Department of Energy on its 2013/14 Annual Report, with Deputy Minister; Audit outcomes: AGSA briefing

Meeting report

Chairperson’s opening remarks
The Chairperson welcomed Members to the meeting, together with the Deputy Minister of Energy, officials from the Office of the Auditor General and officials from other entities who were at the meeting.

Briefing by Office of the Auditor General of South Africa (AGSA)
Mr Carl Wessels, Senior Manager, AGSA thanked the Committee for the invitation. He introduced the team from the AGSA. The AGSA had a constitutional mandate and, as the Supreme Audit Institution (SAI) of South Africa, it existed to strengthen the country’s democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence.

The purpose of the presentation was to provide members of parliament with the necessary information and guidance on the audit outcomes for the portfolio to enable the Portfolio Committee to effectively execute their oversight function.

He said over the past three years the energy portfolio had improved. Two of the DoE’s entities had received clean audits, five had receiving unqualified audits with findings and one had an outstanding audit. Electricity Distribution Industry Holdings (EDI) had not yet made their financial statements available to AGSA. Nersa and the Equalisation Fund had improved their audits moving from unqualified audits with findings to an unqualified audit with no findings. The DoE, the Central Energy Fund (CEF) and Sanedi remained unchanged with unqualified audits with findings. The South African Nuclear Energy Corporation (Necsa) however regressed moving from an unqualified audit with no findings to an unqualified audit with findings. He explained that AGSA looked at three things when conducting an audit; financial statements, compliance with legislation and performance reports.

He explained that of the R 6.5 billion the DoE received during the 2013/14 financial year, only about R500 million was used for its operations, with the remaining money allocated to entities under transfer payments. As at 31 March 2014, the DoE disbursed transfer payments to the value of R6,02 billion, which represented 92,5% of the total budget allocation for the year to public entities, municipalities and implementing agencies. The major transfer payment was to the Integrated National Electrification Programme (INEP) Eskom, where over R 2 billion was transferred to the programme. INEP Municipalities received the second biggest allocation, R 1.6 billion, followed by the Energy and Efficiency and Demand Side Management (EEDSM) Eskom which was allocated R 1.1 billion. He spoke to the significant emphasis of matters included in the audit report and explained that an emphasis of matters was not a finding. An emphasis of matter paragraph was used to draw users’ attention to a matter presented or disclosed in the financial statements by the accounting officer/authority which is of such importance that it is fundamental to their understanding of the financial statements.

Mr Wessels spoke to each entity separately with regard to Supply Chain Management (SCM); on Sanedi, he said the procurement process did not comply with the requirements of a fair SCM system. Among other things; the bid documentation did not specify the evaluation and adjudication criteria applied, contracts and quotations were awarded to bidders who did not submit a declaration on whether they are employed by the state or connected to any person employed by the state, which is prescribed in order to comply with Treasury regulation, and Contracts were awarded to bidders that did not score the highest points in the evaluation process. On the CEF, the goods and services were not procured through a procurement process which is fair, equitable, transparent and competitive as required by section 51(1)(a)(iii) of  the Public Finance Management Act (PFMA). AGSA suggested that a bid specific committee be set up for the user departments to submit the bid specification.

With regard to “material misstatements to the financial statements” he said upon auditing the CEF, the AGSA found that there was inadequate review by financial management to ensure that the financial statements complied with the financial reporting framework. Financial statements submitted by the DoE for auditing were also not prepared in accordance with the prescribed financial reporting framework as required by section 40(1) (b) of the PFMA. Business plans for utilisation of the INEP conditional grants made to 13 municipalities were not approved prior to the start of the financial year, as required by sections 10(1)(a) of the Division of Revenue Act.

With regards to “other matters of interest”, no unauthorised expenditure was incurred by any of the entities in the portfolio. However fruitless and wasteful expenditure was incurred during the 2013/14 financial year. In 2014, the DoE did not incur any fruitless or wasteful expenditure, the CEF incurred R7.2 million in fruitless and wasteful expenditure, a drop from the R38.6 million incurred in 2013. Necsa incurred R0.16 million in fruitless and wasteful expenditure while Nersa incurred R 0.01 million. With regards to irregular expenditure for the 2013/14 financial year, the DoE incurred R 380 000, CEF incurred R 1.6 billion, Necsa R 5.8 million, Nersa R 0.06 million and Sanedi R 6.5 million in irregular expenditure.

