Archive | Energy

Parliament updated on SOE finances

…..article dated 25 August 2020……

DPE presents bleak picture…. 

As part of a portfolio committee meeting covering the status of the seven SOEs under the umbrella of the Department of Public Enterprises (DPE), new director general,  Khathatso Tlhakudi,  provided a sombre picture of the current financial malaise within the SA public sector.  However. he ended up on a more positive note with regard to Denel and SAA.    On Eskom, he said,  he would make some comment but as they were reporting on a regular basis to Parliament, he said he would not report in great depth.

On Denel, he commented that he had “a good feeling that acting CEO Talib Sadik would hold the situation until a new CEO was appointed”, saying that “we need Denel for strategic reasons”.  He said that Sadik had the necessary enthusiasm and  drive to hold the fort.

As far as SAA was concerned, DPE “had made good progress with a business rescue plan which had now been approved” which fact  he claimed was “a major milestone after what had happened beforehand”. Now it was just a question if support could be found for the plan.

Outside Eskom

Tlhakudi commented that a good deal of the problem at Eskom, other than the specifics of state capture, was that most of the municipalities were not investing adequately in their distribution networks which he said were “falling apart at the nation’s expense”.

On electricity distribution “much of the problem could be put down to bad town planning”, he said.  “As a result of an inability to provide a proper  “pay as you go” service, informal settlements had simply connected themselves to the network, resulting in overloading and continual damage.”

Another issue was that councils should not just collect rates from communities but had to also invest in those communities. Consumer attitudes had to change, Tlhakudi said. Eskom was not in a position to subsidise non-payment in infrastructure, he said. “Responsible management is called for at community level and consumer attitudes have to change”.  He looked to CoGTA to assist in bring such changes about, as well as  the departments of Human Settlements, Water & Sanitation and Public Works to play their roles more purposefully.

Not all bad

DG Tlhakudi said that an infusion of new thinking had started at DPE.  “New ideas are emerging, he said. Great progress had been made with the ports; business was flowing well through the Maputo Corridor with the export of exporting magnetite; and activities around wine and fresh produce were getting some good numbers, ” he listed.  “The story at Transnet is coming right and the Trade and Industry Committee will be impressed, despite the problems of COVID”.

He concluded that DPE was in the process of finding new ways to intervene and assist timeously in SOE and departmental problems and cut short any drift towards malfeasance and corruption with intervention from the top, on an immediate response basis.

Overview of the SOE seven

In an overview of the DPE portfolio, Ms Jacky Molisane of DPE  took MPs through the sorry picture.

In alphabetical order, she recounted that (1) Alexkor, a diamond mining business and which has been attempting to establish a diamond polishing venture down the line, had reported a loss in the 2019/2020 financial year of R63m. This was in part due to low diamond prices, not helped by corruption at management level at its mine. Its cash reserves will be depleted by September and DPE.  Furthermore, its head office is being wound down.

Denel (2), which had been in the newspapers a lot this month with attempts to save the entity for its strategic value, reported a loss of R1.7bn for the 2019/20, its equity being well below the level of R4bn required as a going concern for investors. This, despite a R1.8bn funding in the year under review.  Ms Molisane said that R576m allocated for the 2020/21 has not been passed on by DPE at this stage, since the impact of COVID-19 had resulted in more strain for Denel, the position now being fluid. An acting CEO was currently holding the fort.

Simple facts

As far as Eskom (3) was concerned, Ms Molisane, giving a short picture, saying the simple facts were that any increase in revenue would purely be mainly reflected as due to increases in electricity tariffs.  Although cash from operations might be increasing, Ms Molisane said, earnings before interest, taxes, depreciation, and depreciation were never going to be sufficient to cover increasing costs.  DPE and the taxpayer, as the shareholder, were not receiving a return on investment and the entity was a serious drain on the economy.

South African Forestry Company (4) had reported a loss of R47m for the year under review, mainly as a result of the decline in revenue and high operating expenses. A fair value adjustment saved the company from worse figures and Safcol badly needs re-investment in its equipment and operations.

South African Airways (5) has been under business rescue since December 2019 due to its declining performance and now the inability to pay its debts as they fall due.   A business rescue plan was approved in July 2020 by all creditors. Various options for raising funds were now being carried with the assistance of RMB as transaction advisor, Ms Molisane said. There was every hope that a partner would be found before 17 September.

Old story, old routes

On SAA, DG Khathatso Tlhakudi added the fact said the Department had brought in “some of the best brains, working together linked around the world to help it implement a plan mainly people who understood the airline industry.” Once a strategy was implemented for SAA, he said, DPE would be looking, first for a feeder network to sustain the airline, and then a decision was to be made as to the best way forward to recover routes.    Right now, “effort is being applied to help SAA out of the situation it found itself in”.

SA Express (6) was placed under business rescue in February 2020, Ms Molisane said, but a credible business plan was not found and liquidators called in.   With little likelihood that any expression of interest will be shown, SA Express could be liquidated at the end of September this year.

Ms Molisane then quickly touched on Transnet (7) where revenue had grown marginally by 3% to R75bn for the 2019/20 year under review but decline in demand is expected for the coming year due to COVID-19 and lockdown circumstances. Revenue at an expected figure of R78bn for 2020/21 therefore looked very unlikely. Given that Transnet would eventually get over the COVID setback, Molisane’s figures indicated a possible break-even point in the near future.

Dartboard

For three quarters of an hour, MPs from across party lines criticised DPE for its handling of a situation over the months preceding, a period in which in their view things had been allowed to get totally out of hand.    It was pointed our , however, by the DPE team that it was the system of government that was at fault as the individual boards ran the SOEs and there was a limit to which DPE could interfere.

Point after point was raised, eventually leading to a relatively sensible overview from Ghalib Cachalia (DA) who calculated that the seven SOEs were the major debt trap that had cumulatively led South Africa into its present sad state, whilst also being the home of state capture. Cachalia told DPE that they had to go about things differently, and very soon.

Action now

With a warning that SA was  “falling off the fiscal cliff”, Cachalia remarked that “tinkering around with balance sheets and expenses was getting the country nowhere” and that some new management concepts “were needed and needed urgently”.  The objectives of DPE were “to lead with vision a stable of state entities that led South Africa into new territory and uplifted the poor”. Quite the reverse was happening, he said.

