Department of Mineral Resources and Energy 2020/21 Annual Performance Plan; with Minister

Meeting report

The Chairperson welcomed everyone and stressed the importance of having the virtual meeting, considering the COVID-19 pandemic. He also introduced the Minister of Mineral Resources and Energy, Mr Gwede Mantashe.

The Minister said that the oil price had had a serious impact on the plans of the Department. They appreciated the importance of energy security in regard to the country’s economic performance, despite the effect of the COVID-19 pandemic.

DMRE’s strategic and annual performance plans

Adv Thabo Mokoena, Director-General (DG): Department of Mineral Resources and Energy (DMRE), presented the 2020-2025 strategic plan and the 2020-2021 Annual Performance Plan (APP) to the Committee. The Department had been established in May 2019 by the merger of the Department of Energy and the Department of Mineral Resources, to better equip and capacitate the DMRE to respond to the strategic objectives derived from the national development plan (NDP) and the Medium Term Strategic Framework (MTSF), as they related to the regulation and transformation of the energy and mining sectors.

The existence of the DMRE was premised on its vision of becoming a leader in the transformation of South Africa’s economic growth agenda through the sustainable development of the mining and energy sectors. The necessary licensing conditions had to be created. A review of legislation related to mine health and safety, and DMRE-led facilitation between the mines and communities, would reduce the negative impacts of mining on communities.

Policy certainty was an ongoing request from investors and businesses, and provided the most significant opportunity to attract investment to the country. The DMRE would lead and facilitate the enabling policy and regulatory interventions required to ensure that the energy and mining sectors made meaningful contributions to national objectives and MTSF targets. It would continue to contribute to the development of a transformed, diversified and sustainable minerals and energy sector, contributing to economic growth by the enablement of energy security and affordability, and environmentally sustainable mining industries. He also elaborated on the DMRE start-up structure, which had been led by the Minister.

There were interventions to ensure macroeconomic policy alignment and coherence and to accelerate delivery through transformative innovation. Initiatives such as the Operation Phakisa Mining Lab were aimed at galvanising growth, investment and employment creation along the mining and energy value chain and mining-related communities. Grid and non-grid connections to households in terms of the National Electrification Plan would enhance social cohesion and safe communities

The APP had been developed to provide support services to the Department to fulfil its mandate and achieve its strategic objectives. Its functions included rendering auxiliary support and security services, providing strategic human resources services, performing an oversight role to all the Department’s state-owned enterprises (SOEs), ensuring the provision of communications and media-related services, providing professional legal support and advisory services to the Ministry and the Department, and developing and maintaining all departmental application systems to ensure a sound information technology service.

The planned targets included complete elimination of wasteful and fruitless expenditure, 100 % reduction of irregular expenditure, approval of the APP, 80% implementation of the public/stakeholder participatory plan, updating of the shareholder compact, plans being approved and performance monitored, and all approved invoices from service providers paid within 30 days of receipt.

The Minerals and Petroleum Regulation (MPR) purpose was to regulate the mining, minerals and petroleum industry. The functions were to manage the administration and evaluation of prospecting and mining rights, ensure technical, economic and legal compliance and enforcement in line with the Petroleum Products Act (PPA), manage the petroleum licensing process and ensure the security of fuel supply in the country, provide a specialised empowerment transaction assessment service, and to render a specialised administration and information service.

The budget allocations were informed by the challenges identified in the strategic plan, and took into consideration interventions such as re-alignment of the budget to the strategic plan and APP as per budget process timelines, the reprioritisation of projects within all programmes (branches), and exploring other funding mechanisms.

He concluded by presenting a chart of the 2020/21 estimates of national expenditure (ENE) allocation per programme.

Discussion

Mr M Mahlaule (ANC) referred to the financials of the Department, questioning the allocation of R1.1 billion to the compensation of employees, and said that because the Department had been amalgamated there should be a decrease -- but in this case, there had been an increase. He asked how it had dealt with the amalgamation of staff, and if there had been retrenchments, what effect this had had on the employees and the Department. The cost of office accommodation had increased from R89.1 million to R96.3 million, and in an amalgamated department there should have been a lower cost. Was there a reason why African Exploration Mining and Finance Corporation (AMEFC) had been listed twice under “Mining and Energy” in a slide of the presentation?

Mr K Mileham (DA) asked why the presentation had indicated that the 2019 Integrated Resource Plan (IRP) preparations had to commence for the nuclear build programme, adding 2 500 MW, as this was a no-regret option in the long term. He asked about the pace and scale of the programme, given the current situation in South Africa, and if the country could afford it. Referring to the Grand Inga hydroelectric project in the Democratic Republic of Congo, he wanted to know if the Department envisaged renewing the treaty, and if so, why and what were the associated costs. Why had its economic transformation and job creation initiatives not referred to independent power producers (IPPs)? What progress had been made in terms of mineral rights, and why was no budget set for the 2020-21 year? He asked what the anticipated time of completion for the solar water heater baseline systems was, and if there was a budget allocation for this programme. What steps were being taken to ensure the financial viability of state enterprises? Were there any steps in place for fuel energy reserves, considering the current oil price?

