Presentation to the Parliamentary Committee on Energy – 2013/14 Annual Report 1 Dr Wolsey Barnard Acting Director-General 14 October 2014

Presentation to the Parliamentary Committee on Energy –

2013/14 Annual Report

1

Dr Wolsey BarnardActing Director-General

14 October 2014

CONTENTS

2

A. Non-financial Performance

• Service delivery environment

• Service delivery improvement plan

• Organizational environment

• Key Policy development and legislative changes

B. Key non-financial Performance Information

• Key Capital Projects

• Recommendations of the AG (from 2012-13 and responses

• Input on progress made on Millennium Development Goals (MDGs)

• Government Priority Outcomes and SOOGs

• Strategic Integrated Projects (SIPs)

• Directives from SONA 2013/14 on Energy Issues and DoE’s Response

• Break down of International Activities

• Supervision of State Owned Entities' (SOE’s)within the Energy Sector

• Overview on Public Participation Programme

• Response to Recommendation from Department of Planning Monitoring and Evaluation (DPME) and

Finance Commission

Service Delivery Environment

3

Overview of the Departmental Performance

In carrying out its mandate, the Department formulate Energy policies, Regulatory frameworks and

legislation, and oversees their implementation to ensure energy security, promotion of environmental

friendly energy carriers and access to affordable and reliable energy for all South Africans. The key

achievements of the last financial year were accomplished as indicated below:

Service Delivery Environment (Cont)

4

The Integrated National Electrification Programme (INEP)

•INEP has gained momentum over the financial year, with support from the Presidential Infrastructure Co-ordinating

Commission (PICC), Eskom and municipalities. Despite the gains realised, challenges still remain, especially in the

municipalities, some of which include:

Funding applications that are six times higher than the funding available per year;Funding applications that are six times higher than the funding available per year;

Long lead times for municipalities, forcing projects to start late in the year;Long lead times for municipalities, forcing projects to start late in the year;

New connections that cannot be made due to lack of network capacity or the bad state of network New connections that cannot be made due to lack of network capacity or the bad state of network

infrastructure;infrastructure;

Limited oversight capacity within the Department due to resource constraints;Limited oversight capacity within the Department due to resource constraints;

Lack of, or limited technical and managerial capacity in municipalities to plan, procure and manage Lack of, or limited technical and managerial capacity in municipalities to plan, procure and manage

electrification projects; and electrification projects; and

High turnover of technical and managerial officials within municipalities.High turnover of technical and managerial officials within municipalities.


5

Renewable Energy Independent Power Producers Programme

•Windows 1 and 2 of the Renewable Energy Independent Power Producer Programme (REIPPP) were successfully

concluded with 47 projects contracted.

•Challenges experienced by the programme were as follows:

Misunderstanding by stakeholders regarding issues relating to localisation and socio-economic Misunderstanding by stakeholders regarding issues relating to localisation and socio-economic

development timeframes and beneficiaries;development timeframes and beneficiaries;

The need for the Department and the developers to intensify engagements and communication with local The need for the Department and the developers to intensify engagements and communication with local

communities and local and provincial governments regarding the socio-economic development aspects of communities and local and provincial governments regarding the socio-economic development aspects of

these projects;these projects;

Interventions by different stakeholders in the delivery of the construction process;Interventions by different stakeholders in the delivery of the construction process;

Delays in connection to the national grid due to grid access constraints; andDelays in connection to the national grid due to grid access constraints; and

Clarification of the interpretation of certain aspects of the Implementation Agreements, especially with Clarification of the interpretation of certain aspects of the Implementation Agreements, especially with

respect to the manner and information required in terms of reporting by the IPP developers. respect to the manner and information required in terms of reporting by the IPP developers.


6

Petroleum Licensing

•The Petroleum Licensing function encountered the following challenges during the year under review:

•Failure of certain licence applicants to submit their documents as required in terms of the Petroleum Products Failure of certain licence applicants to submit their documents as required in terms of the Petroleum Products

Amendment Act, (PPAA) and applicable regulations, which adversely impacted on Amendment Act, (PPAA) and applicable regulations, which adversely impacted on decision-making and increased decision-making and increased the the

turnaround time;turnaround time;

•The tendency for site and retail applicants to focus on overtraded areas, leading to an increase in the number of The tendency for site and retail applicants to focus on overtraded areas, leading to an increase in the number of

new-to-industry (NTI) site and retail applications which were turned down, and an increase in the number of appeals new-to-industry (NTI) site and retail applications which were turned down, and an increase in the number of appeals

challenging the decision of the Petroleum Controller;challenging the decision of the Petroleum Controller;


7

Petroleum Licensing

•The fact that site and retail activities tend to be recycled amongst Africans, in particular Blacks, thus defeating the The fact that site and retail activities tend to be recycled amongst Africans, in particular Blacks, thus defeating the

imperatives of economic transformation;imperatives of economic transformation;

•Structural issues such as land and property ownership and development tend to perpetuate the imbalances with Structural issues such as land and property ownership and development tend to perpetuate the imbalances with

regards to access to site and retail ownership;regards to access to site and retail ownership;

•Non-compliance with licence conditions; Non-compliance with licence conditions;

•Abuse of legislative gaps by law firms and applicants’ representatives, which drain the overstretched human Abuse of legislative gaps by law firms and applicants’ representatives, which drain the overstretched human

resource capacity of the Petroleum Licensing function;and resource capacity of the Petroleum Licensing function;and

•As part of addressing the challenges mentioned above, the Department hosted 11 PPAA and licensing awareness

campaigns during the year, where the queries of individual applicants were addressed.