Sibusiso Gumede (ANC) said the quagmire that DPE found itself in was contributed to by the inability state to intervene at any particular point, having to deal with a balance sheet problem well after the event.        He said, “Whilst it is commendable that DPE itself has shown good performance, it had to start running ‘good’ SOEs as well.  He said, “One cannot have an excellent department running ‘bad’ SOEs and we cannot have business as usual any more’.

Eskom starts internal overhaul – ParlyReportSA

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Pravin Gordhan’s plan for ailing SOEs

……article dated 3 September 2020……

New DG explains ‘step in’ powers…..

Khathatso Tlhakudi, appointed recently by Pravin Gordhan as the new Director General, Public Enterprises, recently had the unenviable task of taking on angry MPs to explain the current state of South Africa’s disastrous public utility scenario.  It was his parliamentary initiation as the head of public enterprises, responsible for the seven government SOEs all of which currently are responsible for a drain on the SA economy.

From the start of the meeting, MPs from across party lines expressed their extreme displeasure at the performance of government-run utilities under the tutelage of the Department of Public Enterprises (DPE).     The meeting had been called to establish exactly what progress had been made and to provide an overview of where exactly DPE was headed and to hear a report back.

The state of Denmark

It might be said that in fact MPs got a true picture from the meeting as to how bad the situation was.   In presenting his DPE overview, Tlhakudi said the department had worked on a new platform “for more timeous intervention into the affairs of SOEs in future”.

This plan, he explained, was at an advanced stage and had been developed at the instance of Minister Gordhan to intervene at short notice without overtly challenging the independence of SOE boards.     Whilst obviously contentious, such a system would possibly give DPE some form of “step-in powers into the affairs of a state-owned entities where they were failing to comply according with their own frameworks, or where there were obvious material governance issues involved”.

Consequence management

The concept was demonstrated in the form of allowing for a series of memoranda of incorporation (MOI) with each of the entities, drawn up to allow a public enterprises minister to intervene in cases of  financial distress, maladministration or certain other defined instances with “step in” rights.

Certain powers would be granted to the minister, such as the ability to call for the resignation of the boards which had been appointed by Parliament and for the minister to request Parliament to re-appoint and re-task new boards after an intervention.

Before the horse bolts

If such a move was to eventually come forward from Minister Gordhan this would probably be in the form of a draft Bill, it was stated by Orcilla Ruthnam, Chief Director: Governance Unit at DPE.   Ruthnam has also undertaken an extensive study of how all CEOs and CFOs came to be appointed by SOEs in recent years and what process each board such appointments had gone through based on their qualifications.

This had been a revealing exercise, she told MPs, and was sufficient to show that the current system had to change before a “runaway” took place.

Agreed upfront

In the light of MPs questions, Orcilla Ruthnam gave detail on the proposed basis of an MOI for the DPE portfolio.  Such would, she said, empower the minister to intervene when a board was seriously under-performing to dissolving the board and appointing a “quasi” administrator to turn around the company…..

  • where the SOC was in financial distress, or there were allegations of maladministration and mismanagement
  • when the SOC had material governance challenges;
  • when the SOC failed to perform its functions effectively or efficiently; and
  • where the SOC had acted unfairly or in a discriminatory or inequitable way towards a person to whom it owed a duty under the legislative or policy framework of the SOC; or had failed to comply with any law or any policy envisaged in the legislative or policy framework relevant to the SOC.

 Powers

The principle of providing the minister with temporary intervention powers in law and which would have to trump long standing legislation enacted to ensure SOE independence was clearly to a river to cross,  Ruthnam explained.  It had to be acknowledged that interference by members if the Cabinet in the affairs of an SOE is specifically disallowed by the Companies Act, the Public Finance Management Act and the founding documents of each SOE, said DPE.

The whole principle behind an SOE’s independence from political interference has been in the past to ensure that their boards and management continue to operate in their own areas of expertise without influence from the body politic, Ruthnam continued, but the MOI was worded in such manner to allow for specific instances under specific circumstances as already outlined to MPs.

There were no questions from MPs on this particular subject, bearing in mind this was a virtual meeting.

 

 

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PetroSA part of new energy plan

…..article dated 2 September 2020…..

CEF to restructure both PetroSA and NECSA…..

In what appears to be the first serious attempt to organise and restructure the struggling state entity Central Energy Fund (CEF) and rescue what will now be branded as South Africa’s ‘national petroleum company’ in the form of PetroSA, Minister of Energy, Gwede Mantashe and the relatively new CEO of CEF, Dr Ishmael Poolo, faced a barrage of questions during their scheduled update to Parliament on the fortunes of the troubled group.  CEF appears to be handling two intensive recovery programme at the same time, including at last replacing a swathe of acting posts.

The  first, smaller programme will be the merger of the Nuclear Energy Corporation of South Africa (NECSA) with subsidiaries Pelchem and NTP Radioisotopes, for which a common board has now been established.   The programme includes a drive to return to profit recovering from the massive losses sustained by NECSA providing for a nuclear programme under the tenure-ship of Jacob Zuma’s presidency and which never materialised.

Project Inkwezi, remember?

The second recovery exercise is to sort out and re-build CEF’s entity, PetroSA, after its long-running saga of failure over the Mossel Bay gas-to-liquid venture.   Having had no CEO for 5 years and left to drift without any co-ordinated approach to the industry it was supposed to serve, PetroSA has been in the wilderness without a technical plan to re-establish its presence called for by Parliament for even longer.   Paralysis and ignorance on the part of successive ministers has also been to blame.

Involving billions of rands, the second issue is, by a long chalk, the most damaging to the national fiscus and although both matters are an acknowledged disgrace in terms of financial management, nobody in government, in this case both the Department of Mineral Resources and Energy (DMRE) and CEF, has come with a proper financial plan on the way forward or have been called to account for the mess.

CEF has also suffered SIU investigations into the illegal sale of oil stocks held by the national Strategic Fuel Fund (SFF), another of its entities, a numerous enquiries instigated by the Auditor General.

Top down

In inheriting the problems, Minister Gwede Mantashe has insisted that new management teams be found to head up not only CEF at the top but also for both NECSA and PetroSA in an attempt to bring fresh perspectives to the whole group.  This means, of course, that the Minister has also decided that both entities, NECSA and PetroSA, are to be saved  and this despite the enormous cumulative losses on the balance sheet of CEF.

