Legal opinions: Karpowership procurement investigation; CEF & NECSA oversight

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Mineral Resources and Energy

03 August 2021
Chairperson: Mr S Luzipo (ANC)
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Meeting Summary

Video of meeting

The Committee received opinions from Parliament's Constitutional and Legal Services Office (CLSO) on two separate matters. The first opinion was whether the Department of Mineral Resources and Energy (DMRE) was correct in its assertion that the Public Finance Management Act (PFMA) did not require that a Schedule 2 entity table an Annual Performance Plan (APP) or Strategic Plan. The second opinion clarified several questions posed by the Committee on the Risk Mitigation Independent Power Producers Procurement Programme (RMIPPPP).

DMRE had informed the Committee that both the Central Energy Fund (CEF) and the South African Nuclear Energy Corporation (NECSA) would not table an APP or their Strategic Plan to Parliament, as the PFMA did not require them to do so. While the Legal Advisors agreed that the PFMA does not mandate a Schedule 2 entity to table these documents, Parliament is at liberty to request any document that will assist its constitutional mandate.

The Committee decided that it will request those documents from CEF and NECSA as they are public entities accountable to Parliament.

The second legal opinion dealt with these Committee questions about the Karpowership deal:
 • Whether the Committee has legal authority to investigate any procurement processes undertaken by the Department of Mineral Resources and Energy before the process is concluded.
• If not at which stage is the investigation of the procurement process justifiable.
• If the Committee can lawfully investigate any matter concerning the Department where a court action on the same matter is pending.
• Under which circumstances is the Committee justified to refer a matter to another Committee of Parliament or work in concurrence with it such as the Standing Committee on Public Accounts (SCOPA).
• The Committee’s approach on a matter that cuts across other relevant committees of Parliament, in this case, Public Enterprises (Eskom); Environment, Forestry & Fisheries, Auditor-General, Finance and SCOPA.

The Legal Advisors advised the Committee that it does have the authority to institute its own inquiry into problems surrounding the RMIPPPP, as well as the Karpowership deal.

The Committee agreed that it would institute an investigation into the RMIPPPP process. The Minister and the affected parties to the Karpowership deal will be invited to brief the Committee on the RMIPP procurement process and on their version of events.
 

Meeting report

The Chairperson said the Committee would receive two briefings from Parliament's Constitutional and Legal Services Office (CLSO). The first would clarify if the DMRE was correct in its assertion that the PFMA does not require a Schedule 2 entity to table an Annual Performance Plan (APP) or its Strategic Plan to Parliament. The second would clarify questions posed by Members, particularly if the Committee can institute an investigation into the RMIPPPP whilst a court action is pending.

He said the Committee was saddened by the death of IFP Member of Parliament, Mr Mthokozisi Nxumalo, and gave Members the opportunity to say a few words.

Mr J Lorimer (DA) on behalf of the Democratic Alliance extended condolences to both Mr Nxumalo’s family and his political party. The country has lost someone who had great potential.

Mr T Langa (EFF) said that Mr Nxumalo had been his close friend, and his death had left him in shock. On behalf of the Economic Freedom Fighters, he extended condolences to Mr Nxumalo’s family and the IFP. Mr Nxumalo was dedicated to his work and had a promising future in politics. As the IFP Youth Brigade Leader, he had a significant impact on the youth, particularly in Kwa-Zulu Natal.

Mr M Mahlaule (ANC), on behalf of the ANC, stated that the party was saddened by his untimely passing and sent its condolences to his family. His election as the IFP Deputy Chief Whip at his young age illustrated not only dedication to his work, but also his ability to rise to the occasion.

The Chairperson thanked Members for their remarks. On behalf of the Committee, he extended condolences to the Nxumalo family and the IFP. Mr Nxumalo has left a greater responsibility for Members to serve the country’s citizens. The Committee will organise five Members to visit Mr Nxumalo’s residence in Nongoma on 5 August. Due to Covid-19 restrictions, the Committee will be unable to attend his funeral.

