Public Enterprises: Minister's Budget Vote Speech & Responses by DA, IFP and ANC

Minister of Public Enterprises, Mr Mr Malusi Gigaba, gave his Budget Vote Speech on the 14 May 2013

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Leading by example: State-Owned Companies driving growth and transformation in the South African economy.

We are honoured to present to this EPC today our Budget Vote for 2013/14.

Our portfolio of State-Owned Companies (SOC) have aggressively been accelerating investment to maintain aggregate demand precisely when there is a downturn globally and the private sector is too apprehensive to invest.

Three years ago, our portfolio of SOC invested R53 billion; but in the next financial year, we will be investing over R113 billion.

Chairperson,

I wish to state it unequivocally that in relation to industrialisation and transformation, we have an unyielding political will.

In October 2012, we convened a Transformation Dialogue as the first step in the development of a transformation framework and guidelines for SOC to be launched during the course of the 2013/14 financial year.

Having awarded the single largest audit appointment of a South African black-owned auditing practice, Sizwe-Ntsaluba-Gobodo, Transnet went further to award a R1.3 billion internal audit contract to a group of three audit firms led by SekelaXabiso, involving Nkonki and KPMG.

Furthermore, Eskom’s total procurement spend for 2012/13 financial year was about R120 billion and total spend on Broad Based Black Economic Empowerment (BBBEE) compliant companies is R103.4 billion, which is 86.3% against the target of 70%.

As at February 2013, B-BBEE spend at Transnet stood at R58 billion or 87% of Total Procurement Spend.

The procurement of 1 064 Transnet locomotives we spoke about last year is now far advanced and shall be concluded in due time.

This historic procurement will result in the development of qualitatively new industrial capabilities and the comprehensive transformation of the locomotive supply chain.

Pursuant to the last Budget Vote’s commitment, the Department of Public Enterprises (DPE) held the Supplier Development Summit attended by SOC’s suppliers, customers and other key stakeholders.

At the summit, the SOC communicated their next generation supplier development, localisation and transformation plans and further explored how they and large companies in strategic sectors can collaborate around supplier development to create a truly national effort around achieving our objectives.

I am confident that within the next six months we will have some exciting announcements to make in this regard.

Over the coming year, we will be mobilising our entire SOC portfolio, along with their customers and suppliers, to give added momentum to a comprehensive industrialisation and transformation programme in our economy.

As part of this we will be exploring set-asides and other mechanisms radically to accelerate the promotion of black industrialists and the entrance of youth and women owned businesses into the mainstream economy.

We will be reaching out to our large private sector customers and suppliers in the resource extraction and processing sectors to partner with us in our developmental programmes; and will also be drawing on our influence over SOC-related pension funds to provide additional leverage to this process.

The detail of this programme will be unveiled at a later stage.

Chairperson,

I will now provide you with an overview of how we are directing our SOC to achieve their developmental mandates whilst ensuring that they remain financially-viable.

Eskom continues to increase its investment with R58 billion spent over the last year.

Over the last financial year, 260 MW of generating capacity has been added to the system through returning to service previously mothballed plants and a further 787 km of high voltage transmission lines were installed.

This year, Eskom will be spending about R65 billion and R337 billion over the next five years to complete Medupi, Ingula and Kusile.

Eskom has committed to ensuring that the first unit of Medupi starts delivering power by the end of the year.

The commercial operation of the Sere wind plant, that will save an estimated 252 603 tons of carbon emissions per annum, is scheduled for 30 December 2014 at a total cost of R2.4 billion, of which R104 million has been spent to date.

The draft procurement strategy for the Concentrated Solar Power plant in the Northern Cape, estimated to cost around R9 billion, has been completed and will be finalised after going through Eskom's internal governance processes.

Chairperson,

Eskom’s funding plan for the currently committed build programme has been finalised, and about 82% of the funding has been secured.

We note NERSA’s decision of an 8% average increase annual over the next five years and are analysing its full implications for Eskom.

As the Shareholder, we are committed to ensure that Eskom remains sustainable and is able to deliver on its build commitments.

Chairperson,

The electricity supply system continues to experience constraints, but we have put comprehensive plans in place to manage this.

Evidence from a survey commissioned by Eskom suggests that our efforts at mobilising the population around the energy saving campaign are bearing fruit, in that the level of awareness of the 49M campaign is as high as 73%.

As we approach the winter season, and in order to intensify communication and make South Africans participate in monitoring their own personal impact, Eskom and the SABC have collaborated to create an exciting initiative, to be launched tomorrow, to educate and inform consumers about the country’s electricity status.

Chairperson,

Over five years, Eskom is projected to spend over R200 billion for the supply of coal.

In light of this, I had an engagement with established miners, the Chamber of Mines, South African Mining Development Association (SAMDA) and Emerging Miners in the coal and limestone value chain, during which I also launched the Black Emerging Miners Strategy the essence of which is to increase black participation and ownership in the coal mining sector.

A key element of the strategy is to establish a Mine Development Fund to provide finance for the development of mines mainly at the early exploration stage.

We intend to ensure that by 2018, Eskom procures over 50% of its coal from emerging black coal miners, which would be a significant act of transformation.

To date, significant work has been done to establish the fund, which will go into operation by the end of the 2013/14 financial year.

Chairperson,

I am pleased to report that the implementation of the Transnet’s Market Demand Strategy is on track.

Over the last year, we have seen a 5% growth in rail volumes, a 4.8% overall improvement in operational efficiencies and a 30% increase in capital invested in the build programme to just below R30 billion.

This strong performance has enabled the company to adopt a counter-cyclical investment strategy with a plan to invest R37 billion this coming financial year and about R307 billion over the next seven years.

Chairperson,

Transnet has risen to the challenge of driving industrialisation in our economy through the way it is pricing its services to relevant customers, through the internal development of industrial capabilities and through the way that it procures from suppliers.

