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16 JULY 2019

16 JULY 2019. PRESENTATION LAYOUT. PART A Introduction Mandate Organisational Structure Executive Summary Achievements Challenges Legislations that govern the energy sector Entities Reporting to Minister

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16 JULY 2019

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  1. 16 JULY 2019

  2. PRESENTATIONLAYOUT • PART A • Introduction • Mandate • Organisational Structure • Executive SummaryAchievements • Challenges Legislations that govern the energy sectorEntities Reporting to Minister • Part B - 2019/20 Annual Performance PlanObjectives, Performance Indicators and Targets per Programme • Part C - 2019/20 Budget

  3. INTRODUCTION • Established in May 2009 – outcome of the split of the Department of Minerals and Energy into Department of Energy and Department of Mineral Resources • AIM: Formulate energy policies, regulatory frameworks and legislation, and oversee their implementation to ensure energy security, promotion of environmentally friendly energy carriers and access to affordable and reliable energy for all South Africans. • MISSION: To regulate and transform the energy sector for the provision of secure, sustainable and affordable energy • VISION 2025: Improving our energy mix by having 30% of clean energy by 2025.

  4. MANDATE • The core business of the Department is premised amongst others on the Energy White Paper of 1998 as well as the National Energy Act, 2008 (Act No. 34 of 2008) which, amongst others mandates the Department to ensure that diverse energy resources are available, in sustainable quantities and at affordable prices, to the South African economy in support of economic growth and poverty alleviation, while taking into account environmental management requirements and interactions amongst economic sectors. • In carrying out this mandate, the Department develops legislation; undertakes programmes and projects; and in some instances, transfer resources to various implementing agencies and state owned entities (SOEs).

  5. MACRO ORGANISATION STRUCTURE OF THE DOE-AS IS Minister Mr GwedeMantashe; MP SOEs Deputy Minister Ms BavelileHlongwa; MP Department of Energy Director General: Mr Thabane Zulu Ministerial Services Mr George Lekorotsoana Directorate Audit Services Acting Chief Audit Executive Mr Mduduzi Figaret Branch Clean Energy Vacant Acting DDG: Ms Mokgadi Modise Branch Corporate Services DDG: Ms Hilda Mhlongo Branch Governance and Compliance Vacant Acting DDG: Mr Lloyd Ganta Branch Petroleum and Petroleum Products Regulation DDG: Mr Tseliso Maqubela Branch Energy Programmes and Projects DDG: Mr Jacob Mbele Branch Nuclear Energy DDG: Mr Zizamele Mbambo Branch Financial Management Services CFO: Ms Yvonne Chetty Branch Energy Policy, Planning DDG: Mr Ompi Aphane

  6. LEGISLATION THAT GOVERNS THE ENERGYSECTOR • National Energy Act, 2008 (Act No. 34 of 2008); • Electricity Regulation Act, 2006 (Act No. 4 of 2006), as amended; Petroleum Products Act, 1997 (Act No. 120 of 1977); • Central Energy Fund Act, 1977 (Act No. 38 of 1977), as amended; Nuclear Energy Act, 1999 (Act No. 46 of 1999); • National Nuclear Regulator Act, 1999 (Act No. 47 of 1999); • National Radioactive Waste Disposal Institute Act, 2008 (Act No. 53 of 2008); Petroleum Pipelines Act, 2003 (Act No. 60 of 2003); • Petroleum Pipelines Levies Act, 2004 (Act No. 28 of 2004); Gas Act, 2001 (Act No. 48 of 2008); • Gas Regulator Levies Act, 2002 (Act No. 75 of 2002); • National Energy Regulator Act, 2004 (Act No. 40 of 2004); and

  7. ENTITIES REPORTING TOMINISTER National Nuclear Regulator (NNR) National Energy Regulator of South Africa (NERSA) South African National Energy Development Institute (SANEDI) South African Nuclear Energy Corporation, (SOC) Ltd (NECSA) CEF (SOC)Ltd (“CEF”Group) National Radioactive Waste Disposal Institute (NRWDI)

