Appropriation Bill [B1-2013]: public hearings with Earth Life Africa (including the Department of Energy)

Meeting report

Chairperson’s opening remarks
The Chairperson welcomed Mr S Njikelana, Chairperson of the Portfolio Committee on Energy, and his delegation.  He said they had a full right to participate in the meeting. Public comment on the Appropriations Bill had been invited, and a number of responses had been received. However, more education still needed to be done on public participation on such matters, seeing that there was a low turnout of the public at the meeting. The Appropriations Committee was a ‘general dealer’, and this was why experts from the Portfolio Committee on Energy had been invited to the meeting. The purpose of the meeting was to hear a presentation and submission by Earth Life Africa- Johannesburg.   However, no immediate decision would be made at the meeting.  
Briefing by Earth Life Africa – Johannesburg
Ms Nerisha Baldevu, Energy Officer, Earth Life Africa – Johannesburg, said the organisation had submitted a written submission to the Appropriations Committee a few weeks ago. The presentation was therefore based on that submission.  Parliament was required to promote effective financial management by the executive, to scrutinise and to oversee executive action, and to ensure that the proposed financial budgets were diligently examined with due regard to national interest.  National budgets and processes therefore needed to promote transparency and accountability, and Parliament had to promote the efficient use of financial resources. The Money Bills Act provided further elaboration on such Constitutional mandates.

There needed to be appropriate balancing of revenue, expenditure and borrowing, the cost of recurrent spending should not be deferred to future spending, and the short, medium and long-term implications of the fiscal framework and the division of revenue had to be considered

The failure of Parliament to exercise its oversight power at such an early stage would conflict with its constitutional duties. It would also constrain the state irrevocably. The 2013 Medium Term Budget Policy Statements (MTBPS) had confirmed the allocation of R1.6 billion to the South African Nuclear Energy Corporation (Necsa) for the Nuclear Power Programme Cluster over the next three years; along with an additional R 14.2 million in the 2013/14 financial year to build a waste processing facility.  
Necsa’s 2013 Strategic Plan focused on developing and demonstrating nuclear fuel cycle capabilities which were aligned with the Integrated Resource Plan (IRP) and new nuclear build requirements. In response to the expected increase in nuclear electricity production resulting from the IRP, the Corporation would work to retain and increase the nuclear skills capacity in the country. Necsa’s plans were therefore eternally linked to the Department of Energy’s plan to secure a nuclear fleet which would provide approximately 9 600 MW of electricity.  Earth Life Africa – Johannesburg welcomed the Department’s investment and dedication to improving South Africa’s energy infrastructure. However, the Nuclear Procurement Programme had not been based on complete accuracy and transparency. Evidence of this was that the Department’s IRP 2010-2030 was outdated.

Earth Life Africa – Johannesburg had the following concerns:

● The cost estimates set out in the build programme were drafted from the Department’s IRP 2010-2030. The IRP was outdated; therefore the estimates for the programme were insufficient and inaccurate. They were not a true reflection of costs proposed for the nuclear programme. The IRP needed to be updated before a decision on the Nuclear Build Programme was implemented

● The electricity demand estimates were also too high, resulting in overstated electricity demands and expenditure estimates.

● Given the absence of accurate costs of the proposed nuclear programme, Parliament would be unable to discharge its constitutional obligations

● Procurement of a fleet of nuclear power stations, rather than one single entity, would involve a level of investment unprecedented in South Africa

Prof S Mayathula (ANC; Portfolio Committee on Energy) said the presentation was not in line with the presentation documents handed out. He asked where Ms Baldevu was reading from.

Ms Baldevu responded that her presentation included her own additional notes, which were not part of the presentation documents.

The Chairperson said Members needed to be able to follow the presentation in order to engage it properly. The oral presentation and the slides which Members were following did not match.

Ms Baldevu said that the slides were generally in bullet point form, and presenters had their own notes to elaborate more on the slides.
Ms Makoma Lekelakela, Programme Officer: Energy, Earth Life Africa – Johannesburg, said Earth Life Africa – Johannesburg repeated the organisation’s three major concerns: the estimates were insufficient and were not a the true cost of proposed future nuclear power; a fleet of nuclear power stations would involve a level of investment unprecedented in South Africa; and this large investment could bind the state and future generations to its detriment, and be costly to change.

Earth Life Africa – Johannesburg therefore proposed the following recommendations:

● The Committee on Appropriations should recommend to the National Assembly that the Department of Energy complete an accurate cost analysis of the proposed procurement of energy from nuclear power. The cost analysis needed to take into account all relevant information, before funds related to this programme, which had been allocated to NECSA or any other entity, were approved.

