department of energy ppc presentation on the department’s 2010/11 annual report ms n magubane...

DEPARTMENT OF ENERGY

PPC PRESENTATION ON THE

DEPARTMENT’S 2010/11 ANNUAL REPORT

Ms N MagubaneDirector General

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PRESENTATION• Introduction• Overview of the service delivery and organisational environment• Performance against predetermined objectives – key focus areas• DOE contribution to Government Outcomes and MDGs• Programme performance

•Programme 1: Administration•Programme 2: Hydrocarbons and Energy Planning•Programme 3: Electricity, Nuclear and Clean Energy•Programme 4: Associated Services

• Financial report•Report of the Auditor General

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INTRODUCTIONIn his 2011 State of the Nation Address, President Jacob Zuma reiterated that energy security is critical for economic development and job creation.

Energy is a fundamental aspect of human existence: it is the principal means for providing access to basic needs such as food and water and it facilitates various opportunities for the achievement of a decent quality of life.

Access to affordable, safe, and modern energy services is therefore a prerequisite for sustainable development and for achieving the Millennium Development Goals.

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INTRODUCTION

Mandate:Ensure secure and sustainable provision of energy for socio-economic developmentMission:To regulate and transform the sector for the provision of secure, sustainable and affordable energyAim:Formulate and exercise oversight on the implementation of the overall energy policies and to ensure access to affordable and reliable energy by all South Africans, as well as promote environmental friendly energy carriers

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OVERVIEW OF SERVICE DELIVERY ENVIRONMENT: STRATEGIC OBJECTIVES

The Department’s 2010/11 strategic plan seeks to deliver results along the following strategic objectives:

1. Ensure energy security – create and maintain a balance between energy supply and demand, develop strategic partnerships and ensure reliable delivery and logistics

2. Achieve universal access and transform the energy sector – diversify the energy mix, improve access, provide quality and affordable energy, promote safe use and transform the energy sector

3. Regulate the energy sector – develop legislation, encourage investment and ensure compliance

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OVERVIEW OF SERVICE DELIVERY ENVIRONMENT: STRATEGIC OBJECTIVES

4. Ensure effective and efficient service delivery – understand stakeholder needs, improve turn around time(s)

5. Ensure optimal utilisation of energy resources – develop enabling policies and encourage energy efficient technologies

6. Ensure sustainable development– promote clean energy alternatives and economic development, promote job creation

7. Enhance the DOE culture, systems and people

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OVERVIEW: THE NEW DOE (interim and final structures)

The following organisational structures were approved for the implementation of the 2010/11 strategic plan:•Interim structure introduced 1 April 2010 – was based on the available funding to accommodates personnel transferred from the DME and to some extent critical posts needed to establish and support the new department.•Final organisational structure – could not be implemented due to funding challenges

A year later, the interim structure is still not fully implemented, due to funding challenges

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OVERVIEW: ORGANISATIONAL STRUCTURE(S)

DEPARTMENT’S INTERIM OPERATIONAL STRUCTURE – IMPLEMENTED ON 1 APRIL 2010

Minister

Director General

Electricity Nuclear and Clean Energy

Hydrocarbons and Energy

Planning

Corporate Services

Office of the Chief

Financial Officer

Office of the Chief Operating

Officer

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OVERVIEW: ORGANISATIONAL ENVIRONMENTTo achieve its mission, the DoE is currently split into the following programmes:Programme 1: Administration – provides strategic and management support service to the Ministry and the Department Sub programme: Corporate Services Sub programme: Office of the CFO Sub programme: Office of the COO

Programme 2 : Hydrocarbons and Energy Planning Developing policy and regulations to manage the petroleum, coal and natural gas industry. The Petroleum Controller is responsible for the implementation of the Petroleum Products Amendment Act,2003(Act No.58 of 2003)Energy planning which includes amongst others integrated energy planning

