Energy Department has demonstrated its ineptitude and thinly veiled venality

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The following speech was delivered in Parliament today by the DA’s Shadow Minister of Energy, Gordon Mackay MP, during the Budget Vote on Energy.

Ngiyabonga Sihlalo,

The Year that Was

What a year it has been since we last met to debate the Department of Energy’s (DoE’s) annual R8 billion budget.

More so than in any previous year, the DoE has outdone itself in demonstrating its ineptitude and its thinly veiled venality.

The news headlines have been awash with the manifold scandals rocking the Energy sector. Not a day goes by without some new disclosure about Eskom, PetroSA, the Strategic Fuel Fund, the Central Energy Fund or the scandalous aspects of the intended nuclear deal.

Not only are the Department’s failures manifold, they are also becoming legendary.

For this is the Department that has gifted citizens the biggest loss by any state owned entity (SOE) in the history of our country. Standing at approximately R16.2 billion, the impairment liability of PetroSA is currently unfunded and will remain so as PetroSA’s precarious financial situation shows little sign of improving.

This is also the Department that oversaw the illegal sale of South Africa’s entire strategic fuel stock at rock bottom prices and then lied about it to the nation calling it a stock rotation. Little did South Africans know that crude oil stocks do not require stock rotation like finished petroleum products such as diesel or petrol.

This is the Department that has led the nation by the nose, claiming all the while that the nuclear procurement process was legally sanctioned, only to be told by the courts in no uncertain terms that the process has been patently illegal and designed to exclude meaningful public participation.

This is also the Department whose previous Minister last year delivered what can only be described as the kookiest speech ever inflicted upon this House, when she made incoherent comments about bad cheap wine, juvenile delinquents, EFF leader Julius Malema being unable to be a mother (a rather obvious observation one would think) and something about a cow licking a fire.

Suffice to say none of these colourful metaphors assisted in providing any clarity on the array of critical Energy issues afflicting the nation.

Then of course, Chair, we have also lived through President Zuma’s ‘Night of the Long Knives’ cabinet purge, where upon, the insistence of either the owners of the Saxonwold Shebeen or the President of a former Soviet Socialist Republic, Minister Tina Joemat- Pettersson was unceremoniously sacked and replaced.

The reason: she was not proving to be the pliable nuclear-deal hand-maiden that the President had hoped she would be.

While we in the DA wish the new Minister Kubayi every success in her new role as Energy Minister and trust that she will live up to her constitutional mandate to act in the best interests of our people, her participation in the ‘white-wash’ that was the Nkandla Ad Hoc Committee does little to inspire our confidence.

In fact, Chair, all the Minister’s participation on the Committee demonstrated is the Minister’s ability to take instruction from Number One, her ignorance of the most basic laws and her rather meticulous manicurist capacities.

The Minister has however, to her credit, made some promising noises about greater transparency and accountability and has made undertakings to ensure greater public participation in Energy policy decisions.

These pronouncements are welcomed by the DA and we wait with baited breath, Chair, to see if the Minister is in fact a woman of her word.

Crisis in the Energy Sector

Chair, as already alluded to, the Energy Sector is in crisis.

Dominated as this sector is by the State, this crisis is in no small part a direct reflection of the broader ANC failure of governance afflicting the nation.

Just as various state institutions have been captured by venal private interests via the governing party, so too has much of the Energy sector been captured to enrich the few at the expense of the majority.

Policy failure has also meant that the Energy sector’s overall contribution to GDP is woefully inadequate and well below the benchmarks and norms of comparable nations.

At a time when South Africa is in desperate need of economic growth to address our innumerable social problems, the Department’s policy planning unit continues to dither and delay.

This dithering is so severe, Chair, that I put it to you it constitutes a crime against our people.

If we are lucky Chair, the Department’s policy planning unit may deliver the Integrated Resource Plan (IRP) and Integrated Energy Plan (IEP) by the end of this year.

However, considering that both are unfavourable to nuclear, they may not survive the cabinet process.