● The Committee also needed to recommend that the Department of Energy act in a more transparent manner, providing adequate information to the public and Parliament as to its intentions and the decisions being taken regarding proposed nuclear energy procurement. Only then could Parliament properly exercise its constitutionally mandated oversight role.

● The Committee should recommend that any large scale procurement be conditional upon greater Parliamentary oversight.

Parliament was obligated to promote and ensure transparency in procurement, in national, provincial and municipal processes. The Department’s current procurement process for nuclear energy had not been conducted in a transparent manner.   Approval of contracts needed to be made public, procurement needed to be approved at different stages, the performance of contracts had to be monitored and oversight information should be made available to the public and to all stakeholders. Reference was made to the 1998 White Paper on Energy, which indicated that “nuclear energy was a minor component of the South African energy sector, contributing about 3% during the 1997 national energy supply, and about 5% of the country’s energy..”  With this in mind, it seemed unnecessary to spend so much money on nuclear. The Committee was reminded about the Pebble Bed Modular Reactor (PBMR) loss of R 9.4 billion in 2011.  Necsa’s expenditure was therefore a huge concern. Energy was not the only issue of expenditure in the country. Corruption was also an area of concern, and lessons needed to be taken from the Arms Deal.

Discussion
The Chairperson pointed out that there were issues which had been raised in the presentation document but which had not been discussed in the actual presentation.  He asked the presenters to elaborate on the implications on nuclear energy, which had been highlighted in the presentation document as a concern. Earth Life Africa – Johannesburg had also made reference to other countries as case studies.

Ms Lekalela, in response, made reference to the Russian Nuclear Cooperation Company, which had suffered from great “kickbacks” as a result of corruption. The implementation of a nuclear programme in South Africa therefore had the potential to feed political meddling, resulting in uncontainable corruption.  Nuclear energy seemed to be very secretive, and this made matters of accountability very difficult.

The Chairperson responded that it would have been helpful for meaningful discussion if the presentation document had been concise and in line with the actual narrative of the presentation. Earth Life Africa would not get another chance to make its presentation before Parliament.

Ms Lekalela responded that they were aware that not all Members had gone through the submission documents.  However, a report was available for everyone present to obtain. The report was detailed and included matters raised in the submission, as well as the concerns raised during the presentation.

The Co-Chairperson thanked Earth Life Africa – Johannesburg for their presentation and said it had raised a number of concerns. The Department of Energy should respond and clarify the its position on the R 1.6 billion allocation to Necsa for nuclear energy.

The Chairperson thanked Earth Life Africa for its detailed submission, but criticised them for moving on the assumption that all Members had read the submission document, and therefore had put very little effort into the actual presentation.  Engagement with the Department was not necessary, as it would at a later stage be invited to make a formal presentation to the Committee, together with the National Treasury.
Mr Katse Maphoto, Director: Nuclear Safety, Department of Energy, said the Department had a nuclear branch headed by the Director-General.  He said the R1.6 billion allocation was not dedicated for the nuclear programme alone. The allocation was based on a three-year allocation to Necsa, divided into portions of about R 600 million per annum.  Necsa was one of the state-owned entities headed by the Department of Energy, and was responsible for research and development of nuclear energy.  Necsa was also in a position of developing medical isotopes with nuclear energy. Therefore some of the funds allocated to Necsa were for such research and development initiatives.

The Chairperson interjected, and said the Department had not been invited to make a presentation to the Committee.  They had been invited simply to observe and to listen to the public submission.

Mr Maphoto said he was merely trying to clarify issues raised by the presenters.

Mr M Swart (DA) asked for clarity on whether Earth Life Africa – Johannesburg was against the use of nuclear energy or whether they were against the inaccurate cost estimations made as a result of the outdated IRP 2010-2030.

Mr L Greyling (ANC; Portfolio Committee on Energy) said the presentation had brought up a number of cross-cutting matters, and these needed to be separated. The first issue raised had been that the current funding allocated to Necsa was for the nuclear build programme, which was unnecessary and too costly, and meant that there was a high risk that the funds allocated to nuclear would be a waste. The second issue was the assumptions underlying the nuclear programme itself. How was the country going to be able to assess the cost effectiveness of undertaking the study on the nuclear programme, and its implementation in the long run? This concern had been raised before by other stakeholders. As much as the IRP was a transparent process, its estimations were currently outdated. The Committee therefore needed to make sure their mandate to facilitate transparency was strong, in order to root out any possibility of corruption.

