Outstanding audits of energy entities; Western Cape Oversight Visit Report

Meeting report

Opening remarks: Chairperson

The Chairperson greeted and welcomed the Committee Members as well as the representatives from the Department of Mineral Resources and Energy (DMRE) who were in attendance. He then allowed the Committee Secretariat to go over the key issues on the first draft of the Committee oversight visit report to the Western Cape.

Deliberation on the first draft of the Committee Report on its Western Cape Oversight Visit

The Committee Secretariat provided an executive summary of the key issues in the oversight visit to the Western Cape, covering the Committee’s concerns, comments and suggestions.

Ms V Malinga (ANC) reminded the Committee Secretariat on how the Committee Members’ names should be titled.

The Chairperson said that the issue should not be hard to resolve by the Secretariat. He then asked about the inclusion of the concern by the Committee on the sudden unreadiness of the Milnerton Plant and the safekeeping of the Solar Water Geysers, as there were certain parts of the geysers that were missing. He did not feel that the report covered the whole issue. The second issue raised by the Committee was that in all the three entities that were visited, the CFOs were not available. Another issue was that the last time there was stock in the Milnerton Plant was many years ago – the report needed to emphasise these matters more.  

Ms P Madokwe (EFF) added that there was an issue about the private entity that was close to the Saldana SFF that no one could explain how that happened.

The Committee Secretariat said that she had highlighted the issues that were raised and would add them in a more comprehensive manner to the report.

Mr M Mahlaule (ANC) wanted clarity on what was meant by the observation that the solar water heater system does not justify the need to exist.

Mr K Mileham (DA) agreed with Mr Mahlaule and questioned the economic value of having a facility of that magnitude not being utilised for 13 years and then having it refurbished. He was also concerned about the wording of some of the observations. He did not understand the concern for intellectual property on the issue of a worker who left the SFF tank facility to go build their own tank farm nearby. He did not think that anyone in the private sector could copy the SFF’s business model.

Ms Malinga said that the Committee’s concern of the tank facility was that it was dubbed a national key point even though it does not have intellectual property rights. It was explained to the Committee that it was a former employee who stole the business model and started their own tank farm next to SFF. The concern of the Committee was on how easy it was to copy the business model of a national key point.

The Chairperson said that the point was that SFF and SEF must explore whether or not there are implications for intellectual property, as it is not allowed for an individual or entity to have a structure that is within 2 kilometres from the national key point. The structure was authorised by NERSA, who need to help with the investigation of the intellectual property issue. The Committee’s observation was not that the individual who started the tank farm had copied the business model, rather it was to say that the individual must also be able to assist in proving that the business was started legally and how NERSA granted the business could be built next to the national key point.

Mr Mileham said that the national key point status is a security classification that is about ensuring the security of a facility. One cannot look at a national key point in terms of a model and design because that would be the wrong way of looking at it. If someone left SFF and stole the idea of the business model, certainly there would be grounds for a civil case against that person, but in terms of bringing up intellectual property and the national key point, that is a problem. The Committee would be going down a bad path by linking intellectual property of the tank farm at Saldana with the fact that it is a national key point.

The Chairperson said that the question of the national key point is in relation to the structure that was built next to it, including the 2 kilometre arrangement and the sharing of relationships. The question of intellectual property applies whether it is a private sector or public entity. The point that was raised with SFF and SEF was on whether they have intellectual property rights and whether they have them protected under their own policy so that even beyond the structure, the information is contained within them. The storage facility was not supposed to exist at SFF because the entity is deserted and there is no way of protecting it and there is no operational activity taking place. The issue that the Committee was concerned about was the fact that there was a donation given to the Department of Land Affairs and the question of the property development rights arose on the basis that DLA had given that land for development. The City of Cape Town, on that basis, raised the issue based on the concerns of the property developers. The other point was that it was requested that the development of the site should be in compliance with certain specifics and they disputed and allowed the process to continue and after seven years went back to agree on the initial agreement. The Committee’s concern was why they did not agree in the first place and noted that it is the same behaviour that causes government entities to have UIFW expenditure.

The Chairperson said the Committee needs to finalise the issue of not visiting Koeberg.

Mr Mileham said the Committee should require the DMRE to provide the Committee with monthly reports on the installation progress of the Solar Water Heater Programme as well as an update on a regular basis on the problems that the DMRE was having on the missing parts of the heaters at SFF. It should be added to the recommendations that the Committee undertakes its planned oversight visit to Koeberg. One of the things that came up in the Committee’s visit to PetroSA was that there is a lot of empty space and unused facilities in the building – the Committee asked to receive an update as soon as the merger of PetroSA, iGas and SFF is complete for the better utilisation of all facilities and office accommodation, including the tank farms that have been underutilised for years.

The Chairperson wanted to know if it would not be an opportunity to capitalise on the possible decommissioning of other private entities to mobilise stocks and exploit the market to the benefit of an entity like SFF and SEF.

Mr Mileham said that as soon as the merger is complete, an audit of all facilities owned or operated by the new entity should be conducted so that the facilities that are underutilised can be identified to see if there is a need to retain or dispose of them.

Ms Malinga said that the Committee was not happy that the office plant was closed down due to mining blasting near it, as there were fears of a natural disaster. The Committee was dissatisfied with the closure because it was the country’s best plant.

The Chairperson said that the Committee was told that the facility was donated as collateral and the Committee asked for more detail on who the plant was donated to and how.

He said that the Committee oversight report would not be adopted in the meeting, as some issues needed to be polished up. The report will be adopted at the next Committee meeting.

Committee discussions on the outstanding audited outcomes of the energy entities

Mr Mileham read the outstanding outcomes of the energy entities for the Committee to consider.

The Chairperson said that the Committee was invited to the Chairperson of Committees meeting on Wednesday and are going to be briefed by the Office of the Auditor-General SA on the audit outcomes of either 2019/20 or 2020/21 financial year.

Mr Mileham was concerned that the meeting on Wednesday would be on the 2020/21 financial year while there are still audit reports that are outstanding for 2019/20 and no indication of when those audits will be finalised. He asked the Chairperson to write a letter to the Speaker, advising her that the Committee is unable to complete its duties in terms of the BRRR and annual review process because of the delays and unavailability of audit reports of some entities.

Ms Malinga said the Chairperson should let the AG’s Office know that the Committee is unhappy with its failure to deliver the audit reports in time, as the Committee is usually harsh on the entities and now it seems the AG is dropping the ball.

The Chairperson agreed that it is important to inform the Speaker of the issue.

The meeting was adjourned.