With regards to the CEF he said two investigations were currently underway at PetroSA; an independent consulting firm at the request of the Minister of Energy and the Board during the 2013 reporting period. The investigation was initiated based on an allegation of possible misappropriation of the public entity’s assets. The investigation was concluded during the 2014 reporting period and resulted in criminal proceedings being instituted against internal and external parties. These proceedings were currently in progress. The “Combined Assurance on Risk Management in the Public Sector” was used to report on the financial position of auditees, their performance against predetermined objectives and overall governance, and one of the important oversight functions of legislatures is to consider auditees’ annual reports. To perform an oversight function, the oversight function needed assurance that the information in the annual report was credible. To this end, the annual report also included AGSA’s auditor’s report, which provided assurance on the credibility of the financial statements and the annual performance report as well as on the auditee’s compliance with legislation. He indicated that internal audit still provided no assurance and was therefore a concern.

With regards to the progress made by the DoE in implementing the commitments made by the previous executive authority to address prior and current year audit findings, he indicated that the Minister of Energy had shown commitment to improve the quality of quarterly financial reporting through proper reviews of financial information by the governance structures through internal audit.

Discussion
The Chairperson thanked AGSA for a comprehensive presentation.

Mr L Greyling (DA) thanked AGSA for the presentation and said it would assist the Committee in the oversight work it would be doing. He raised a concern about the CEF and the R1.6 billion incurred in irregular expenditure, could AGSA explain? On the CEF and its entities he spoke to PetroSA and its entities which were outside South Africa’s borders such as in Egypt and in Ghana; how were these entities being audited? He asked about the National Radioactive Waste Institute which had received R 9 million in transfers; how were they being audited? He raised a concern about Sanedi and the contracts which were awarded to bidders who had not submitted their declarations; has AGSA gone over these contracts to ensure that the proper processes were followed? How could the Committee assist in this regard? 

The Chairperson agreed with Mr Greyling and said the question on the CEF and its R1.6 billion incurred in irregular expenditure was an area which needed much attention.

Mr Wessels responded to the question on PetroSA and its entities outside South African borders. He explained that the AGSA worked with the “big firms” throughout Africa that would audit these entities based on a criteria set by AGSA. The AGSA would then receive feedback from these outside firms and include these in their audit outcomes. With regard to the nuclear radiowaste institute he said the entity was currently being audited as part of the DoE, AGSA has met with the Minister and the entity would be ring fenced and subjected to a separate audit during the next financial year. Guidance from the National Treasury would put these entities in a very favorable position.

On the CEF’s irregular expenditure of R1.6 billion he said R 50 million was procured without a competitive process and the rest was as a result of non-compliance with the procurement process. Management had identified the majority of the irregular expenditure hopefully this would translate to increased levels of accountability and reduced or eliminated irregular expenditure. On Sanedi, he said R6.5 million related to 17 contracts and R4.7 million was procured without following a competitive bidding process. Management therefore needed to better manage its contracts.

Mr Greyling said R1.6 billion was a huge amount to be incurred for irregular expenditure. How much of this was as a result of processes not followed and how much as was a result of mismanagement of funds? He said any cases of fraud needed to be identified and dealt with and the Committee would be more than willing to assist where necessary.

The Chairperson agreed with Mr Greyling and asked whether AGSA could not provide the Committee with a breakdown of what the money was used for.

Mr Wessels responded that the investigations were still ongoing and the processes were quite complex because other countries were involved as well. The AGSA was also doing a lot of work with the Department of Public Service and Administration, which was facilitating these investigations. He asked that the AGSA come back to brief the Committee more comprehensively. He said a detailed response could be provided in writing.

Mr Greyling said the written response would be highly appreciated. He asked about the investigations; which transactions were being investigated, was it the transactions around Ghana?