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OVERVIEW: ORGANISATIONAL ENVIRONMENTProgramme 3 :Electricity, Nuclear and Clean EnergyElectricity: developing, implementing and monitoring electricity policy and programmes. The INEP business unit manages electrification planning, funding and implementationNuclear Energy : improving the governance of the nuclear sector, specifically in relation to the nuclear safety, on – proliferation and nuclear technologyClean Energy : facilitating the implementation of renewable energy and energy efficiency technologies, and promoting and regulating CDM facilitiesProgramme 4: Associated ServicesState owned entities reporting to the Minister of Energy

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DEPARTMENT OF ENERGY – APPROVED FULL STRUCTURE

*Revised line function streams

Minister

Deputy Minister

Director General

Energy Policy and Planning*

Clean Energy*

Nuclear*

Energy Programme

s and Projects*

Financial, Information and

Supply Chain Management

Governance and

Compliance

Corporate Support Services

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OVERVIEW: ORGANISATIONAL ENVIRONMENT• DoE started to operate with 41 % of its capacity in

April 2010 which later on in the year increased to 52% of the required capacity

• Majority of funded posts were transfers from the DME and did not address most of the critical post requirements

• Most senior positions in Support Services were filled by year end. One critical resignations during the year – Acting CFO

• On average, the vacancy rate for the past year based on the approved interim structure was 10.6%

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OVERVIEW: ORGANISATIONAL ENVIRONMENT

•We ensured that vacant positions were filled within a period of four months

•Employment equity figures of the DoE, Black constituted 93% while women constituted 54%

•Due to lack of adequate funding, not all training gaps could be addressed during the year

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OVERVIEW: ORGANISATIONAL ENVIRONMENT•The following governance structures were established during the year under review:-Internal Audit-Audit Committee-Strategy and Risk Management-Monitoring and Evaluation (later in the year)-Procurement Committee and-Committees related to HR

•DoE is currently sharing accommodation with DMR at the Trevenna Campus in Pretoria and regional offices

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OVERVIEW: SERVICE DELIVERY ENVIRONMENT

Some of the challenges faced by the Department in its first year 1. Country was recovering from the 2008/9 economic meltdown2. Urgent need for integrated plans to address security of energy supply 3.Lack of significant investments in the energy sector4. Challenges in the electricity distribution industry5. Urgent need to respond to climate change and global warming in an integrated manner 6.Regulatory uncertainty and price instability in the liquid fuels industry 7.Capacity challenges- manufacturing (refining) and distribution in the liquid fuels sector

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Outcomes Departmental Programme

Outcome 2: A long and healthy life for all South Africans

Electrification of Clinics and health centre's through the National Electrification Program me; introduction of more affordable and cleaner source of energy (LPG) for household heating and cooking

Outcome 4: Decent employment through inclusive economic growth

Security of energy supply to sustain economic growth and job creation

Outcome 6: An efficient, competitive and responsive economic infrastructure network

To ensure reliable generation, distribution and transmission of electricity; address the backlog challenges concerning the maintenance of electricity distribution infrastructure; and to build the NMPP between Durban and Johannesburg to ensure a reliable and sustainable supply of liquid fuels inland.

Government Outcomes and Millennium Development Goals

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Outcomes Departmental Programme

Outcome 8: Sustainable human settlement and improved quality of household life

To contribute to support households and business via the INEP and the job opportunities presented by the electrification program me.

Outcome 10: Environmental assets and natural resources that are well- protected and continuously enhanced

Reduce greenhouse gas emissions and climate change impacts, and improve air/ atmospheric quality


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MDG Departmental Contribution to the MDG’SMDG 1: Eradicate extreme poverty and hunger

The Department’s focus is on the eradication of energy poverty through the implementation of the national electrification programme, energy diversification and affordability.