Not only this, but he insists that the group moved into the black as a whole in the shortest time, but this is only made possible by the fact that it’s entities will have continue functionally bankrupt in the meanwhile.

In the case of NECSA, new appointments are about to be made, MPs were told.   In the case of PetroSA, CEF chairperson Dr Monde Mnyande announced earlier this year that Pragasen Naidoo had been appointed as CEO of what is now branded as the “new national oil company.”   Dr Mnyande said at the time that this move was the first step in “breathing new life in CEF”.    He said that more appointments would follow.

This month

In his first appearance before Parliament, the new CEO of CEF, Dr Ishmael Poolo and appointed by Dr Mnyande in May, told the Committee that a consortium of the three consultancies Mazars, Bayajula Services and US consultancy AT Kearney, are now contracted to assist CEF in the process of merging the entities of SFF and i-Gas into PetroSA.

On a second separate exercise of absorbing Pelchem and NTP Radioisotopes into NECSA, an announcement on the names of consultants to be used in this case would shortly occur, he said.

New Bill

A major refurbishing process was now being hastened in the case of PetroSA, Dr Pollo said, because of the advent of the Upstream Petroleum Resources Development Bill, the crux of which Bill was to allow for PetroSA to receive the benefits of “free carry” gas and petroleum exploration rights granted by the state, thereby fulfilling its mandate as the state’s contractual agent.

“Such a merger of interests, led by a strong PetroSA, would unlock the upstream petroleum economy”, Dr Pollo told MPs, “whilst also maximising the socio-economic benefits flowing from such arrangements and assisting the Minister in realising the state’s Integrated Resource Plan (IRP).”

Bare facts

In an earlier report back to MPs this year, CEF had confirmed that PetroSA had incurred losses totalling R20bn since 2014, mostly in its attempts to stave off shutting down Mossel Bay as a community in a downhill battle for additional gas for its gas-to-liquids refinery, which itself has also had a chequered production life.

Dr Pollo said that now PetroSA was currently producing at a rate of only 6,000 barrels per day, primarily due to shortages of gas from drilling and well operations in nearby coastal waters.    MPs were told by him that PetroSA’s headcount remained at the same level as it had been when producing at an earlier daily rate of 18,000 barrels. He drew attention to the fact that PetroSA was a relatively large company and it accounted for a large portion of CEF’s 1 800 employees.

Rescue plan

It was important for PetroSA to refurbish the refinery and upgrade its ability to take on more gas supplied as part of the overall plan for liquid fuels, Dr Poolo said, and the restructuring processes in respect of merging  SSF and i-Gas into one group was to start Sept. 1.   He said that CEF was exploring its options for either selling or finding a partner to assist with “the commercialisation” of the gas-to-liquid unit.

Dr Poolo concluded by telling MPs that he would return to Parliament in October and account to them on progress of the PetroSA stabilization programme.    During questions, labour issues immediately arose immediately because retrenchments would follow

Cold facts

The Minister said that PetroSA had three union movements involved and negotiations were underway regarding retrenchments which could not be avoided.  Only one of the three plants at Mossel Bay was operating and lay-offs were being limited to the smallest number possible, the unions “having acknowledged that over-staffing existed”. He had told unions that success with PetroSA would result in further employment at a future date.

Questions from both the EFF and DA concerned consultancy fees being paid.  Dr Poolo replied that on retrenchments, the internal teams had stated they were unable to be objective.  “Obviously they could not ‘self-amputate’ and consequently, for many other reasons as well, third party consultants were preferable” Dr Poolo confirmed that both SFF and i-Gas were viable units but that PetroSA was reporting a loss of R200m for 2019/2020.

Asset acquisitions

As to the future, MPs were told that both CEF and Sasol had indicated that talks on the sale of a stake in the Romco gas pipeline from Mozambique to South Africa were possible and discussions were well advanced.   Other assets of Sasol for sale were being considered as Sasol was offloading to raise cash.

Refurbishing the Mossel Bay refinery in order to be able to use liquid feedstock was also part of the restructuring considerations, Dr Poolo said, and CEF was further exploring its options to find a partner to assist with the commercialisation of the PetroSA gas-to-liquid unit.

New nucleus

On matters regarding the re-structuring at NECSA, David Nicholls, board chairperson, told MPs that an “appointment of an external service provider was imminent” in order to act as consultant in the process of merging Pelchem and NTP Radioisotopes into its parent body.  By eliminating the need for three boards and re-sizing, profitability would be seen sooner, he said

Nicholls added that in the short-term, losses of R239m in 2020-21 were projected bearing in mind that COVID-19 had cost an estimated R400m as a result of having on-board highly paid scientific experts but, nevertheless, the new NECSA was estimated to return to profitability in 2021-22, he felt.

He noted that in the meantime Pelchem was producing sanitisers in response to COVID-19 and that the Fund’s Ketlaphela Pharmaceuticals unit “was working hard toward the production of anti-retroviral medication at the soonest”.

DMRE tunes in

As the meeting progressed , a department of energy presence became evident as more members joined the meeting.  In a discussion on general energy matters, Tseliso Maqubela, Deputy DG, Petroleum and Petroleum Products Regulation, DMRE, was called upon to answer the question from MPs as to why the country had very recently “run short of diesel in such critical times”.

He told MPs that the reason was theft direct from the pipeline by “ a highly organised group”  in the Pretoria area, coupled with fuel unloading problems at the East London terminal due to a COVID-19 outbreak which had occurred.

In conclusion, Minister Mantashe, in answer to questions from Kevin Mileham (DA), committed DMRE to publishing an Integrated Energy Plan (IEP) before the end of the current parliamentary year. Mileham had pointed out that in terms of the Energy Act, a IEP was required from the ministry on an annual basis. Seven years had passed since the last energy plan and investors needed this.

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Eskom starts internal overhaul

…..July 7 article…..

De Ruyter keeps his cards close 

When asked by parliamentarians if Eskom would be calling upon retirees and ex-employees to assist with the Eskom recovery plan, CEO André de Ruyter told a joint Public Enterprises meeting called to hear progress on the Eskom unbundling, that at this stage it had not been necessary to rely on consultants.  “For the exercise in hand, money has to be saved.  We have plenty of expertise internally but once things get really complicated, this cannot be ruled out”, he said.

