NEMLA Amendment Bill: Department response to submissions; SANParks; SAWS; Isimangaliso Quarter 3 & 4 performance

Meeting report

NEMLA Amendment Bill: DEA feedback on financial provisioning

The Department of Environmental Affairs (DEA) provided feedback after the stakeholder engagements regarding the National Environmental Management Laws Amendment (NEMLA) Amendment Bill, and reported on the following comments and suggestion which had been received:

Definitions: Primary processing

The proposal from the Chamber of Mines was to delete the definition, but use the Mineral and Petroleum Resources Development Amendment (MPRDA) terms and definitions. The DEA response was to delete the definition, but not to use the MPRDA terms or definitions, as they were wider in scope than required for NEMA. The terms would be retained in the text of NEMA, and was already explained in detail in the activity list published in terms of 24(2) and D of the Act.

Definitions: Financial Provision

Comments from stakeholders included that reference to “bank guarantee” should be reworded as “financial guarantee,” as well as adding a reference to “remediate” and “mitigate” to the definition of “financial provision,” in addition to “rehabilitation.” Both of these were agreed to in the initial and final response by the DEA.

The comment about not being limited to prospecting and exploration was responded to by the DEA, saying that the wording would be fixed in the definition to ensure wider application.

Section 24C(2A)

There were no comments from stakeholders. The response from the DEA was that the ‘Reference to extraction must be retained’.

Section 24P(1A)

The Chamber of Mines had suggesting linking rehabilitation to plans. The DEA response was to link rehabilitation outcomes to that agreed in the Environmental Management Programme (EMPr). It had also suggested that reference to “annually comply” should be reworded. The response was it was agreed there must always be compliance, not just annually, and “annually” was to be removed.

Section 24P (2)

The Chamber’s proposal was that failure to rehabilitate must be explicitly linked to the EMP and the annual rehabilitation plan. The response by the DEA was for this to be considered in the regulations.

Section 24P (3)

The Centre for Environmental Rights (CER) had supported a three-year audit, but had also suggested a three-year review instead of an annual one (CER), but a three-year audit instead of an annual one was not supported by Agri SA.. The final DEA response was to required a review every three years, with review report every five years to ensure better alignment of processes (three years in the case of a mining permit), as well as an audit required in terms of the Companies Act to be appended to the five-year review report.

Aspects not agreed to by stakeholders were the DEA’s proposal to retain the inclusion of VAT, as the Department of Mineral Resources (DMR) would be charged VAT; and secondly, its proposal to retain a level of consumer price index (CPI) + 2%, which was necessary to ensure funds were sufficient.

Discussion

The Chairperson wanted to know what was wrong with the definition that it needed to be changed.

An official of the DEA stated that certain definitions conflicted with Bills and would require constitutional amendments, and therefore it had been decided that the definition should be shortened.

Mr RK Purdon (DA) asked for clarity on the meaning of ‘vehicles.’

The DEA official responded that ‘vehicle’ meant the method of utilization in order to put financial provisions aside. Currently there was a bank guarantee, an insurance product and the accounts were from the DMR in a trust fund. They were called ‘vehicles,’ but were basically just a way to put aside finances. Due to the size of the risks with oil and gas companies, banks did not wish to fund and insure them, so the oil and gas companies formed groups with massive companies such as Chevron and BP, so what when things went wrong they supported each other. The backing was on condition that the reputation of the parent companies was accepted by the other companies. The system of companies putting money aside on their own was not economically feasible due to the scale of the businesses, and therefore the parent and affiliation system had been introduced.

The Chairperson said that it was not necessary that companies should have to accept the reputation of the parent companies just because they were perhaps bigger, and had been in the industry for a longer period. There should be a system of putting money aside by companies, so that when things went wrong they were not reliant on other companies and also that they were not subjected to the conditions imposed when being backed by those companies.

Mr R Purdon (DA) said he had three points to make. The first was that the Portfolio Committee were all environmental people, and needed the experts in the field form Treasury and the DMR to come and present the facts. The second was that there should be a minimum in the Act with regard to the vehicle, which excluded parent companies and affiliates, otherwise any mining and gas company would want to get money from it. Finally, there should be a minimum risk assessment regulation in the Act as well.