MDG 3: Promote gender and equality and empower women

Gender mainstreaming in departmental policies, support of women empowerment initiatives, introduction of clean energy initiatives and enhancement of women participation in the energy sector

MDG 7: Ensure environmental sustainability

Introduction and support of sustainable clean and renewable energy initiatives.

MDG 8: Develop global partnerships for development

International cooperation and collaboration at multilateral, bilateral and trilateral levels on energy issues.


SUMMARY OF PERFORMANCE AGAINST PREDETERMINED OBJECTIVES KEY FOCUS AREAS

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Objective Key Focus Area(s)

1. Ensure energy

security

2. Achieve universal

access and

transform the

energy sector-

1. Integrated Resource Plan (IRP2010-2030)2. The Department also started the process of

developing the Integrated Energy Plan (IEP). 3. New Multi Product Pipeline (NMPP) from Durban to

Johannesburg.

1. Integrated National Electrification Programme (INEP)2. The Inclining Block Tariffs (IBTs) for domestic

/residential customers implemented this year. 3. Solar Water Heaters programme. 4. Compliance Audit on the Liquid Fuels Charter5. We launched the 7th Integrated Energy Centre (IeC)

in Qunu

SUMMARY OF PERFORMANCE AGAINST PREDETERMINED OBJECTIVES

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Objective Key Focus Area(s)

3. Regulate the energy

sector

4. Effective and

efficient service

delivery

5. Optimal utilization

of energy resources

1. Regulation of the Liquefied Petroleum Gas (LPG)

supplied to residential customers

2. Published the road-map for clean fuels / CF2.

3. Tabling of the ISMO Bill

4. New Generation / IPP Capacity Regulations

promulgated September 2010.

1. Improve the turn-around time for Petroleum licensing and clear backlogs

2. National and International Stakeholder engagements3. Improve turn-around time for filling vacancies

1. Key policy decisions: IRP (2010-2030), (ISMO) Bill and the New Generation/IPP Regulations, Integrated Energy Plan (IEP)

SUMMARY OF PERFORMANCE AGAINST PREDETERMINED OBJECTIVES

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Objective Key Focus Area(s)6. Ensure sustainable

development

7. Enhance DoE culture, system and people

8.Promote corporate governance

1. Solar Park International Investors Conference in Upington

2. Institutionalise The South African National Energy Development Institute (SANEDI).

3. Create job opportunities through our programmes(i.e. INEP)

1. Department capacity increased from 41% at the beginning of the year to 52% by year end.

2. 26 employees were awarded bursaries

3. A total of 55 graduates participated in the Department’s internship programme

1. 97% of the 2010 budget was utilised. 2. Establishment of governance structures – Internal

Audit Function, Audit Committee, Strategy and Risk Committee, BAC, HR Committees

PROGRAMME PERFORMANCE

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PROGRAMME 1(Sub-programme: Office of the COO)

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PROGRAMME 1: Administration Sub Programme: Office of the COO•Branch started operating in May 2010 with less than 10% capacity, resulting in challenges to fully establish all required components. The unit was able to ensure that •Jointly with DMR, produce and table the last Department of Minerals and Energy’s Annual on time, • Hold the first DOE strategic planning session in November 2010 where the new outcome based planning approach was introduced and implemented.•The Department’ s 2011/12 MTEF(five year plan) was tabled in February 2011 and later presented to the Parliament Portfolio Committee on Energy and the Select Committee on Economic Development.

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PROGRAMME 1: Administration (Continued)

Sub Programme: Office of the COO• Together with the Internal Audit function, governance structures were established• Capacity challenges in the implementation of the Strategy and Risk Management function• Provide oversight of state owned entities reporting to the Minister, strategy alignment, monitor performance against approved plans and ensuring that all SOE Boards are fully capacitate by appointing board members for CEF, PetroSA and NERSA. • Following the Cabinet decision to halt the operations of the Electricity Distribution Industry Holdings, the branch is leading the process of winding up in collaboration with the appointed Administrator and EDIH Board