The Chairperson said that the Committee noted that the increase in fuel pricing has become a crisis, and will further look into the matter. The Committee has noted and taken into consideration the disruptive effect that the recent wave of unrest in Gauteng and KZN has had on the economy and the energy sector in particular.

The Chairperson stated that after an earlier 2021 meeting with the DMRE, the Committee received a letter from the Director-General stating that according to the PFMA, both CEF and NECSA are not expected to table their corporate plans or annual financial statements to Parliament. Members felt that this opinion might not be correct and sought legal advice.

Legal opinion on Schedule 2 entity tabling APP
Mr Andile Tetyana, Legal Advisor from Parliament's Constitutional and Legal Services Office (CLSO), explained that the Committee received correspondence from DMRE indicating that because NECSA and CEF are Schedule 2 entities, they do not table an APP or Strategic Plan in Parliament according to the PFMA. DMRE suggested that these entities submit their Corporate Plan for Ministerial approval instead. The Committee thus requested a legal opinion on whether the DMRE assertion was in line with the legislation.

After careful consideration, the CLSO determined that whilst there is no provision in the PFMA that mandates a Schedule 2 entity to table these plans, Parliament is at liberty to request these plans or similar documents that will assist it with its constitutional mandate. The intention of the legislature and the rationale for this is premised on the fact that if the two entities do not receive money through the Appropriation Bill, then there is a less burden and/or no duty placed on them to table these documents and show how they will be spending the money.

Discussion
Mr Lorimer said that in the past NECSA and CEF usually provided the Committee with their plans thus their current stance is not in line with previous practice. As indicated by the legal opinion, the Committee is entitled to request that the APP be submitted if it is in the interest of public transparency.

Ms V Malinga (ANC) welcomed the briefing. It was unusual for the two entities to refuse to appear before the Committee which is tasked with conducting oversight of all DMRE entities. She asked why there had been an exception for NECSA and CEF.

Mr Mahlaule agreed with Mr Lorimer’s point that the legal opinion gives the Committee the right to request the documents, if it thinks it is in the best interests of the country – which in this case it is. In previous meetings the Committee has been briefed on the challenges faced by both CEF and NECSA. He suggested that the two present their APPs and other relevant documents to the Committee at a later date.

Ms P Madokwe (EFF) welcomed the briefing and said that it provided the Committee with the confidence to request the APP of the two entities. She went further and suggested that the entities be compelled to provide the requested documents. In addition, DMRE should be invited to clarify the status of the merger between iGas, PetroSA and the Strategic Fuel Fund.

The Chairperson stated that the Rules of Parliament allow for a Committee to invite any person or organisation to appear before it if it believes it will assist it in the performance of its duties. The same legislation permits a Committee to request information and produce documents such as the AFS if it requires it. There is a distinction between the tabling of information – which is a procedure of Parliament – and submitting information requested by a Committee.

He pondered if there is a need to strengthen the level of parliamentary intervention in the absence of performance by organs of state. Who is expected to assist a Schedule 2 entity which is non-cooperative and faces financial challenges?

Mr Tetyana indicated that the Committee is empowered by Section 56 of the Constitution to compel entities to submit documents when there is a need to. If the entities refused to do so, they would be setting a dangerous precedent. It is the Committee’s duty to maintain oversight over all the entities within its portfolio.

Senior Parliamentary Legal Advisor, Adv Frank Jenkins, indicated that once a public entity is no longer a going concern, government will step in and assist either through a financial bailout, or by converting a loan provided into equity.

Whilst these entities are meant to be self-supporting and generate their own income, they are still public entities, and organs of state are accountable and should be subject to the oversight of the National Assembly through the Committees. Thus the Committee has the duty to ensure that there is oversight over the two entities. Additionally, as their strategic plans are approved by the Minister, the Committee is able to request that they be submitted to it.