At the moment, he said, things were going well with existing internal sources and Eskom was busy with unbundling, divisionalisation and restructuring, de Ruyter said.   It had re-allocated nearly 9,000 employees to the divisions, of which 6 500 from its head office in Sunnyside, Sandton had moved to ‘hands-on” functions and “moved into operating divisions”.

In place

Most important and in time to meet the human resources plan implementation date, Eskom had appointed its new team of divisional managing directors.  The word “managing” had been incorporated into titles to reflect a clear responsibility in terms of revised job criteria. All had been appointed from existing resources and that had been additional cost in the process. Many existing  employee within the Eskom structure, de Ruyter said, were simply taking on more responsibilities.

MPs from the joint meeting comprised of public enterprises MPs from both the NA and the NCOP were told that critical vacancies were now filled and that all power stations had fully substantiated general manager vacancies. 1,384 learner plant operators had been hired and trained and had filled their positions by April 2020, he said.

Breaking up is hard

In answer to questions from MPs on unbundling  question of divisional unbundling, de Ruyter said that the intention was to divisionalise production into transmission, generation and distribution.    For this it had set up a divisional financial reporting programme design; had already in place power purchasing and electricity supply agreements between divisions; and had commenced the internal trading of energy within Eskom.

De Ruyter reported that a power purchasing and energy supply agreement was in place between a transmission entity named “SA Energy” to handle energy from the 27 different power output stations.    De Ruyter told MPs that it would take some time for the legal separation of all three divisions to take place, the end state being three businesses operating as subsidiaries under Eskom Holdings.

“We have also established a market operator and a central purchasing agency to allow the transmission business to act as the buying agent for electricity and I hope to see considerable private sector investment in generation”, he said.

Much of the old

He warned that Eskom had to retain certain shared services to maximise cost saving opportunities by “leveraging economies of skill and scale.”  For example, Eskom would still only have one IT system, the extremely expensive but highly effective SAP system, and appropriate segregation of equipment and separation  “programming would be installed to give adequate comfort to investors that their commercial information would be adequately protected.”

He said he had rejected the idea of three IT systems, one for each division, purely on the factor of cost. As a result, Eskom would only have one payroll and would maximise certain scarce resources, for example tax and financial resources.  He concluded that the divisionalisation process was aimed at streamlining and driving down accountability, but this had to be “to the right level within the organisation in order to manage cost, bearing in mind that the final arbiter was the cost of electricity to the consumer.”

Big boss

With Minister Gordon Pravin present as a contributor to the speaker panel but who said very little, the only time that the urbane André de Ruyter looked slightly ruffled was when one MP, asking about future load shedding, said that she was tired of hearing “the same old story of broken-down plant that had not been maintained”.

De Ruyter said that the problem was very real and continued to play the major part in the continuity of power supplied to industry and the SA public.

A winter’s tale

“Whilst the Covid 19 lockdown period, de Ruyter said, has led to a direct decline in electricity usage in the country there has been a clear increase in electricity usage since the move to level 4 lockdown and this will obvious change massively and suddenly as we go in lockdown 3 with winter having arrived”.

“Lockdown also provided Eskom with an opportunity to conduct maintenance on its plants, with the power utility’s new base scenario shifting from a possible 31 days of stage 1 load shedding during the winter period to just 3 days,”, he said adding that the unreliability and unpredictability of the system we have has a built-in risk of load shedding.  “That’s how it is, and the situation remains. This will be the reality until after the 18 months of reliability maintenance, which will last until August 2021.”

Small business again

He concluded that large industrial customers are unlikely to be impacted and that any planned load shedding would likely only be required during the evening peak with load shedding schedules being staggered so that customers were not impacted on consecutive days.

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NECSA says nuclear will come to SA

……may 15 2020……

A damaged NECSA plans its energy future

….. The South African Nuclear Corporation (NECSA), with an employee role beyond its capacity as a result of waiting  for a R750bn nuclear programme which never arrived, might be getting back on track with the possibility of nuclear down the track.  Having lost some extremely valuable and experienced, government is attempting, it seems, to be breathing life into this once highly successful operation nearly destroyed by political interference.

NECSA is a valuable but largely ignored nuclear component in the stable of the now combined  Department of Mineral Resources and Energy (DMRE), an entity which for the last ten years has been subjected to mismanagement, patronage, lack of management appointments and a considerable number of ministerial financial scandals.

After the years of waiting during the Zuma era, NECSA then lost and additional two years with the integration of the departments of mineral resources into energy but appears that DMRE , its parental department, has appointed a new board with new ideas on a NECSA future.

Bigger picture

The DMRE this year presented a plan to Parliament for an estimated budget of R9.3bn for the current financial year, 95% of which will be transferred as usual to its entities.

These will be Council for Geoscience National Energy; the Regulator of South Africa (NERSA), Central Energy Fund (CEF) (including PetroSA and the Strategic Fuel Fund or SFF):  the National Nuclear Regulator’s office(NERSA); NECSA itself; the National Radio-Active Waste Disposal Institute; Mintek and other smaller entities such as the Mine Health and Safety Council, the State Diamond Trader and the Diamond and Precious Metal Regulator.

Parliament therefore had to consider recently the period ahead covering 2020-2024 in the form of the Medium-Term Strategic Frameworks, or projections, for all these DMRE bodies.   This is no mean task in the light that may have suffered from the perambulations, thievery and in some cases, sheer ignorance resulting from the switchback ride of ten successive ANC ministers of energy and and ministers of mining.

Disjointed empire

Himself a  somewhat confusing and at times erratic Minster of Mineral Resources and Energy, Gwede Mantashe  is now trying to put back the combined pieces of the jigsaw representing DMRE into some sort order but until now he seems to have been dealing with the edges and corners pieces of the puzzle but not dealing with the centre section where the working parts are.

Nobody is ever quite sure, it seems, in the case of NECSA, what actually is going on in this somewhat secretive corner of government.    In this area, now that the Zuma myth of the “New Build Nuclear” has been dispelled thanks to a court order to this effect, the re-tasking and consolidation of Minerals Resources and Energy department has been mostly completed.

The magic word

However, the question of nuclear energy has once again arisen, mainly due to a passing comment from the Minister that nuclear was indeed to become at some time part of the energy mix.