The Chairperson said that it would be arranged that DMR and Treasury appear the following week in order to draft proposals and assist in establishing a minimum level.

iSimangaliso Wetland Park: Quarter 3 & 4 2017/18 performance

Peof Anis Karodia, Interim Chief Executive Officer, iSimangaliso Wetland Park, reported on the park’s performance during the third and fourth quarters of 2017/18. 

Programme 1: Conservation & Park Operations

The strategic objective was to ensure the world heritage values were conserved. A highlight was that every quarter, 320 km of accessible coastline was cleaned. However, the target for the completion of the annual burning programme had not been met, as this was dependent on the variable weather and other factors. It would be possible to begin earlier in the season.

Programme 2: Transformation

The strategic objective was to optimise empowerment in all activities of the park in a way that would improve the livelihoods of previously-disadvantaged. The target for the number of training days was not met was due to delays in procuring training service providers. The number of temporary jobs created was also below target.

Programme 3: Tourism/Commercial

The strategic objective was to optimise the Park’s revenue generation in a commercially and environmentally sustainable manner that fostered job creation and empowerment of historically disadvantaged communities. The key performance indicators (KPIs) for the number of visitor entries and revenue from commercial sources had been achieved.

Programme 4: Corporate Governance

The strategic objective was to ensure that iSimangaliso operations were properly funded and cost effect-effectively managed while maintaining an appropriate system of internal control and reporting of accounting, management, and statutory information. The KPI for the percentage implementation of plans to mitigate the impact of identified threats to rare and endangered species and ecosystems was not met in the third quarter, and the KPE for the number of visitor market surveys was not met in the fourth quarter.

2017/18 Quarter 3 Financial Performance

Income had exceeded the budget by R65.1m for the period April to December 2017. This was due to the difference in the basis of preparation of the budget and the financial statements. Revenue for the period ended 31 December was R160m, and the surplus was R76.1m.

Expenditure was below budget by R11m. Depreciation was lower than anticipated, Personnel costs were lower than budget due to a restructuring process undertaken by a consultant appointed by the DEA. Professional fees were higher due to environmental-related services on the St. Lucia precinct.

2017/18 Quarter 4 Financial Performance

Income exceeded the budget by R72.6 m for the period April to March 2018. This was due to the difference in the basis of preparation of the budget and the financial statements. Revenue for the period ended 31 March was R199.2m. The surplus for the period was R82.6m. This was a non-cash surplus and was the result of the accounting policies relating to grants. Expenditure was below budget by R10m. Personnel costs were lower than budget due to the restructuring process undertaken by a consultant appointed by the DEA.

Discussion

Mr Z Makhubele (ANC) said his question was based on the issue of the 87 additional monitors who had been deployed due to additional funding. He wanted to know where the additional funding had come from. A lot of unauthorised events had taken place in the park, and wanted to know if those additional monitors were assisting in stopping that from happening, as well as who had been participating. Four bursary holders had dropped out, and he wanted to know if any investigation had been made as to why those bursaries had been dropped, and if any assistance had been given to those people. Lastly, he asked why the expenditure was R11m below the budget, as he was sure that there was place were that money could have been used. There was a fine line between being below expenditure and just not utilising money properly.

Ms J Steenkamp (DA) asked why one person’s departure had had such a big effect on the company. She wanted more elaboration on the statistics of the rhino poaching.

iSimangaliso’s response

Prof Karodia replied that the effect was not due to one person leaving, but the main impact had been that since they had not received the budget they had originally expected, they had had to prioritise some of the projects which had to be funded.

Regarding the monitors, this had been a sizeable intervention strategy to create employment, and the additional funding had been negotiated with the DEA, and covered a three-year contract. The monitors had been selected from various areas and had played a decisive role in overview and checking what had been going on in the park. They were an essential component in the oversight of the Park.

Regarding the bursaries, they had no control over when students dropped out, and there had been various reasons for it. The option had been to award the bursary to someone else, which then created opportunities for others in the area.

The events which had been held formed part of a strategic intervention to involve the youth and the community at large and to enhance them, and they would try their best to continue it. However, it all depended on their budget.