8

Solar water heaters

•The Solar Water Heater (SWH) Roll-out Programme experienced installation delays during the year under review

due to problems that included the installation of poor quality products, poor workmanship, and the crowding out of

locally produced systems by imports.

•At the end of the year, 46 654 solar water heaters had been installed against a target of 80 000.

•The Department revised the SWH contracting model to prescribe a minimum local content of 70% for subsidised

systems and a rebate can only be secured if the local content has been verified by the South African Bureau of

Standards (SABS).


9

Electricity distribution infrastructure

•The performance and operational state of the electricity distribution infrastructure in the country requires an urgent

investment and rehabilitation to prevent long-term catastrophic power failures among all major distributors.

•The distribution networks of municipalities and Eskom are in some cases not maintained or have been upgraded on

an ad hoc basis and as a result are not operating effectively.

•It is estimated that the maintenance and rehabilitation backlog figure is about R38 billion.

•As part of the 2013/14 appropriation, the Department was allocated R320 million to initiate and conduct pilot projects

in municipalities and metros to test a policy option to rectify this challenge.

•Nine municipalities/metros across the country were identified as recipients of the allocated funding.

•At the end of the financial year, 50% of these projects had been completed.

•This network upgrading will ensure a more stable supply to customers who have been experiencing regular power

dips and outages due to network failures.

Service Delivery Improvement Plan

10

In accordance with the Public Service Regulations, Chapter 1, Part III C, the Department have developed and produced a

Service Delivery Improvement Plan (SDIP) and Service Delivery Charter which sets out the service standards that citizens

and customers can expect from the Department and which serves to explain how the Department will meet each of the

standards. The table below sets out the Department’s SDIP:

Main services Beneficiaries Current/Desired standard of

service

Actual achievement

New Multi-Product Pipeline

(NMPP) from Durban to

Johannesburg

South African

public

Monitor and report on

implementation of the

agreement for completion of

the NMPP trunk line.

The NMPP has been operational

since end of 2012, and currently

transports only diesel.

Inclining Block Tariffs (IBT)

for prepaid metering

Municipalities Extend IBT to cover prepaid

meters in more municipal

areas.

For 2013/14, Incline Block Tariffs

(IBT) implementation in municipal

areas had progressed to 76%,

including Centlec licensed areas

(e.g. Kopanong, Naledi and

Mohokareng) of 1%.

Service Delivery Improvement Plan (Cont)

11

Main services Beneficiaries Current/Desired standard

of service

Actual achievement

Petroleum Licensing The South African public;

Manufacturers, wholesalers

and retailers;

Industry associations across

the value chain;

Oil companies;; and

Independent

consultants/lawyers/attorneys

representing applicants.

100% compliance rate by

the Controller in finalising all

applications within 90 days,

excluding Site and Retail

NTI applications.

90% compliance rate by the

Controller in finalising site

and retail NTI applications

within 60 days.

An average of 97%

compliance with the 90-day

turnaround time.

An average of 93%

compliance with the 60-day

turnaround.

Service Delivery Improvement Plan(Cont)

12


of service

Actual achievement

Compliance with the

Petroleum Product Act

The South African public;

Manufacturers, wholesalers

and retailers;

Industry associations across

the value chain ; and

Oil companies.

1 500 compliance

inspections conducted at the

sites during 2013/14.

1 080 fuel samples and tests

during 2013/14.

1 945 compliance

inspections were conducted

at the sites.

Only 200 fuel samples were

tested due to a delay in

signing the Service Level

Agreement (SLA) between

the Department and the

service provider.


13

Main services Beneficiaries Current/Desired standard of

service

Actual achievement

Fuel stock levels and

corrective actions

Petroleum Industry;

Transnet; and

NERSA.

Fuel stock levels

monitored and corrective

action taken to avoid

distribution shortages co-

ordinated.

Thorough monitoring of fuel

stocks was undertaken by the

Department and industry through

supplier manager meetings and

the Logistics Planning Team. As a

result, minimal fuel supply

disruptions were experienced.

Nuclear safeguards

compliance inspections,

audits and investigations

Nuclear industry; and

Energy users.

Four nuclear safeguards

compliance inspections

and one audit conducted.

Eight nuclear safeguards

compliance inspections were

conducted.


14


of service

Actual achievement

Nuclear radiation security Nuclear industry

stakeholders

Facilitation of installation of

Radiation Portal Monitors

(RPMs).

Conducting Nuclear

Radiation Security training,

courses, workshops.

Enhance security measures

at strategic points.

Facilitation of installation of

RPMs in progress.

Training courses and

workshops ongoing.

Energy efficiency incentive

scheme

Industry Energy efficiency incentive

scheme implemented.

Incentive scheme

promulgated and launched

in December 2013.

SWH units in residential and

commercial sectors

The general South African

public, in particular poorer

communities that currently

do not have electricity

500 027 SWH units

installed.

400 046 units installed as at

31 March 2014.


15

Main services Beneficiaries Current/Desired

standard of service

Actual achievement

Clean Development Mechanism

(CDM) projects

Industry;

Municipalities; and

Organisations.

100% of all CDM

applications processed

within the set timeframes

(45 working days for

Project Development

Documents (PDDs) and

30 working days for

Project Identification Notes

(PINs).

All applications processed

within stipulated

timeframes.