Ears pricked up in the environmental lobby camp and energy experts said in aghast that the energy mix after years of debate was now fixed.  One must remember, of course, that the nuclear energy issue never really goes away in the light of Koeberg power station operations in Cape Town and and medical isotopes from Pelindaba, Pretoria.

Half a billion in the red

The NECSA subsidiaries are NTP Radio Isotopes, Pelchem, Pelindaba Enterprises and Safari-1. NECSA overall has suffered cumulative losses of R257.78m in the 2016/17 and 2017/18 financial years and is expected to announce an even larger loss of R294.27m for 2018/19, resulting in cumulative losses of R552.05m for the three-year period.

This was more than evident in NECSA recent presentation to Parliament which, as it turned out, was just an interim report and more of a wish list than anything else.   Nevertheless, the ‘plan’ does indicate a complete change of direction.

SOE problems

In the case of NECSA the return to  “normality” might be a little faster than the other problem child of Department of Mineral Resources and Energy (DMRE),  PetroSA.    Sadly, in NECSA’s case, many excellent scientific brains have gone elsewhere and an opportunity to establish SA excellence in the field of isotopes lost.

The frightful track record of losses came to a head in 2019 when it was stated in the NECSA annual report that “ the significant delay in any new nuclear power plant programme to be undertaken by NECSA had become irrelevant”.  This was established to be for experts hired but never deployed.  “Irregular and wasteful” as the Auditor General put it.

Turnaround plan

The NECSA board filed a report in 2018, signed by former chairperson Dr Rob Adam and former acting CEO Don Robertson, which attempted to return NECSA to its original mandate of to promoting radiation sciences and technology research which included a programme of the retrenchment of valuable staff as part of the process of slimming down.

Both Dr Adam and CEO Robertson then left NECSA having filed the report with new DMRE department but this gathered dust, it appears, since other priories in gas development and Eskom dramas must have occupied the mind of Minister Gwede Mantashe.  However, he subsequently and eventually appointed Ayanda Myoli as acting CEO of NECSA.

In his first attendance at Parliament, 19 May 2020, Myoli  told Parliament that NECSA that for the coming year, NECSA would have a turnover of more than R2bn in the 2020/21 but still carrying a projected net loss of R61m on its shoulders.

Possible profits

Myoli told MPs last week that the key financial objective in the short term was to reduce losses and to rehabilitate the balance sheet to enable it to fund its growth and expansion strategy.  Looking ahead he further told the Portfolio Committee that for year five of the plan ahead, NECSA expected to make R550m in net profit and by 2030, R1.4bn net profit.

Over the next 12 months, he said the group’s objectives included commercial subsidiary NTP Radioisotopes regaining its 20% share in the global market for Molybdenum-99 (Mo-99) medical radioisotopes, lost due a hibernation period when the station at Pelindaba was closed down in terms of UN requirements.   In the future NECSA is to increase its range of medical radioisotopes from three to four, Myoli added and continue support services include irradiating target plates from the SAFARI-1 research reactor.

 Competing with China

Another objective is to re-gear NECSA’s other subsidiary, chemical manufacturer Pelchem, who produce fluorochemicals in competition with China, and increase its revenues by R78m by building the necessary plant to enter the  commercial hydrogen fluoride industry, Myoli said.

With sister subsidiary Mintek, Pelchem would enter the antiretroviral drug market working with “international partners” Myoli then said, aiming to achieve a 35% share in the local ARV market and targeting to earn revenues in excess of  R721m per annum.

Re-entering nuclear

Ayanda Myoli stated that NECSA was not only to be responsible for the recreation of a nuclear fuel cycle in South Africa, protecting and maintaining the Koeberg installation but was proposing a new multi-purpose 2,500 GW nuclear reactor direction for the future.

In questioning NECSA, Kevin Mileham (DA) said he was particularly concerned that Ayanda Myoli had talked about a about 2 500 gigawatts nuclear reactor, small as that maybe compared with previous plans  of past president Jacob Zuma. This would fall, Mileham presumed, under the mysterious Pelindaba Enterprises, which according the, had hardly been mentioned in the framework plan at all for the next period. He asked for confirmation

Conflict on statements

DA’s Mileham said any nuclear reactor did not align with the IRP, which made no provision for 2 500 gigawatts from any new build projected. He said that NECSA must be working off the wrong version of the IRP and said CEO Ayanda Myoli had simply repeated what Minister Mantashe had announced a week ago when he spoke on this to the media. Mileham, as shadow minister of energy for the DA, wanted an official explanation in writing as this was the first time the issue had been raised in Parliament.

CEO Myoli responded that the IRP had delineated what plant ought to be commissioned up to 2030. He said the IRP does not list what goes beyond 2030. He added that even assuming DMRE, on behalf of NECSA, placed contracts in 2024 for any relatively small and supplementary new build nuclear programme, there would be nothing online before around 2030/32, after the current IRP period had expired.

Commenting as an individual, Myoli said that he felt that the current IRP had a weakness in this area  as it now considered inputs in process nine years from now, and for mega projects in energy nine years was absolutely nothing.

Further nuclear questions

Myoli said any ARV’s with Pelchem would be produced under licence from Macleod Pharmaceuticals Limited from India, currently the largest producer and supplier of ARVs and TB pharmaceutical products. Currently, they were awaiting the final concurrence from the Minister of Finance and the Minister of Health on this.

It seems Macleods  it is one of the ten largest pharmas in India owned by Dr Rajendra Agarwal & family producing generics for a range of diseases including asthma, osteoporosis and diabetes.  Agarwal’s older brothers Girdhari Lal Bawri and Banwari Lal Bawri are chairman and joint managing director respectively.

 Wrapping up 

In conclusion, the presentation said that the new strategy was intended to make NECSA “a world leader in nuclear radiation and related technologies and chemicals  by 2030”. The strategy set targets for the next 12 months, the next five years and the next ten years.

Although the meeting time was limited (the main problem with parliamentary virtual meetings) it was quite apparent that by no means had NECSA close to explaining its full programme for the future, nor in fact was it ready to disclose this in detail.

Posted in Energy, Enviro,Water, Finance, economic, Fuel,oil,renewables, Mining, beneficiation, Public utilities, Trade & Industry0 Comments

Hopes pinned on PetroSA comeback

…… may 15 2020…..