R700 million was disbursed in the 2012/13 financial year from the R1 billion ports rebates to the exporters of manufactured goods announced last year; and the remaining R300 million will be disbursed this year.

Transnet has put proposals to the Ports Regulator for a ports pricing strategy that reverses the historical legacy whereby bulk commodities were favoured at the expense of containerised manufactured goods.

We have also established a task team involving the department, Department of Trade and Industry and the Transnet National Ports Authority to develop joint strategies to promote investment in port dependent sectors that are prioritised in our Industrial Policy Action Plan.

We saw progress in 2012 in positioning Transnet Engineering (TE) as a rail and ports manufacturing centre for Africa.

TE invested R1.3 billion in new technology, equipment and plant upgrading in year 2012/13 and plans to invest a further R954 million over this financial year.

TE presently has an order book of over R1 billion for locomotives, wagons and coaches for six countries in Africa.

Our objective in owning TE is to develop strategic industrial capabilities relating to Transnet’s business while supporting the growth of a broader private sector rail and ports supplier cluster.

We have made significant progress over the past year in defining the role of TE in relation to the private sector and will continuously engage with the private sector around our approach.

Building intermediate and advanced industrial capabilities will require enormous effort by all stakeholders in the South African economy.

Over the coming year, we will be exploring how we can more coherently leverage the capabilities in Denel, Transnet Engineering and Rotek to support the localisation of strategic and complex industrial components.

Chairperson,

Broadband Infraco (BBI) has been stabilised over the last financial year with all key management positions having been filled.

The company invested R140 million over the last year and has plans to spend over R700 million to upgrade technology and improve network performance and reach this financial year.

This should enhance the company’s competitiveness and value proposition to both public and private customers.

Building on this enhanced position, and with the department’s support, the company will over the coming year focus on ensuring that government becomes an anchor tenant at a national, provincial and municipal level.

In this regard, I am pleased to announce that the Department of Science and Technology has taken up 70% of the capacity associated with BBI’s investment in WACS in support of the Square Kilometre Array (SKA) project.

The department continues to work with the company on a detailed funding plan to ensure that the infrastructure roll-out takes place and that the company is placed on a stable footing.

Chairperson;

Given the acceleration of our investment programme and the key role played by our SOC in the Strategic Integrated Projects, a number of initiatives have been taken to enhance our ability to design, fund, manage and oversee megaprojects:

• Eskom has codified the lessons they have learnt in implementing the build programme into a comprehensive toolkit and has established an Institute for Project Management Excellence to provide training based on this tool-kit. We are exploring how to make this a resource that all our SOC and broader government can draw on to enhance their ability to manage complex mega-projects;
• The Eskom and Transnet Boards have established Sub-Committees which will have the specific responsibility of monitoring progress on the build programmes;
• The DPE has established a Project Oversight Unit that will focus on intelligently monitoring and adding value to the SOC infrastructure roll out programme as well as to those Strategic Integrated Projects (SIPs) where the Minister or SOC in the DPE portfolio play a leading role; and
• We have established a funding capability within the Department to work with our SOC to see how we can draw on new sources of equity finance for the build programme. A task team has already been established with Transnet and the Chamber of Mines to explore the funding of specific projects.

Chairperson,

It is no secret that South African Airways (SAA) has had a turbulent year in terms of its leadership and governance.

I hope that the appointment of the new CEO, Mr Monwabisi Kalawe, and the finalisation of the Long-Term Turnaround Strategy will provide SAA with the stability, leadership and direction it requires decisively to turn around.

I am cognisant that SAA has produced a number of turnaround plans over the last ten years, yet none have put the airline on a sustainable footing.

Consequently, the DPE, in collaboration with the SAA Board, will be designing a special governance arrangement to ensure that we are able rigorously to monitor progress on the implementation of the strategy.

I am happy to report that SAA has already begun to implement its turnaround strategy and achieved its cost compression target of R1.3billion for the year ending March 2013.

Over the next year we will focus on ensuring that SAA’s cash position is stabilised, the cost compression programme is accelerated, the international network is reviewed and the long-term fleet plan is finalised.

During the next quarter, SAA will start taking delivery of a fleet of twenty Airbus A320 aircraft, valued in the order of R10 billion that form part of a broader fleet replacement plan that aims to address the fuel inefficiency of SAA’s current long-haul fleet.

Chairperson,

As reported last year, we have been working with the SAX Board to address internal control challenges in the airline.

To this end, the 2010/11 financial statements were tabled to Parliament on 25 April 2013.

SAX plans to have all outstanding audits finalised by the end of July.

As with SAA, the department and the Board of SAX are working to develop a comprehensive turnaround strategy for the company.

It is pleasing to note that SAX cut R129 million in costs in the last financial year.

Over the coming year SAX will continue to focus on enhancing efficiencies and cutting costs, improving customer service and enhancing internal controls.

Chairperson,

Denel returned an unaudited profit of R60 million in the 2012/13 financial year, breaking a long stretch of losses.

The turnaround is a result of implementing a strategy of global alliances to supplement the domestic revenues.

Last year, Denel signed R3.7 billion in new, predominantly export orders.

Denel received a R1.85 billion government guarantee and a R700 million capital injection in order to position the company to access these international orders.

In the coming year, the company will continue with its three year plan to consolidate its structure and cost base.

We will be focusing on ensuring the success of the Hoefyster infantry combat vehicle production programme and further positioning the business for collaborative product development opportunities, with a focus on Latin America, Africa, Asia and the Middle East.

The department will be also working with SAA to ensure that the supplier development obligations associated with the SAA fleet renewal contribute to the expansion of Denel’s aerostructures, engineering and maintenance capabilities.

