DMRE Quarter performance & legislative programme for 2020/21; IEMO Bill: Committee Report

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Mineral Resources and Energy

02 September 2020
Chairperson: Mr S Luzipo (ANC)
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Meeting Summary

Tabled Committee Reports

The Department of Mineral Resources and Energy briefed the Committee on its second, third, and fourth quarter performance report for 2019/20 in a virtual meeting. The Department presented the comparative performance and performance highlights of the former Departments of Energy (DOE) and Mineral Resources (DMR) separately, as the Department is still using separate budget votes in 2019/20.

Highlights included 99.7% of approved invoices were paid within a 30 day receipt, imbizos conducted, 19 foreign participants to advance the energy agenda with the rest of the world, draft commodity flow report compiled, collated gas supply and gas consumption data and the draft biofuels regulatory framework tabled in Cabinet.

Committee Members asked questions about the electrification programme, as it is one of the Department’s major service delivery imperatives; the Solar Water Heater Programme; why the number of mine shafts sealed are so far below the target; what the lack of resources cited as the reason for the non-submission of the gas strategy report are; what the status of the off-take agreement with the Democratic Republic of Congo is; what is holding up the development of the decommissioning and decontamination policy; and what is being done to address gender based violence in the sector.

Members commended the Department for achievements in employment equity and mine health and safety.

The Department also briefed the Committee on the Department’s legislative programme for 2020/21. The presentation looked at the strategic intent; current progress and time-frames for the draft Upstream Petroleum Resources Development Bill; the Gas Amendment Bill; the Draft Radioactive Waste Management Fund Bill; the Electricity Regulation Amendment Bill; and the National Energy Regulator Amendment Bill.

Committee Members asked for more precise timeframes for legislation, to assist the Committee in planning its programme; and enquired about the governance of the Radioactive Waste Management Fund.

The Committee also considered and adopted its Fourth Term Programme, and its Report on the Independent Electricity Management Operator Bill. The Report on the Bill was adopted with the inclusion of a minority view. It concludes the Bill is undesirable
 

Meeting report

The Chairperson said all Committee Members have political mandates from their constituencies. He appealed to all Members to respect each other and the rules of Parliament in interactions. He respects all Members of the Committee and he asked all to respect him and his rulings as the Chairperson. He welcomed the new alternate Committee Member representing the EFF, Mr T Langa (EFF) and accepted apologies from Mr V Zungula (ATM) and the Minister of Mineral Resources and Energy Mr Gwede Mantashe.

Department of Mineral Resources and Energy Presentation on its Second, Third and Fourth Quarter Performance Report for 2019/20
Adv Thabo Mokoena, Director-General, Department of Mineral Resources and Energy (DMRE), said the presentation will deal with the former Departments of Energy (DOE) and Mineral Resources (DMR) separately, as the Department was still using separate budget votes in 2019/20.

Mr Lucas Mulaudzi, DMRE, looked at comparative performance and performance highlights for the DOE and DMR. For each of the three quarters under review, he looked at the performance targets which were achieved, which were partially achieved, and those not achieved by DOE, in eight areas:

- Policy and planning
- Petroleum and petroleum products regulation
- Nuclear energy
- Clean energy
- Programmes and projects
- Corporate services (administration)
- Financial management
- Governance and compliance

He looked at the achievement of performance targets by DMR for the same period, over five areas:

- Corporate services
- Financial administration
- Mine health and safety
- Mine regulation
- Mineral policy and promotion

Performance highlights of the DOE includes: 1 014 petroleum site inspections; issuing 92% of the licence applications it received to South African applicants with more than 50% historically disadvantaged ownership; and 215 343 electricity grid connections.

Performance highlights of the DMR includes: the lowest number of fatalities in the sector on record; a 23% decrease in the incidence of occupational diseases (mainly silicosis, pulmonary tuberculosis and noise-induced hearing loss); sealing 61 mine shafts; women occupying 60% of positions at the level of Deputy Director-General; and enrolling 20 women in a small scale mining skills programme.

Ms Yvonne Chetty, Chief Financial Officer (CFO), DMRE, went through the financial performance of the DOE for the period under review. She looked at the finances per quarter by economic classification. There was under-spending of R1bn against a budget of R4.1bn for the three quarters. The bulk of this is R949m, which was budgeted for transfers and subsidies for electrification. This was caused by administrative delays, and withholding of Integrated National Electrification Programme (INEP) transfers to municipalities and to Eskom.

She looked at the finances per quarter by programme, giving reasons for the differences between the amounts budgeted and amounts spent where it occurred. A significant fraction of the under-spending in programmes and projects consists of funds withheld from Eskom. It has since been rectified. Under-spending on compensation of employees is mainly due to vacancies not being filled during the DOE-DMR merger. The clean energy programme overspent by R8.1m because of storage fees for solar water heaters. This was offset by under-spending on other aspects of the project.