  8. PART A

  9. EXECUTIVESUMMARY The Department is mandated with the responsibility of ensuring secure and sustainable provision of energy for socio-economic development. As the regulator of the energy sector, the Department plays a pivotal role in the development and promotion of this sector of the economy. The Department’s strategic plan seeks to deliver results along strategic objectives that include: promoting energy security through reliable, clean, and affordable sources universal access to energy sources transformation of the energy sector strengthening the operations and management of the Department

  10. EXECUTIVESUMMARY These strategic objectives take into account decisions from various political and government platforms, the mandate of the Department and the environment within which the Department operates. Our Strategic Plan takes guidance from the National Development Plan (the NDP) which envisages that, by 2030, South Africa will have an energy sector that promotes economic growth and development, social equity and environmental sustainability.

  11. EXECUTIVESUMMARY The plan outlines the Department’s medium-term priorities and highlights the key activities we will undertake in the next five years as we continue to ensure that energy security and the promotion of environmentally-friendly energy carriers are accessible, affordable and reliable for all current and future generations of South Africa. Highlights of the Department’s achievements against the predetermined objectives and the Department’s response to the 12 government outcomes which are detailed in the Annual performance Plans and Annual Reports.

  12. MAJORACHIEVEMENTS Integrated Resource Plan Cabinet approved the IRP for public comments to allow 60 days for public inputs and comments. We are in the process of finalising the Integrated Resource Plan (IRP) of which the draft was approved by Cabinet in August 2018 for public input. Following the consultations at Nedlac the IRP will be tabled at Cabinet for final approval and gazetting by end of September 2019 (Q2).

  13. MAJORACHIEVEMENTS Annual Energy Balances Publication The annual energy balances for 2015/16 was published. Grand Inga South Africa signed a treaty with the Democratic Republicof Congo (DRC) onthe Grand Inga Hydro Scheme Power Project. In 2018/19 financial year the Department accelerated implementation of bilateral and regional engagements (Botswana, Zambia, the Democratic Republic of Congo (DRC) and Zimbabwe) in order to realise the objectives of energy cooperation in terms of Hydro-Electricity.

  14. MAJORACHIEVEMENTS HDSA wholesalers The Department in issuing licenses for the operation of Manufacturers, wholesalers, and retailers of Petroleum Products, has ensured that 89.18% of licenses issued to entities contained at least 50% ownership and control in the hands Historically Disadvantaged South Africans (HDSA). Fuel sampling A total of 1080 fuel samples from the 1892 were collected and tested by the 31st of March 2019.

  15. MAJORACHIEVEMENTS Compliance Inspections The Petroleum Products Act (Act No. 58 of 2003), (PPA) and the Regulations promulgated thereunder provide for conditions in which the regulated activities may be conducted and the license conditions that licensees must comply with and inspections are conducted to ensure compliance therewith. A total of 1590 retail site compliance inspection were conducted by 31st of March 2019, 90 inspections were above the target of 1500. Fuel Margins Studies were conducted to review the asset base and operational expenses of a benchmark service station as well as benchmark storage facilities respectively. With respect to the Benchmark Service Station (BSS), the department wanted to determine the costs of building a service station and operational expenses associated with it. The revised Regulatory Asset Base was determined based on material take for mechanical, electrical and instrumentation items, bill of quantities and construction costs, including the major cost items such as tanks, loading arms, pumps valves, piping and fitting.

  16. MAJORACHIEVEMENTS • Energy Efficiency Initiatives • The roll out of the Energy Efficiency initiatives have improved with significant savings being realised over the 0.5 Terra Watt Hour (twh) target. • Radioactive Waste Management Fund Bill • Draft Fund Bill is in place. • Stakeholder consultations held with Eskom, South African Nuclear Corporation (NECSA), National Nuclear Regulator (NNR), National Radioactive Waste Disposal Institute (NRWDI)and National Treasury (NT). • Socio Economic Impact Assessment Study (SEIAS) Phase 1 report has been submitted to DPME. • Memorandum of Objects submitted to Chief State Law Advisor (CSLA). • Comments on SEIAS 1 report received from DPME and currently being addressed.