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PROGRAMME 4: Associated ServicesTransfers to SOEs•During the year under review the Department transferred grants to the EDIH, NECSA and the NNR. NERSA is fully funded by levies from the regulated industries. The CEF Group operations are in the main funded from the income generated from operating activities

•The table below indicates the transfers to the SOE’s for the 2009/2010 and 2010/11 financial years

* significant decrease in 2011/12

• m

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ENTITY 2009/10 2010/11

SANERI(Pty)Ltd R32 719 000 R25 654 000

EDIH R72 214 000 R61 582 000 *

NECSA R446 485 000 R476 780 000

NNR R23 793 000 R19 954 000

PROGRAMME 1(Sub-programme: Corporate Services)

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PROGRAMME 1: Administration (Continued)Sub Programme: Corporate Services•Through the HR function, the Department’s average vacancy rate for this past year was 10.6%•The first 95 critical posts were filled within 4 months. •Employment equity – blacks represent 93% of the total staff compliment, women represents 54% of the total employees.

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262 employees participated in the Department’s training programmes e.g.:

•Advance Management Development Programme, •Financial Management for non Financial Management, •Excellent Customer Service for Frontline Staff, •Job Evaluation, Core and Job Description, •Anti- Fraud and Corruption, •Leadership and Management,•Human Resource Management, •PERSAL training, •Computer Training(Microsoft Excel, Word and PowerPoint), •Basic Accounting System (BAS), •Departmental Induction programme and Public Service

Induction Programme.

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Sub Programme: Corporate Services• 39 employees were awarded internal bursaries (26 employees accepted). 55 unemployed graduates were engaged on an internship programme and 12 students (i.e. civil, chemical and mechanical engineering fields) •The Chief Directorate Communications together with GCIS developed and implemented the Energy Efficiency Awareness Campaign. A number of radio dramas, TV series (eTV) and other SABC channels as well as Billboards and newspaper adverts were done.

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Sub Programme: Corporate Services•A total of 10 Public Participation Programmes (PPP) were conducted during the fiscal period under review as per Cabinet pronouncement.

•The Department has partnered with SOEs such Eskom, Nersa, NNR, PetroSA, EDIH and Necsa on these public participations

•These PPPs have proved to be a successful platform to engage civil societies across all government spheres

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PROGRAMME 2Hydrocarbons and Energy Planning

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PROGRAMME 2: Hydrocarbons and Energy PlanningPurpose: Undertake integrated energy planning to promote the sustainable use of energy resources. Develop appropriate policies, implement regulations and monitor compliance within the hydrocarbons sector.

Hydrocarbons develops policy and regulations to manage petroleum, coal, and natural gas The Petroleum Controller is currently included under this sub-programme and is responsible for the implementation of the Petroleum Product Amendments Act (2003).

Energy Planning promotes the sustainable use of energy resources through integrated energy planning

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PROGRAMME 2: Hydrocarbons and Energy Planning (Continued)

Objectives and measures•Ensure sustainable energy supply by developing the Integrated Energy Planning Strategy by September 2010.•Developing the national strategic fuel stocks policy by March 2011.•Provide oversight over the construction of the National Multipurpose Petroleum Pipeline. •Encourage research and development for energy related technologies with a key focus on energy efficiency and mitigating greenhouse gases by establishing the South African National Energy Development Institute (SANEDI) by March 2011. (R &D –focus on energy efficiency and mitigating greenhouse gasses)

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Objectives and measures•Strengthen the regulatory framework in the petroleum products industry by implementing the regulatory accounting

system before March 2011.• Improve the countrywide availability of petroleum products by licensing retail, manufacturing and wholesale operators within 90 days of receiving confirmation of the publication of licensee applications.• Facilitate the participation of historically disadvantaged

individuals in the petroleum sector by licensing 25 per cent of all licence applications by historically disadvantaged individuals in each year of the MTEF period