The presentation also detailed the implementation of the Annual Performance Plans. This was not presented but was referred to during the discussion.

Discussion
Mr M Mahlaule (ANC) was satisfied with the financial information because it showed consistency in spending patterns. He acknowledged the number of new grid connections made, but wanted to know what the target was, and if it was met. This is important in light of the significant under-spending on electrification, one of the DMRE’s major service delivery imperatives. He noted concern regarding the Solar Water Heater Programme, and budgets shifting every year to cater for this programme.

Mr K Mileham (DA) said the DOE and DMR use different performance reporting methodologies. He said he hopes it will be standardised going forward. He noted the high number of performance targets DOE missed, and asked what the reasons were.

He asked why the Integrated National Electrification Programme (INEP) payment to Eskom was delayed in September 2019; what the total number of mining rights issued during the period under review are; why the number of mine shafts sealed are so far below the target; what the lack of resources cited as the reason for the non-submission of the gas strategy report are; what the status of the off-take agreement with the Democratic Republic of Congo is; and what is holding up the development of the decommissioning and decontamination policy.

He drew attention to a project which was put on hold at the bid adjudication stage and then cancelled because of lack of funds. He asked why it reached this stage without funding, or what happened to the funds allocated to it.

He asked what the reasons for the non-achievement of the Izimbo PPPs are. He said there was a general inability to process legislation in both DOE and DMR. He asked if DMRE has the necessary skills to draft and process legislation.

Ms N Hlonyana (EFF) said under-spending is a crime and amounts to non-delivery. The Department needs to improve. She asked what exactly is being done to address gender-based violence, and to improve the working conditions of women in the mining sector.

Ms V Malinga (ANC) commended the Department for the level of employment equity it achieved at Deputy Director-General level. She agreed with Mr Mahlaule about the problems in the Solar Water Heater Project which needs to be resolved speedily. She asked if any jobs were lost because of the merger of the Northern Cape and Kwazulu-Natal regional offices.

She also asked if gas drilling plans proceeded as planned in 2020, or if it was affected by COVID-19. She was concerned about the under-spending on compensation, especially considering many policy and planning targets were not achieved. She commended the Department for its mine health and safety achievements.

Mr M Wolmarans (ANC) said under-spending on solar water heaters impacted on service delivery. He noted the Committee planned to be briefed on it.

Ms C Phillips (DA) said the under-spending on electrification projects is a huge problem, because so many people are without electricity. This leads to illegal connections. Government is not looking after the poorest of the poor. She said she was calling for more than 11 months for an oversight visit to check on the solar water heaters in storage, and asked the Committee to set a date for such a visit.

Mr S Kula (ANC) asked what plans DMRE has to meet performance targets which were not fully achieved in 2019/20, such as the shortfall in the number of petroleum site inspections. He commended the Department for approving licences for historically disadvantaged South Africans, and asked how many youth and women were included. He also commended the Department for exceeding its target for the number of bursaries it issued, the number of women at Deputy Director-General level, and its support for small scale mining.

He asked the Department to clarify the specific role of the Gender-Based Violence Centres it set up. He said he shared Mr Mahlaule’s concerns about the Electrification Programme, and wanted clarity on funds which were withheld by National Treasury, from non-compliant municipalities. This is not something the DMRE should be concerned with.

Responses
Ms Chetty said funding was not withheld from non-performing municipalities indefinitely, but was paid when whatever problems existed were rectified. There was a lot of under-spending. The Department put tighter controls in place and implemented a project management system. The Department expects projects will be completed more efficiently.

Ms Hilda Mhlongo, Deputy Director-General: Corporate Services, DMRE, said the reason for under-spending on compensation is, new hiring was put on hold during the DOE-DMR merger, to avoid duplication and to increase job security. This process is going well. Regional Committees on gender-based violence were set up, and the Department’s focus is on education and raising awareness. There are also forums to deal directly with issues.

Mr David Msiza, Chief Inspector of Mines, DMRE, told the Committee the Department takes the health, and safety and security of women in mining very seriously. National tripartite forums were established in all the provinces where women in the mining sector can engage on challenges encountered. This helps to develop research programmes which inform policy. For example, it emerged the personal protective equipment issued was not adequate, and sexual harassment was also looked at.

Since 2015 Annual Indabas on women in mining are held to assess progress in the sector. He appreciated Ms Malinga’s commendation of the mine safety record, and said the Department will continue working with organised labour and business to ensure the improvement continues.

