Minister Chabane on State Owned Enterprises Presidential Review Committee: Terms of Reference

STATEMENT BY MINISTER COLLINS CHABANE ON THE TERMS OF REFERENCE AND REVIEW FRAMEWORK AND METHODOLOGY OF THE PRESIDENTIAL STATE OWNED ENTERPRISES REVIEW COMMITTE, IMBIZO MEDIA CENTRE, 120 PLEIN STREET, CAPE TOWN

12 OCTOBER 2010

Good Morning Ladies and Gentlemen of the media

Chairperson of the Presidential SOE Review Committee, Riah Phiyega

President Jacob Zuma, on the 12 of May earlier this year announced the appointment of the Presidential State Owned Enterprises (SOEs) Review Committee to review the role of SOEs in the country. The appointment of the Review Committee is a response to the acknowledgement that there is a need to strengthen the role of SOEs to ensure that they respond to a clearly defined public mandate and support the developmental state aspirations of government.

The President appointed the Review Committee guided by the Polokwane resolution of the ruling party and the Medium Term Strategic Framework (MTSF) 2009 – 2014. The MTSF states the need for the review of State Owned Enterprises as part of the economic transformation agenda of government. The MTSF further states that while these entities remain financially viable, SOEs, development finance institutions as well as companies in which the state has a significant shareholding must respond to a clearly defined public mandate, and help government to build a developmental state.

SOEs form a significant portion of South Africa’s vital industries that drive the economy. Inputs such as electricity, transportation and telecommunications are dominated by SOEs. These sectors are principal drivers of the formal sector of the economy, and provide for the bulk of economic growth. SOEs are the principal entities that deliver many social goods and services to ensure quality of life of all South Africans.

 

Given the importance of the SOEs, including among others the need to sustain job creation, skills development and retention as well as contribution to the government’s developmental and transformation agenda, it has become necessary to review them.

 

The move to review them recognise the need to inculcate alignment, efficiency and viability within them while concurrently ensuring that the entities fulfil their public mandate through ensuring that social and infrastructural goals are met. The proper governance and control of SOEs is an important component. The magnitude of this task cannot be overestimated, given their aggregate size and their contribution to the Gross Domestic Product. There are estimated 300 state-owned enterprises with 9 reporting to the Department of Public Enterprises. The rest of other institutions report to various ministries, provinces and municipalities.

 

The review of State Owned Enterprises will in the long term strengthen government’s oversight, but more specifically the review process shall facilitate the government’s efforts to achieve the goal of aligning them to the developmental agenda. Whilst recognising that there have been reforms and some improvements in the past, the current national debate on the state and future of SOEs suggest that there is a need to review and make cardinal recommendations on their roles and relationship with government.

The Committee was appointed to review all entities including SOEs, agencies, utilities, as well as companies within which the state has significant shareholding. The scope of the review covers all three tiers of government being national, provincial and local.

There are five (5) workstreams through which the review process will be undertaken. Each workstream will be chaired by a member of the Review Committee and may include other technical experts. The Work Streams are;

·         Development and Transformation

·         Ownership and Governance

·         Viability of Business Cases

·         Strategic and Operational Effectiveness and;

·         Research and Development.

The President gave the Review Committee three months to familiarise itself with the mandate and assist government to ensure that water tight and all encompassing Terms of Reference (ToR) and review framework and methodology were developed to guide this important work. The Review Committee has been given 12 months to conclude its work, which commenced on the 1^st September 2010.

The Review Committee will conduct the review and make its recommendations to the President. The committee will provide a 6 months report to the President in February 2011 giving a progress update of the review and where necessary making recommendations. The final report shall be submitted to the President in September 2011.

Cabinet and government have already given their support to this process; I now wish to call on all SOEs, entities and companies which government has a stake to support the Review Committee to ensure that this process is completed within reasonable period.