Mr Wessels said the National Prosecuting Authority was involved with these cases and AGSA reported on a need-to-know basis. AGSA’s job was simply to point out irregularities; however they would gather as much information as possible on the investigations and forward these to the Committee.

Ms Lufuno Mmbadi, Senior Manager, AGSA, responded that the investigations were for the overall procurement process within the CEF group and to see whether there were any irregularities. The investigations were commissioned during Minister Dipuo Peters’ term in office.

Mr M Mackay (DA) said it was unacceptable that the information about the R1.6 billion would only be provided to the Committee at a later stage; this information was needed from AGSA so that Members could conduct proper oversight over DoE entities. He said it should not be celebrated that management had identified irregular expenditure in these entities because it was management’s job to prevent irregular expenditure. He described CEF as the “ugly stepchild” which violated a lot of requirements. He asked whether the problem was with CEF as a whole or whether it was with PetroSA specifically.

Ms N Louw (EFF) asked whether the AGSA had outlined any deadlines to the DoE and its entities for the implementation of its recommendations and findings in order to avoid recurrence.

Mr J Esterhuizen (IFP) said the irregularities with the buildings which were rented out without leases could have been picked up during the audits and prevented.

Mr M Matlala (ANC) asked that AGSA provide clarity on why some local municipalities were receiving clean audits even though they still had outstanding projects.

Mr Greyling asked about Sanedi. Could the AGSA compile a report which would unpack some of the issues faced by its entities? On the declaration of interests, he said the only person who had access to the register was the Minister and this made it difficult for Members to assess as a way of oversight, whether there were any conflicts of interest. Did AGSA have access to the register, if so, where there any cases of conflict of interest which AGSA could report on?

Mr R Mavunda (ANC) said some of the questions should be directed to the specific entities and to the DoE, and not to the AGSA. He asked whether the entities and the DoE have looked into the recommendations made by AGSA. When would they be responding to these? How often did the AGSA communicate with these entities in a year?

Mr Wessels responded that the AGSA met with entities on a continual basis and Chief Operations Officers were met with on a quarterly basis. However, the AGSA was also working with the internal audit within the DoE. The executive was met with twice a year. With regard to the conflicts of interests he agreed that the senior managers declared the interests. The Public Service Commission verified this information and the AGSA looked at Persal information to see who was doing business with the DoE.  He said the new Public Administration and Management (PMA) Bill had zero tolerance for conflict of interests and would be implemented even down to municipal level.

Mr Greyling said seeing that the AGSA had access to the conflict of interest register; could it indicate whether there had been any conflict of interest which had been picked up on. He also asked about Nersa’s liability with regard to highly enriched uranium.

Mr Wessels said the purpose of the briefing was to guide the Committee and to provide as much information was possible, but the majority of the information was with the entities themselves and they would be in a position to provide better clarity to Members. In response to Mr Greyling’s question, he said AGSA has not picked up on any conflict of interest within the DoE yet.

The Chairperson thanked AGSA for the presentation and thanked Members for their engagements with the AGSA. He suggested that the DoE brief the Committee on its Annual Report so that the Deputy Minister could briefly respond to whatever questions Members might have. The Minister would not be at the meeting after the lunch break. He said the DoE’s relationship with its entities, plus with municipalities were a matter of concern, coupled with the DoE’s capacity challenges.

Briefing by DoE on its 2013/14 Annual Report
Ms Thembisile Majola, Deputy Minister, DoE, apologised for arriving late to the meeting. She was not aware that the time for the meeting had been changed. She welcomed the presentation by the AGSA. She said the capacity challenges within the DoE were primarily because it was formed during a very difficult time - during the 2008 financial crisis. Therefore there was no more money allocated to the DoE after the split from the Department of Mineral Resources. Policy making within the DoE was therefore a challenge because the monitoring and capacity tools were insufficient. Human and financial resources were also a challenge.

The Chairperson thanked the Deputy Minister for the introductory remarks. He indicated that some of the aspects in the DoE’s Annual Report presentation were covered when the Committee met up with the DoE in Pretoria. The Annual Report had been tabled as the 4^th Quarter Report.

