hydrofluoric acid, fluoride containing salts, fluorine gas, and
speciality fluoride containing gases and fluoro-organic monomers to local
industry and to selected international customers. These products are used in
the petroleum, pharmaceutical, glass, electricity, metallurgical, mining,
polymer, agrochemical, electronics, construction, aluminium and detergent
industries.
ARECSA Human Capital (Pty) Ltd is a joint venture
(JV) company between AREVA from
In the 2010/11 financial year no new funding was secured
for training and funding that was expected from one of the obligors based in
Nine people received training through ARECSA,
funded by the R2.2 million allocation secured from Patria in the previous
financial year. This included training which was given by Institute National des Sciences et
Techniques Nucleaires (INSTN) in
6.5.4. Financial
performance
State funding for operating costs increased by 1 percent in
real terms (2009/10: 7.0 percent) and group sales increased by 1 percent
(2009/10: 60.6 percent) in real terms respectively. Income generated for the
year under review amount to R1.6 billion and sales and other income has a share
of 66.6 percent of the total income generated (government grant is also
included).
NECSA financial position in the period under review was
stable. This is because the company has assets and liabilities amounting to R 1
804 174 billion respectively (2009/10: R1 496 943). Similar financial position
prevailed in 2009/10 financial year. Its
assets and liabilities increased by R307 231 million (17 percent). This attests
to the fact that NECSA group is growing from year to year.
Profit for the year was R129 million after taxes which
decreased by R34 261 from 2010 financial year (R163 720). It has contributed
R68 million in taxes to the central revenue fund.
NECSA received an unqualified audit outcome from AG.
However, AG raised some issues under emphasis of the matters.
7. Consideration of
Other Sources of Information
The State of
7.1.1. Capital Investment Programme
The State of
The build programme priority for power generation under
Government’s capital investment programme was a policy response after the 2008
power outages and government has continued to prioritize this initiative over
the past few years. Eskom has delivered 4 454 MW of new electricity generation
and 1 962 kilometers of high voltage power lines to the system since 2004. A 10
100 MW of transformer capacity has been installed to enable it to carry the amounts
of power being generated across the country.
The State of
7.1.2. Green Jobs Initiative
A new focus area outlined by the President targets green
jobs which is regarded as having a potential to create jobs. Green New Deal
movement emerged after the 2008 power outages, which advocated a move from over
reliance on fossil fuels to a more diversified energy sources notably renewable
sources (hydro, solar, wind), cleaner energy technologies and energy efficiency
measures. Therefore, the green jobs focus area is not a new policy priority as
it had been introduced in the energy sector through the energy efficiency
programme some years ago. However, it could be regarded as a renewed effort by government
to intensify the creation of more jobs in the currently untapped industries
such as renewable and energy efficiency projects.
To date, public awareness and education campaigns for energy
efficiency together with Eskom’s Demand Side Management are in progress. Over
the past years the country has seen nation wide installation of compact
fluorescent lights in the residential areas in order to promote energy savings
for the Country. The Department is still to finalize regulations for building
standards and requirements of the energy programme. It is evident that there
are on-going projects in the area of green jobs or energy efficiency.
The Green Jobs strategy as articulated in the Industrial
Action Plan includes a range of possible monetary, trade and industrial policy
interventions. This includes instruments such as environmental taxes on
enterprises that have measurable negative impacts on the environment and incentivize
investment that create larger number of green jobs. The plan to roll out these
measures is still in its infancy and Government need to articulate a plan on
how these measures will be implemented.
In this regard government is currently developing a green
jobs strategy to identify ‘green job’ opportunities in energy, manufacturing and
services and incorporate it into the revised Industrial Policy Action Plan.
Government has committed itself to the roll out of one million solar water
heating panels to households, with opportunities to create jobs in the
manufacture and installation of the units.
International experiences shows that
7.1.3. Inter-Ministerial Committee on Energy
The State of
The Integrated Resource Plan is also charged with the
responsibility to ensure participation of Independent Power Producers in the
energy market, and protecting the poor from rising electricity prices. This
committee is further tasked to establish independent system operators separate
from Eskom Holdings.
The South African energy market, particularly electricity
generation, transmission and distribution is monopolised by Eskom. Monopoly by
Eskom in the electricity sector inhibits competition in the market and
consumers bear the costs of paying expensive bills and are left with no choice
in the market. The envisaged Integrated Resource Plan will open the energy
market to other Independent Power Producers and such a measure will in turn
promote competition in the market, thus influencing a downward trend in
electricity prices.