In addition, the department will rigorously interrogate how synergies between SAA Technical, SAX Technical and Denel Aviation in the maintenance, repair and overhaul space can be captured to create an organisation with the credibility to capture the growing air-traffic through South Africa.

Chairperson,

SOC continue to play a leading role in skills development and will be investing over R2.8 billion in training over the coming year.

Over the last year, more than 16 000 learners were trained in various scarce and critical skills learning programmes within the SOC in the DPE Portfolio.

Eskom also facilitated the training of 5 248 young learners through their key suppliers.

Transnet has secured an amount of R175 million from the Department of Higher Education and Training to train an additional 1 000 learners, who will be recruited across provinces over the coming year. This will increase artisan learners at Transnet training facilities to 3 000.

In the coming year, we will be focusing on further optimising the use of existing SOC training facilities to increase the number of artisan and technician trainees beyond the portfolio’s requirements.

Chairperson,

In July 2012, we launched the SOC climate change response framework and all our SOC committed to the UN global sustainability Compact.

We have given the SOC eighteen months to design and implement their climate change strategies before they will be integrated into the shareholder compacts.

In this regard,

• Transnet has aligned energy efficiency objectives with management incentives;
• Eskom has a collaborative initiative with SAFCOL around the establishment of a charcoal manufacturing plant in Mpumalanga to lower Eskom’s carbon emissions whilst promoting rural development; and
• SAA, under the leadership of the department, has established an Aviation Biofuels Project in response to the threat of internationally imposed bio-fuel requirements.

Chairperson,

The governance programme in the department is focused on undertaking targeted initiatives to operationally enhance the shareholder management model.

Five Deputy Directors-General (DDGs)  are now appointed, and the outstanding two have been recruited and their appointment is waiting final cabinet approval.

I am proud to say that over 70% of our DDGs are female.

Chairperson,

The Deputy Minister will give further details on some of our achievements and plans in the areas delegated to him.

In conclusion, I hope that I have demonstrated to you that our SOC are a unique instrument of our developmental state, and are systematically driving investment, industrialisation and transformation amongst their customers, suppliers and in the broader economy.

I believe that we are getting an extra-ordinary return on the capital that we have invested in them and they are worthy of our continued unflinching support.

I would like to thank Deputy Minister Bulelani Magwanishe, the Director-General, Tshediso Matona and all the DDGs and staff of the Department for their relentless support and tireless work.

I thank the Chairperson of the Portfolio Committee, the Honourable Peter Maluleke, the Honourable Members of the Portfolio Committee and my Cabinet Colleagues for their support and regular wise counsel.

I hope that this EPC will join me in conveying our sincerest condolences to our Chairperson, Mr Maluleke and his entire family at the sad loss of his brother.

I further wish to thank the Chairpersons, CEOs and all staff of our SOC for their commitment to fulfilling the difficult goals and targets we set them, particularly during this difficult economic climate.

I am humbled to request the EPC to support this budget of R236,889,000 for our department that has received nine consecutive clean audits.

I thank you.

 

Budget Vote Debate, National Assembly by Public Enterprises Deputy Minister Bulelani Gratitude Magwanishe

Honourable Chairperson,
Honourable Ministers and Deputy Ministers,
Honourable Members,
Chairpersons  and Board members of our SOC,
The Director General of the department, Mr Tsediso Matona,
CEO and senior managers of our SOC,
All DPE colleagues present,
Distinguished guests,
Ladies and gentlemen.

The sight of visions of trees says to us we are alive as we can see. Passionately we rise daily to water them as we build their strength. As we live we commit to nurture the trees to enjoy watching them grow. Department of Public Enterprises (DPE) adopted a vision in  2011 to “to drive investment, productivity and transformation in the department’s portfolio of State Owned Companies (SOC), their customers and suppliers so as to unlock growth, drive industrialisation, create jobs and develop skills”.

This vision gave birth to Provincial Engagements whose objective is to align planning between provinces and SOCs. At a strategic level, this involves ensuring that the SOC investment plans and the economic development of provinces are aligned. Further, that the implementation of these plans is coordinated so that impact is optimised.

In 2012 four provinces namely, North West, Kwa-Zulu Natal, Eastern Cape and the Free State were visited. This was in response to Minister’s commitment made in 2011. Our SOCs provided updates on issues which were raised per provinces during the Minister’s initial visits in 2011.

(SOCs) were able to make presentations on opportunities available within them to benefit the provinces, and entrepreneurs. Recently we have agreed that these sessions should also address the issues of actual employment, opportunities available within SOCs. We are currently finalising establishment of institutional support mechanisms to process issues raised in provinces. We are working on our vision of trees.

The provincial engagements serve also as a vehicle for our Youth Economic Participation Programme. We are alive to the fact that young people constitute the majority of our society and those who are unemployed.

As such, youth engagements sessions are part of all the provincial engagements. This is done so as to ensure that community stakeholders and youth in particular, receive the required information. This refers to information relating to skills, jobs, business opportunities and corporate social investment programmes.

In collaboration with all SOCs, a plan on priorities for 2013/14 financial year has been developed. Our Youth Economic Participation (YEP) programme, together with our SOCs, has been successful in engaging young people in the above mentioned provinces. This programme has spread its presence to local communities attracting more than 5 000 young people through Career Expo’s done with SOC.

Grade 10 to 12 learners and the unemployed youth of Khayelitsha benefited from the Expos. Learners in Mpumalanga as well as young people of Kwa-Zakhele in PE benefitted from these Expos. 

In the month of June 2013 YEP will be hosting a three days Youth Career and Skills Expo jointly with the Ekurhuleni municipality focusing on aviation as a career of choice. This is expected to draw 5000 learners, young entrepreneurs and young people in general.