Mr D Mthenjane (EFF) said that it was almost a year since the departments were amalgamated, but there were still two directors general (DGs), and there was a need for the Minister to explain. Since the report was compiled around December, was the plan still relevant now, as the pandemic was affecting everyone and a lot of things were going to change? Regarding the nuclear programme, the Department seemed to be spending a lot of money at Koeberg by bringing in Chinese and Russian experts. How often were these oversight visits -- the Committee deserved to know how many there were.

Ms V Malinga (ANC) asked if the Department thought that the R400 million allocation to the Mining, Health and Safety Council would be sufficient, given the COVID-19 pandemic, because they needed to check that the mining industry was adhering to the regulations on social distancing. The Department had had 11 branches, and since they merged there were now six -- how feasible was this for the Department, and were there any employees who had lost their jobs?

Mr V Zungula (ATM) asked if there were any targets in place for small, medium and micro enterprises (SMMEs). Referring to partnerships between mines and the communities, he asked what plans there were to make sure that communities benefited from the mines’ activities.

Ms N Hlonyana (EFF) asked in regard if the money allocated to the Mining, Health and Safety Council had also taken into account the effect of COVID–19 on the mining sector.

Mr M Wolmarans (ANC) asked what challenges the Department would face, given that the budget was likely to change. Were there timeframes for the Koeberg life extension programme? He commented that most of the policy proposals had gone to Cabinet for approval, but few for public comments.

Ms C Phillips (DA) referred to the strategic planning document, and asked how many jobs had been created from mining projects, and what kind of production was involved. She also wanted to know about the continuation of electricity infrastructure development, and how many projects were still in the pipeline.  How much investment had been secured and how many jobs had been created? What progress was being made with the development of the gas market as an alternative source of energy to meet limited and depleting gas supplies? The DMRE had an increasing culture of corruption -- what was being done about that issue? Had a team been put together for the IRP? She was very concerned about the amount of money spent on consultancy.

Mr S Kula (ANC) asked if the Department had taken into consideration the COVID -19 pandemic and its current financial position in developing the budget. Was the Department being trimmed down to six branches a cost cutting measure, and if so, how much was it likely to save? What were the DMRE’s plans to bring in new players for the exploration of gas?

Mr M Nxumalo (IFP) asked about the job losses in the mining industry, and what interventions the Department was making to ensure the number was not high.

DMRE’s response

Minister Mantashe stressed that there was no post COVID-19 budget.  One thing that had to be appreciated was the fact that many of the renewables were developed by the private sector, because there was an appetite in the market. Companies had to make a presentation, and there would be no immediate call for funding from government.

He said that the second director general was tasked with leading a team that was dealing with the Grand Inga hydroelectric project in the Democratic Republic of Congo.

The government was working on installing solar geysers, and the project was under way.

Regarding the oil price, there were agreements which managed such issues. The Department would brief the Committee, since the fuel was still at Saldanha and had not left South African shores. There were about five million barrels of crude oil, and they were working on increasing this number.

Disruptive developments for the DMRE were the COVID-19 impact and the downgrade in the country’s financial status, so the Department was working on a plan.

He said there were no Chinese or Russian experts being brought to Koeberg -- there had been the servicing of one turbine at the nuclear power station.

A number of entities in the energy sector should be merged into one company, hence the rationalisation of companies in the Department.

Regarding communities benefiting from mining, the Minister said that there was a need to know the past situation and then compare the developments that had taken place, since a lot had happened. Even small black economic empowerment (BEE) companies were playing their part in the combating of COVID-19 pandemic, which meant there was a partnership between communities and the mining companies.

A DDG in the Department said that the Koeberg extension programme was a “work in progress” at the moment. The Department was not involved with any of the nationalities that had been mentioned by the Committee.

The Department clarified the situation of the strategic fuel reserves, saying that there were between four and five million barrels of fuel at the moment.

Referring to independent power producers (IPPs), the Department said job opportunities had been created from the conception, construction and commissioning of the projects. 6 400 MW had been procured and 4 000 MW was on the grid.

Regarding legislation and the project pipeline, the pipeline was indeed beginning to bear fruit. For instance, the greenfields projects had been doing well, as there had been more than 800 people employed and there was still more in the pipeline. A company in the Northern Cape was still exploring for copper.

The Department was confident of achieving its targets, although it had lost about two months of time. Once the lockdown was lifted, there would be visits to communities.

The Mining, Health and Safety Bill was ready to go to Cabinet.

SMMEs had been considered in the DMRE’s procurement programme. Treasury had put out a guideline on how the procurement should happen, and there was a database for all this.

Mr Mthokozisi Zondi, Acting Chief Inspector of Mines, responded to questions on health and safety, and said that the mining companies were expected to budget for the impact of COVID-19. Some of the mining companies would be able to quarantine their employees.

Ms Pat Gamede, Deputy Director General: Corporate Services, said that there had been four corruption cases. Two were currently with the labour court, one had been reported to the police, and one case was currently awaiting a court date.

The Chairperson said that questions would be forwarded to the Department so that they could respond in writing, since the timeframe did not allow it to respond in detail.

The meeting was adjourned.