Monopoly and rigid economic structure are considered, by
many scholars, as the main ingredient of high inflation (high electricity
prices). Monopoly in the private and public sector are part of the problem of
keeping inflation high. The term "structural rigidities" refers to
arrangements in the economy that limit its flexibility and therefore its
ability to respond to changing conditions. This rigidity reduces efficiency and
adds to the cost of production.
While there are positive motivations for power sector
reform, there is also substantial opposition to privatization. The Municipal
Government has objected to restructuring, fearing loss of revenue and citing
their constitutional rights to distribute electricity. The Unions have been
arguing strongly that a State should retain its role in development, in particular
in sectors delivering basic services.
7.2. National Planning
Commission (NPC)
The National Planning Commission is a new
initiative of government. Chaired by the Minister in The Presidency for
National Planning, the NPC will be responsible for developing a draft long term
vision and strategic plan for
The aim of the NPC is to take a broad, cross-cutting,
independent and critical view of
The NPC worked with the broader society to draw on the best
expertise and consult with relevant stakeholders. The view is that many
successful countries had national plans and the South African government had
often taken a sectorial and short-term view that has hampered development. A
long-term and independent view would add impetus, focus and coherence to what
needed to be achieved in RSA.
The establishment of the NPC was the promise to the people
of
The NPC highlighted that the country under-invested in its
infrastructure for over a generation. The development was being held back by
too little investment in new infrastructure, and a failure to maintain existing
infrastructure.
The poorly located and inadequate infrastructure limited
social inclusion and faster economic growth.
The settlement pattern was problematic and the poorest lived either in
the former homelands or in cities far from where the jobs were. There was a
failure to coordinate the delivery of household infrastructure between
provinces, municipalities and national government. People could either be moved
where the jobs were or jobs could be moved to where the people were, and to
reverse the effects of spatial apartheid would be a central challenge in
decades to come.
The Commission considered making various recommendations regarding the energy
issues, like balancing the domestic and export interests in coal.
7.3. Department of
Performance Monitoring and Evaluation (DPME)
The Department of Performance Monitoring and Evaluation
(DMPE) provided a progress report of the performance of the Department of
Energy (DoE) with regard to the relevant outcomes regarding the Service Delivery
Agreement concluded with the Ministry.
The outcomes are the government’s main initiative to achieve
effective spending on the right priorities and the aim is to improve government
service delivery.
The outcomes, as highlighted by the DPME, applicable to the Department
of Energy are:
·
Outcome 6: Economic infrastructure -
An efficient,
competitive and responsive economic infrastructure network
·
·
Outcome 9: Local government - Responsive, accountable, effective
and efficient Local Government system
·
·
Outcome 10: Environment - Protect and enhance our
environmental assets and natural resources
·
·Each of the 12 outcomes has a number of outputs which need
to be achieved. To follow is the outputs applicable to outcomes 6, 9 and 10 (as
per DPME)
7.3.1. Outcome 6 –
Economic Infrastructure
Output 2 of outcome 6: Ensure reliable generation,
distribution and transmission of electricity.
7.3.2. Outcome 9 –
Local government
Output 2 of outcome 9: Improving Access to Basic Services.
7.3.3. Outcome 10 –
Environment
Output 2 of outcome 10: Greenhouse gas emissions reduced
climate change impacts mitigated & air/atmospheric quality improved.
7.3.4. Overall
progress against the outcomes
To follow is the progress of the outputs vis a vis the
outcomes as highlighted by the Department of Performance Monitoring and
Evaluation of the outputs vis a vis the outcomes:
·
Output
2 of Outcome 6
·
o
Create
regulatory and institutional structures for the introduction of viable
Independent Power Producers (IPPs) and start the process for the participation of IPPs in 2010 – according
to the DPME sub-outputs are either proceeding slower than targeted or which
face impediments require intervention
o
o
Develop
a funding and implementation plan and reduce the electricity distribution
infrastructure maintenance backlogs of R27.4b to R15bn by 2014 - according to
the DPME sub-outputs are either proceeding slower than targeted or which face
impediments require intervention
o
o
Household
access to electricity should be 92% - According to DPME sub-outputs are on
track and require no interventions.