CEF outlines plan to save PetroSA

…… In a series of statements to Parliament’s Mining and Energy Portfolio Committee, acting CEO of Central Energy Fund (CEF), Lufuno Makhuba, surprised many with a promise of not only totally restructuring government’s stake in the energy sector but to save ailing oil and gas subsidiary PetroSA with major capital “re-vitalisation”.

He also hinted on plans to enter the fuel retailing industry as a major player, PetroSA currently owning only one fuel station in the Free State.

Pipe plans

Makhuba stated that it would be proposed that “the Transnet fuel pipeline” (which particular one was not named) should fall under the management of CEF with income re-routed accordingly.  The plan also was a request that PetroSA should move towards LNG developments and to execute liquid nitrogen gas (LNG) projects with “strategic partners”.  He also proposed that CEF should receive 25% of the national fuel levy.

In order to breathe new life into PetroSA, Lufuno Makhuba suggested that in addition a proportion of carbon tax funds should be re-directed by Treasury to assist in the “recapitalisation” programme as well as the previously mentioned pipeline income.  He said that CEF would acquire by transfer other state “energy assets” in order to build its portfolio income.

Makhuba told Parliament that the CEF was now “busy reducing operational costs and divesting in unnecessary  buildings” as a holding entity.   The liability on its books of an estimated figure of R8bn mainly arising from the PetroSA Mossel Bay gas to liquid operations would be “dealt with”.

The answer

“Until now”, he commented in his presentation, “CEF had had no operational plan, no strategic direction and has been subjected to a leadership vacuum.”    He said he and his colleagues were at the moment producing the final plan to solve the group’s two most pressing problems – that of restructuring the group so that activities were inter-connected and to provide for the principle that PetroSA becomes “a revenue producing National Oil Company as per its mandate”.

Lufuno said that the new plan would also involve integrating its subsidiaries Strategic Fuel Fund (SFF) and iGas with PetroSA.

Long time coming

Parliament has been demanding a plan during portfolio meetings for PetroSA for over two years, some attempts at doing this being attempted but always they had come before committee with neither Treasury approval or any form of accompanying financial plan. (ParlyReports in 2018/9 refer)  Parliament has rejected all over the months.

Lufuno said that the CEF group was still making an overall loss, and estimated R330m for 2018/9 which was an “improvement” on the R1.4bn net loss reported in the previous year, most of the loss attributable to  PetroSA. However, no actual numbers were  once again presented.

Right into the red

Makhuba, presumably speaking in his dual capacity as financial officer, his previous position at CEF, said the PetroSA deficit “weighs heavily on the group’s earnings and although PetroSA remains in the red, it had nevertheless improved on the losses reported in  previous years.   PetroSA recently suffered an “impairment” on its balance sheet of R14bn.

Matters to be dealt with in the next few weeks include deploying an external refinery team to optimise refinery operations at Mossel Bay. Other tasks include strengthening sales and business development and institute consequence management

Issues and problems at PetroSA are not being taken lightly,” he told his audience of MPs.  “We can’t have poor business performance, quarter on quarter, and not react as has been the case in the past.  The new plan deals with how to hold people to account and what to do with assets.”

Desperate stuff

In what sounded like a business rescue discussion, Monde Mnyande, acting chairman of CEF, (it appears on loan from SA Reserve Bank) said that CEF had established that in deciding what to do there were three options before them . The first was doing nothing at all, other than finding find R25m to finalise PetroSA accounts for the current year,  which option would probably collapse CEF in the process and lead to costing the taxpayer “billions in write offs” .

The second option was restructuring CEF but closing down PetroSA at a cost of some R15bn with the associated cost to the Mossel Bay and Eastern Cape economy.

Just money

The third option was to source R18bn from equity input and re-structure PetroSA with its new management developing a partnership strategy on the basis of new initiatives in the petroleum industry.

Monde Mnyande said that the third option was preferred but there was no intention of asking Treasury for this as a bailout for PetroSA.  What the new CEF board wanted would be the portfolio committee’s support for the restructuring process as described.

As far as PetroSA was concerned,  he said, such restructuring would involve inviting strategic partners to assist them with upgrading refinery operations, divesting from upstream blocks and investing in downstream activities.

Sasol story

Following this, a major case of misunderstanding by the media arose.  During questioning, Cheryl Phillips (DA,) said she knew that PetroSA only had downstream one filling petrol station in the Eastern Cape but asked if there was any plan for PetroSA was to build more petrol stations of its own or acquire such assets from others.  She reminded MPs of the aborted PetroSA deal with Petronas/Engen.

Monde Mnyande replied that he knew such assets did exist on the market at this moment and in particular he was aware that Sasol was selling such assets.  This sort of thing might be an example of the way PetroSA had to go, he said.

Due to misreporting in minutes and the what perhaps was said somewhat indistinctly by Mnyande, a head line emerged in Business Day that PetroSA was already involved in a deal with Sasol.  Mnyande never said this, confirmed by ParlyReport, and a CEF spokesman denied that he did a week later in a statement.

Looking back

Mnyande continued with his time slot stating that one of CEF’s biggest mistakes in the past was to think it could operate alone without the government and DMRE, especially during turbulent times at Mossel Bay. A great number its executives without experience were in acting roles and failed to follow the basic rules, he said.

In answering questions by Kevin Mileham (DA) on the illegal sale of national strategic fuel stocks by the Strategic Fuel Fund four years ago to a large oil trader-consortium, Lufuno Makhuba  replied that the contested sale was the subject of a court case nearing completion, the oil still being retained in storage in South Africa.       Chair Monde Mnyande said a new CEO, who was a woman well known in the industry, would be appointed as CEO for SSF shortly.

Let’s hear more

In general questioning, which is difficult in virtual, Mileham threw cold water at any plans to save PetroSA in the manner suggested since any such idea at the moment could not be loaded on to the taxpayer’s shoulders. However, he said the DA would await developments and finalisation of the plan before responding in full

He asked if, in the process of restructuring, whether it was CEF’s  plan to move the regulatory authority, the Petroleum Agency of South Africa, out of CEF to a new domain. As the meeting timed-out, the chairperson asked Lufuno to respond to Mileham’s question in writing.