Dr Wolsey Barnard, Acting Director-General, DoE, thanked the Committee for the invitation. He explained that in carrying out its mandate, the Department formulate Energy policies, Regulatory frameworks and legislation, and oversees their implementation to ensure energy security, promotion of environmental friendly energy carriers and access to affordable and reliable energy for all South Africans.

He explained that the Integrated National Electrification Programme (INEP) had gained momentum over the financial year, with support from the Presidential Infrastructure Co-ordinating Commission (PICC), Eskom and municipalities. Despite the gains realised, challenges still remain, especially in the municipalities, some of which included:

•Funding applications that were six times higher than the funding available per year
•Long lead times for municipalities forced projects to start late in the year
•New connections that could not be made due to the lack of capacity or the bad state of network infrastructure
•Limited oversight capacity within the DoE due to resources
•Lack of, or limited technical and managerial capacity in municipalities to plan, procure and manage electrification projects

On Renewable Energy Independent Power Producers (IPPs), some of the achievements were Windows 1 and 2 of the Renewable Energy Independent Power Producer Programme (REIPPP) were successfully concluded with 47 projects contracted. Some of the challenges faced were; misunderstandings pertaining to localisation and timeframes, interventions by different stakeholders in the delivery of the construction process, and delays in connections to the national grid due to grid access. On petroleum licensing, he said there were also a few challenges experienced during the year under review, one of which was the failure of certain licence applications to submit their documents as required in terms of the Petroleum Products Amendment Act and applicable regulations, which adversely impacted decision-making and increased turnaround time. On Solar Water Heaters (SWH), he said the rollout of the programme experienced installation delays during the year under review due to problems that include the installations of poor products, poor workmanships and the crowding of locally produced systems by imports. At the end of the year, 46 654 solar water heaters had been installed against a target of 80 000.

With regards to universal access to energy a minimum of 215 000 households target was set to be electrified per annum, comprising of 200 000 grid and 15 000 non-grid connections. The actual achievement was that connected 157 893 planned connections and municipalities achieved 87 231 planned connections. Therefore a total of 292 714 connections were achieved. With regard to key policy development and legislative changes, he said during the year under review stakeholder engagement on the Integrated Energy Plan (IEP) was completed. The IEP was a high level planning platform to manage the interrelations between electricity, gas, and liquid fuels up to 2050. The revised Integrated Resource Plan (IRP) was drafted for public consultation and the draft Gas Utilisation Master Plan (GUMP) was completed; stakeholder engagement would commence to solicit broader input into the plan.

On the DoE’s Key Capital Projects, he explained that the Renewable Energy IPP formed part of the IRP 2010 energy diversification generation technologies plan and 17,8 GW has been earmarked to be produced by Renewable Energy sources by 2030. In addition, 17 IPPs have started with construction. As part of the bidding process, each IPP was evaluated according to its socio–economic development (SED) programme during the operational phase, which was for 20 years. The SED model was prescriptive to the fact that local communities within a 50 km radius around the IPP had to benefit socio-economically as a result of the IPP development; each IPP used a different economic development plan, however the community was given a percentage ownership of the development, or the IPP opted for community upliftment project(s) that would be managed by a community trust. Although some socio-economic benefits have been achieved during the construction phase of Window 1 and 2, some serious oversight of critical aspects had to be acknowledged.

Dr Barnard said the Auditor-General’s 2013/14 Audit of the department and its Entities had been completed and both the Department and its Entities received unqualified audit opinions. The DoE would monitor the implementation of correctives measures to address issues raised by the AG as emphasis of matter, as part of oversight function. On international activities, South Africa, together with the SADC region, was working on regional integration of the region’s transmission infrastructure. This was driven by the Southern African Power Pool, which to date, had established a day-ahead market where trading of electricity would take place among member countries. With regard to oversight, he explained that the Minister of Energy was responsible for overseeing the following five state owned entities (SOEs) and their subsidiaries, which are scheduled as schedule 2 and schedule 3A Institutions in terms of the Public Finance Management (PFMA) Act, 1999, these were:

The National Energy Regulator of South Africa (Nersa)
The National Nuclear Regulator (NNR)
The Central Energy Fund (CEF)
The Nuclear Energy Corporation of South Africa (Necsa)
The South African National Energy Research and Development Institute (Sanedi)

The Department had established governance structures as part of the processes for monitoring and evaluating the performance of the SOE’s against approved strategic plans and government policy. These structures include:

•The Minister’s quarterly meetings with the Chairpersons of the SOEs to address strategic policy issues. The SOE Oversight Unit will liaise with the office of the Minister to plan for the next meeting.
•The Director General hosts the Forum for Energy Executives (“FEE”) which was made up of all Chief Executives Officers of the SOEs reporting to the Minister of Energy.
•The SOE Oversight Unit holds quarterly performance review meetings with SOE executives to discuss the submitted performance reports and address any challenges or ensure that these are appropriately escalated where necessary.

With regard to the DoE’s Public Participation Programme, the Minister and the Deputy Minister hosted 45 formal public engagements with an additional 15 engagements hosted by the Director-General and the staff of the Department during the year under review. During these engagements the Department used the opportunity to share information on access to energy, the use of different energy carriers, safety aspects relating to energy, opportunities for women and youth in the energy space, planned projects to improve access to energy, the use of energy in an efficient manner, as well as general responsibilities of energy users.

Discussion
Mr Greyling asked what price Grand Inga was bought for.

Deputy Minister said the matter of the Grand Inga was of serious concern; as a result the treaty still needed to be rectified. The general agreement that the DoE would have was that South African businesses would buy at more favorable prices, however the actual price has not yet been determined. The DoE has set up teams with the Democratic Republic of Congo to look into the matter. Energy from the Grand Inga would result in the cheapest source of energy.

Mr Mackay asked about the CEF’s R 1.6 billion irregular expenditure; what steps has the DoE considered in an effort to rectify the situation?

Minister Majola responded and said there have been a number of restructuring processes within the CEF however the CEF would talk to these when they appear before the Committee. She said the immediate challenges faced by the CEF were mainly around governance as well as with other subsidiaries. In addition, some Board Members’ contracts had also expired. The investigations around the R1.6 billion would be finalized and the Committee would receive a full briefing.

The Chairperson thanked the Deputy Minister for her engagements with the Committee.

The Committee paused for lunch and resumed at 2pm.

Briefing by DoE on its Annual Financial Statements 2013/14

Ms Yvonne Chetty, Chief Financial Officer, DoE, thanked the Committee for the invitation. She indicated that she would be presenting on the financial statements as at 31 March 2014. She explained that much of the information in the presentation would be repetitions from the presentation made in the fourth quarter. The financial statements have been prepared on the modified cash basis as required in terms of the Departmental Financial Reporting Framework Guide issued by National Treasury. She explained however that financial skills still remained a challenge in the Financial Branch, training was currently underway. Some of the achievements however were that the DoE was chosen as one of the best performing departments in the 2013 MPAT process by the Department of Performance Monitoring and Evaluation (DPME) for 100% compliance in the payments of invoices within 30 days. As a result, the DoE was also selected as a case study for this achievement.

The final appropriation of the DoE moved from R 6.73 billion in the 2012/13 financial year to R 6.50 billion in the 2013/14 financial year. The top three allocations were as follows; the National Electrification Programme received R 3.89 billion, the Demand Side and Efficiency Programme received R 1.33 billion and the Necsa received an allocation of R 592 182 million. With regard to financial performance, the DoE had a total budget of R 6.61 billion; of this the DoE had spent R 6.47 billion of its allocation by the 31 March 2014 and had a surplus of R142 463. The DoE’s major spending areas were as follows: Transfers and subsidies received R 6.06 billion and 99.89% of the budget was spent, Compensation of employees received R 230 312 and spend 99.23% of its allocation, Goods and Services received R 199 932 and spent 93.15% of its budget and Payment of capital assets received R 12 173. In total the DoE spent 99.60% of its budget for the 2013/14 financial year.