The Chairperson thanked Mr Greyling for assisting the Committee in identifying what the real concerns of the presentation were.  It was the first time that Earth Life Africa had made a presentation to Parliament, so they were not familiar with the processes of Parliament.

Ms R Mashigo (ANC) said there was more concern about how the money was being appropriated, and it was a pity that the Deputy Director-General could not elaborate further on the R1.6 billion allocation. It seemed that the main concern raised by Earth Life Africa was that of the outdated IRP estimates, and not that it was against the use of nuclear energy.

Ms N Mathibela (ANC; Portfolio Committee on Energy) asked what proof Earth Life Africa – Johannesburg had to support the concerns they had.  They had seemed to question the credibility of the Department. Had they at any point met with, and discussed, all their concerns with the Department before they made a presentation to the Committee?

The Chairperson responded and said the presentation was not necessarily questioning the credibility of the Department. However, the presentation had not been as detailed as their submission document. The Committee on Appropriations was not familiar with the energy sector, which was why it was important that when making their presentation, Earth Life Africa had had to be very clear.

The Co-Chairperson said it was important that the Committee should not speak on behalf on Earth Life Africa. Members needed to deal with the content of the presentation as it had been presented, because they should have done their homework.

Ms Lekelakela agreed that Earth Life Africa – Johannesburg was not familiar with some of the processes of Parliament and it was therefore possible that they might have missed some of the key points outlined in the submission document. She appreciated that they had been given the space to clarify themselves. Earth Life Africa – Johannesburg was an environmental justice organisation, and did not in any way support the use of nuclear energy. Nuclear energy should not be part of energy alternatives in the country; there was already an abundance of energy alternatives available in South Africa, such as renewable energy. One of the suggestions it had made was that the Committee ensured that Parliament promoted the use renewable energy. 
As for nuclear medical isotopes, Earth Life Africa – Johannesburg agreed that there was a need for such technology.   However, building a nuclear power reactor was a drastic move.  It was not correct for the Department to suggest that the bulk of Necsa’s budget went to the development of medical technology and advancement.  It was also a concern that there was no transparency on the work of Necsa.  The processes of the IRP raised a few concerns, seeing that some of its forecasts were not correct. According to the plan, it was supposed to be reviewed every two years, and this had not been the case.

Mr Swart thanked the presenter for specifying that Earth Life Africa – Johannesburg was not in support of the use of nuclear energy. However, what other forms of energy did they support and what projections accompanied these, giving a comparison with the use of nuclear energy. And if the appropriation to nuclear was a waste, where did Earth Life Africa – Johannesburg suggest the funds should be redirected?

Mr G Selau (ANC) apologised for his late arrival, asked whether the current debate was correctly placed. If the main matter for debate was appropriations, then the focus of the meeting should be about assessing whether the appropriations had been properly appropriated. The politics of nuclear energy was not one for the current meeting. The matter of whether Earth Life Africa – Johannesburg liked or disliked the idea of nuclear energy being used should be removed from the agenda.

The Chairperson said that Ms Selau was a disadvantage, because at the beginning of the meeting he had indicated that public comment was welcomed and there were no limitations on what would be discussed. The concern of the Committee was around the utilization of resources and the costs of the lifecycle going forward.  As for policy decisions, the Portfolio Committee on Energy had been invited to assist in this regard.

Mr L Ramatlakane (ANC) said the procedure should be that after Members had heard the presentation, the presenters should be allowed to leave so that the Committee could have a discussion based on the information given.

The Chairperson agreed with Mr Ramatlakane, and added that one matter which the Department needed to comment on was Earth Life Africa’s assertion that in 2008 there had been a discussion around nuclear power, and the Department had wanted to develop two reactors. At that time, it had been found that two reactors could not be financed, but now it was proposed that there were going to be six reactors developed.   Could the Department provide more information on this matter?

Ms Lekelakela said there other questions had been raised by the Committee, and asked if they could be addressed.   The Department of Energy had been engaged by Earth Life Africa – Johannesburg on a variety on matters, but there had been no specific discussion on nuclear energy.

Ms Baldevu added that in 2007, Eskom had looked at building two reactors, each of which would cost US$2 500 per kilowatt, without any tender. The estimations from the tenders were at US$8 000 per kilowatt.

The Chairperson asked what the total price was for the two reactors, and what the total price was for the six reactors.