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PROGRAMME 2: Hydrocarbons and Energy Planning (Continued)Progress Achieved

• A draft LPG Strategy has been developed – The Department will soon publish a Liquefied Petroleum Gas (LPG) strategy in a bid to encourage greater use of LPG in place of electricity, which could also help delay the need for new electricity generation capacity. Currently 5% of South Africans use LPG and the intention is to target at least one million additional users over the next five years. •Clean Fuels 2 – Discussion document on fuel specifications and standards –Published 08 March 2011 for comment •SANEDI was established during the year - to promote the diversification of energy supply and ensure emerging energy technologies are incubated and commercialized, as well as to

ensure appropriate human capital is developed, to support new energy-related industries.

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Progress AchievedOther progress included an infrastructure database report containing maps, and further improvements to the energy statistics database.

Progress Partially Achieved• CSIR has been contracted to develop the modelling system for the IEP and work on this has commenced. • Availability of relevant data at the required level of detail for energy modelling purposes remains a key concern, which is difficult to address in the short term.• A draft Strategic Stocks Policy has been developed and associated regulations drafted. A Cabinet Memorandum has also been prepared to seek approval for publication and public comment. The consultation process, particularly with National Treasury took longer than expected. However, this was necessary due to the concurrence required for the use of public funds for the construction of storage tanks by Government

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Progress Partially Achieved•The Integrated Energy Plan was expected to be published for comments by

31 March 2011. Further revisions had been made to the Plausible Futures as well as to the IEP methodology within the IEPS. Significant work has been done in developing the IEP, with the IEP methodology, the Plausible Futures, and the Integrated Energy Planning Strategy documents having being finalized. However, the Integrated Energy Planning Strategy was not approved by Cabinet for publication as was originally envisaged.• Against the annual target of establishing two Integrated Energy Centres

(IeCs), one had been established in Qunu within the financial year, while another at Mbizana scheduled for completion by May

2011. • A comprehensive review of the Liquid Fuels Charter also meant the postponement of the Petroleum Products Amendment Act into the next

financial year since the Charter is currently appended to the Act.

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Progress Partially Achieved•License inspections - a target of 3 660 was planned for the year, and 2 460 inspections were conducted. Insufficient budget and lack of vehicles for inspectors in the Northern Cape and Free State were some of the constraints. •A total of 360 petroleum licensing applications out of 600 lodged were processed within ninety days (60%). •Other partial progress achieved concerned the development of data

collection regulations for which three Cabinet Ministers had provided comments which had been incorporated into the regulations for final gazetting. Original timeframes were extended due to the requirements of State Law Advisors for concurrence by other Cabinet Ministers before gazetting the regulations. • The final report on the Regulatory Accounting System has been submitted

internally, but execution awaited a departmental implementation plan, as well as audited 2009 data from the industry

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Progress Not Achieved

• Although the entire R1.5 billion was transferred by DoE to Transnet for the construction of the Multi-Products

Pipeline from Durban to Gauteng in terms of the Grant Funding Agreement, installation of the 24-inch trunkline has been delayed pending a workable funding mechanism.

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PROGRAMME 3Electricity, Nuclear and Clean Energy

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PROGRAMME 3: Electricity, Nuclear and Clean Energy

Purpose: Provide the policy and regulatory framework for the electricity, nuclear and clean energy sectors in a manner that ensures energy security, universal access to electricity, diversification of primary energy sources and the promotion of clean and efficient technologies The Electricity Chief Directorate develops, implements and monitors electricity policy and programmes. The Integrated National Electrification Programme Business Planning Unit manages the electrification planning, funding and implementation process, including the addressing of electrification backlogs in the quest to achieve universal access to electricity. Nuclear Chief Directorate aims to improve governance of the nuclear sector, specifically in relation to nuclear safety, nuclear non-proliferation and nuclear technology. Clean Energy Chief Directorate facilitates the implementation of renewable energy and Energy efficiency technologies and also regulates and promotes the Clean Development Mechanism (CDM) activities