With regard to the budget allocation per programme, the allocations were as follows: Administration received  R 233 142 and spent 99.75% of its allocation, Energy Policy and Planning received an allocation of R 47 989 and spent 99.51% of its budget, Energy Regulation received R 39 865 and spent 64.81% of its budget, the National Electrification Programme received R 3.96 billion and spent 99.77% of its allocation, Nuclear Energy and Regulation received R 723 998 and spent 99.79% of its allocation while Clean Energy received R 1.49 billion and spent 99.96% of its budget allocation. R 233 142 was allocated for the DoE’s Administration and 99.75% of the budget was spent. With regard to the DoE’s overall performance, she explained that of the seven planned targets for the Administration Branch, the DoE managed to achieve five and two were partially achieved. Energy Policy and Planning planned 12 targets and three were achieved and eight were partially achieved.  Nuclear Energy and Regulation had nine planned targets; four were achieved, two were partially achieved and three were not achieved, to name a few. As at 31 March 2014, the DoE had an unspent allocation of R 26.18 million, 0.4% of the adjusted allocation. A rollover motivation totalling R21.13 million was submitted to National Treasury for consideration. (Subsequently, R18.9 million was approved).

Ms Chetty explained that with regard to transfer payments the management of transfer payments in terms of the Division of Revenue Act (DoRA) were managed by line function (Integrated National Electrification Plan (INEP) / Clean Energy) based on funding requests received from individual municipalities and subsequent project plans which were included in the DORA implementation agreements. With regard to the Municipal Energy Efficiency and Demand Side Management (EEDSM) Programme she explained that in 2009/10 there were some improvements to the management and the administration of the programme. However these were some of the challenges remaining:

•Poor EEDSM proposals submitted by municipalities due to inadequate technical skills and/or capacity to manage and implement the project

•Monthly, quarterly and annual progress reports not being submitted on time as requested by the DORA

•Lack of accountability on reports provided, most reports were not officially signed off by an authorized person within the municipality

•Poor expenditure by most municipalities

Ms Chetty explained that there had been technical support provided to municipalities for the EEDSM Programme. In 2011/12 the Department decided to develop an implementation and monitoring guidelines for the EEDSM programme. The guidelines served as a practical tool for the development, implementation and monitoring of the EEDSM measures within municipalities, and also list options on various technologies and methodologies that can be adopted. In 2013/14, the Municipal Infrastructure Support Agency (MISA) also came on board to provide support specifically on improving municipal capacity and project management on implementation of the programme. In addition, the DoE had also conducted structural workshops and site visits to various municipalities to address any shortfalls on the implementation agreements. The INEP Programme had also experienced some challenges. Some of which included; the slow delivery of electrification projects by municipalities and in certain Eskom regions, lack of skills and the high vacancy rates within municipalities, slow roll-out of non-grid connections due to negative perceptions about non-grid technologies, current non-grid systems were not addressing the basic electricity needs of customers and more funding was needed for the programme.

With regards to the DoE’s financial position, she explained that the R14.86 million in unauthorised expenditure was due to an infrastructure grants transfer payments paid to the Mthonjeni Municipality in May 2010. The transfer was appropriated in the 2009/10 financial year; however the payment to the municipality was processed in March 2010, but only transferred in May 2010 due to the system rejection of the banking details. In addition, irregular expenditure amounting to R 379 000 was discovered during the 2012/13 financial year, during an audit at the time. This was due to the additional expenditure incurred for the installation of 65 non-grid home systems prior to seeking the approval of the expansion scope.

Ms Chetty concluded that the DoE received an unqualified audit opinion with the following emphasis matters; determination of the provision for the contingent liability relating to the Necsa operational past strategic facilities and reclassification of corresponding figures (which was as a result of the amended standard chart of accounts by National Treasury). The Department had completed an action plan to address all outstanding AGSA findings.

Discussion

Mr Matlala said the problem of illegal connections was not only one which was a concern in rural areas but also on townships as well, and these needed to be addressed.

Mr Mavunda said it would be helpful if in the next presentation by the DoE, the costs which came about as a result of non-achieved targets be stipulated, together with the DoE’s plans to address the non-achieved. He said the DoE in its presentation had indicated that there were a number of weaknesses within municipalities; what plans did the DoE have to assist these municipalities?