Ms Lekelakela said that at the moment the Department did not have any designs for the six reactors, and so no actual pricing was known. This was the main reason why the Department’s transparency on nuclear matters was highly questionable. The public needed to be informed about these decision-making processes, seeing that the current estimations for the nuclear build programme went as high as R1 trillion.

The Chairperson asked whether the Department had been engaged by Earth Life Africa previously.

Ms Lekelakela responded that they had met up with the Portfolio Committee on Energy on different issues, but not specific to nuclear energy.
Ms Baldevu said they had made various submissions to the Committee on Energy, specifically on the IRP, but no specific submission on nuclear energy.

The Chairperson asked whether there was anything else which Earth Life Africa wanted to add in closing.

Ms Lekelakela said the recommendations they had made were very important, and she urged the Committee to consider them. The practices of other countries when it came to appropriations needed to be taken into account; Slovakia was given as an example. Civil society observers needed to be given full access to all relevant documentation. The Arms Deal was again highlighted as a lesson from which South Africa needed to learn in order to avoid making the same mistakes, especially with regard to matters of accountability, corruption and transparency. The Department needed to consider investing more in renewable energy, especially for job creation aspects, rather than on empowering Independent Power Producers and nuclear energy.

The Chairperson suggested that Earth Life Africa – Johannesburg be allowed to leave the meeting so that the Committee could further discuss any other matters.

Ms A Mfulo (ANC) said Earth Life Africa – International should have made the presentation to the Portfolio Committee on Energy, rather than coming to the Appropriations Committee.

Mr Ramatlakane responded and said Earth Life Africa – Johannesburg was not wrong in coming to the Appropriations Committee to make their submission. However, he was not convinced that the statements made should deter the Committee from making allocations to the Department for the nuclear build programme. The reason for this was that no cost analysis had been made on alternatives to the use of nuclear energy, and so the case made was not a convincing one at all. Added to that, no projections had been made to back up their concerns and recommendations, and no case had been made to support their conclusion. If the argument was that the Committee should not appropriate funds for Necsa’s build programme, where should the funds be directed to? The only critical argument made was that of outdated data.

Mr K Moloto (ANC; Portfolio Committee on Energy) apologised for arriving late at the meeting, but indicated that he had read the submission and would like to make a few comments on it for Earth Life Africa – Johannesburg to take into account. First was the separation of powers stipulated within South Africa’s constitution -- the executive authority was vested in Cabinet, led by the President, while the legislative authority was vested in Parliament. To make the point that Parliament needed to make a decision on key transactions, had to be analysed in the context of the Constitution. Therefore Earth Life Africa needed to rework their document to understand the oversight mandate of Parliament, and the decision-making mandate of the Executive. Secondly, on the matter of the IRP, he said the Department would be taking the IRP to Parliament before the end of the current financial year. The IRP would allow all stakeholders to make submissions on technology advancements, and other matters, because the IRP had to be reviewed every two years. Also, electricity demand should not be based on the current situation -- the National Development Plan looked at the economic growth of the country as a whole, and this would mean a high electricity demand. As for Necsa, the assumptions made on the funds allocated to Necsa were unfounded. There was a need to fully understand the mandate and operations of Necsa as a whole, and such homework should have been done before presenting to Parliament. The fact the Earth Life Africa – Johannesburg’s policy was clearly anti-nuclear made it difficult for the Members to engage them effectively, to explain the Departments’ motivation for the use of nuclear energy.

Mr Greyling said the immediate issue was the R1.6 billion appropriation to Necsa. It was a concern that Necsa had received a R500 million appropriation annually. He wondered what would happen should the nuclear build project not be fully implemented over the ensuing years, and whether this was not a total waste of taxpayers’ money. As for the IRP, the real issue was that the two-year review period had passed, so it was important that the Department made it very clear whether they would review the IRP before a decision on nuclear was made, or afterwards.  A proper debate with the public needed to be held to discuss all these concerns and more. Parliament should also ensure that the procurement process was clean and transparent.

The Chairperson said the Appropriations Committee did not deal with policy matters, it dealt with costs.

The Co-Chairperson said the Committee needed to sit alone, and discuss the matter at hand. The dilemma was that there had been a specific reason for the Energy Committee to attend the meeting, but some of the matters raised by Earth Life Africa- Johannesburg had not been in line with the meeting’s mandate. The debate therefore was not proper or structured. The agenda of the meeting had seemed to be very unclear.

The Chairperson reiterated that Earth Life Africa – Johannesburg should be allowed to leave the meeting so that the Committee could engage among itself. The responsibility of the Appropriations Committee was to assess appropriations. He thanked Earth Life Africa – Johannesburg for the presentation and they were asked to leave the meeting.