Ms Buyisiwe Faith Ntokozo Ngcwabe, Deputy Director-General: Mineral Policy and Promotions, DMRE, said criminal elements often prevent the Department from sealing mine shafts. At some sites, officials are confronted by illegal miners with guns. In a few cases there were procurement delays at the Council for Geosciences (CGS). The Department is working with law enforcement to address the problem. A number of arrests were made, but delays are expected to continue.

Mr Zizamele Mbambo, Deputy Director-General: Nuclear Energy, DMRE, said the de-commission and decontamination policy project is delayed. The Department was not able to appoint an external service provider to do a cost estimate in time, because of supply chain management problems. These problems have since been addressed. A service provider is now in the process of being appointed. A discussion paper on the policy was approved by the Minister and made available for public comment. A draft policy is expected to be completed by the end of the year.

Adv Mmadikeledi Malebe, Acting Deputy Director-General: Mineral Regulation, DMRE, said a total of 26 mining rights were issued during the period under review.

Mr Mulaudzi said the target for the number of new grid connections was 195 000. The Department exceeded its target. He said the Solar Water Heater Project had numerous dependencies. For example, before a solar water heater can be installed, the water supply must be set up, the Municipality’s readiness must be assessed, technicians must be trained, and service providers must be appointed. There were storage problems, but these are now resolved and the project is underway. He said the inconsistent reporting styles in the presentation are the result of the merger process. A consistent reporting system, taking its cue from the Department of Planning, Monitoring and Evaluation (DPME), will be in place by the time the Department tables its next report to the Committee.

Mr Mthokozisi Mpofu, Chief Director: Electricity Infrastructure, DMRE, explained the procedure for withholding money to non-performing municipalities. The Municipality is first notified of problems and given a chance to correct it. Failing this, the money is redirected to a better-performing municipality. Payment to Eskom was delayed because the budget was reduced by R250m. This results in projects being delayed or funded from savings.

Mr Tseliso Maqubela, Deputy Director-General: Petroleum and Petroleum Products Regulation, DMRE, said the majority of the licences approved for historically disadvantaged South Africans went to youth. He asked for time to present the precise figures.

Adv Mokoena said the Department will work hard to achieve its targets. Where there is any deviation from the target it will be under extraordinary circumstances. He said the Department welcomes an oversight visit to sites where the solar water heaters are installed. The Department does have the capacity to process legislation. It is simply a cumbersome process. He noted Mr Mileham’s concern.

No jobs were lost as a result of COVID-19 or the DOE-DMR merger. Gas drilling will start in September 2020. One of the first issues the Bid Adjudication Committee looks into whenever a tender is required, is if funds are available. .

The Chairperson said there is a difference between mining and prospecting rights, and its utilisation. Companies and individuals often hold onto rights beyond the prescribed time. This failure to use rights amounts to a form of under-investment. He asked how active the rights are which were issued, and if it talks to transformation.

Without suggesting any particular spending irregularities in the DMRE, the Chairperson asked what systems are in place to control spending. He asked if the Department pays consultants to do work it already has the capacity to do. He was concerned about the under-spending of almost R1bn, which is a large proportion of the Department’s budget. COVID-19 cannot be used as an excuse.

Adv Mokoena noted the Chairperson’s comments. He said he made a profound point about the utilisation of mineral resources. Licensing involves multiple departments and external parties. The DMRE will make sure to start a conversation with its sister departments. He acknowledged the points made about consultants.

DMRE Presentation on its Legislative Programme for 2020/21
Ms Ngcwabe said the presentation will look at the strategic intent, current progress, and time-frames for the legislation DMRE is currently working on.

Ms Sibongile Malie, DMRE, reported on the draft Upstream Petroleum Resources Development Bill. Its provisions are already contained in Chapter Six of the Mineral and Petroleum Resources Development Act. The Bill caters specifically to the petroleum industry. Public consultations on the Bill took place, and the Department is currently seeking approval from Cabinet to introduce the Bill to Parliament.

Ms Nonhlanhla Ndebele, DMRE, reported on the Gas Amendment Bill. The Bill is intended to promote the development of gas and gas-related industries in line with the 2019 Integrated Resource Plan. It provides for sources of gas not covered by existing legislation and will empower the National Energy Regulator of South Africa (NERSA) to enforce compliance. The Bill was presented to the cluster of Directors-General in August 2020, and the Department is currently consulting with DPME to get a certificate on the socio-economic impact of the Bill.

Ms Lerato Makgai, Nuclear Policy, DMRE, reported on the draft Radioactive Waste Management Fund Bill. The Bill seeks to ensure long-term funding for the management of radioactive waste, and ensure the polluter pays principle for high-level radioactive waste is applied. The Department consulted with Eskom, the Nuclear Energy Corporation of South Africa (NECSA), and the National Radioactive Waste Disposal Institute (NRWDI). The Bill was presented to the cluster of Directors-General in August 2020, and the Department plans to publish it for public consultation before the end of the 2020/21 financial year.