16

Main services BeneficiariesCurrent/Desired

standard of serviceActual achievement

Universal access

to energy

Eskom and Municipalities;

and

The general South African

public, in particular poorer

communities that currently

do not have electricity.

A minimum of 215 000

households electrified

per

annum, comprising:

200 000 grid 200 000 grid

connections; andconnections; and

15 000 off-grid 15 000 off-grid

connections.connections.

Grid household connections:

Eskom (157 839 planned, 202 943 Eskom (157 839 planned, 202 943

including roll-overs achieved);including roll-overs achieved);

Municipalities (87 231 planned, 89 Municipalities (87 231 planned, 89

771 including roll-overs achieved). 771 including roll-overs achieved).

Therefore a total of 292 714 achieved.

Non-grid connections:

14 059 were achieved.

Two Integrated

Energy Centres

(IEC’s) established

and operational

One IeC was launched in Free State

Province and one in KwaZulu-Natal.

Organisational Environment

17

• The Department of Energy was established in 2009 with a staff complement of 426 permanent and 97 additional

employees, being interns and contract employees.

• The approved organisational structure was implemented in a phased approach due to financial constraints.

• As at the end of the 2013/14 reporting period, the Department’s permanent staff complement had increased to 550

employees, with a further 57 employees appointed additional to the approved establishment.

• The development and implementation of the Human Resource Development Strategy has, address the critical skills

shortages in the energy sector; and led to the placement of 54 interns in various municipalities around the country.

• Partnerships were formed in addition to the focused human resource development interventions with the Energy and

Water Sector Education and Training Authority (EWSETA) and the Chemical Industries Education and Training

Authority (CHIETA) to increase the scope of energy training to meet the growing skills needs of the energy sector.

Organisational Environment

18

NO PROGRAMME PROGRAMME PURPOSE

1. Administration Provide strategic support and management services to the

Ministry and the Department.

2. Energy Policy and Planning Ensure evidence-based planning, policy setting and

investment decisions in the energy sector to improve energy

security, through supply- and demand-side options, and

increase competition through regulation.

3 Petroleum and Petroleum

Products Regulation

Manage the regulation of petroleum and petroleum products

to ensure optimum and orderly functioning of the petroleum

industry to achieve government’s developmental goals.

4 Electrification and Energy

Programme and Project

Management

Manage, co-ordinate and monitor programmes and projects

focused on access to energy.

5 Nuclear Energy Manage the South African nuclear energy industry and control nuclear material in terms of international obligations, nuclear legislation and policies to ensure the safe and peaceful use of nuclear energy.

6 Clean Energy Manage and facilitate the development and implementation

of clean and renewable energy initiatives, as well as energy

efficiency and demand side management initiatives

Organisational Environment (Cont)

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Minister of Energy

Director-General

DDG: Energy Programmes and Projects

Chief Operating Officer

DDG: Nuclear Energy

DDG: Petroleum and Petroleum Products Regulation

Chief Financial Officer

DDG: Corporate Services

DDG: Energy Policy, Planning and Clean Energy

Deputy Minister of Energy

Key Policy Development and Legislative Changes

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• During the year under review stakeholder engagement on the Integrated Energy Plan (IEP) was completed. The IEP

is a high level planning platform to manage the interrelations between electricity, gas, and liquid fuels up to 2050.

• The revised Integrated Resource Plan was drafted for public consultation, with major highlights being:

– Reconfirmation of nuclear and renewables as supply side solutions to meet environmental and macroeconomic Reconfirmation of nuclear and renewables as supply side solutions to meet environmental and macroeconomic

development objectives;development objectives;

– Shale gas and imported piped-gas playing a prominent role;Shale gas and imported piped-gas playing a prominent role;

– Coal technology, particularly fluidised bed combustion, to sustain the coal programme; andCoal technology, particularly fluidised bed combustion, to sustain the coal programme; and

– Regional integration through imported hydro projects to improve the SADC economy, while simultaneously Regional integration through imported hydro projects to improve the SADC economy, while simultaneously

providing a renewable energy source.providing a renewable energy source.

• With regard to the development of South Africa’s gas resources, including regional gas opportunities in neighbouring

countries and the country’s own shale gas resource, the draft Gas Utilisation Master Plan (GUMP) was completed and

stakeholder engagement will commence to solicit broader input into the plan.

Key Policy Development and Legislative Changes

21

• The Biofuels Incentive Framework was published for public comment. The framework has been developed to facilitate

the mandatory blending of ethanol into South Africa’s liquid fuels. It is envisaged that the increased cultivation of

energy crops like sorghum and sugar will be coupled with agrarian reform to result in more job opportunities and

transformation of the economy.

• Consultation on the Liquefied Petroleum Gas (LPG) maximum refinery gate price, which started during the year, is

intended to facilitate the importation of LPG, especially during supply constraints in the winter season.

22

Key Capital Projects

The Renewable Energy IPP forms part of the IRP 2010 energy diversification generation technologies plan and 17,8

GW has been earmarked to be produced by Renewable Energy sources by 2030.

First Renewable Energy IPP Determination, 3 725 megawatts (MW) allocated.

Second Determination, a further 3 200 MW was allocated.

To-date, the Department of Energy (DOE) has:

Under Bid Window 1, entered into 28 agreements on 5 November 2012 for 1450 MW,

Under Bid Window 2, entered into 19 agreements on 9 May 2013 for 1045 MW.

• 17 IPPs have started with construction

23

Under Bid Window 3, the DOE published the names of 17 preferred on 5 November 2013 for 1450 MW.