As a response to a plea made on our visit to the Free State province in December 2012, the DPE-SOC(Denel, Transnet, Eskom and South African express working together with the Free State Dept of Economic Development and the Free State department of education will be hosting a Youth Camp for  grade 10-11 including learners with disability. Learners will be drawn from schools in around the province with special focus on rural learners.

These learners will visit all operations of our SOCs. They will fly for the first time in their lives. Thanks to South African express. They will ride a train for the first time in their lives. Thanks to our collaboration with PRASA. Following our provincial engagement in KZN, our YEP is planning an SOC Supplier Forum in KZN.

In June we will be launching State owed companies Youth Forum. From the 1 June will be starting a yearlong programme of distributing maths dictionaries developed by DENEL to schools that performed dismally in maths and Science. These will be donated to their libraries for a start.

From July we plan to replicate competitive supplier development summits to all the provinces. Before the end of October we will host a summit with our SOC Foundations and foundations of our supplier companies.

We are addressing the question on how to use Corporate Social investments programmes to fund youth employment and youth development in general. We will continue to support Eskom’s initiative to support FET colleges through building electrical and mechanical workshops at the tune of R1.9 each. The following provinces have benefited: Gauteng, Limpopo, KwaZulu-Natal (KZN) and the Western Cape.

We have established a forum of CEOs and heads of CSI departments of our SOC Foundations to foster collaborations and to learn best Practises from one another. We will be working with SAMSA and Transnet to expose our young people to maritime opportunities.

Our focus for the August month will be on young woman in engineering. Our young woman engineers at Denel, BBI, Eskom and Transnet will be dispatched to schools to popularise engineering to young woman as a career of choice. SOCs will submit plans on how older engineers will be mentoring young woman engineers during this month and how the plan is sustained going forward. 

In September Transnet through the NSF will be recruiting 1 000 learners to be trained as artisans. We are collaborating with the department of human settlement to ensure that young people who are in construction are assisted to get the required CIDB certification. We are working with COGTA, Department of Energy (DOE) and MISA to develop a joint program on electrical infrastructure refurbishment using our engineers as part of their employee volunteer scheme.

We are nurturing the tree. We are nurturing the young to watch them grow.

South African Forestry Company (SAFCOL)

Since our last budget vote in 2012, SAFCOL has appointed a permanent CEO. She is the first and the only black and female CEO in the forestry industry in South Africa. Since her appointment the new CEO she has initiated a project that has already created employment to approximately 134 individuals in the community of Sabie.

This is in addition to the 1 681 permanent employees and 2 500 contract workers. SAFCOL has also built a number of infrastructures using timber frame, like Classrooms, administration blocks, kitchens, houses, and computer centres. This is in line with our government rural development strategy.

SAFCOL has been awarded 70 000 hectares in the Sofala province of Mozambique. Through this development, the company is destined to positively contribute to Government’s drive for regional development. DPE, SAFCOL and DRDLR are in the process of finalising the land claim settlement model relating to disputed land on which SAFCOL is operating. The model is not just to ensure that sustainable benefits are transferred, but also to ensure continuity of forestry production with the assistance of SAFCOL.

ALEXKOR

Since the last budget vote the following have happened at Alexkor. To turn around the company the shareholder appointed a new board of directors with a mandate of appointing a CEO within 3 months, this has been done. The board is finalising the appointment of a CFO. A turn- around strategy for the PSJV is ready to be presented to the shareholder. The board has improved relations with communities.

The new board has taken a decision to be firmer in dealing with poor performing contractors whilst rewarding the better performers with more opportunities. As the Shareholder we are behind the board in this regard. This will be underpinned by the monitoring of sea days vs. production, stone size distribution analysis, security upgrade, introduction of middle water mining and the implementation of the deep-sea mining agreement with IMDSA.

Alexkor has successfully completed all necessary upgrades for the township infrastructure that will support handover to the Richtersveld Municipality. The company is currently attending to the rehabilitation backlog and is employing over twenty employees in this regard. An amount of R200m has been given to Alexkor for this project.

The company has to enter an era where it becomes a driver of prosperity in the Richtersveld and Namaqualand regions of our country. The Master of the High Court has appointed an investigator to investigate the affairs of the trusts.

As the DPE we led a delegation consisting of Deputy Ministers from Rural Development and Mineral resources to meet the four communities of Richtersveld. As result of the visit, the following interventions are underway. On the Farm Recap: Grow-Agri has been confirmed as a Strategic Partner to revive farms.

Already there is a person deployed to turn around the farms. On Youth: 60 young people have been captured in their system for the National Service Corps. Spatial development plan have been approved by COGTA. 195km of road to be improved. The Alexkor board has been given a mandate to look for mining opportunities beyond diamonds in line with the relevant enabling legislation.

PBMR

Government decided (in 2010) to place the PBMR into care and maintenance mode until 31 March 2013. This was done so as to protect and preserve its intellectual property and preserve its assets. The packaging of the intellectual property to be preserved has been completed. The Department is in the process of facilitating a consolidated government view on which PBMR’s assets will be preserved, donated or disposed off for cash. This process should be completed this coming year.

AVENTURA

Pursuant to the 2001 Cabinet decision, I am glad to announce that Aventura has been put on liquidation. Its assets will finally be disposed the process to wind it down is currently underway. I want to take this opportunity to thank Minister Gigaba for his leadership, warmth and counsel.

My colleagues at DPE for their support, Boards and management of SOCs for their support. The Portfolio Committee for their support, the study group of the African National Congress for their guidance. And all the guests for their attendance.

I thank you!