These two critical documents which form the very foundation of the Energy sector in our country and which are required to provide much needed investor certainty have been delayed by more than 7 years.

Despite these serious delays, Chair, the Deputy Director General for Policy Planning, Mr Ompi Aphane, a dapper Malusi-Gigaba-esque individual, has remained in his position for over 4 years, his lack-lustre performance condoned by various ANC Ministers at a very real cost to our people.

The Department’s dysfunctional performance is also reflected in the various SoEs for which it bares responsibility.

PetroSA

Referred to most recently, Chair, by new Minister Kubayi as the DoE’s problem child, an epic understatement, PetroSA has become a joke that just isn’t funny anymore.

What is hilarious though, Chair, was the PetroSA board’s most recent presentation to the Portfolio Committee of its supposed turnaround strategy.

Presented in an 8 page PowerPoint document, yes Chair, I kid you not, 8 pages of PowerPoint of which 4 were merely company collateral, are what PetroSA board members think constitutes a turnaround strategy for a R16.2 billion loss making entity.

Simply put, Chair, the turnaround strategy failed to address the 2 critical problems facing PetroSA namely, that if it has no feed stock it cannot continue to operate.

And, if it ceases operation, then the ever expanding impairment liability falls due and needs to be repaid by the State as guarantor within 30 days.

Let me be plain, the minute PetroSA stops production at its refinery, Mr Gigaba is going to be forced to pull out the nation’s cheque book and fork out close on R20 billion. Not only is that R20 billion that the state doesn’t have, it is also yet another log to be added to the fire that has consumed the nation’s sovereign credit rating.

Chair, perhaps even more alarming than the complete lack of any strategic reflection in this so-called turnaround strategy – the document didn’t even contain the most basic SWOT analysis – is the fact that the directors of PetroSA were paid R17.3 million in bonuses in the last financial year, which would be funny chair, if hundreds of South Africans were not about to lose their jobs and livelihoods because of the blatant mismanagement and self-enrichment of PetroSA’s directors and board.

Action Step: DA Calls for Parliamentary Inquiry into PetroSA

Chair, as the DA we will not stand by idly.

I have today written to the Chairperson of the Portfolio Committee requesting that he use his powers to call for an immediate and thorough Parliament inquiry into the directors and board of PetroSA.

The urgency of the issue cannot be over stated, the very real possibility of collapse of PetroSA was highlighted in recent media reports on internal discussions indicating PetroSA’s intention to seek business rescue. Immediate action must therefore be taken by this Parliament as a matter of urgency lest we be found wanting.

A failure to act at this critical juncture will only hasten the demise of PetroSA and will add to the very significant debt burden already faced by the State, with the attendant impact on our sovereign credit rating.

Let me be clear, Chair, we are putting the Portfolio Committee Chairman Majola on notice, the DA awaits his immediate response and should the Chair fail to adequately apply his mind, the DA will take his decision on review to the courts.

The time for dithering on this matter is over.

The Strategic Fuel Fund

Chair, on the 2nd of May this year, Minister Kubayi for the first time confirmed what has long been suspected – that the supposed stock rotation of the nation’s strategic fuel stocks was in fact a sale and not a rotation as stated in this House by the Minister’s predecessor.

10 million barrels have been sold at bargain basement prices, at least $10 per barrel below the spot price at the time, without the required concurrence of National Treasury or any detail to the procurement and tender processes followed.

This is money taken from the poorest of the poor and is an absolute disgrace for a government that claims to be the champion of the dispossessed.

The sale of the crude at well below its market value and replacement value means that South Africa has no discernible path to replenishing its strategic fuel stocks.

The reason for the apparent sale are unknown and as the Central Energy Fund, the SFF’s parent company, admitted it only became aware of the sale when it identified unaccounted funds in its own bank accounts.

As the situation now stands, South Africa currently retains approximately 300 000 barrels of its former strategic fuel stock, against a daily demand of approximately 650 000 barrels.