• All bidders are currently busy with Financial Close.

Window 4 bidding closure was on 18 August 2014.

Need to project the positive aspects of this programme more aggressively, since serious misunderstandings and some

mistakes have been made.

Economic Development commitments contained in the Implementation Agreement for each of the preferred bidders –

failing which, penalties will be applied that might lead to termination of the Power Purchase Agreement.

Economic Development is comprised of: job creation local content Ownership management control preferential procurement enterprise development socio-economic development



PROVINCE BW1 BW2 BW3 TOTAL

EC5 6 2 13

FS1 2 1 4

GP0 0 1 1

KZN0 0 1 1

Limp2 0 1 3

NW1 0 0 1

NC15 7 10 32

WC4 4 1 9

Total 28 19 17 64

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As part of the bidding process, each IPP was evaluated according to its Socio–economic development programme

during the operational phase, which is for 20 years.

The SED model was prescriptive to the fact that local communities within a 50 km radius around the IPP have to

benefit socio-economically as a result of the IPP development –each IPP used a different economic development

plan:

• Community was given a percentage ownership of the development, or

• The IPP opt for community upliftment project(s) that will be managed by a community trust.

Although some socio-economic benefits have been achieved during the construction phase of Window 1 and 2,

some serious oversight of critical aspects has to be acknowledged.

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Key Capital Projects Summary

Bid Window 1 :

Commercial Operation (CO):

• BW 1: 17 projects achieved COD - 713.68 MW

• BW 1: 10 projects achieved COD late

• BW 1 and 2: 7 projects did not achieved to date SCOD (SCOD in past)

Early Operating (EO):

• BW1: 2 Projects in EO period – 155 MW

Bid Window 2 :

Commercial Operation (CO):

• BW 2: 3 projects achieved COD - 54.5 MW

• BW 2: 1 project achieved COD late

Total Green energy supplied into the grid - Window 1 and 2: 886 MW

Key Project Completed Green Energy Generated Window 1 and 2

Slide 27

IPPID number and Project nameb Technology Achieved Capacity(MW)

RustMo1 Solar PV 6.93Hopefield Wind 65.4 MetroWind Wind 27Kalkbult Solar PV Solar PV 72.4Aries Solar PV Solar PV 9.65Konkoonsies Solar PV Solar PV 9.65PV De Aar Solar PV 45.6Droogfontein Solar PV 45.4Herbert Solar PV Solar PV 19.9Greefspan Solar PV Solar PV 9.9Dassiefontein Wind 27Jeffreys Bay Wind 135.11Letsatsi Solar PV 64Lesedi Solar PV 64Soutpan Solar PV 27.94Nobelsfontein Wind 73.8Mulilo de Aar Solar PV 10Kathu Solar PV 75Dorper Wind 97.53

Total MW 886.21

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Recommendations of Auditor General and responses thereto

• The Auditor-General’s 2013/14 Audit of the department and its Entities has been completed and both the

department and its Entities received unqualified Audit opinions.

• The department will monitor the implementation of correctives measures to address issues raised by the AG as

emphasis of matter, as part of oversight function.

29

Input on progress made on MDGsThe DoE also contributes to the following four of the United Nations Millennium Developmental Goals (MDGs) through the indicated SOOGs.MDG SOOGs Departmental Contribution

MDG 1: Eradicate extreme poverty & hunger.

SOOG 4: Universal Access & Transformation – To ensure thatthere is an efficient & diverse energy mix for universal accesswithin a transformed Energy Sector.

The DoE’s focus is on the eradication of energy poverty throughthe implementation of the INEP, energy diversification &affordability, Free Basic Electricity (FBE), & Inclining Block Tariffs (IBTs).

MDG 3: Promote gender & equality & empower women.

SOOG 4: Universal Access & Transformation – To ensure thatthere is an efficient & diverse energy mix for universal accesswithin a transformed Energy Sector.

Gender mainstreaming in DoE policies, support of womenempowerment initiatives, introduction of clean energy initiatives& enhancement of women’s participation in the Energy Sector.

30

Input on progress made on MDGsMDG SOOGs Departmental Contribution

MDG 7: Ensure environmental

sustainability.

SOOG 5: Environmental Assets – To

ensure that environmental

assets & natural resources are

protected & continually

enhanced by cleaner energy

technologies.

SOOG 6: Climate Change – To

implement policies that adapt to

& mitigate the effects of climate

change.

Introduction & support of sustainable

clean & renewable energy

initiatives.

MDG 8: Develop global partnerships

for development.

SOOG 7: Corporate Governance – To

implement good corporate

governance for effective & efficient

service delivery.

International cooperation &

collaboration at multilateral, bilateral

& trilateral levels on energy issues.

31

Strategic Outcomes Oriented Goals

The Department of Energy is not a lead department in any of the 12 Government Outcomes; however the Minister has

signed delivery agreements with regard to the following seven outcomes which are pursued by the indicated Strategic

Outcomes-oriented Goals (SOOG) and departmental programmes implemented during the year under review. The table

below also highlights the proposals in terms of the National Development Plan (NDP).

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33


34


35


36


37


Strategic Integrated Projects (SIPs)

38

The Department chairs one (1) of the projects and co-chairs two (2). The Department also participates in ten (10) projects where it attends regular Inter-Governmental Forum meetings and provides inputs on specific parts of the SIP. The DoE has observer status in five (5) SIPs where it only attends meetings as and when required. The Department’s involvement in the SIPs chaired/co-

chaired can be categorised as follows:

SIP NO. STRATEGICINTEGRATED PROJECT

DEPARTMENTAL CONTRIBUTION

6 Integrated Municipal

Infrastructure Project

This SIP is chaired by the Minister of Energy.