  17. KEY CHALLENGES • Interdependencies among several targets had a negative multiplier effect on the achievement of targets; • Sub-optimal organisational structuring and staffing, including several immature, or non-existing functions, such as a dedicated research unit; • Lack of specific skills, such as integrated modelling and data collection; • Leadership changes during the year under review; • Governance challenges with some SOEs; • Challenges with the implementation of the Solar Water Heating programme; and • International oil price volatility.

  18. PART B | 2019/20: ANNUAL PERFORMANCEPLAN

  19. PROGRAMME 1:ADMINISTRATION The Programme purpose is to provide strategic leadership, management and support services to the Department. The programme include the following sub-programmes, but only the International Coordination targets were reviewed: Ministry Departmental Management Finance Administration Audit Services Corporate Services

  20. PROGRAMME 1: ADMINISTRATION....cont. • This sub-programme provides overall management and administration of the DoE and ensures that SOEs that report to the Department comply with good governance principles, norms and standards, and that their corporate plans are aligned with the strategic objectives of the DoE. • This sub-programme is also geared to support high–level policy prioritisation of the Department through the following: • Conduct political oversight and accountability to Parliament. • Providing guidance and direction for the development of strategic plans and annual performance plans for the Department and its public entities. • Supporting and ensuring good corporate governance practices by entities reporting to the Department.

  21. PROGRAMME 1: ADMINISTRATION…cont. • Coordinating engagement programmes with entities through the established management structures. • Submitting /tabling strategic plans, annual performance plans and annual reports for the Department and its public entities in Parliament. • Ensuring effective communication between the Department and its key stakeholders, and creating awareness of the Department’s key objectives and activities through community engagement sessions. • SOEs Strategic Plans, Corporate Plan & Shareholder Compacts submitted for approval • Advance energy agenda with the rest of the world and multilaterals

  22. PROGRAMME 2:ENERGY POLICY &PLANNING • The programme seeks to ensure evidence-based planning, policy setting and investment decisions in the energy sector to improve the security of energy supply, regulation and competition. • Programme’s strategic objectives as per Medium Term Strategic Framework: • Improved energy security. • Improved Liquid Fuels energy security. • Policy and Regulations to ensure security of supply. • Bulk electrical infrastructure required for universal access to electricity. Security of supply through additional power

  23. PROGRAMME 2:ENERGY POLICY & PLANNING…cont. • Planned Targets • Annual Energy Balance report • Gas Strategy Report • Gas Amendment Bill certified by State Law Advisor. • Biofuels Regulatory Framework Gazetted • Proposals of the ‘end-state’ of the electricity sector • Proposal on the National Energy Regulator Bill certified by State Law Advisor. • Municipal Assets Management programme roll-out framework developed • Negotiations of the Off-take Agreement with the project developer concluded

  24. PROGRAMME 3: PETROLEUM & PETROLEUM PRODUCTS REGULATION • The Programme’s aims to regulate the petroleum and petroleum products industry to ensure the optimal and orderly functioning of the petroleum industry to achieve government’s developmental goals. • The programme include the following sub-programmes: • Petroleum Compliance monitoring and enforcement Petroleum Licensing and fuel supply • Fuel Pricing • Regional Petroleum Regulation Offices

  25. PROGRAMME 3: PETROLEUM & PETROLEUM PRODUCTS REGULATION...cont. • Programme’s strategic objectives as per Medium Term Strategic Framework: • Compliance monitoring and enforcement in the petroleum sector. • Petroleum and Liquid Fuel Sector Transformation. • Promote Petroleum Licensing. • Planned Targets • 1500 Retail Site Compliance Inspections conducted • 1 080 Fuel Samples tested • 50% of license applications approved have a minimum of 50% HDSA ownership