o
o
Develop
a funding model for Electricity Generation/build programme to ensure security
of supply - According to DPME sub-outputs are on track and require no
interventions.
o
o
Long
term energy mix diversification to address the security of energy supply and
requirements for renewable energy – according to the DPME sub-outputs are
either proceeding slower than targeted or which face impediments require
intervention
o
o
Coal
haulage logistics – According to DPME sub-outputs are on track and require no
interventions.
o
o
Electricity
Distribution Industry (EDI) restructured – according to the DPME sub-outputs
are either proceeding slower than targeted or which face impediments require
intervention
o
o
Setting
cost reflective tariffs while cushioning the poor from increasing electricity
costs - According to DPME sub-outputs are on track and require no
interventions.
o
·
Output
2 of outcome 9
·
o
Increased
access to basic electricity - According to DPME sub-outputs are on track and require
no interventions.
·
Output
2 of outcome 10
·
o
Renewable
energy deployed – According to DPME sub-outputs are on track and require no
interventions.
o
o
Efficient
energy use - according to the DPME
sub-outputs are either proceeding slower than targeted or which face
impediments require intervention
o
7.3.5. Findings
·
Delivery
agreements are not “cast in stone” and can be changed. If it is found that the
sub-output does not have the impact required, it can be changed.
·
·
With
regard to skills development, the Department of Higher Education and Training
is collaborating with line function departments and Eskom to address the skills
shortage.
·
·
The
intention of the analysis and progress of the outcomes by the DPME is to
continually inform Cabinet (quarterly), where Cabinet will decide on the
necessary action to be taken if performance is not up to standard.
·
·
With
regard to concurrent functions, the provinces with continuously update the
national department with progress.
·
·
The
PDME has good relations with the 9 respective Premiers Offices.
·
·
The
PDME acknowledged that they were too lenient with the progress of certain
outputs, e.g. maintenance backlogs.
·
·
The
work done by the DPME will reinforce and strengthen parliamentary committees in
its oversight function.
·
·
The
DPME is too lenient in its overall appraisal regarding the performance of the Department
of Energy in terms of the progress of the outputs.
7.4. Auditor-General’s
Report
The Department of Energy received an unqualified audit
opinion; however the Auditor General drew attention to the following matters:
7.4.1. Emphasis of matter
·
The
Department incurred unauthorized expenditure of R14 860 000 due to funds which
were spent for purposes not in accordance with the vote. Details of irregular
expenditure are well documented on 142 of the annual report
·
·
The
Department incurred irregular expenditure of R110 992 000. This was in
contravention of Treasury Regulations 8.2.2, expenditure not approved in
accordance with department’s financial delegations
·
·
The
department also incurred irregular expenditure of R1 371 000 as the expenditure
was in contravention with Treasury Regulation 16.A.3 relating to SCM
(Transparency and fairness).
The then DME 2009/10 annual report also drew attention to
similar matter which is:
·
Irregular
expenditure to the amount of R4.2 million incurred as a result of contravention
of the authorized delegations of authority of the department, the irregular
expenditure was condoned in the financial year.
7.4.2. Report on other legal and regulatory requirements
The reported performance has been found to be deficient on
the following:
Consistency: Targets and indicators in the annual reports
are not complete as compared to targets and indicated in the strategic plan.
Measurability:
Targets are not measurable.
In a nutshell this implies that strategic objectives,
targets and indicators in the strategic plan and annual report are not
comparable and measurable.
7.4.3. Statement of Financial Performance
The Department had a total revenue of R5 658 125 billion and
its total expenditure of R5 506 256 billion with a net surplus of R151 869
million. The net surplus as documented in the annual report is as a result of
unspent budget and it is not clear if savings were made in some of the
programme.
7.4.4. Statement of Financial Position
It could be concluded that the financial position of the
department is in good standing because its balance sheet shows that the total
assets and liabilities are equal.
7.5. Recommendations
by the Financial and Fiscal Commission (FFC) on energy
7.5.1. Water and
electricity tariffs, municipal sustainability and the local government fiscal
framework
The FFC recommended that local government be incorporated
into the system of intergovernmental fiscal relations, where they can share in
revenue and grants in order to provide basic services and perform other
functions allocated to them of which electricity is one. Local government will
be able to spend their revenue sharing funds in terms of their own needs and
priorities vis a vis basic services.