The main functions of this SIP are to address all maintenance

backlogs and upgrades required in water, electricity and sanitation

bulk infrastructure in the 23 least resourced district municipalities,

covering 17 million people, in a project that is nationally managed

but locally delivered. The Department is contributing to this SIP

through the following programmes:

• Integrated National Electrification Plan; and

• Solar Water Heating Programme.


39

SIP NO. STRATEGICINTEGRATED PROJECT


8 Green Energy in Support

of the South African

Economy

This SIP is co-chaired by the Minister of Economic Development and

the Minister of Energy.

The main functions of this SIP are to support sustainable green energy

initiatives on a national scale through a diverse range of clean energy

options as envisaged in the IPR 2010 and to support bio-fuel production

facilities.

The Department is contributing to this SIP through the following

programmes:

• Independent Power Producer Programme;

• Bio-fuels;

• Clean Energy;

• Solar Water Heating Programme; and

• Solar Park.


40

SIP NO. STRATEGICINTEGRATED

PROJECT


10 Electricity Transmission

and Distribution for All

This SIP is co-chaired by Minister of Public Enterprises and the Minister of Energy.

The main functions of this SIP are:

• To accelerate the transmission and distribution network to address historical

imbalances, provide access to electricity for all and support economic development.

• To align the 10-Year Transmission Plan, the service backlogs, the national

broadband roll-out and the freight rail line development to leverage off regulatory

approvals, supply chain and project development capacity.

The Department is contributing to this SIP through the following programmes:

• Integrated National Electrification Plan;

• Approach to Distribution Asset Management (ADAM); and

• Mini-ADAM (providing subsidies to nine (9) municipalities to address the

maintenance, refurbishment and backlog concerns in order to improve the quality of

electricity supply).

DoE’s Response to the 2013/14 SONA

41

SoNA Programme Impact

• The National

Development Plan

outlines interventions

that can put the

economy on a better

footing. The target for

job creation is set at 11

million by 2030 and the

economy needs to grow

threefold to create the

desired jobs.

All Jobs from Nuclear Programme - 27000 direct jobs at peak

construction. In the long term there would be about 4900 permanent

jobs. However, if we target 80% localisation and mining for uranium,

the number of long term direct jobs would exceed 7 000.

The total number of sustainable jobs created by the nuclear

programme would exceed 25 000

Renewable Energy Independent Power Producers (REIPP’s)

In the two windows of REIPP been announced, of which 2250 MW of

electricity will be generated by means of various renewable energy

technologies, about 20 000 direct jobs will be created during the

construction phase, about 10 000 indirect jobs due to up-stream

manufacturing and secondary industries.

DoE’s Response to the 2013/14 SONA (Cont)

42


• The National Development Plan

outlines interventions that can put

the economy on a better footing.

The target for job creation is set at

11 million by 2030 and the

economy needs to grow threefold

to create the desired jobs.

All While about 900 direct and about 1200 indirect permanent

direct jobs will be created in the operation phase of these

two windows of opportunity alone. These jobs are created

throughout the country from small towns to the big metros.

Solar Water Heater programme (SWH)

The second phase of this programme is to ensure that the

local content of these SWH are 70% and above locally

manufactured to ensure job creation. Under phase one of

this programme, about 2000 direct jobs and about 1300

indirect jobs have been created. With phase two, which the

localization drive is linked, about 3500 direct jobs and about

1800 indirect jobs will been created over the period


43


• The National

Development Plan

outlines interventions that

can put the economy on

a better footing. The

target for job creation is

set at 11 million by 2030

and the economy needs

to grow threefold to

create the desired jobs.

All In addition, it will also ensure that South Africa become a net

exporter of these products to the rest of the world which will have

a long term job creation linked to this new industry that is being

created.

Electrification programme: On average about 220 000 new

connections are annually made under the national electrification

programme of Government , and which is managed by

Department of Energy through an annual grand from fiscus.

Annually about 8000 direct jobs are ensured as a result of this

programme, and about 3000 indirect jobs. This is not including

250 jobs being created annually by having access to electricity,

the so-called beneficiary effect or productive use of access to

electricity.


44


• The National

Development Plan

outlines interventions

that can put the

economy on a better

footing. The target for

job creation is set at 11

million by 2030 and the

economy needs to

grow threefold to

create the desired

jobs.

All In 2012 effectively through this intervention of the Department of

Energy an estimated of 5000 direct jobs during the construction of

these service stations and a further 1260 permanent jobs. In

addition, service stations employ about 60 000 workers and that this

number is expected to increase.


45


• The National Development Plan outlines

interventions that can put the economy on a

better footing. The target for job creation is set

at 11 million by 2030 and the economy needs to

grow threefold to create the desired jobs.

All The Department, in collaboration with the

Municipalities and Private Companies, is

committed to establishing 2 Integrated Energy

Centres (IeCs) every year for the next five

years. Each IeC contributes to about 60

temporary jobs during construction and at least

10 permanent employment opportunities.


46


• I have asked for work in

the North West to be

fast-tracked further in

light of the huge backlogs

in that province,

especially electricity,

schools, clinics, roads

and water in the next two

years.

Programme 4 The electrification backlogs in the North West Province makes out

4.5% of national backlogs figure, however in the financial year

2013/14 about 11% of the overall national INEP funding allocation

has been earmarked for this province, a total of about R400

million.