Ms Ndebele reported on the Electricity Regulation Amendment Bill. The Bill provides for licensing electricity resellers and addresses different categories of electricity trading. It will insert a section into the Electricity Regulation Act, outlining the procurement framework for Independent Power Producers (IPPs). DMRE plans to submit the Bill to Cabinet and stakeholders for consultation before the end of 2020/21. However, in developing the Bill, DMRE is in constant consultation with the Department of Public Enterprises (DPE) to ensure alignment with the restructure of Eskom. This might result in delays.

Ms Ndebele reported on the National Energy Regulator Amendment Bill. The Bill seeks to amend the National Energy Regulator Act, to clarify the new governance structure of the Regulator, while maintaining its integrity and independence. The Department plans to bring the Bill to the economic cluster and Cabinet in September 2020.

Adv Mokoena thanked the women involved for work on the development of policy in the Department.

Discussion
Mr Mileham asked the Department to provide more precise timeframes where possible, as this will help the Portfolio Committee to plan its programme.

Mr Mahlaule agreed this will be helpful.

Ms Malinga asked if the Fund created by the Radioactive Waste Management Bill will be managed by the board of National Radioactive Waste Dispute Institute (NRWDI) or if a separate board will be created.

The Chairperson said this question can be dealt with when the Committee considers the Bill. He asked what became of the Mine Health and Safety Amendment Bill. This Bill was particularly relevant in light of COVID-19.

Responses
Ms Ngcwabe said tangible timeframes will be brought to the Committee.

Ms Makgai said the Radioactive Waste Management Fund will have its own governance structure, although it will not be a fully separate entity of the Department.

Ms Malie said the Mine Health and Safety Bill is currently being processed internally. It is not included in the presentation because it is not expected to be ready to present to Parliament in the 2020/21 financial year.

Portfolio Committee Draft Fourth Quarter Programme
The Chairperson took the Committee through the Draft Fourth Quarter Programme. He asked the Secretariat to include an oversight visit to the Solar Water Heater Project, and to the PetroSA Mossel Bay plant. Along with the Committee’s other oversight duties, this might necessitate splitting the Committee into two groups.

He asked if a discussion on illegal mining can be accommodated.

Mr Mileham agreed on the need to do oversight at PetroSA, but said the major concern which was not addressed, is the feedstock shortage. It needs to be addressed in this Term, because PetroSA indicated it will run out of feedstock by the end of 2020/21.

An item to address this issue was added to the programme of four November.

The Chairperson reminded the Committee, the draft programme is subject to changes according to the programme of Parliament.

Adoption of Committee Report on the Independent Electricity Management Operator Bill
The Chairperson read through the Committee Report on the Independent Electricity Management Operator Bill, which summarises the majority view of the Committee on the Bill. It concludes the Bill is undesirable. The Report includes an account of the consultations and procedures the Committee went through before reaching its conclusion. He said he will seek guidance on inclusion of the minority report the DA submitted.

Mr Mahlaule welcomed the Report. He asked for paragraph nine to be reformulated. He wanted it to better represent the Committee’s view about international best practice, which calls for complete state control of the transmission grid, as it is a strategic asset. As it is, the paragraph suggests the Committee has a problem with Eskom holding a monopoly on electricity transmission. He said the National Assembly Rule 166(4) does not allow a Committee to submit a minority report, but the views of the minority must be expressed in the report, if it is not unanimous.

Mr Mileham said he circulated a revised document which changes the title from “minority report” to “minority view.” He drew attention to one point included in the minority view, which is, the Committee did not observe Rule 286(3), requiring the Committee to give the Member in charge of a Bill reasonable notice before it considers the Bill. The Bill was only considered the day before, and no notice was given to Ms Mazzone.

Ms Malinga said Mr Mileham should have raised this issue the day before.

Mr Mileham objected. He said a breach of the National Assembly Rules can be raised at any time.

The Chairperson agreed Mr Mileham is within his rights to raise a breach of the rules, but he did not agree Rule 286(3) was breached. The Committee invited Ms Mazzone to make a presentation on the Bill earlier during its consideration, which she did. He asked if the minority view needs to discussed and accepted on a point-by-point basis by the Committee as a whole.

Mr Mahlaule did not think the content of the minority view needs to be discussed.

Mr Mileham said he did not expect the Committee to debate the content of the minority view he submitted.

The Chairperson asked for confirmation it should simply be attached to the Report.

Mr Arico Kotze, Committee Secretary, confirmed this.

The ANC supported the Report, the DA objected to the Report, and the EFF abstained. The Report was adopted with the minority view attached.

The meeting was adjourned.

 

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