7.5.2. Impact of
electricity reform on municipalities
According to the FFC no stakeholder should experience
deterioration in its circumstances owing to the restructuring process, unless
this is an explicit policy decision. The FFC highlighted that tariff support to
low-income consumers should be financed primarily by a national grant to
Regional Electricity Distributors (REDs) for the provision of free electricity,
and to a lesser extent by a consumer cross-subsidy. Capital electrification for
low-income consumers must be financed by National Government, and provision for
this should be made in the MTEF estimates.
7.5.3. Location of
energy related powers and functions
The Commission made a submission on the proposed reforms of
the Electricity Distribution Industry during 2005/06. The FFC noted that the
reform of EDI could have a substantial impact on municipal finances, but
successful EDI restructuring will only be possible if sound implementation
strategies are developed. If municipalities are not adequately compensated,
service delivery across the sphere may be affected in terms of loss of funding
to cross-subsidize other municipal services
Recommendations from the FFC include:
·
Government
must revisit Blue Print assumptions initially drawn to restructure the EDI
·
·
Underlying
causes of poor performance in the EDI need to be highlighted and addressed
·
·
Conduct
an up-to-date re-evaluation and analysis of the benefits of restructuring the
EDI
·
·
It
is important that the social objective of universalizing access to electricity
is not lost in the process of restructuring the EDI
7.5.4.
Intergovernmental response to climate change
Using an econometric model, findings show that climate
change is a real threat to energy security in the local government sector,
where climate change induces increases in electricity infrastructure
expenditures.
A recommendation from the FFC is that government should
ensure that municipalities develop their own climate change mitigation and
adaptation strategies and plans for climate change as part of the Integrated
Development Planning process. Government should provide support in this respect
to municipalities over the next three years, distinguishing between different
types of municipalities by both location and capacity in terms of the mandatory
requirements placed on them. Government should consider providing
municipalities with a performance-based conditional grant which rewards or incentivizes
actions that are environmentally efficient and responsive to adaptation and
mitigation challenges of climate change. Design of proposed grant should pay
attention to municipal-specific factors, such as the area, topography,
coastal/or otherwise, and vulnerability to climate change
7.5.5. Impact of
inefficient land use on energy consumption and hence climate change.
According to the FFC a vibrant urban economy is critical for
sustainable development and economic growth and optimum land use has the
potential to unleash growth potential of the economy. The FFC noted that in
South African cities, land is used inefficiently as characterized by low
density levels. According to the FFC this challenge needs to be addressed, as
it has direct impact on sustainability of resources such as land and is costly
to overall economy
The FFC noted that various pieces of legislation do not
create many incentives. Current funding
for built environment is uncoordinated and does not support delivery of
integrated and sustainable human settlements with all basic infrastructure
Government should actively and specifically pursue
development of a more spatially compact urban form for cities, by developing
and adopting appropriate policies and financing instruments. According to the
FFC these specific fiscal instruments may include:
·
Wider
use of development charges in financing infrastructure associated with the land
development process
·
·
Public
transport subsidies that specifically target high density low-income areas
·
·
Fiscal
incentives for urban land development projects located within the existing
urban form
·
·Government should conduct a
broad-based review of the efficacy of current housing finance arrangements in
meeting housing needs within the context of creating sustainable and more
compact human settlements
7.5.6. Conditional
grants
The FFC recommended that when introducing and/or terminating
conditional grants, national departments must ensure that there is an
independent evaluation of the grant performance at entry, midterm and end of
the grant
7.6. Budgetary Review
and Recommendations Report (BRRR) 2010
The Portfolio Committee on Energy adopted its BRRR 2010 with
the following findings:
·
There
is a lack of continuity which relates to the alignment and synchronization
between the national, provincial and local spheres of government focusing on
planning, budgeting and implementation of programmes.
·
·
There
is delayed implementation of the business model of implementing the Integrated
National Electrification Programme
(INEP) and Solar Water Heaters
·
·
Delays
with regard to the Transnet’s Multi-purpose pipeline continue.
·
·
The
Clean Energy Programme of the Department of Energy is lacking the necessary
funding to be implemented successfully.
·
·
Progress
reports to the committee on the solar water heaters roll-out are inconsistent, haphazard
and reactive.
·
·
Monitoring
and evaluating the performance of its State Owned Enterprises by the Department
of Energy is lacking.
·
·
The
committee is concerned that too little emphasis is placed on hydrocarbons and
clean energy.