DoE has also established a technical task team to investigate the

backlogs and develop a recovery plan for the respective

Municipalities that were highlighted in the SONA.


47


• NDP roadmap to a

South Africa where all

will have water,

electricity, sanitation,

jobs, housing, public

transport, adequate

nutrition, education,

social protection,

quality healthcare,

recreation and a clean

environment.

Programme 1 Integrated national Electrification Programme (INEP) has developed a

new Electrification Roadmap which among others, outlines how the

backlogs in households without electricity will be electrified. A realistic

roll-out plan is being developed as part of this Roadmap, which shows

that given the current backlogs, utilizing different energy technology mix

and funding options, it is possible to achieve universal access to

electricity by 2025 for all areas in South Africa. One of the outcomes of

the roadmap is the process of developing of a National Electrification

Master plan which the Department is in the process to develop in

partnership with Eskom. This Master plan will cover the entire country

and will show areas that will be electrified via grid or non-grid options

and will also show the roll-out sequence of the electrification projects

based on least cost. This Master plan should be finalized in the latter

half of 2013.


48


• In the energy sector, we have now laid

675 kilometres of electricity

transmission lines to connect fast-

growing economic centres and also to

bring power to rural areas.

Programme 4 In addition to the transmission lines of about 675 km

that have been constructed in 2012, also as part of the

INEP allocations in 202/13 and previous financial year’s

allocations, about 1260 km of low en medium voltage

lines have been constructed. A further 28 substations

have been completed or upgraded in the same period.

• In addition, government signed

contracts to the value of R47 billion in

the renewable energy programme. This

involves 28 projects in wind, solar and

small hydro technologies, to be

developed in the Eastern Cape,

Western Cape, Northern Cape and in

the Free State.

Programme 6 In relation to the first window, 20 of project are already

connected and supplying energy to the grid with

approximately 890MW. With regards to window 2, only

two projects with about 54MW are supplying power to

the grid.

Most of the projects under window one should be

connected to the grid before the end of the year.


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• We established an 800 million rand

national green fund last year. To date,

over 400 million rands investments in

green economy projects have already

been approved for municipalities, other

organs of state, community organisations

and the private sector across all

provinces.

Programme 6

• We have also rolled out 315 000 solar

water geysers as of January this year,

most of which were given to poor

households, many of whom had never

had running hot water before.

Programme 4 As part of the initiative to supply 1 million solar water

heater (SWH) by 2014/15, just over 331 000

beneficiaries received solar water heaters to date due

to combined initiatives from DoE allocations, Eskom

phase 1 roll-out, City Power and other donor funded

projects such as the Emfuleni project funded by

Danish International Development Agency.


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• We have scored successes in extending basic

services through the infrastructure programme.

Close to 200 000 households have been

connected to the national electricity grid in

2012.

Programme 4 A total of 306 773 connections have been

completed during the 2013/14 Financial Year

due to funding allocations made by INEP.

Completed connections are as follows:

Grid household connections:

Eskom (157 839 planned, 202 943 including Eskom (157 839 planned, 202 943 including

roll-overs achieved);roll-overs achieved);

Municipalities (87 231 planned, 89 771 Municipalities (87 231 planned, 89 771

including roll-overs achieved). including roll-overs achieved).

Therefore a total of 292 714 achieved.

Non-grid connections:

14 059 were achieved.


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• You will also recall that Census 2011 outlined

the successes in extending basic services.

The report said the number of households

with access to electricity is now at 12.1

million, which translates to 85%. Nine out of

10 households have access to water.

Programme 4 According to Census data about 12,242 mil

households are utilizing electricity as a lighting

source. Given the total number of households of

14,45 mil, hence about 85% of households have

access to electricity for lighting purposes.

The following observation is made regarding the

definitions of the different types of households

included into the overall household figure:

Houses/flats/rooms in backyard 423 000

Informal dwellings in backyards 713 000

Room/flatlet on a property or larger

dwelling/servants quarters/granny flat 120 000

Total 1,256 000


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• You will also recall that Census 2011

outlined the successes in extending basic

services. The report said the number of

households with access to electricity is now

at 12.1 million, which translates to 85% of all

household. Nine out of 10 households have

access to water.

Programme 4 From the above it observed that about 1,256

households are built on the same stand as the

formal household. Given the nature of the

above households and general observations of

households development in the country, the

majority of these households (about 90% plus)

are not metered, and hence are supplied with

electricity, but are not regarded as formally

electrified.


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SoNA Program Impact

You will also recall that

Census 2011 outlined

the successes in

extending basic

services. The report

said the number of

households with access

to electricity is now at

12.1 million, which

translates to 85%. Nine

out of 10 households

have access to water.

Programme 4 This resulted in about 1,1 mil of these households which are receiving an

electricity service, but are not metered and have to be formalised as a

metered households. It is important to note that the network designs were not

done to accommodate these additional households and hence will have to be

upgraded or improved to accommodate the addition increased demand on the

networks, due to these additional households that are been connected to the

networks.

The total number of households according to Census 2011 stats that are

without electricity is about 2.208 mil, and a total figure of about 3,3 mil

households are obtained which have either no electricity or not been officially

electrified.

This figure is in line with the backlog figure INEP is using with respect to the

national overall backlogs. Hence, these 1,1 mil households still have to be

formalized by upgrading the networks and be metered.


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• We are cracking down on corruption,

tender fraud and price fixing in the

infrastructure programme.