Posted in Energy, Enviro,Water, Finance, economic, Fuel,oil,renewables, Public utilities, Trade & Industry, Transport0 Comments

By-passing Parliament at one’s peril

….editorial,  30 May 2020

Regulations mania hits South Africa …..

Winston Churchill, perhaps the greatest political and parliamentary figure of the last century, said that if you make 10,000 regulations you destroy all respect for the law.  Take a look at South Africa where far too many conflicting and nonsensical regulations are espoused on a weekly basis, some of them with only a loose and highly doubtful connection to the law, the Disaster Management Act, under which they are gazetted.

What started with good intent in the rush to halt the spread of Covid 19, ‘flatten the curve’ and buy time to build medical supply lines and PPE reserves, has turned into a regularised pattern of government by dictate.  We are in danger of getting used to the idea of government finding a way around the people’s Parliament just because 400 people can’t gather together in the light of social distancing, in itself another regulation.

This shortcut to governance has to be stopped before it becomes regularised in any way.  In the process of searching for a way to speed up what at times can be a cumbersome system of democratic checks and balances, the country has invented an immensely powerful and what could well be an illegal intervention named, by somebody unknown, as the National Coronavirus Command Council.

Rules in bulk

After only a month of the president’s announcement of the declaration of the national state of disaster, more than 50 sets of Covid-19 related regulations, directives, notices and directions have been published nationwide in its name.    Lawyers and business chambers are struggling to keep up with it all.

The problem now being faced is two-fold.  Firstly, the high-sounding and most unfortunately militarised name of “Command Council” represents an entity not recognised in the Constitution, or anywhere in the statute book.   It is purely an invention of a clique within the governing party as an instrument to administer a law cobbled together in a few months called the Disaster Management Act.

Somehow, without the knowledge of Parliament, a handpicked number cabinet ministers, chosen one has to assume by persons residing at Luthuli House, has granted executive functions and powers to a pick of between 8 and 19 cabinet ministers (the number varies) who meet at undisclosed places and take national decisions.

The same unknown group has ignored some thirty to forty other cabinet ministers for reasons unstated to form this command unit and there we have it, a new grouping administering a whole country by regulation.  It is so important that we do not get used to this alien concept as a substitute for ordinary democracy, whether or not it has a body a scientific expertise advising it or not.

Power point

On the subject of powers, the Constitution is quite clear – all cabinet ministers are accountable “collectively and individually to Parliament”.   But to repeat, this caveat is made nonsense of when a cabinet cabal, including the Deputy President, start making government policy affecting citizens’ rights without even a parliamentary nod.

Granted, that originally there was a need for speed and given the fact that Covid 19 is a disaster of global proportions, it was understandable that hastily convened and rushed virtual parliamentary portfolio committee meetings tried vainly to “debate” the issues that might arise as a result of implementing the Disaster Management Bill.    In fact, they did remarkably well in the circumstances and South Africa became the first country to try and handle parliamentary debate electronically in the light of lockdown.

Law by laptop

Virtual meetings make any meaningful debate nearly impossible at the best of times. They are designed more for briefings than for discussion.  In the understandable rush, the buttons pressing the “ayes” became the norm in the short time allowed. The Disaster Management Act (DMA) is the result and is now history.

Now, the buttons are being pressed by Dr Nkosazana-Zuma, the Minister of Cooperative Governance and Traditional Affairs (COGTA), the department which the DMA empowered, most assuming that COGTA would be more of a spokesperson for the system to be adopted.

Governance by regs

However, “risk-adjusted strategy regulations” were published in a flash by COGTA in the light of the disaster (not emergency) powers with a statement that read, “The Cabinet minister responsible for cooperative governance and traditional affairs upon the recommendation of the cabinet member responsible for health and in consultation with cabinet, declare which of the following alert levels apply, and the extent to which they apply at a national, provincial, metropolitan or district level.” It all sounded like we had things in hand.

In the UK or Commonwealth countries, this process would have amounted to making Dr Nkosazana-Zuma prime minister and Dr Zweli Mkhize her deputy prime minister.  Nevertheless, Parliament in SA  soon fell outside of the inner circle when it came to oversight. Parliament deals with legislation not regulation.

What sticks to the wall

After a week or so,  it became more than noticeable that many of the regulations just did not link up and appeared randomly unconnected. The cooked chicken problem, no flip flops and absurd choices on who could and could not work.   Looking at it from a parliamentary aspect, to create temporary hospitals and to ban liquor and cigarette sales, and then cancel one factor but not the other, seemed not only a stretch under the same law but also a legal anachronism.

Worse, just the act of banning liquor sales and thus damaging the tourism and hospitality industry possibly forever is unlikely to pass any “justification analysis” constitutionally.    Most of the public comments called for in the form of  business submissions are now accumulating in government offices or parliamentary boxes and certainly unlikely ever be seen by Dr Nkosazana Zuma.   She is known for having no appetite for this sort of thing, as was discovered by the African Union.

LIFO

Now many of the regulations are causing serious “unintended consequences” in application, such as schooling, resulting in a law gone rogue.  A further well publicised example has been where regulations allow religious gatherings whereas most major religions did not call for them, nor will exercise them. Gatherings include funerals for the dead but not a healthy game of bowls for the elderly. Most have no idea of who consulted who on outcomes, representing more muddled thinking by a body which records no minutes and meets in secret.

South Africa has invented a most dangerous mechanism where everybody just relies on the Presidency to eventually “put things right” when the panic is over.  To do this, President Ramaphosa, in the light of a forthcoming ANC conference, will have to dissolve this mechanism somehow and terminate its powers. This politically powerful entity is led by a person who contested with him the position of president and who split the governing party in half doing this.

Its going to be a bumpy ride.

Posted in cabinet, Cabinet,Presidential, earlier editorials, Finance, economic, Fuel,oil,renewables, Justice, constitutional, Security,police,defence, Special Recent Posts, Trade & Industry0 Comments

Parliament goes virtual for lockdown


….20 May 2020…

SA first with virtual e-debate

….At the same time as the venerable British Parliament was tackling what seemed to them a totally invasive idea of a virtual e-Parliament, South Africa was simultaneously tackling the same subject as COVID 19 arrived at the shores of Africa.  Immediately, the issue of the consideration of lockdown conditions arose in SA and the question of how Parliament could work with everybody boarded.