The rhino poaching, and poaching of animals at iSimangaliso in general had seem some issues recently. Four poachers had been arrested and the police were handling the matter. This was another way in which the monitors played a vital role. The exact poaching statistic numbers would be forwarded to the Committee.

The Chairperson said he was aware that iSimangaliso’s poaching statistics were not compiled by them, but by a third party. However, he asked if they could please include that information whenever they appeared before the Portfolio Committee for them to get a broader picture of what was occurring at the Park. He enquired whether iSimangaliso could take over the functions done by Emzembu, as they were sitting at a vacancy rate of 50% and their budget had been reduced.

Prof Karodia replied that they were aware of the current situation of Emzembu, and it was a risk which they were currently working on addressing.

Ms Abeeda Kadir, CFO of iSimangaliso, said that Emzembu operated with their own budget, and in return they kept some of the facilities, sites and chalets that were in iSimangaliso’s books that were managed by them, and they kept the revenue.

The Chairperson said that it would be good to get all the necessary information about iSimangaliso and their third-party involvements and to assess what the advantages and disadvantages were to having everything done internally by iSimangaliso, and what the overall implications would be. 

SANParks Fourth Quarter Performance

Mr Fundisile Mketeni, Chief Executive Officer: SANParks, report on the entity’s 2017/18 performance.

The Management Effectiveness Tracking Tool (METT) had recorded an average score of 71% from a total of 19 parks, in comparison to their target of 67%. The total area added to national parks had amounted to 3 847 ha, which exceeded the annual target of 3 715 ha. The property was comprised of succulent Karoo and fynbos vegetation. The state biodiversity rating was achieved, as 19 parks had been completed and their baseline had been determined.

A 2% reduction in fossil fuel usage was not achieved, although there had been a huge improvement since the previous quarter due energy efficiency awareness programmes and the heat pump maintenance programmes. A pilot study to improve energy awareness was planned with the research department to get more buy-in from the tourists who used the water and electrical services.

No rhinos had been poached in the six rhino parks, in line with their target of having no rhino poaching. There had been a 12.5% increase in tourism revenue, from R1.423 billion, to R1.602 billion. A rhino management strategy had been implemented, and an elephant management plan approved by the CEO. A total of 52 peer-reviewed publications had been completed. However, the target of having the integrated transformation strategy developed had not been achieved. This was because, during the internal scoping process, SANParks had realised the magnitude of the development of such a strategy as it needed to cover transformation in all aspects of the organisation. It was therefore decided to outsource the development of such a strategy. 

Mr Mketeni said that at the end of the fourth quarter, SANPark’s net worth had risen to R2.241 billion. Its current assets stood at R1841 billion, and current liabilities at R1.512 billion. Tourism, retail operations, concession and other income accounted for 74% of the revenue stream, followed by government grants and other funding.

Discussion

The Chairperson said the presentation slides were so small that the information had been unreadable, so in future there should be a slide per page, and not three or four pages on each slide. They could not really ask questions when they were not able to see the information. He just wished to know about the projects which were being looked at, and why the municipal bills seemed not to have been paid by SANParks in certain areas.

Mr Purdon asked how much money had been given to the special projects, and why the municipal bills were so high, as R65 million was an enormous amount.

Mr Mketeni apologised for presentation format.

He said there was a programme to root out corruption in place, and measures that had been implemented internally which he would prefer to present to the Committee in a closed session.

Funding-raising was being done simultaneously while strategies were being completed. However, they were very hesitant to just take the money, as money was not everything and some money was ‘dirty’ -- it came with conditions, and that was why they had told DEA they wanted the funds they raised vetted. 

Regarding the municipal bills, SANParks had always paid their accounts, and the only reason why they had not paid for certain things was because they were not sure of what those bills were for. There had been instances when they had not even accumulated those amounts, and therefore the matter had even gone to court. In most areas, SANParks supplied their own water via their own boreholes, and it was only in a very small area where they did not supply their own water, which was why they had contested certain municipal bills.

Regarding game donations, there were two aspects -- there were donations and there were loans. In communities where people were trying to educate themselves, they donated, but there were certain spheres where private emerging game farmers were awarded loans. In total there were nine game farmers who had been given loans; to help them grow and achieve success.