Ms T Mahambehlala (ANC) thanked the DoE for the presentation. She said for some of the Members who had met with the DoE during the oversight visit to Pretoria, not much of the information had changed. There could not be many changes in a space of a week. She asked a question around the lack of skills at municipalities; she said MISA was there to assist municipalities in the area of skills development. She said it was important that the DoE develop the skills within the DoE as well. She said skills to maintain infrastructure at municipal level were also crucial as an attempt to move out of the DoE’s crisis management mode. On EEDSM she said having identified energy efficiency as one of the challenges faced by the country, the DoE needed to double their efforts. Has the DoE done an audit on the effectiveness of the initiatives on EEDSM such as MISA? What are the outcomes?

The Chairperson thanked Members for the questions.

Mr Greyling asked whether Members could ask questions on the presentation made earlier, seeing that there was no time to do so.

The Chairperson agreed to Members asking questions on the presentation made earlier by the DoE. However, the intention was that the Committee would receive all presentations first then Members would be allowed to ask their questions.

Presentation: Audit and Risk Committee

Mr N Swana CA(SA), Member of the Audit Committee, presented on the

[This presentation will be added later]

Discussion

Mr Greyling said most of his questions were on DoE’s presentation given earlier. He spoke about the Integrated Energy Plan (IEP) and said it was done a while back. Had it been accepted by Cabinet and how would it now inform energy planning? With regards to the Integrated Resource Plan (IRP), he asked how the process of the revision of the IRP would go. On energy efficiency, everything seemed to have moved from Eskom to the DoE however implementation of projects had been lagging behind. A lot of companies had raised a number of concerns that no audits had been initiated in the last 18 months; when can we expect the rollout of solar water heater geysers to begin? On the Gas Utilization Master Plan (GUMP) he asked where the country was with this policy currently and when can Members expect a copy?

Mr Matlala said every time Members met with the DoE, the same questions arose from the same Members. Mr Greyling had been in the Committee for the past 10 years however he had been asking the same questions to the DoE and had very few suggestions on how the Committee could move the country forward. He said Mr Greyling should assist the DoE and not simply oppose all the time. The questions Mr Greyling was raising to the DoE were the same questions which had been answered while Members were in Pretoria the previous week.

Mr M Plouamma (Agang) said the presentation document was not different from the one Members saw in Pretoria and Members were given enough opportunity to engage with the document. He thanked the DoE for the presentation. He said the process was assisting Members in familiarizing themselves with the work which the DoE was doing, and Members were highly appreciative. He added that the issue of rollovers should be dealt with so that there were no repetitions in the coming year.

The Chairperson said he understood why some of the questions were being repeated, and some of the questions could be resolved by Members among themselves.

Dr Barnard thanked Members for their engagements with the presentation. On the illegal connections in rural areas, he apologised if it came through as though illegal connections were only taking place in rural areas. The biggest problem with illegal connections was in fact in households in urban areas. With regards to skills and capacity building in municipalities, the matter was a “thorny one” because municipalities were reporting to Department of Cooperative Governance and Traditional Affairs (COGTA). The function of electricity was a policy matter within the DoE, regulation also did not fall under the scope of the DoE, but it was the responsibility of the National Energy Regulator of South Africa (Nersa). The DoE’s interface with municipalities was around funding for electrification. Building capacity within municipalities was therefore a very difficult matter for the DoE. Out of all municipalities, only 30 found audit queries around transfers from the DoE and oversight, according to the Auditor-General. Only 15 municipalities received a clean audit. The DoE could not interfere with municipality’s legal framework. The DoE held regular forums with all municipalities throughout the country where information was constantly shared with these municipalities.

He agreed however that the skills shortage at municipal level was still a serious challenge. The DoE had a programme which absorbed electrical engineering graduates and placed them at different municipalities. During the 2013/14 financial year, the DoE had absorbed 35 graduates and placed them all over the country. Working with the Setas was one way in which the DoE was contributing to the challenge of skills shortages within municipalities. 75 municipalities had been checked and they were found to be qualifying to receive the solar water heater geyser rollouts. The DoE was in the process of securing local manufacturers for these geysers. He said the focus of these rollouts were on youth, women and military veterans.