 

Natasha Michael, Shadow Minister of Public Enterprises
 

Speech Highlights: 
•    We cannot expect to grow our economy, create jobs and better the lives of South Africans if we cannot ensure a constant and secure supply of electricity
•    Problems in SOE governance can be attributed to the poor operational and financial performance
•    Load shedding will be a fact of life unless we, the public of South Africa, pull together like never before and save energy everywhere we possibly can
•    South Africans have a right to know what is going in with the national carrier; after all, it is their money being used to keep the airline afloat

Speech: 

Mr Speaker, Minister and Deputy Minister of Public Enterprises, Honourable members, Ladies and Gentlemen

South Africa’s State Owned Entities are protected from failure. Insolvency is not a concern as government bailouts are the financial rescue plan in most instances.  The threat or option of a takeover bid, which would be viable for private companies is out of the question for our SOE’s which results in possible slumps of management efficiency and the fall into complacency of many board members. 

The power of the boards of SOEs is often usurped by Government. Government sets and drives the strategy of SOEs; appoints and dismisses the CEO; and approves financial and major capital expenditures of the SOEs. This creates a complex situation in which various factors contribute to confuse the board as to its powers and their execution. 

Research indicates that problems in governance can be attributed to the poor operational and financial performance of SOEs in general. An effective government shareholder management model that addresses the key challenges of SOEs’ governance will improve the performance of SOEs and better protect the assets of government. Even modest improvements in the efficiency of SOEs in a country could free up financial resources equivalent to 1-5% of its GDP.

Chairperson,

No doubt at the front and center of most South African’s minds right now is the worry of our very precarious electricity supply.  It is not the DA alone who have raised concerns regarding the electricity situation of our country.  The President of the Cape Chamber of Commerce and Industry, Michael Bagraim, said that the business world is worried about the likelihood of Eskom’s planned power outages.  Bagraim’s concerns come after Eskom Chief Executive Officer: Brian Dames warned the country that power cuts could be on the cards this winter. I quote Dames “We have said consistently alone Eskom cannot give assurance that load shedding won’t hit South Africans this winter.”  Allow me now to quote Bagraim’s response to Eskom’s situation “I am very worried and the business community is shaking, because the reality is every time there is a power cut we lose an enormous amount of money.”

We cannot expect to grow our economy, create jobs and better the lives of South Africans if we cannot ensure a constant and secure supply of electricity.  We are fumbling in the dark when it comes to the building of our power stations.  Both the Medupi and Kusile stations are way behind schedule.  Virtually continuous labour disputes on both sites have set the projects dangerously behind schedule.  The DA has called for the appointment of permanent mediators at both sites to ensure that future disputes are resolved before crisis levels are reached.  We urgently need to boost capacity such as allowing Independent Power Producers to enter the market and ease the burden on the state entity.

We must now be realistic.  Load shedding will be a fact of life unless we, the public of South Africa, pull together like never before and save energy everywhere we possibly can.  We as South Africans have been forced into a situation where we have no option but to look to ourselves to dig the country out of this crisis.  It will be thanks to the South African public...and the public alone should we manage to avert the crisis this winter.

Another public entity that has flitted from scandal to scandal and crisis to crisis is South African Airways.  If it wasn’t the clandestine resignation of a board, it was the allegations of security services spying on board members, not to mention allegations of tampering with legal opinions regarding the suspension of then Acting CEO Mr Kona.

The DA has called for Minister Gigaba to appoint a task team to urgently investigate ALL alleged irregularities at SAA and any related matters that are impeding the airline’s functioning, and report back to parliament on its findings.  

Chairperson, I think it is more than fair to say that the airline’s survival has for far too long depended on billions of rands of government bailouts.  The national carrier has been shrouded in a veil of secrecy for too long now.  South Africans have a right to know what is going in with the national carrier; after all, it is their money being used to keep the airline afloat. 

Another huge concern remains the issue of the Transnet pensioners.  This is an issue that simply cannot be politicized.  Thousands of South Africans who dedicated their lives to bettering our country are suffering.  The amount of money that these pensioners are expected to survive on is unacceptable.  The situation has reached crisis levels that could have been avoided had the necessary attention been paid to the issue by DPE and Transnet.  A parliamentary directive was directly ignored with regards to increases to be paid to the pensioners.  Excuse after excuse was given for the situation.  The DA approached the Public Protector last year in June and requested a full scale investigation into both the pension schemes.  I am pleased to inform parliament that on the 25th of July 2012, we received confirmation that the Public Protector would investigate the issue.  The investigation is ongoing and I look forward to the outcome of the investigation.


Minister of Public Enterprises, Malusi Gigaba’s comments on cadre deployment at the Cape Town Press Club will hamper the government’s efforts to professionalise the public service.

Minister Gigaba said that he “wouldn’t apologise for deploying a cadre into a board” and that “there will be some rotations on the board[s], based on people whose time has lapsed”.

We cannot allow our public enterprises to become a revolving door for failed ANC cadres. We need professional and capable people to make sure that the trains run on time, the lights are kept on, and that the national carrier does not continue to run at a loss. 

Minister Gigaba’s comments are also a blatant contradiction of the National Development Plan (NDP) and will undermine South Africa’s fight against corruption. The NDP is clear that the government needs to take steps to “…professionalise the public service, strengthen accountability, improve coordination and prosecute corruption.” Furthermore, the NDP criticises political appointments by saying that "…in South Africa the current approach to appointments blurs the lines of accountability. The requirement for cabinet to approve the appointment of heads of departments makes it unclear whether they are accountable to their minister, to the cabinet or the ruling party.”

The reality is that cadre deployment has undermined the ability of the government to deliver quality services to all South Africans and has effectively been used as a smokescreen behind which whole-scale corruption has been allowed.

South Africa needs an efficient and professional public service and not a Luthuli House-appointed bureaucracy.

In contrast to King I and King II report, King III report applies to all entities, both private and public, regardless of the manner and form of their incorporation or establishment. By adhering to King III’s key principles, any entity will have practiced good governance.