The Chairperson pointed out that CEF and NECSA have not tabled their AFS to Parliament for the past two years. The reason provided by the Department for this was that the books are not good. Further, DMRE indicated that the PFMA does not require that Schedule 2 entities submit their AFS to Parliament; they only have to submit them to the shareholder (who in this case is the Minister). The Committee acknowledges that the Department was correct in its assessment. However, the Rules of Parliament allow for a Committee to request information to be submitted that it believes is relevant and will assist it in its oversight. As such, the Committee will request that CEF and NECSA submit their AFS, as they are public entities accountable to Parliament. He suggested that the Committee also invite the Department to brief it on this.

Mr Malule moved to adopt the suggestion. Mr Lorimer seconded.

The Chairperson said that the suggestion had been adopted.

He wondered if there had been instances where a Committee has subpoenaed a witness to appear before it.

Legal opinion on Risk Mitigation IPP procurement process
Mr Tetyana stated that the first question asked by Members was if the Committee could lawfully investigate any matter concerning a department where a court action is pending. In their response, the Legal Advisors indicated that there is no rule or law which states that Parliament cannot inquire (or compile a report) into a matter merely because it also happens to be before the courts. As such, if it wishes, the Committee can undertake an investigation into the RMIPPPP.

Members had also asked what circumstances would justify the Committee referring the matter to another Committee or for it to work together with another Committee. In their response, the Legal Advisors indicated that Rule 169 of the NA Rules states that a Committee may confer with any National Assembly committee and that such conferral can only be justified if it furthers the mandate of the committee concerned.

If the Committee wants to subpoena someone, it must make a formal request to that particular individual. Further, if the Committee wants to summon a witness, it must apply to the Office of the Speaker for concurrence, as this method is usually used as a last resort.

Discussion
Mr Lorimer said that the legal opinion made it clear that the Committee can investigate the matter if it so chooses. Given the gravity of the allegations against the Department about the tender process, an investigation should be instituted.

The Chairperson suggested that the Committee constitute an investigation into the matter, and the Minister will be summoned to brief Members on the whole RMIPPP process. The Committee will expect the Minister to respond to the allegations of malfeasance and undue influence on the tender process. The DNG Power Holdings CEO will be invited to appear before the Committee to provide his version of events. All affected parties will also be invited to appear before the Committee.

Due to the sensitivity of the matter, the sitting with the Minister should be held physically. The terms of reference for the investigation must be specific.

Mr Lorimer agreed with the Chairperson’s proposal. He asked if the Committee should appoint an evidence leader. He agreed that a physical meeting will be important.

Mr S Kula (ANC) agreed with the Chairperson’s proposal, and said that the Committee did not require an evidence leader to lead the investigation.

Ms Madokwe said that the Committee should institute the investigation now it had clarity from the legal opinion that it can do so. She suggested that Members be given an opportunity to apply their minds on who should be invited and what the investigation terms of reference will be.

Mr Mahlaule said that it is important to establish if the Committee should appoint an evidence leader or not. The appointment of an evidence leader might prevent the participation of Members during the investigation. Another option would be to allow the Chairperson to lead the process, which would allow greater involvement of the Members.

The Chairperson said that the legal opinions indicate that the Committee must exercise its responsibility in ensuring accountability. Obtaining an evidence leader would require the approval of Parliament, which might delay the Committee process.

He clarified that his suggestion was that all affected parties should be allowed to provide their version of events and evidence to support such claims. Once this process is concluded, the Committee will decide on a way forward. The terms of reference for the process will be established in a separate meeting. During that meeting the Committee will establish the dates for each hearing.

Mr Mahaule moved to adopt the proposal. Mr M Wolmarans (ANC) seconded.

The Chairperson indicated that the proposal had been adopted.

Adv Jenkins explained that if the Committee were to subpoena a particular individual, it must take a resolution, with which the Speaker of Parliament must concur. The challenge of this process is setting the terms of reference for the investigation.

The Chairperson appreciated the legal advice provided by CLSO.

Before closing, he said the Committee will consider the extent to which the unrest in Gauteng and KZN has affected the energy sector.

The meeting was adjourned.
 

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