The bulk of the municipal bills were for water and electricity, and electricity was expensive. Therefore SANParks were looking for alternative methods to be able to reduce those costs, especially for lighting.

South African Weather Service (SAWS): Third quarter performance

Mr Jerry Lengoasa, Chief Executive Officer: SAWS, reported on the Weather Service’s third quarter performance, focusing on the entity’s strategic goals and objectives.

Goal 1: Provision of products and services

The impact of climate change was resulting in an increasing number of extreme weather events, which impacted on food security, lives and property.  It was involved in the development and provision of innovative products and services for both commercial and public good purposes that enabled a weather-smart nation.

Goal 2: Capability and capacity developed

A shortage of skills of skills in weather and climate-related sciences made it difficult for SAWS to consistently deliver on its mandate and achieve its vision. This required building a talent pool both in-house and on a national basis, while extending and upgrading current infrastructure

Goal 3: Engaged stakeholders

SAWS functioned in a complex scientific and service environment where it was essential to maintain and manage stakeholder relationships to the benefit of both parties. Through the activities supporting this goal, SAWS was committed to effectively partnering, collaborating, managing and leveraging its key stakeholder relations to deliver on its mandate and objectives and to ensure its sustainability.

Goal 4: Research, knowledge and intelligence creation

SAWS was mandated to innovate and provide products and services that were designed to solve real life weather-related challenges. This required ongoing research to maintain its technological edge in meteorology and related disciplines.

Goal 5: Growth and sustainability

SAWSs was an essential element of South African public life, contributing to both the country’s economic activities and safety of life. To grow while also ensuring that it remained sustainable, SAWS had to establish sustained and high value sources of revenue to fund its operations.

Mr Lengoasa reported that total revenue had been slightly above budget, although revenue from the aviation sector had been down slightly.

Discussion

The Chairperson requested that next time quarterly reports were presented, more information should be provided on the financial aspect, as a three-pager was very little, and he would appreciate it if SAWS could unpack their finances and expenditure in more detail.

Mr Purdon referred to the radar data, and asked about the power outages and the availability of the supporting structures, and how the non-performance had affected SAWS. He also wanted to know whether the significant decrease in aviation revenue was isolated or a trend, and what had caused it.

Dr B Holomisa (UDM) wanted to know if SAWS had a sustainable method to achieve and increase their aviation growth considering the situation which had arisen at South African Airways (SAA) and various other airlines,. 

SAWS response

Mr Lengoasa responded that the radar unavailability had not significantly impacted on the performance of SAWS. This was due to the continuous issuing of warnings, and other products and services that were required. What it had done was to differentiate in detail what was offered in products without radar availability. The new target that was being aimed for was 98% availability of radar if SAWS wanted to be serious about disaster management and warnings.

Ms Busisiwe Shongwe, Chief Financial Officer: SAWS, said that the airlines had impacted on SAWS’s revenues. The aviation sector was regulated, and therefore the revenue was regulated. They were trying to increase their commercial revenue and were also trying to balance their expenditure, which they had cut in certain areas. For 2018/19, however,  they had not done so, mainly in anticipation that the commercial revenue would increase to make up for the loss of revenue from the grants.

Mr Lengoasa said that the SAA situation had been unknown at the beginning of the year. The decrease in the number of SAA flights had meant that most of the revenue that was received was from the internal movement of the aircraft. The reduction in the number of flights had impacted directly on the tariffs received, and now there was the new aspect of SA Express issues emerging, which would also need to be looked at to see how it would impact SAWS. However, there was no true trend, as one year may go well and another may not -- it came down to preparation and the response in order to deal with it.

The Chairperson wanted to know if SAWS had moved to their new premises yet, and what had happened to the old building.

Ms Shongwe responded that SAWS had moved to their new premises, located in the Eco Park Business Centre in Centurion, and the old offices were empty.

The Chairperson said that SAWS was a vital element in the aviation industry and to the public in general, and therefore the necessity to keep and maintain infrastructure was crucial to fulfil the mandate of SAWS.

The meeting was adjourned.