Presentation on the Section 32, PFMA Publishing of reports on the state of budget

1. Presentation on the Section 32, PFMA Publishing of reports on the state of budget Presented by : Ms Yvonne Chetty Chief Financial Officer 15 November 2011

2. DoE Management Team • Mrs. Yvonne Chetty : CFO • Ms. Thandeka Zungu: COO • Ms Thandiwe Maimane: Chief Director Communication

3. Presentation outline • Introduction • Mandate of the Department of Energy • Financial performance as at 30 September 2011 • Major costs drivers. • Overall performance overview. • Conclusion.

4. Introduction • Objective is to highlight the department’s budgetary and performance review for the first six months of 2010/11, focusing on major programmes. • The presentation has taken into account the following: • Minister's Budget Vote commitments • Department Strategic Plan 2010-11 – 2012-13

5. MANDATE OF THE NEW DEPARTMENT OF ENERGY The 2011/12 Strategic Planning best explains the mandate of the Department through its strategic objectives: Energy supply is secure and demand is well managed An efficient, competitive and responsive energy infrastructure network Improved energy regulation and competition Efficient and diverse energy mix for universal access within a transformed energy sector Environmental assets and natural resources are protected and continually enhanced by cleaner energy technologies Mitigation against, and adaptation to, the impact of climate change Good corporate governance for effective and efficient delivery

6. Financial Performance 1st Quarter Vs 2nd Quarter

7. Financial Performance as at 30 September 2011 –per economic classification

8. Financial Performance as at 30 September 2011 –per Programme

9. Financial Performance as at 30 September 2011 –per Programme

10. Financial Performance as at 30 September 2011 –per Programme

11. Financial Performance as at 30 September 2011 –per Programme

12. Financial Performance as at 30 September 2011 –per Programme

13. Financial Performance as at 30 September 2011 –per Programme

14. MAJOR COST DRIVERS (Top 5) -GOODS AND SERVICES AS AT 30 SEPTEMBER 2011

15. Performance Overview • Budget allocation • Internal Adjustment • The Department started the current financial year with a budget allocation of R6,089.9 billion • Critical obligations, which were not catered for within the baseline, necessitated a review of the baseline, resulting in the Department’s first adjustment, i.e. Virement, redirecting existing resources to critical obligations • A total of R7.27 million was redirected to Programme 1 to enable a payment incurred by the NERT • Rollover • The National Treasury approved a total of R88.2 million being funds carried over from the 2010/11 financial for the 2010/11 committed expenditure

16. Performance Overview • Budget allocation • Unforeseeable & Unavoidable Expenditure • R21.192 million an additional allocation from NT towards the NNR to bridge the funding gap created by the loss of authorization fees as a result of the closure of the PBMR project • The net effect of all the above adjustments is an adjusted appropriation of R6,199.3 billion • The above will increase to a total of R6,200.9 billion as R1.6 million is to be made available for the 2011/12 salary increases

17. Performance Overview • Actual Performance • The Department has disbursed a total of R2.9 billion or 46.6% of its adjusted appropriation as at 30 September 2011 • Total value of committed expenditure, excluded in the above, is R11.9 million • Compensation of Employees • A total of R90.9 million or 50% of available appropriation has been utilized. • The Department’s spending trend is in line with available budget • This is even before the additional funding, R1.6 million, for salary increases

18. Performance Overview • Actual Performance • Goods & Services • Total actual expenditure amounts to R75.7 million or 59.9% of the total 2011/12 budget • The spending in this area has been negatively affected by unfunded mandates. • Major unfunded mandates are as follows: • - 75% of the Office Accommodation Lease • - National Energy Response Team Unit (NERT) • - COP 17( energy side events and participation in COP 17) • - AEMC • - PPPs • - International Membership fees • - The approved structure not fully funded

19. Performance Overview • Goods & Services • Major Cost Drivers • The major cost drivers within the Department are mainly due to unfunded mandates • Consultants/Professional services • The YTD total of R19 million includes an amount of R15.8 million which was paid to the service provider for the NERT • The Department could only source, within, R7.27 million • Operating payments • Includes membership fees, notably to the IAEA for an amount of R9.8 million • Approximately R8 million has been made available from the Rolled over funds

20. Performance Overview • Goods & Services • Major Cost Drivers • Lease payments • The Department was allocated R7 million for the office accommodation lease • The actual cost of this lease amounts to R28 million • The result is that R21 million is unfunded • Venues & Facilities and Travel & Subsistence • The costs were affected by expenditure incurred on the AEMC and PPP events

21. Performance Overview • TRANSFER PAYMENTS • The movement within the Transfer payments category was slower than anticipated in the first quarter. This however improved in the second quarter. A total amount of R2.7 billion was transferred from a YTD total available benchmark drawing of R3 billion. • Total transfers made amounts to R46.2% of the total adjusted budget • Due to a number of reasons, no transfers were processed, although budgeted for, to the following : • - EEDSM Eskom & Municipalities • - SANEDI Working for Energy • - REFSO -original allocation • - Transnet pipeline –second quarter transfer

23. CONCLUSION • The Department has been able to operate with minimum resources • This has however, necessitated a continuous review of the baseline to establish slow spend items and redirecting to critical items. This has necessitated a number of fund shifting • The Department has forwarded a proposal to National Treasury to reclassify funds originally appropriated for REFSO and Working for Energy programmes, total R57.32 million • These funds will be directed towards the major unfunded items, as mentioned above