·
·
Changing
consumer behavior on the usage of energy is critical, which is one of the
objectives of the Department.
8. Committee
observations/findings
·
The
Department of Energy was successful in monitoring its expenses and implementing
cost containment measures.
·
·
For
the period under review the committee undertook an oversight visit to CEF and
its subsidiaries (01-05 August 2011). The following were found by the committee
during briefings by the Petroleum Agency
of SA (PASA), PetroSA and the Strategic Fuel Fund (SFF), respectively:
·
o
The
committee found that PetroSA was not doing enough to train and hire more of the
local people in
o
o
PASA
is both regulator and “player” in the energy sector.
o
o
Strategic
Fuel Fund (SFF) pointed out that their funding received from government was
insufficient to deliver effectively and efficiently on its mandate.
o
o
The
committee raised concern that the strategic stock kept by the Strategic Fuel
Fund (SFF) during a crisis will only be sufficient for 21 days
o
o
Members
found that a limited number of PetroSA’s employees go through the centre of
excellence in
o
·
The
following was found by the committee during its briefing by the Central Energy
Fund in
o
Procurement
details were missing or not addressed to the satisfaction of the Committee.
This was the case with a number of CEF affiliates which made presentations.
o
o
CEF’s
pioneering nature resulted in many impairments. What was not clear was whether
such was due to lack of proper planning, inadequate resources or poor legislation
and regulatory framework.
o
o
Staff turnover levels seemed to be alarmingly
high. The Committee was concerned about the number of managers in acting
capacity and whether that did not affect efficiency.
o
o
Concerns
were raised by members over the large number of projects that were terminated
after investing substantial amounts of resources. CEF is requested to clarify
its strategy regarding its decisions to embark on projects and how it conducts
its feasibility studies.
o
The
Committee was concerned about the delays in obtaining the Section 54 approval.
An explanation would be needed as to why obtaining the approval from the National
Treasury is difficult.
o
The
information shared concerning the Darling wind power project was far from
convincing. A detailed report on the community trust was needed, with reasons
for the delays and lack of communication.
o
The
Committee was concerned about how the CEF will raise the €30 million for
investment.
o
·
For
the period under review the committee undertook an oversight visit to
o
·
For
the period under review, the committee further undertook a study tour to
o
Nuclear
Energy is one of the proven options with the capacity to produce “clean”
electricity on a global scale with no carbon dioxide or other greenhouse gas
emissions. Wind, hydro and solar energy can do the same but on a smaller scale.
o
o
Operational
safety: With regard to operational safety,
technological advancements at nuclear power plants, together with a global
nuclear safety culture, largely mitigate the risks and hazards associated with
nuclear power generation such as the infamous
o
o
Costs
reduction: With regard to costs, the industry’s steady reductions in both
operational and capital costs would probably result in nuclear power emerging
as the most cost-effective source of energy in the long term.
o
Nuclear
waste management: Nuclear waste management poses a challenge. While there is
technology to process the dangerous waste, there is no yet industrial solution
on how the waste could be disposed. At the time of the visit, storing waste in
recyclable canisters seems to be the only alternative. A strong compromise
favours deep geological repositories as a safe and affordable means of
achieving long-term storage of nuclear waste.
o
The
risk of abuse of nuclear technology for military vis a vis use for peaceful means
(e.g. generation of energy) was noted. The committee highlighted that public
education is crucial regarding this issue.
o
o
With
regard to the vulnerability of nuclear power plants, they are, by their very
nature, among the most robust structures ever built.
o
Government
should consider investing heavily in clean electricity from renewables, that
is, solar, wind, biomass and geothermal power in the long run in order to
embrace viable energy mix.
o
o
Currently
some governments around the world are gradually embracing nuclear power as part
of their strategies of national energy security.