Some principles from King III that the DA would like to see implemented in our SOE’s are:

•    The need for an annual integrated report that focuses on the impact of the organisation in the economic, environmental and social contexts;
•    A statement by the audit committee to the board and shareholders on the effectiveness of internal financial controls is to be included in the integrated report;
•    The consideration of the strategic role of IT and its importance from a governance perspective;
•    The positioning of internal audit as a strategic function that conducts a risk-based internal audit and the provision of a written assessment of the organisation’s system of internal control, including internal financial controls;
•    The governance of risk through formal risk management processes; and
•    The need to follow business rescue procedures should it become evident that the entity is distressed

Chairperson, allow me to conclude with a quote by Theodore Sorensen which I believe sums up the importance of the need for transparency and realistic expectations for our countries Public Enterprises:

“If we can but tear the blindfold of self-deception from our eyes and loosen the gag of self-denial from our voices, we can restore our country to greatness.”

 

Budget Vote11 - Public Enterprises   Contribution By The Hon. Mr KP Sithole, MP

Honourable Speaker, We as the Inkatha Freedom Party wish to use this opportunity for debate to highlight how damaging the existence of the Department of Public Enterprises is to our fiscus, our State and our Republic. Somehow there has long been a realisation that the very existence of this Department is problematic and there have been projects, programmes, commissions, workshops and endless deliberations aimed at possibly doing away with it. We find this all utterly unacceptable. It is self-evident that this Department makes no sense whatsoever, is a huge waste of money, leads to the mismanagement of each of the relevant State-owned enterprises and is retrograde to public interests and common sense alike. One should just have the political will to abolish it without further procrastination. Each of the State-owned enterprises must be moved to the line function department with the relevant expertise, rather than having a department which must replicate expertise in transport, energy, mining, defence and all the other aspects which this Department must have expertise on. It is has been recently reported that the government could be planning to bring the state owned oil company Petro SA as well as the South African Broadcasting Corporation into the Public Enterprises fold. This is tantamount of moving from the sublime to the ridiculous. The Inkatha Freedom Party strongly opposes these moves should they occur and re-iterate our call for state owned enterprises to be moved and in this case, remain within their line function department. This Department is staffed with qualified and competent experts who could enrich the relevant line function departments, some of which already have responsibility over State-owned enterprises which Apartheid did not see fit to lump together into this absurd Department. The persistent State ownership of Denel and South African Airways, which must be privatised, as they have become great enemies of the people, the taxpayers and the Republic. SAA is singlehandedly destroying and undermining one of our most important industries; our tourism industry, while Denel has become a twenty-year drag on our scarce resources, with no real social or public benefits. Eskom too must be broken up into two competing companies to reduce the massacre which the electricity monopoly is perpetrating on a daily basis on our industries and families alike. Eskom has failed us and we are bearing the brunt of their failure, not only with intermittent electricity supply but also through crippling electricity price increases somewhere in the region of 16% per annum over the next five years. For these reasons, the IFP will be opposing this budget. I thank you.   Speech by Hon Gloria Borman during the National Assembly Debate on Public Enterprise Chairperson, Hon Ministers and Deputy Ministers, Hon Members and Distinguished Guests, President Zuma in his State of the nation address in February this year concluded his speech with these words: "As South Africans, we should continue to have one primary goal – to make our country a truly great and prosperous nation." The ANC believes our state owned companies have a significant contribution to make towards achieving this goal. In the aftermath of the 2008/09 economic crisis we saw an increased role for the state in the economy in major parts of the world, in particular in driving investment. In South Africa, where private sector activities have continued to be subdued, State Owned Companies have assumed major strategic importance regarding investment, job creation and economic growth. Broadband Infraco is one of the State Owned Companies with an important role to play in the roll out of Information Communication Technology (ICT) needed to grow the economy. Again I quote from the President’s speech: "To prepare for the advanced economy we need to develop, we will expand the broadband network. Last year the private and public sector laid about 7000 new fibre optic cables. The plan is to achieve 100% broadband internet penetration by 2020." The rationale for the establishment of Broadband Infraco by the Government of South Africa was to create an environment in the ICT sector in which business and ordinary citizens are able to access large streams of high bandwidth capacity at affordable rates and with ease of access at places where they live and work. This intervention had a significant impact on the pricing strategies of different operators resulting in the reduction of Business-to-Business prices by up to 70% between certain cities, which helped boost the growth of ICT driven industries such as Business Process Services - call centres. Broadband Infraco acts as a basic platform to stimulate private & public sector development and innovation. Up to R1.8 billion has been invested which has resulted in the construction of almost 13 000 kms of fibre and access to 151 open Points of Presence. A Point of Presence is a node from where government and other private operators can plug their networks into Broadband Infraco’s network for onward usage. This means more capacity available for the South African public to use. Broadband Infraco has served as the backbone of the Second Network Operator. It carries high capacity for all three major network mobile operators - Cell C, MTN and Vodacom - and provides connectivity to operators who carry traffic to neighbouring countries (Liquid Telecommunications; SEACOM). Broadband Infraco assumed a major investor status in the West African Cable System (WACS), which is a 14 500 km long submarine fibre optic cable linking Southern Africa, West Africa and Europe. The benefits to South Africa and Africa at large will be to: Lower cost of international bandwidth to a level comparable with international benchmarks. Create sustainable efficient international bandwidth market in South Africa. Position South Africa for future growth – connect her to key Global Knowledge Economies: Europe, North America, South America, India Provide cost effective access to international bandwidth for key projects such as the Square Kilometre Array. a) Chairperson, the Square Kilometre Array Telescope will be the world’s biggest telescope – and one of the biggest scientific projects ever!! It will use enough optical fibre to wrap around the earth twice. The data collected by it in a 24 