Earth Life Africa – Johannesburg left the meeting.

The Chairperson asked whether the Department had other comments it wished to make on the matters that had been discussed.

Mr Maphoto said the Department had been under the impression that the meeting would be about the R1.6 billion allocation to Necsa, but this had been a very short discussion during the meeting. The debate instead had become about whether nuclear was desirable or not. The two reactors in 2008 were a strategy supported by the Energy Board, but no mandate had been given to Eskom to deal with the fleet.  Eskom’s balance sheet was not adequate and so the project had had to be halted. Since then, the government had been taken aboard as a major partner.

The Chairperson said the Committee did not want to have a discussion which was not relevant. The issue at hand was whether these reactors were related to the matter on nuclear energy.

Mr Maphoto responded that the issues were very much related.   According to the IRP, the Department would start with two reactors and build up from there to get to 20 000 MW. On the matter of costs, through the National Nuclear Energy Executive Coordination Committee (NNEECC,) the Department had made a presentation to them and they had been sent back to the drawing board for a cost analysis on nuclear.  This was what the Department was currently busy with. Costs included capital costs, as well as overhead costs, through the next years.  Appropriations had nothing to do with the nuclear build programme, and so Earth Life Africa’s view had been distorted. Most of the appropriations had been given to Necsa to carry out its research and development mandate.

The Chairperson said Necsa and the nuclear build programme were related.

Mr Maphoto added that Necsa was not yet part of the 2013 appropriations to which Earth Life Africa had referred -- it was still part of a plan for going forward. Currently, there was no programme at Necsa dedicated to nuclear.

Prof Mayathula referred to the recommendations made by Earth Life Africa – Johannesburg, and said they were based solely on rejecting nuclear energy. These recommendations had been made on wrong assumptions and by continuing the discussion, the Committee was moving in circles.

Mr Selau asked that the Department explain the difference between nuclear and nuclear build.

The Chairperson said the Members seemed to have understood what the debate and discussion was about. He asked that Members make closing remarks.

Mr Greyling said the R1.6 billion allocation to Necsa would be used for nuclear, so the Department should not say it would not be used for nuclear. The Committee therefore had to deal with the policy issue of ascertaining whether the nuclear programme was feasible or not. The fact the Necsa received an appropriation of R 500 million annually was also problematic.

Mr Moloto said the Department, together with the representative present from National Treasury, needed to give Members a proper breakdown of what the R1.6 billion was for. It was the role of the Appropriations Committee to assess whether the allocation was in line with government mandates.

The Chairperson reiterated Mr Ramatlakane’s point that Earth Life Africa had not made any case to the Committee. They had not spoken to their submission at all -- their focus was more on nuclear power than on the R1.6 billion allocation to Necsa.

Ms Mfulo agreed that the matter should be closed because Earth Life Africa – Johannesburg had not made a case. The submission should have been made to the Committee on Energy, and not the Appropriations Committee.

Ms Mashigo agreed with the Members that the role of the Committee was to assess whether the R1.6 billion to Necsa was properly allocated.  If not, proposals should be made to reallocate the funds to other entities where it was needed the most.
Ms Mathibela agreed that Earth Life Africa- Johannesburg had a good submission document, but had not presented their point well to the Committee.

The Co-Chairperson said one of the greatest problems was that the Committee had not really been able to engage Earth Life Africa – Johannesburg.  It was unrealistic for the non-governmental organisation to announce that it represented all South African citizens, because that was not the case. The current debate of energy planning was not adequately addressed in the IRP 2010-2030. The Integrated Energy Plan (IEP) was therefore a short term tool to address this deficiency, and this had given rise to the IRP. The understanding was that every two years, the plan would be revised, but the two year period had passed. He suggested that a workshop be held by the Department to inform the public on its plans for nuclear energy, because nuclear energy was a very sensitive issue. The entire nuclear build programme should not be approved until the IRP had been revised and there was agreement on it.

The Chairperson agreed with the Co-Chairperson on the suggestion of a workshop to empower the Appropriations Committee to better deal with the nuclear concerns brought before them. The public would also be included in the workshop, together with the Department of Energy and the National Treasury. He reiterated the point made by other Members, that Earth Life Africa – Johannesburg had submitted a very good document, but had been unable to present it well to the Committee. He added that the presenters were correct to appear before the Select Committee on Appropriations. He thanked the Co-Chairperson and the Members from the Portfolio Committee on Energy for their participation and robust debate.

The meeting was adjourned.