· During the period under review a delegation from the committee attended a workshop convened
by World Future Council Renewable Energy in
·
o
Local
manufacturing of products will create job opportunities in the green
economy.
o
o
Urban
waste can be considered as a source of energy.
o
o
Renewable
Energy Technology can play a significant role in the energy sector.
o
o
Intellectual
Property Rights of Renewable Energy Technology might hamper knowledge transfer
and capacity building.
o
o
Advocacy
of RETs should not promote one technology over another.
o
o
Many
electrical appliances are still not labeled, in a way that indicates their
energy in/efficiencies.
o
o
Fiscal
incentives which are country specific will be critical to develop Renewable
Energy Technology.
o
o
Standardization
of solar PVs to ascertain materials used to manufacture the units and also look
at the ways of handling and disposal of acid batteries; hence there is a need
to establish an African Technology Test Centre.
o
o
This
workshop is an annual event and regular attendance would be beneficial
o
· During the period under review delegation
from the committee undertook an study tour to
o
Power
generated from water is considered cleaner as it has no carbon emissions and
other green house gases.
o
o
In
an effort to diversify energy mix in
o
o
Given
that
o
o
Enabling
policy framework such as Renewable Feed in Tariffs (REFIT) and other incentives
should be expedited encourage greater uptake of renewable energy in
·
Observations
by the FFC and DPME independently corroborate issues and concerns the Portfolio
Committee on Energy has raised consistently on specific issues - refer to
relevant sections on FFC and DPME in the report.
·
·
The
Portfolio Committee on Energy is not taking advantage and harvesting in international
activities such as conferences, symposia, and parliamentary fora to the benefit
of Parliament and thus improving oversight on DoE.
·
Collaboration
with Select Committee on Economic Development (SCED), albeit limited, as well
as Portfolio Committee on Public Enterprise has assisted in the oversight work
of the Portfolio Committee on Energy. Specific reference is made to:
·
o
ESKOM-
especially on INEP and, rehabilitation of electricity infrastructure
o
o
EDI-
with focus on electricity distribution in the post – REDS era including
regulatory environment vis-à-vis role and contribution of municipalities in
particular.
o
·
The
DoE’s reporting on the following is lacking:
·
o
International
activities,
o
o
Supervision
of SOE’s within the energy sectors,
o
o
Progress
on legislation,
o
o
Information
on Public Participation programmes is rather terse and limited and its
usefulness is in doubt.
o
·
The
role and contribution of Department of Energy with regards to:
·
o
Energy
efficiency
o
o
Restructuring
of Electricity Distribution Industry(EDI)
o
o
Rehabilitation
of electricity infrastructure
o
o
Public
participation
o
o
Integrated
Energy Plan has been either partial or unfulfilled when compared with the
strategic plan
o
·
The
investment drive, at international level, has not been adequately articulated as well,
although there is a sense that there is activity taking place in this regard
·
·
The
Department of Energy has been established on a compromised resource baseline.
That is, it was provided with very low resource base e.g. 30% of former
Department of Minerals and Energy (DME) resources as well as absence of
personnel in certain key positions.
·
·
Notwithstanding
such challenges the Department of Energy has achieved in a number of areas viz:
IRP 2010, renewal of liquid fuels charter, establishment of a distinct
department, unqualified financial report, cleaner fuel programme, etc
·
·
Department
of Energy has not adequately clarified the status quo regarding challenges of
resourcing including funding by National Treasury
·
·
Whilst
an informed assessment of the Department of Energy is crucial , due
consideration has to be given to its strategic objectives, service delivery
outcomes, MDG’s, predetermined is essential, both the service delivery and
organisational environmental considerations have to be factored in as well.
·
·
Above
all, the Department of Energy is one of the departments that was established in
the current term as such is not endowed with resources as well as legacies such
as an established organisational culture. Apparently energy was a sector that
was overshadowed by mineral resources in the erstwhile Department of Minerals
and Energy. Underinvestment was one of
the manifestations of such unfortunate legacy.
·
·
Even
the exercise of reviewing and particularly performance of Department of Energy needs
intense scrutiny. After separation from the erstwhile Department of Minerals
and Energy it can be verified that there are programmes that were earlier not
activated partially implemented were able to get adequate attention. Thus
assessment performance of the Department of Energy in a manner similar to that
of a long established department is rather unfair .
·
·
The
legislative and regulatory constraints especially in BBBE Empowerment, LPG
sector, Liquid Fuel Charter, NERSA, EDI, PASA have had a negative effect and
compromised on performance of the Department of Energy.
·
Whilst
taking cognizance of the existing radioactive waste management system the
committee takes note of the challenges experienced in this sector. Innovative
ways of improving the current system must therefore be earnerstly explored.
·
Linked
to some of the above observations and findings the committee further observed
there were challenges regarding the strategic coherence within the Department
of energy as well as its compromised ability to drive its programmes.