hour period would take nearly two million years to play back on an iPod. It will generate enough raw data every day to fill 15 million 64 GB iPods. The central computer will have the processing power of about one hundred million PCs. The mind boggles!! The most important spin-off will be the generation of new knowledge and knowledge workers – young scientists and engineers with cutting edge skills and expertise in a wide range of scarce and innovative fields. South Africa has areas which are not deemed financially viable for ICT infrastructure roll-out. Through Broadband Infraco, government has committed to ensuring backbone coverage in underserviced rural areas in terms of its license obligations - these cover 57 Points of Presence. The plan is to provide for 100% broadband coverage to all households by 2020, establishing core Points of Presence in District municipalities, extending new fibre networks across provinces, at local levels, and taking the network into deep rural areas with affordable access. While the private sector will invest in ICT infrastructure for urban and corporate networks, government will co-invest in township and rural access as well as e-government, school and health connectivity. Part of digital access to all South Africans includes TV migration nationally from analogue to digital broadcasting. According to Section 4 (1) of the Broadband Infraco Act, 2007: ‘The main objectives of Infraco are to expand the availability and affordability of access to electronic communications, including but not limited to underdeveloped and under serviced areas.......... through the provision of – (a) Electronic communications network services: and (b) Electronic communications services. The Act stipulates that Broadband Infraco will be able to fulfil its objectives once it obtains the two licences. To date only the ECNS licence has been granted. Chairperson, may I address the Minister through you. Hon Minister, Broadband Infraco is making a significant contribution to economic development. As parliament, we are concerned that the ECS licence has not been granted. This is having a negative effect on delivery of ICT into the rural areas. We urge both you and the Minister of Communications to bring resolve to this impasse urgently. Chairperson, the acting CEO, Dr Andrew Shaw, stated in his 2012 report the following: "The organisational structure was adjusted in October 2011. This was necessary to meet newly defined market needs, improve accountability, enhance capital project roll-out and address a number of governance related shortcomings in the previous structure." He further says, " By the end of calendar year 2011 the presence of the newly appointed executive management was felt in earnest....." We note the improved financial performance of Infraco, recording a net loss of R95.2 million for 2011/12 as opposed to a loss of R206.9 million in the previous year. Vacancies have been filled with suitably qualified persons. The ANC welcomes the new Chief Executive Officer, Ms Puleng Sejanamane and Ms Ramasela Magoele as the Chief Financial Officer. We want to thank the DG and his department for the significant role they have played in steering this ship through stormy waters. Chairperson, the ANC believes Broadband Infraco is ready to play a significant role in contributing towards growing the economy and making our country a truly great and prosperous nation. Speech by Hon Connie September during the National Assembly Budget Vote Debate on Public Enterprise 14 May 2013 Honourable Chairperson, Minister, Deputy Minister, Honourable Members, Guests, Ladies And Gentleman I rise ON BEHALF OF THE ANC in support of the budget for the department of Public Enterprises. The economic crisis saw an increased role of the state in the economy in major parts of the world, in particular in driving investment. In South Africa, where private sector activities have continued to be subdued, State Owned Companies have assumed major strategic importance regarding investment, job creation and economic growth. Hence the ANC led government decision to invest in major infrastructure. SOEs are not created to maximise profits or incur losses, but rather to drive the development agenda. Thus it is correct for the state to intervene when the invisible hand of the market fails by providing a guarantee to SAA. It cannot be construed as a moral hazard. It is common cause that the working capital of the airline was depleted presenting an immediate risk of the company not being able to meet its obligations. The deterioration of the debt equity position of the company required the intervention of the Shareholder to stabilise the company. This is in line with the SAA ACT as amended in 2007 that states Since the Republic`s rapidly developing economy requires reliable and extensive air transport capacity; And since the State desires to promote air links with the Republic`s main business,trading and tourism markets within the African continent and internationally; And since the State has a developmental orientation and regards South African Airways as a national carrier and strategic asset that would enable the State to preserve its ability to contribute to key domestic, intra-regional and international air linkages, the State intends to retain it as a national carrier, the DA according to hansard voted in favour of this. Chaiperson The investments by the State Corporations have played a fundamental role in moving the economy out of the recession and has crowded-in private sector investment. The policy strategy is to use the strength of SOEs and directing private sector investments in the productive sector of the economy to stimulate manufacturing and promotion of entrepreneurship development programmes that will enhance deracialisation of the economy and the creation of new firms and industries, the focus on the productive economy as opposed to tender-dependence in economic transformation. Chairperson The ANC welcomes the constant search to use ICT`s to improve its service delivery to citizens. This extends to areas such as health enabling public hospitals to transfer the files and or medicines of patients to remote areas; being able to interlink various schools through compute-based distance-learning and by connecting government centres through high-speed bandwith. Broadband Infraco`s backhaul network is available as a core platform to deliver such citizen services. As the ANC we have responded to areas which are not deemed financial viable for ICT infrastructure roll-out. We ask that Broadband Infraco, continue to ensure backbone coverage in rural underserviced areas in terms of its license obligations so that 57 Points of Presence (Pops) in the following provinces: Kwa-Zulu Natal, Eastern Cape, Limpopo, North West, Free State, Northern Cape and Mpumalanga continue to enjoy your roll-out. Broadband has become an important part of almost every aspect of the knowledge economy and is especially so in activities that relies on the provision of data and information, particularly in service sectors. The ANC led government through, Broadband Infraco assumed a major investor status in the West African Cable System which is a 14 500 km long submarine cable fibre optic linking Southern Africa; West Africa and Europe. At last we are starting to have in South Africa and Africa at large are the following: Lower cost of international bandwidth to level comparable with international benchmarks. Create sustainable efficient international bandwidth market in South Africa. Provide cost effective access to international bandwidth for key projects such as the SKA.Square Kilometre Array Position SA for future growth – connect