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PROGRAMME 3: Electricity, Nuclear and Clean Energy (Continued)

Objectives and measuresEnsure a well managed, efficient and safe electricity, nuclear and clean energy industries by:•Implementing the nuclear energy policy through developing an implementation strategy by June 2010•Implementing energy efficiency policies and issuing regulations and strategies to achieve electricity savings of 12 per cent by 2015, based on forecasted energy demand•Regulating the security of nuclear material and facilities through developing appropriate regulations for the physical protection of nuclear material by March 2011. Promote the sustainable use of electricity to achieve a 100MW saving over the MTEF period by:• Publishing the solar water heating framework by June 2010•Ensuring the use of compact fluorescent light bulbs in public buildings and reducing the power used for domestic and street lighting

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Objectives and measures Promote the sustainable use of electricity (cont)•Facilitating the development and implementation of energy efficiency technologies and programmes through developing the energy efficiency standards for appliances and publishing them by 2010/11.

•Increase access to electricity by monitoring the implementation of the integrated national electrification programme, which aims to connect 3.2 million households by 2012.

•Facilitate the implementation and adoption of new and renewable energy technologies in order to meet the 2013 target of 10 000GWh generation from clean energy sources by providing increased support through the renewable energy finance and subsidy scheme and other support programmes

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Progress AchievedEDI RestructuringThe process to review the entire electricity distribution value chain with the aim of developing a focused strategy on energy security, as well as determining the implications of the capital investment required for the entire value chain commenced during the year.

Integrated Resource Plan (IRP 2010-2030)The IRP 2010-2030 was promulgated in March 2011. It provides the blueprint of the power generation options that the country has adopted for the next 20 years, including a portfolio of renewable energy technologies, coal, nuclear, gas and the energy efficiency option.

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Progress Partially AchievedREFIT and fossil-fired power generationUnder the measure 200MW of renewable and fossil-fired power introduced, partial progress was achieved. Negotiations in respect of the 1000MW Open Cycle Gas Turbine Project were concluded and commercial close was reached in January 2011. EEDSM and Solar Water Heaters •Energy Efficiency Demand Side Management (EEDSM) incentive scheme

Standard Offer) - the policy was promulgated and Nersa concluded the stakeholder engagement process, the Minister of Finance has indicated that in order to avoid double dipping between this scheme and the Energy Efficiency Tax Incentive Scheme (EETIS), it has become necessary to ensure that the institutionalisation of SANEDI be fast-tracked, so that they could manage both schemes, before the Standard Offer became operational. • Public consultations on regulations for the EETIS will only commence after June 2011.Nonetheless, the Standard Offer promulgation will facilitate the accelerated uptake of solar water heaters.

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PROGRAMME 3: Electricity, Nuclear and Clean Energy (Continued)Progress Not AchievedRenewable Energy Finance and Subsidy Office (REFSO)When REFSO was conceived, there was no REFIT (or any other incentive scheme) for supporting renewable energy project developer. With the inception of REFIT, it has not been appropriate to use REFSO to fund the 5 renewable energy projects by December 2010 as originally planned. The introduction of the REFIT has necessitated a review of the allocation of subsidies to support renewable energy projects, in order to avoid misallocation of scarce resources. Nuclear TransactionThe plan was to obtain Cabinet approval by June 2010, for the consideration of a nuclear power programme. This was not achieved, because of the delay in adopting the IRP, of which nuclear is a constituent part. The resolution of the nuclear question under the IRP happened in March 2011, thus delaying the decision on the nuclear transaction to the 2011 financial year.