Particular reference is made on inter-departmental programmes where the
Department is supposed to be the lead department.
9. Conclusions
The Department of Energy was able to operate independently as department
as from 2009. Logically all programmes on energy were transferred from the
erstwhile Department of Minerals and Energy to the new Department of Energy. However,
it is worth noting that quite a number of programmes have either not been
implemented or partially implemented .e.g. Energy efficiency as from 2005,
Solar Water Heater Roll-out Programme as from 2009, etc., or at times not
implemented according to committed deadlines – IRP 2010,IEP, etc.
As articulated in the findings, since the Department was established on
an incorrect and compromised resource base, anxiety must therefore be expressed
on the extent to which the Department of Energy can sustainably execute its
mandate and implement programmes under its wing in view of the huge financial
and human resource constraints. This extends to the deficit and shortcomings in
certain legislative and regulatory areas. Notwithstanding the resource
challenges the Department of Energy has commendably achieved in a number of
programmes.
The dedication and commitment displayed by the Minister, the Deputy
Ministry, the Director General and her team has been observed. However, the
sustainability of their performance is questionable if requisite resource
allocation is not provided.
10. Recommendations
·
The
Minister of Finance in conjunction with the Minister of Public Service and
Administration (DPSA) and the Minister of Energy should address appropriate
resourcing of the Department of Energy in both the forthcoming Medium Term
Budget Policy Statement Processes well as Budget Vote for Energy for 2012/13.
Particular reference is made to human resource, regional offices and
international activities.
·
The
Minister of Energy should expand and intensify the Department of Energy’s
continental activities. A comprehensive plan on this area should be submitted to
Parliament by the end of the first quarter of 2012.
·
·
The
Minister of Energy should address the challenges in the distribution of
electricity as a matter of urgency. These include a restructuring of the
electricity distribution industry, as well as reviewing the legislative and
regulatory environment throughout 2012. Progress of addressing the challenges
should be submitted to Parliament by the end of June 2012.
·
The
Minister of Energy should improve progress reporting on Solar Water Heaters.
The Minister of Energy should provide Parliament with quarterly progress
reports as well as provide a briefing, early in 2012 on the proposed new plan
regarding the roll-out of this programme.
·
·
The
Minister of Energy should consider establishing a special directorate that
would oversee the performance of the State-Owned Enterprises. Alternatively an
upgrade of any existing office in this regard should also be considered by the
end of the first term of 2012.
·
·
Central
Energy Fund (CEF) should, as part of its restructuring process, satisfy the Portfolio
Committee on Energy on how it will raise requisite capital for its future
initiatives. A report thereon should be submitted to Parliament by the end of
the first term of 2012.
·
The
campaign around changing consumer behaviour on usage of energy (energy saving
lifestyle), as one of the objectives of the Minister of Energy, should be
intensified and strengthened as a matter of urgency.
·
Local
manufacturing and beneficiation of products (focusing on, inter alia, solar
photovoltaic and renewable energy technology) in the green economy should be prioritized
by the Minister of Energy. Due consideration should include the consideration
of urban waste as a source of energy.
·
·
The
Renewable Energy Technology Policy and Programme should be developed in line
with the conventional grid infrastructure by the Minister of Energy and progress
on such be shared with Parliament by end of June 2012.
·
The
Minister of Energy should ensure that electrical appliances should be labeled
to indicate their energy in/efficiencies. A report thereon should be submitted by
the end of June 2012 to Parliament.
·
·
The
Minister of Finance should introduce fiscal incentives to address Renewable
Energy Technologies (RET’s).
·
·
The
Minister of Science and Technology should introduce standardisation of solar PV-units to ascertain quality
materials used to manufacture the units as early as is practically possible.
·
The
Minister of Energy should develop regulations for handling, disposal and recycling
of power batteries by the end of the third quarter of 2012.
·
Establishment
of an African Technology Test Centre, in partnership with NEPAD, should be
explored by the Minister of Energy in order to standardize
materials used to manufacture photovoltaics and associated products. Progress thereon should be shared
with Parliament by end of 2012.
·
The
Minister of Energy should emphasize education focused on nuclear technology
used for nuclear energy, as part of its public education programme on energy issues.
This is an effort that should be executed in collaboration with other spheres
of government. The Minister of Energy should share the programme with
Parliament by end of first quarter of 2012.