Mr Ompi Aphane, Deputy Director-General: Energy Policy and Planning, DoE, responded to the question on energy efficiency and the DoE’s plans in this regard. The EEDSM Programme, particularly the residential component of it, was promulgated under the Income Tax Act. To be able to understand the efficiency of the programme, baselines had been initiated and there were about 40 municipalities taking part in these interventions. The DoE was also able to track the work of a municipality before an intervention and after an intervention. Going forward he said the National Energy Efficiency Strategy has set a 12% target by 2015 and the DoE was in a process of developing an Energy Efficiency Target Model so the country could better understand how the DoE has performed. Energy efficiency was inherent in the energy planning process.

He responded to the questions on the IEP, IRP and GUMP collectively and said the DoE went out on a consultative process in the IEP and the policy still needed to go a Cabinet consultative process. He said there was no sector plan different for electricity or gas. On the rollout of solar water heater geysers, he said the plans had een developed and after approval from Cabinet, they would be rolled out.

Ms Chetty responded to the comment on the targets non-achieved and the costs associated with them, she said the DoE would be more than willing to come back and brief the Committee on the matters.

Ms Mahambehlala informed Members that media reports indicated that there was another nuclear deal which South Africa would be signing with France. Was the DoE ready for another public spectacle, seeing that the new deal was right after the signing of the deal with Russia. It was too soon for such an announcement to be released to the media. It was not acceptable that the media caught hold of the DoE’s plans before they were brought before the Committee. Whoever was leaking information within the DoE should be caught and dealt with. There were many positive things that the DoE was doing but it was not shared with the media; negative news always seemed to dominate.

Mr Greyling said he warned the DoE while in Pretoria that the new announcement on the nuclear deal with France would cause an unnecessary media stir. The DoE needed to indicate when the agreement would be coming into effect and how many more of these agreements would be signed and when would these agreements be tabled before Parliament.

Ms Mahambehlala said Mr Greyling was raising these matters opportunistically because he was in the meeting the whole day since the morning but he chose not to say anything on the nuclear deal until she raised comments on the matter. She accused Mr Greyling of bringing with him a media entourage to the Committee meeting in Pretoria.

Mr Mavunda said it would be very difficult for anyone to seek clarity on a question which was about perception. The implementation of INEP had been very slow. The DoE had a target of 1 million installations for 2014 but only a quarter of these installations had been completed. Will the DoE reach the 1 million target before the end of the year. He said the Committee needed to know in time about any projects which would not be completed in time.

Mr Greyling said he felt the need to respond to Ms Mahambehlala’s opportunistic attack. He had not raised the issue first because he had written to the Chairperson about three weeks ago to request that the Minister appear before the Committee to brief Members about the new nuclear deal with France. He did not arrive in Pretoria with a media entourage but what had happened that morning was that he had received many calls from the media who wanted to find out the details of the nuclear deal with France, based on a press release which came from the DoE. He had urged the DoE to clarify the matter in an urgent manner. If the African National Congress (ANC) continued to attack him for raising issues, the comradeship within the Committee would be destroyed and this would be very sad because the kind of issues which the Committee dealt with were the kind of issues which affected South Africa’s economy at large and working across parties was vital. He would continue to ask the hard questions until the country’s energy crisis was resolved.  He would appreciate it if the Chairperson protected him in this regard.

The Chairperson said Members should continue the conversation among themselves. Members should focus on posing questions to the DoE. The current conversation would indeed have other unforeseen circumstances and this needed to be avoided. A request was made that the Minister brief the Committee on all the nuclear agreements. The Chairperson was committed to this cause and Members needed to communicate this to the media as well, when asked. He acknowledged that Mr Greyling did infact write a letter to the Chairperson to ask the Minister to brief the Committee, however the Minister was currently out of the country. He asked that the Committee wait for the Minister. It was important that the comradeship not be destroyed.

Dr Barnard responded that the French-South Africa agreement was signed five hours ago and a media release was issued.

The Chairperson thanked Members for their interactions with the DoE.

The meeting was adjourned.