  26. RETAIL SITE INSPECTIONS PER PROVINCE

  27. FUEL SAMPLING PER PROVINCE

  28. PROGRAMME 4: ELECTRIFICATION & ENERGY PROGRAMME & PROJECTS • Programme purpose is to manage, coordinate and monitor programmes and projects focused on access to energy. • The programme include the following sub-programmes: • Integrated National Electrification • Programme Energy Regional Offices • Programme and Project Management Office • Electrification Infrastructure/ Industry Transformation/ Community Upliftmentprogrammes and projects

  29. PROGRAMME 4: ELECTRIFICATION & ENERGY PROGRAMME & PROJECTS…cont. • Programme’s strategic objectives as per Medium Term Strategic Framework: • Access to Electricity by Households. • Enhancement Programme and Project Management. • Energy Infrastructure Development Monitored

  30. MUNICIPAL PLANS NOTE: The allocated budget includes both household connections and bulk infrastructure projects. The number of household connections for KZN are preliminary figures due to some municipalities finalising their project list.

  31. ESKOM PLANS NOTE: The allocated budget includes both household connections and bulk infrastructure projects.

  32. PROGRAMME 5: NUCLEARENERGY • Purpose of the branch is to manage the South African nuclear energy industry and control nuclear material in terms of international obligations, nuclear legislation and policies to ensure the peaceful use of nuclear energy. • The programme include the following sub-programmes: • Nuclear Safety and Technology • Nuclear Non-Proliferation and Radiation • Security Nuclear Policy

  33. PROGRAMME 5: NUCLEAR ENERGY…cont. • The following are the programme’s strategic objectives as per Medium Term Strategic Framework: • Improved Security of Energy Supply. • To Strengthen the Control of Nuclear Material and Equipment • Improved Nuclear Safety and Security • 70% of authorisation applications processed with the 8 week time period. • Draft Decommissioning and Decontamination Policy Submitted to Cabinet. • National Nuclear Regulator Amendment Bill submitted to Cabinet. • Draft Radioactive Waste Management Fund Bill submitted to Cabinet.

  34. PROGRAMME 6: CLEANENERGY • The Programme seeks to manage and facilitate the development and implementation of clean and renewable energy initiatives, as well as Energy Efficiency and Demand-Side Management (EEDSM) initiatives. • The programme include the following sub-programmes: • Energy Efficiency • Renewable Energy • Climate Change Response, Environmental Compliance and Designated National Authority

  35. PROGRAMME 6: CLEAN ENERGY…cont. • The following are the Programme’s strategic objectives as per Medium Term Strategic Framework: • Implementation of the EEDSM measures across all sectors coordinated and monitored. • Renewable Energy. • Implementation of Energy Related Climate Change Response measures and Environmental Compliance coordinated and monitored. • Measurement, Reporting and verification system of climate change parameters.

  36. PROGRAMME 6: CLEAN ENERGY…cont. • 0.5 Twh of energy savings realised and verified from EEDSM projects. • Energy consumption baselines developed from 15 additional municipalities • Draft Renewable Energy Technology Roadmap (RETRM) completed. • Report on installation of 87 000 Solar Water Heater baseline systems in 19 Municipalities. • Annual Compliance Report on the 3rd Environmental Management Plan Edition approved.