Whilst British parliamentarians dithered on the subject and due to the fact that the UK kept social distancing going for a much longer time before their lockdown came into force, South Africa’s virtual website portal went up in an incredibly short time and was first in the world by a few days.

Maak ‘n plan

In comparison, the British virtual system. which is also now also working, only allows for debate in the House of Commons whilst South Africa, in terms of its Constitution, follows proceedings in both the National Assembly and the NCOP and also at committee level as well, with the current joint meetings providing provincial coverage.

The design of the entrance website is pretty similar to the UK portal, the principle being the same but with a British budget, the UK presentation is a good deal slicker.  All the same, the Daily Telegraph complained after the UK launch that all that the voice links in the meetings sounded like Darth Vadar and it was confusing to know who was speaking.

Many players

The beginner’s look of the SA virtual meetings is understandable in the situation.   One can see in SA technicians are having a daily struggle with people using Skype and Zoom connections for the first time, some of whom have little knowledge of the difference between an app and a hard drive.

Most are trying, knowing it all has to happen and it would be best to learn quickly but a certain number of senior politicians still demand studio facilities and a camera.   We shall no doubt look back in years to come and laugh at these early attempts to live a virtual reality life.

48 hours allowed

In South Africa, where the decision to suspend the SA Parliament was a “precautionary measure” in the light of a forthcoming Cabinet decision on how to deal with the pandemic, Parliament’s presiding officers in the form of chief whips and political parties all agreed beforehand on the 17 March that the remaining two days of parliamentary business would be devoted to urgent legislation only.

As a result of this decision, Budget Papers in the form of the Division of Revenue Bill were hustled to the National Assembly for adoption in order that money could flow to the provinces and local government.   A Cabinet meeting followed and the Speaker of the House, who acts for the President in Parliament, was summonsed for a meeting soon after.

Hard facts

The role of Parliament is indispensable for the country to run.   The Constitution demands that Parliament scrutinise and oversee all Executive actions, processes Bills in the  form of legislation, to provide a forum for public consideration of issues and to facilitate public involvement in its legislative and other processes. Such is inviolate, whatever the conditions facing the country.

Realizing that the only way was virtual meetings to consider matters,  Speaker Thandi Modise issued a statement that Parliament would have to “intensify its technological capabilities for a transition to an “e-Parliament”.   She concluded that as a result, a decision had been taken that “Parliament will be able to resume taking advantage of virtual media technology”.

 Into action

The leave period, or recess, for MPs was duly cancelled and parliamentary staff were assigned permits to stay at work.  They used this time for urgent meetings -to assess how Parliament could best resume its proper function under lockdown regulations and deal with the lacuna (i.e. a situation where there is no applicable law to deal with the matter).

It was agreed by the Speaker that priority had to be given in Parliament to virtual meetings that required oversight on COVID-19 matters, bearing in mind the limited number of meetings that could be held at any one time.  It was also agreed that any virtual meetings would be primarily joint meetings based on the government cluster system, i.e. meetings comprising the various representatives from a number of differing committees affected by one subject.

 Order, order

Chief whips were then tasked to adapt parliamentary rules to meet the new conditions. All this had to be based on the procedures, precedents, practices and conventions, which have been developed over the years, known as parliamentary rules.  This was in respect of not only how NA and NCOP virtual plenary meetings were to be run but how debate was to be conducted committee.

Speaker Thandi Modise then confirmed to all political parties that in the planned virtual meetings, members of parliament would have the same powers, privileges and immunity as they have ordinarily in parliamentary proceedings.  Quorum requirements were to be exactly the same she said, and MPs would be entitled to cast their votes either electronically or by voice.

Public participation and access to virtual proceedings had to be made possible, said Modise, “in a manner that is consistent with a participatory and representative democracy, virtual meetings to be live-streamed wherever possible”.

Global comparisons

Despite time limitations Parliament was indeed able to try and benchmark against some other legislatures who were operating as legislatures whilst their countries were fighting against COVID-19. To the surprise of all, little was found.

The prime constitutional constraint in South Africa’s case was that any virtual meetings had to involve both the sittings of the National Assembly and the National Council of Provinces and these had to be seen to be happening if the public wished to observe proceedings, a factor necessary according to the Bill of Rights.   This was overcome by making most meetings “joint” committee meetings of parallel committees from both Houses.

One and only

In the UK, which has no constitution, a parliamentary virtual meeting concept had been designed and planning was six months into happening.  From a standing start, SA Parliament achieved their deadline in about a fortnight.  Australia and New Zealand are still only thinking of going about it and the USA is still fighting about lockdown itself.

Without fanfare, the parliamentary process under the extraordinary conditions began internally in the Cape Town precinct after a very short training period on 20th April, with access being made to the existing  public parliamentary website on the link www.parliament.gov.za/parliament-tv.

 Time will tell

The whole thing seems to work quite well but obviously glitches occur regularly whilst MPs struggle from time to time to find the mute button and some appear if they have just got out of bed.  Already, however, after an initial learning curve, things are changing and before long it will be the way things happen.

At each meeting, provision is made for the parliamentary secretary to log in those MPs present at a virtual meeting, name them, see them, accept apologies and at point count voting if required from those logged in through the  electronic response system.   Minutes are established later through the audio track recorded in the same manner as before. This is quite some procedure to witness in some of the hallowed chambers where the Speaker once wore a wig.

An MP’s presence in any virtual meeting is established through a secure link sent to their email address which also enables counting to be established for the purposes of establishing a quorum, taking decisions on issues or voting on a matter. Links are established on Facebook, Linked-in, Twitter and Instagram, the photography on Facebook on parliamentary issues being quite stunning.

 7 out of 10

In general, the new parliamentary virtual world established is considered by most quite for such a rush and the process will no doubt tide the country through this terrible period in its history.  This aside from any opinion on how well MPs handle their own inputs and deal with difficult question of switching between one another to pose and answer questions.  What you see is what you get.  The result is not always pretty but it is legal.

One advantage is that with so much happening with lights flashing and buttons to worry about, there is little time for any MP to have a quiet slumber.

Posted in Agriculture, cabinet, Communications, Defence, Earlier Stories, Energy, Fuel,oil,renewables, Home Page Slider, Justice, constitutional, Police, Public utilities, public works, Security,police,defence, Trade & Industry, Transport0 Comments

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