·
The
Minister of Trade and Industry should ensure that Intellectual Property Rights
on Renewable Energy Technologies be developed in a manner that it does not
undermine knowledge transfer and capacity building.
·
Optimization
of Muela and Cahora Bassa hydropower facilities should be favourably considered
in the context of a South African Development Community Regional Energy Power
Pooling Programme by the Minister of Energy. The outcome of such consideration should
be integrated into the review of IRP2010 during 2012.
·
The
Minister of Energy, in conjunction with the Minister of Science and Technology,
should review
·
·
The
Minister of Energy should ensure functions and competencies on nuclear and
nuclear-related programmes and activities be rationalized and harmonized
amongst various Ministers and their respective government departments and
entities, e.g. Health, Science & Technology, Mineral Resources, Water and
Environmental Affairs. A report thereon should be submitted by October 2012 to
Parliament.
·
The
Minister of Energy should address the need for a comprehensive radioactive
waste management system through public private partnerships and include
universities and similar institutions. A report thereon to be submitted by the end
of June 2012 to Parliament.
·
The
Minister of Energy should, through the National Nuclear Regulator, explore
creative ways and means of strengthening
·
·
The Development Bank of Southern
Africa (DBSA) should, in conjunction with other partners in the Darling Wind
Energy Project, submit a report regarding challenges on the project to
Parliament by the end of the fourth term 2011.
·
The Minister of Finance should submit
a report to the Portfolio Committee on Energy about Section 54 challenges
regarding State Owned Enterprizes (SOEs) roles and status in the Renewable
Energy Feed-In Tariff (REFIT) or similar initiatives. Such report should
indicate whether there are any alternatives or likely solutions on such
challenges. Such report should be done within the first term of 2012.
·
The Central Energy Fund (CEF) should
compile a proposal/plan and brief the Portfolio Committee on Energy on its
strategy regarding its decisions to embark on projects and how it will conduct
feasibility studies for such projects. Such must include future strategy on
pioneer projects.
·
The
Minister of Energy in partnership with the Minister of Higher Education and
Training should arrange an Indaba on Skills Development in the Energy Sector with
the aim of producing a strategy and programme on skills development in the
energy sector by the third term of 2012. Such should be done in partnership
with the business sector.
·
·
A
Budget Review Facilitation Unit or dedicated personnel, located in the Office
of the Speaker to assist all parliamentary committees in the budget review
processes as well as monitoring and evaluating the budget review processes, be
established as a unit and personnel be appointed as a matter of urgency
·
The
Minister of Performance Monitoring and Evaluation should ensure presentation of
its plan regarding the Department of Energy for 2012-2013 financial year (or
MTEF whichever is applicable) and regular briefings on its assessment of the
Department of Energy on a quarterly basis to the Portfolio Committee on Energy as
from the Phase 1 of the forthcoming Budget Review Cycle (i.e. November 2011)
·
The
Minister of Finance should consider allocating additional resources for the forthcoming
Budget Vote for the Department of Energy for the Clean Energy Programme in
order to allow for implementation of renewable energy projects.
·
The
Minister of Energy should report to the Parliament on the recruitment of
appropriate personnel for the Clean Energy Programme. The latter report should
be submitted to the Portfolio Committee on Energy every six months for the three
coming years.
·
The
Minister of Energy should examine the adequacy of the Strategic Fuel Fund’s
(SFF)’s funding received from the fiscus. Such effort should include a comprehensive
review of fuel stocks reserves which are currently 21 days. A report should be
submitted to the Parliament by end of the first term of 2012.
·
The
Minister of Energy should ensure that further engagements be undertaken with
the Mozambican authorities to explore and scale up hydro electricity opportunities
to supply
·
The
establishment of the UN-sponsored observatory should be explored jointly by the
Minister for the National Planning Commission (NPC), Minister of Finance and
Minister for Performance Monitoring and Evaluation (DPME) in partnership with the
UN Habitat.
·
The
Minister of Energy should embark on a comprehensive restructuring programme for
both Central Energy Fund and PetroSA, specifically with the aim of positioning
them as strategic national entities in the energy sector. .A report thereof
should be submitted by conclusion of the Budget Review Process of 2011/2012
i.e. October 2012.
·
The
Minister of Energy should submit a brief plan on how the Department of Energy
intends to improve its strategic coherence in programmes where it is the lead
department, to the Committee by the end of the second term of 2012.
Report to be considered.