  37. MUNICIPALITIES PARTICIPARTING IN THE NATIONAL SOLAR WATER HEATER PROGRAMME (NSWHP)

  38. MUNICIPALITIES PARTICIPARTING IN THE NATIONAL SOLAR WATER HEATER PROGRAMME (NSWHP)

  39. PART C | 2019/20: FINANCIALINFORMATION

  40. 2019/20 - FINAL ENE ALLOCATION - PERPROGRAMME

  41. 2019/20 – FINAL ENEALLOCATION– OVERVIEW PERPROGRAMME • Changes to the baseline which either increased or reduced the final budget allocation in Programmes were effected as follows: • Programme 1 increase in property payment related costs, computer services costs and annual increase for salaries inclusive of a provision for vacant DDG positions. • Programme 2 net-budget reduction of R1.56 million (2.78%) is attributable to the Compensation of Employees (CoE) budget realignment in order to align the budget with the headcount in the Programme. • Programme 3 also affected by the CoE budget realignment, hence a net-decrease of R1.43 million (1.54%) • Programme 4 budget reduction is attributable to reductions of INEP Municipality grant and INEP Eskom grant • Programme 5 budget increase is as a result of upward adjustments in NECSA’s and NRWDI’s budget allocations • Programme 6 the downward adjustment is due to CoE budget realignment.

  42. 2019/20 - FINAL ENEALLOCATION- PER ECONOMICCLASSIFICATION

  43. 2019/20 - FINAL ENE ALLOCATION – OVERVIEW PER ECONOMIC CLASSIFICATION • The Department is appropriated R7.44 billion for the 2019/20 financial year, with 90.91% allocated to transfer payments and the remaining balance of 9.09% for operational purposes. • The 2019/20 budget allocation increased by R276.49 million, translated as 3.86% compared to 2018/19 final budget allocation of R7.16 billion. • The final budget allocation reflects an overall budget reduction of R133.63 million translated as 1.76% in comparison with the indicative baseline.

  44. 2019/20 - FINAL ENE ALLOCATION – OVERVIEW PER ECONOMIC CLASSIFICATION • Changes in the final allocation are attributable to: • Goods & Services A net increase of R15.17 million or 5.57% was implemented from the indicative baseline of R272.10 million to final allocation of R287.27 million. • The above increase is largely due to an additional allocation of R8.40 million to INEP for the development of the electrification master plan and additional allocations of R6.77 million for office accommodation related costs and for SITA license fees. • Transfer Payments – Final budget is R6.76 billion with a net-reduction of R148.79 million being 2.15% of the baseline made up of: • R264.60 million budget reduction on the INEP-Municipalities grant andR58.40 million reduction on the INEP-Eskom grant. • Budget increases were simultaneously implemented for NRWDI, R4 million, in order for the entity to achieve its mandate and NECSA R170.21 million for Stage 1 of the decommissioning and decontamination of past strategic nuclear facilities project.

  45. 2019/20 - MTEF ALLOCATION AND OUTER YEARS INDICATIVE BASELINES

  46. 2019 MTEF PERIODOVERVIEW • The 1.76% net-reduction in 2019/20 is carried through to subsequent years of the 2019 MTEF period, decreasing by 7.79% in 2020/21 and by 0.92% in the outer year. • The significant reduction in the 2020/21 year is attributable to a high reduction in the INEP-Eskom grant of R558.75 million. • The above brings indicative allocations to R7.37 billion in 2020/21, increasing by 14% in 2021/22 to R8.41 billion. • Factored adjustments are : • Goods and Services – An increase of R13.92 million in 2020/21 was implemented, consisting of R8.75 million additional for the electrification master plan project and an upward adjustment in property related payments and SITA fees of R5.17 million. • In the outer year 2021/22, the goods and services budget increases by R5.19 million as budget increases for property related payments and SITA fees are carried through to this year.

  47. 2019 MTEF: PERIOD OVERVIEWALLOCATION • Transfer Payments: • 2020/21- A net reduction of R636.78 million was implemented as follows: • R558.75 million reduction on the INEP-Eskom grant • R267.60 million reduction on the INEP-Municipalities grant • R179.57 million baseline increase for decommissioning and decontamination of past strategic nuclear facilities programme in NECSA and • R10 million increase for NRWDI’s operational activities. • 2021/22 - A net reduction of R82.87 million consisting of: • R282.32 million reduction on the INEP-Municipalities grant • Baseline increases of R189.45 million for NECSA and R10 million for NRWDI.

  48. 2019 - MTEF: TRANSFER PAYMENTSSCHEDULE

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