Programme 1 Anti-Fraud and corruption policies and prescripts,

including the Whistle Blowing Policy, have been

developed. Awareness and training sessions are

being rolled out in this regard. To combat the

scourge of fraud and corruption within DoE, the

tender processes are strictly regulated and controlled

through the approved supply chain regulatory

framework of DoE. All employees within DoE are

expected to comply with the Framework on

Remunerative Work Outside the Public Service and

to complete the Financial Disclosure forms on and

annual basis .


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• Government has several programmes

of supporting small business. A key

project for the Presidency currently is

to get government departments to pay

SMMEs within 30 days. Departments

are required to submit monthly reports

so that we can monitor progress in

this regard.

Programme 1 The Department is making every attempt to pay suppliers

within 30 days of receipt of invoice. A manual tracking

system is in place. This system tracks all invoices from

date of receipt until date of payment. The department has

commenced the process of investigating an automated

invoice tracking system and has contacted 2 national

departments for bench marking.


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• State owned

companies provide

apprenticeships and

Learnership and we

urge that these be

increased.

Programme 1 The DoE has established a partnership with the Energy and Water Seta

(EWSETA) as well as CHIETA, and DoE has representation at

Accounting Authority levels of both SETAs. Their participation at these

levels, has amongst others, enabled both SETAS to cater for the

various critical skills requirements of the Energy sector in their five year

Sector Skills plans. A Human Resource Forum has been established

with the State Owned Entities within the Energy Sector to ensure co-

ordination and implementation of skills development interventions within

the Energy Sector. CHIETA has already identified Necsa,SANEDI and

PetroSA as the three key strategic state owned entities to go into

partnership with in various areas, including research and development,

Bursaries; Learnership programmes, Internships etc. The Energy and

Water Seta is currently funding experiential training of thirty Electrical

Engineering students that are placed at Municipalities for training

purposes.


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1. As the convener of the NEPAD

Presidential Infrastructure

Championing Initiative, South

Africa continues to work with

other champions to implement

high impact infrastructure

projects in the continent

Programme 1 As part of contributing to the continent wide NEPAD

Presidential Infrastructure Championing Initiative,

South Africa participates in SADC Regional

Infrastructure Development Master Plan (RIDMP)

which includes the energy sector. The SADC Regional

Infrastructure Development Master Plan will form part

of the Programme for Infrastructure Development of

Africa (PIDA) program. South Africa is also involved in

the development of a 40 000MW Grand Inga project

with the Democratic Republic of Congo. The success of

this project will benefit the region and the continent.

The DoE is the lead department in the implementation

of the Grand Inga project.


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1. Our vision of a better

Africa in a better world

will receive great

impetus when we host

the 5th BRICS Summit

next month in Durban.

Programme 1 Energy related issues features prominently into the BRICS’s

programme of action, ie. The Delhi Declaration and the draft

eThekwini Declaration. As the role of International Coordination Unit

of the DoE is to ensure that South Africa’s energy interests and

commitments is well represented in this forum and further facilitates

the DoE’s participation and contribution to the Energy Working

Group of BRICS. Of critical importance our role is to ensure that we

monitor the DoE’s adherence to implementation of decisions within

this multilateral grouping. Both the National Development Plan and

the draft DoE International Strategy acknowledges the importance of

forging relations with strategic partnerships to ensure security of

supply of energy resources in a more reliable and affordable way.

Break down of international activities

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• The Department has maintained co-operation with the SADC Region, the African continent and the rest of the world.

These strategic partnerships have been in line with the energy interests of the country, particularly the need for

security of supply, diversification of the energy mix and access to finance, technology, technical skill and information.

• The IEP has taken cognisance of the abundant clean energy resources available in the region and seeks to

incorporate these sources.

• This marks the Department’s strategy to multi-source, with the objective of reducing our carbon footprint and driving

South Africa’s low carbon trajectory.

• The Department initiated and signed a treaty with the Democratic Republic of Congo in 2013, which seeks to jointly

develop the Grand Inga Hydro Power Project. The project has an estimated generation capacity of 40 000 MW and

will be constructed in phases. The first phase aims to generate 4 800 MW. We are currently exploring ways to

operationalise the treaty and initiate the development of phase one. South Africa is also exploring other regional

projects within the SADC Region in countries such as Mozambique and Lesotho.

Break down of international activities

60

• South Africa, together with the SADC region, is working on regional integration of the region’s transmission

infrastructure.

• This is driven by the Southern African Power Pool (SAPP). To date, the SAPP has established a day-ahead market

where trading of electricity takes place among member countries.

• The regional transmission system needs further strengthening and connection to other countries such as Angola,

Malawi and Tanzania.

• Plans are under way to implement the interconnectors for the SAPP.

• The main objective of the Department’s approach towards international relations is to advance the South African

energy agenda and facilitate sustainable development in the energy with the African region and the rest of the world.

• In line with this imperative, the Department has forged bilateral and multilateral relations that meet our strategic

objectives.

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a) The Minister of Energy is responsible for overseeing the following six state owned entities (SOEs) and their

subsidiaries, which are scheduled as schedule 2 and schedule 3A Institutions in terms of the Public Finance

Management (PFMA) Act, 1999.

National Energy Regulator of south Africa

National Nuclear Regulator

Central Energy Fund

Nuclear Energy Corporation of South Africa

South African National Energy Research and Development Institute

b) The SOE Oversight Unit, which monitors the DoE SOE’s both locally and internationally (including CEF and NECSA

subsidiaries), on behalf of the Minister of Energy, has continued to provide oversight of SOE’s which report to the

Minister of Energy by ensuring the timely approval of their Corporate Plans, Strategic Plans, Annual Performance

Plans and budgets.