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PROGRAMME 3: Electricity, Nuclear and Clean Energy (Continued) Progress Partially AchievedEnsuring Reliable Transmission and Distribution NetworksThe reliability of transmission and distribution networks outcome was achieved through the identification of critical infrastructure that requires rehabilitation/maintenance. This was done with a specific focus to Metropolitan Municipalities and host cities. The mapping report provides a high level assessment of the situation in metropolitan municipalities and host cities. The outcome of the report further detailed municipal allocations towards maintenance and shortfall for metros and a sample of municipalities. This resulted to the development of implementation plan to manage electricity distribution asset management

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PROGRAMME 3: Electricity, Nuclear and Clean Energy (Continued)Progress Not AchievedElectricity Regulation (ER) Second Amendment BillCertain limitations have been identified under the existing ER legislation, including the facilitation of Independent Power Producers. The intention was to amend this law by April 2010 and this was not achieved. Additional issues have been uncovered under the REFIT programme, which necessitated a delay in processing the amendment of the ER Act piece-meal, but rather to holistically incorporate all the issues that related to IPPs holistically.

CHALLENGES AND REMEDIES Solar Water HeatersSince the programme was announced by the Minister in May 2009, 115 000 solar water heaters have been installed, against a target of 200 000. The majority of the systems installed are funded though the tariff based rebate system. There has not been much penetration in the high pressure market segment, due to the high capital cost The department has introduced the standard offer incentive scheme to augment the funding that has been made available under the rebate scheme by leveraging additional private sector funding

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ANNUAL FINANCIAL STATEMENTS AND THE REPORT OF THE AUDITOR GENERAL

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INTRODUCTION• The department of Energy started operating independently on 1st

April 2010.• The department was allocated 30% of the resource from the

former Department of Minerals and Energy.

• The above resulted in huge challenges for the newly established department of Energy.

• The department had to implement a number of strategies in order to ensure service delivery.

• Despite the challenges related to the establishment of a new department and limited resources, the department’s performance

was satisfactory, with room for improvement.• A New Audit Committee (AC) was appointed in September

2010.

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FINANCIAL PERFORMANCE

Statement of Financial Performance for the year ended 31 March 2011 2010/2011

R’000

Total Revenue 5 658 125

Current Expenditure (234 730)

Transfers and subsidies (5 268 206)

Expenditure for capital assets (3 320)

Total Expenditure

Surplus for the year

(5 506 256)

151 869

Voted fundsDepartmental RevenueAid assistance

143 2783 9204 671

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2010/11 BUDGET OVERVIEW

BUDGET OVERVIEW 2010/11 - Major spending areas

DETAILS Budget Actual spend 31/03/2011

Actual % on budget spend

Rands Million R'000 R'000 %

Transfers and subsidies 5,394.7 5,268.2 97.7%

Compensation of Employees 143.3 142.8 99.7%

Goods and Services 105.5 91.9 87.1%

Payments for capital assets 5.2 3.3 63.5%

Totals major spending areas 5,648.7 5,506.2 97.4%

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2010/11 BUDGET OVERVIEW

BUDGET OVERVIEW 2010/11

DETAILS Budget Actual spend 31/03/2011

Actual % on budget spend

Rands Million R'000 R'000 %

Total Budget - 2010/11 5,648.7 5,506.2 97.4%

Administration 127.5 122.5 96.0%Hydrocarbons and Energy Planning

1,564.7

1,556.4 99.5%

Electricity, Nuclear and Clean Energy

431.7

408.6 94.6%

Associated services 3,524.8 3,418.7 97.0%

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FINANCIAL PERFORMANCEAnalysis of financial performance

• The department’s total spending for the year was R5.51 billion (Budget : R5.65).•The above represents an under spending of 2.5% or R143.28 million.• NT approved R88.22 million as a rollover.

•Unused funds is due to transfers payments not disbursed of 49 Million. This was mainly in non grid electricity that was not transferred due to delays is finalizing implementation agreements with service providers.