Most of the remaining crude stocks are however unrecoverable and are of no use in the event of a global oil market shock.

Action Step: DA to Seek Investigation into whether the DoE Wilfully Misled Parliament

Chair, the matter was referred to the Auditor General for investigation by the former Minister. The Portfolio Committee awaits this report, but it must be noted that the new Minister’s admission stands in stark contradiction to repeated comments made by the Department to the public, in the media and in Committee, in which it maintained that the sale was in fact a rotation.

The DA is of the opinion that the Department has wilfully mislead Parliament and is currently reviewing all minutes and transcripts in order to formulate allegations in order to have them investigated by the Public Service Commission and the Office of the Speaker.

Action Step: DA to Seek Legal Advice on Declaratory Order to Have Sale Declared Illegal

The DA is of the firm belief that the sale of the nation’s fuels stocks was conducted in violation of the Public Finance Management Act (PFMA) as well as applicable procurement regulation requiring concurrence from National Treasury. The DA has briefed its legal counsel and will be taking advice on the potential success of a declaratory order declaring the sale illegal.

Nuclear Deal

Regarding the nuclear deal, the court has ruled the process undertaken by the Department to be illegal and has set it aside. The finding of the Court is a victory for the people of South Africa.

The Court has been unequivocal in its requirements that:

1. The procurement process be defined before the actual commencement of nuclear procurement; and
2. That credible public participation form a part of the National Energy Regulator of South Africa’s (NERSA’s) approval of any Ministerial determination to procure nuclear.

The Minister has said she will not appeal the court’s ruling.

Action Step: DA to Seek Time Frames on Nuclear Procurement Regulations and Court Promotion of Access to Information Act (PAIA) for All Nuclear Documents

Therefore, I have today written to the Minister asking her to clarify when exactly the people of our country can expect to see the proposed procurement regulations relating to nuclear procurement.

The DA will also in the coming weeks launch a court based PAIA application to obtain all government and National Treasury studies on the feasibility and costs associated with the nuclear deal in order to make this information publically available as a precursor to any public participation process.

The DA also puts the Minister on notice that our legal counsel have been briefed and are ready to interdict any deviation from the court’s rulings.

The Minister should further note that her statements in this House in response to oral questions as regards the issuing of the Request For Proposal (RFP) would seem to suggest that Minister has not quite understood the court’s ruling and I strongly suggest that the issuance of the RFP be held off until after the procurement regulations and IRP are finalised. Failure to do so Minister, would leave you and your Department vulnerable to further legal action.

The DA restates its absolute commitment to all Parliamentary and legal recourse to ensure that this disastrous and corrupt deal never sees the light of day.

Renewables and Independent Power Producers (IPP’s)

While the new Minister can rightly claim that much of the crisis engulfing the energy sector is not of her making, the Minister’s failure to compel Eskom to sign the remaining 37 outstanding IPP’s to the grid is damaging the fledgling sector and endangering R200 million worth of investment and thousands of jobs.

Your failure to act, Minister, is having very real consequences on the lives of ordinary and especially poor South Africans. That is to say nothing of the damage you are doing to investor confidence.

Might I remind you, Minister, that a robust renewables sector has the opportunity to play a leading role in assisting South Africa from exiting junk status.

Investors have shown a distinct appetite for investment in renewables and every day you dither, the appetite diminishes, and while that may be pleasing to your government which sees renewables as direct competition to nuclear, it is not pleasing to the vast majority of South Africans who are being denied a livelihood in the sector.

Word of Thanks

In closing, Chair, I would like to express my gratitude to our Committee Chairman, Slovo Majola, and my colleagues on this Committee. While we often disagree on critical issues, I can honestly say that the work of the Committee is conducted professionally and in a bi-partisan manner. Our Chair’s democratic instincts are a credit to the institution of Parliament.

I thank you.

5 YEARS LATER, WE'RE STILL WAITING FOR JUSTICE

The Farlam Commission Report was released over 2 years ago, but nothing has been done since then to provide closure on the greatest tragedy of our young democracy.