SOE Oversight

c) The aforementioned duties includes, but is not limited to, ensuring that the SOE’s have:-

appropriate and effective planning and budgeting processes in place (section 52 of the PFMA);

the financial management and control structures and processes that are capable of accurately, timeously and reliably

recording and reporting on all financial transactions which take place (section 51 of the PFMA);

the appropriate financial management systems and controls to ensure the effective management of the financial affairs of

the SOE (section 51 of the PFMA);

systems of ensuring that the financial affairs and performance of the SOE as reported is acceptable in terms of the

corporate plans and shareholders compacts (section 51 of the PFMA and Treasury Regulations 29.1);

programmes and objectives which are aligned to the Department’s objectives and government programmes; and

effective and efficient systems to ensure that the SOE’s deliver on the agreed strategic objectives, performance measures

and within the agreed timelines.

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SOE Oversight

d) The Department has established governance structures as part of the processes for monitoring and evaluating

the performance of the SOE’s against approved strategic plans and government policy. These structures include:-

The Minister’s quarterly meetings with the Chairpersons of the SOEs to address strategic policy issues. The SOE

Oversight Unit will liaise with the office of the Minister to plan for the next meeting.

The Director General hosts the Forum for Energy Executives (“FEE”) which is made up of all Chief Executives

Officers of the SOEs reporting to the Minister of Energy.

The SOE Oversight Unit holds quarterly performance review meetings with SOE executives to discuss the submitted

performance reports and address any challenges or ensure that these are appropriately escalated where necessary.

e) The SOE Oversight Unit facilitates the aforementioned quarterly meetings between the Minister and the various

Chairpersons of the SOEs, to offer strategic direction and support. These meetings are also used to update

the Chairpersons of any major decisions taken by the Cabinet which might affect the operations of the entities.

The following issues, inter alia, may be discussed in these meetings:- - board performance reviews; - individual board member reviews; - general performance of the entity; - mandate and Strategic direction of the SOE; and - review of the performance of the CEOs.

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SOE Oversight

• The SOE Oversight Unit also conducts annual evaluations of the general performance of the SOE Boards, as a

collective, and of the individual Board members in accordance with the Protocol on Corporate Governance in the Public

Sector, the King III Report on Governance and the Companies’ Act.

• The SOE Oversight Unit also recommends, to the Minister, the appointment of suitable candidates to the Boards of the

various SOE’s that report to the Minister of Energy.

• In addition to the aforesaid, the SOE Oversight Unit is gravitating towards monitoring and evaluation its SOE’s on a

project-like basis, with monthly reports on all projects currently being undertaken by SOE’s. Thus will allow the unit to

become more proactive, rather than reactionary, in dealing with the SOE’s.

• Unfortunately, these, and a few other envisaged projects, have been inhibited by capacity challenges within the Unit,

and attempts are ongoing within the DoE to ensure that SOE Oversight Unit is ultimately resourced with additional

skilled personnel as a matter of urgency.

• All SOE’s reporting to the Minister of Energy received unqualified audit opinions during the 2012/13

and 2013/14 financial years

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SOE Oversight

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Overview on Public Participation Programme• The Minister and the Deputy Minister hosted 45 formal public engagements with an additional 15 engagements hosted

by the Director-General and the staff of the Department during the year under review.

• During these engagements the Department used the opportunity to share information on access to energy, the use of

different energy carriers, safety aspects relating to energy, opportunities for women and youth in the energy space,

planned projects to improve access to energy, the use of energy in an efficient manner, as well as general

responsibilities of energy users.

The challenges experienced in these engagements were as follows:

• The time required to prepare and conduct engagements; The time required to prepare and conduct engagements;

• The cost of arranging the engagements, since the majority were held in rural areas; The cost of arranging the engagements, since the majority were held in rural areas;

• Limited resources within the Department to manage the large number of engagements, given that the same Limited resources within the Department to manage the large number of engagements, given that the same

staff members were involved in the roll-out of the electrification programme; andstaff members were involved in the roll-out of the electrification programme; and

• Difficulties in the remote management of procurement where procurement could not be undertaken at local Difficulties in the remote management of procurement where procurement could not be undertaken at local

government level due to cash flow challenges, and as a result had to be undertaken via the Department. government level due to cash flow challenges, and as a result had to be undertaken via the Department.

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• The first and second draft Strategic Plan and Annual Performance Plan linked to the Budget Programme

Structure was submitted to National Treasury and DPME for analysis and recommendations.

• Recommendations in respect of the above mentioned documents from both National Treasury and DPME

were incorporated in our final Strategic Plan, Annual Performance Plan and Budget Programme Structure.

• The department has meticulously responded to the NDP from the National Planning Commission and

incorporated energy related policy priorities in the Strategic Plan and Annual Performance Plan.

• There is currently a link between the Budget Programme Structure, Strategic Plan and Annual Performance

Plan informing our Medium and Long Term priorities.

• There is a Departmental Finance Committee which is convened on a regular basis to monitor the financial and

programme performance against the set targets of the department.

• Financial Reports to National Treasury are submitted on a regular basis as prescribed by PFMA and Treasury

Regulations.

• The Management Performance Assessment Tool (MPAT) as required by DPME is being implemented within

the Department.

Response to Recommendation from DPME and Finance Commission

Thank You!

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