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FINANCIAL PERFORMANCEAnalysis of financial performance

• The major reasons for under spending are:Transfers for INEP non grid electrification projects – R114 millionTransfers to REFSO – R20 millionOutstanding transfer payments to EDIH – R5 million

Other:Delays in the procurement of capital assets and vacancies

• Assets Management:The department purchased assets to the value of R3.32 million.

The reason for low purchase of assets is due the fact that the department received assets with an estimated value of R17.41 million from the Department of Mineral and Resources.

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57


Detailed expenditure ( Top 5 Expenditure)

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FINANCIAL PERFORMANCEStatement of Financial Position as at 31 March 2011

2010/11R'000

ASSETSCurrent assets 165,847Unauthorised expenditure 14,860Cash and cash equivalents 136,283Prepayments and advances 60Receivables 14,644 Non-current assets 2,205Investments 2,205Loans - TOTAL ASSETS 168,052LIABILITIESCurrent liabilities 165,847Voted funds to be surrendered to the Revenue Fund 158,138Departmental revenue and NRF Receipts to be surrendered to the Revenue Fund

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Payables 4,079Aid assistance repayable 3,577 TOTAL LIABILITIES 165,847NET ASSETS 2,205

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• The unauthorized expenditure of R14.86 million is due to the transfer payments paid to municipality using an incorrect vote

• The receivable includes an amount of R9.31million receivable from municipalities, the amount was received after year end

• The total liabilities of R165.85 million include R158.14 for revenue to be surrendered and R4.08 million payable to DMR for Independent Power Producer (IPP) project

ANALYSIS OF FINANCIAL POSITION

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INFORMATION TECHNOLOGY MANAGEMENT

•The department has upgraded the Petroleum licensing system

• The department is able to identify license holders in default

• The above system will be upgraded further in order to ensure efficient processing and reporting

•One of the additional functionality will be the interest calculation, on outstanding balances as required by PFMA

•Average systems availability during 2010 calendar year was 70%

• Average availability in 2011 calendar year thus far is 97%

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Report of the Auditor General

Audit opinion:Unqualified audit opinion – both the department and all its state owned entities

Emphasis of MatterIts must be noted that these are not qualification, but items that the AG considers important to users

Matters reported under emphasis of matter:• Unauthorized expenditure – R14.86 million• Irregular expenditure – R110.99 million• Irregular expenditure – R1.37 million

The department has completed an action plan to address AG findings

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Report of the Auditor General

Unauthorized expenditure – R14.86 million

•The unauthorized expenditure was as a result of payments made to municipality using the incorrect vote. These funds were part of the 2009/10 vote. Due to the rejection of this transactions on the system, the payment was disbursed in the 2010/2011 financial year

•The department is in the process of requesting authorization for this transfer from National Treasury

•The department has however addressed the above weakness, to avoid a repeat finding.

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FINANCIAL PERFORMANCEReport of the Auditor General

Irregular expenditure – R110.99 million

•The irregular expenditure was as a result of transfer payments to NECSA that was voted in the 2010/11 financial year

•The transfers were approved by parliament and National Treasury. The actual payment on system was not approved by the delegated official, and the AG concluded that this is irregular expenditure

• The control deficiency has been addressed

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Financial PerformanceReport of the Auditor General

Irregular expenditure – R1.37 million

•The irregular expenditure is as a result of non compliance with procurement process

•The above was due to non adherence to Practice Note 8 of 2007/2008

•Future non compliance with procurement process will be addressed via internal disciplinary process

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Performance information Report of the Auditor General

Reported performance information challenges included

•Consistency

•Relevance

•Measurability Changes to planned objectives, measures and targets are not disclosed in the report of predetermined objectives Reported objectives, measures and targets are not complete when compared with the Strategic planned objectives, indicators and targets Changes to planned objectives, indicators and targets are not approved Planned and reported targets are not measurable Reliability of Information

(There were no material findings on the annual performance report concerning the reliability of the information)

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Thank you

67

department of energy ppc presentation on the department’s 2010/11 annual report ms n magubane...

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