SA to key Global Knowledge Economies: Europe, North America, South America, India Comrade Minister the ANC would want infraco to continue aligning the entity with the objectives of the NDP that says that the regulatory framework must be changed to ensure that internet broadband capacity improves, prices fall significantly and access improves. Eskom The imbalance between the supply and demand of electricity has triggered Eskom to embark on the biggest build programme in South Africa. While the supply constraints remain, significant progress has been made by the ANC with regards to the implementation of the Return to Service (RTS) programme and expansion of transmission capacity In efforts to stimulate the local economy, Eskom has placed an average of 76.9% of local content in new build contracts which is greater than the target of 52% over the three year period; and Eskom had a total learner compliment of 11 953 learners, of which 5 715 are engineering, technical and artisans learners and 5159 are in the youth programme- 2011/12 which provides critical work experience to unemployed youth. These are the direction that the ANC is driving the skills programme in support of our youth. Working with the Department, the ANC congratulates Eskom for successfully managing the national supply/demand constraints over the last three years which resulted in no rotational load shedding since 2008 including keeping the lights on during the FIFA World Cup 2010 and the African Cup of Nations hosted in 2013; President Jacob Zuma said in the State of the Nation address that “we should put South Africa first. All of us have a patriotic duty and responsibility to build and promote our country.” And further said “The National Development Plan provides a perfect vehicle for united action precisely because it has the support of South Africans across the political and cultural spectrum. Leaders in every avenue should be ready to rise above sectional interests and with great maturity, pull together to take this country forward.” NDP THE NDP REMINDS US THAT SA have missed a generation of capital investment in roads, rail, ports, electricity, water and sanitation, public transport and HOUSING. So too does the RDP of the ANC STATE attacking poverty and deprivation must be the first priority of a democratic government, this includes SOE`S. The ANC ask Minister and Deputy Minister that you align the department and entities with the following objectives. Speech by Hon Dr Gerhard Koornhof during the National Assembly Debate on Public Enterprise 14 May 2013 Mr Chairperson and Honourable Members, The Chairperson of the Portfolio Committee, Honourable Peter Maluleka, lost his elder brother on Saturday. I am certain that I speak on his behalf of this Extended Public Committee, and in particular all political parties represented in the Portfolio Committee on Public Enterprises, in conveying our condolences to Honourable Maluleka and his family on their great loss. I am proud to represent the African National Congress in this debate, for the three reasons. Firstly, we have a Minister in charge who takes on the responsibility to leads, who gets his hands dirty, who seeks solutions to problems, who lead from the front with visible leadership. He is not shaky. The State solves problems in State Owned Companies. Secondly, the Department of Public Enterprises has again received a clean audit report from the Auditor-General, the eighth consecutive year. It is a relatively small Department with a small budget, compared to other Departments, but it succeeds to oversee successfully some of the largest State Owned Companies in South Africa - We acknowledge the sterling job done by the Director-General, Mr Tshediso Matona, and all our officials, in continuously strengthening their oversight functions. Thirdly, we have State Owned Companies who continuously ensure that they remain sustainable and are able to support government`s objectives. They employ more than 100,000 workers directly, who are loyal and hard working. They are proudly South African State Owned Companies. This year Eskom, celebrates its 90th birthday and SAA celebrates its 80th birthday. When we analyse gross fixed capital formation in South Africa, it is clear that capital expenditure by State Owned Companies are key in sustaining overall investment growth. Fixed capital investment by public corporations has been on the upward trend since 2004 and has grown by approximately 300%. Of equal important is that the high levels of growth experience between 2008 and 2012, during the downward phase of the business cycle, have been maintained, in support of government`s countercyclical, approach. This reflects commitment by the ANC government to the build programme! Quarterly growth in investments indicates that investments by the state in the economy continued to accelerate in 2012. Although the state investment expenditure is not on par with that of private business enterprises, the rate of investment expenditure growth by the state outstrips that of the private sector. I briefly want to address some governance issues and related oversight responsibilities. Given the complexity of the multiplicity of legislations and policy frameworks of different departments at different spheres of government and their entities and difficulties of implementing an overarching strategy, are acknowledged in the context of decentralised and multiple policy frameworks, legislations and oversight approaches. The task of the ANC government is to embed a uniform strategy for state owned commercial entities in South Africa that effectively responds to the developmental state agenda and creates an enabling environment, which amongst others, seeks to create a universal policy framework and legislation and develops state capacity to effectively monitor and evaluate state owned commercial entities, at all spheres of government. The absence if this will lead to conflicts of governance and lack of clarity within Boards. Implementing this strategic perspective is what the ANC requires of the Department. However this cannot be assumed to automatically happen and the Portfolio Committee will have to ensure that in its responsibility of oversight, key principles of governance and management of SOC`s are met. These would include: Firstly, an investment planning framework that is linked to long term strategic economic priorities of the country. These cannot be determined only by balance sheet constraints; Secondly, expansion and diversification of sources of funding for the investment plan beyond the balance sheet and the fiscus must include development finance institutions and the private sector; Thirdly, a focus on localisation in the procurement programmes in order to support local suppliers and hence promote investments in national industrial capabilities through entering into longer term sustainable contracts to reduce dependency on imports for intermediate goods and building of stable relationships; Fourthly, enhanced coordination between SOC programmes and all levels of government to ensure that SOC capabilities are fully leveraged, that implementation is accelerated and the impact of the programmes is optimised. This will mean all provincial governments will have be involved in the facilitation of this process. Mr. Chairperson, we should partner with the Private Sector not unbundle State Assets and Resources The theorists who repeatedly call for unbundling of state assets are locked in a time warp, a failed project of neo-liberal restructuring in order to meet the narrow needs of capital accumulation, whilst selling off state assets to the highest bidder, without any developmental appreciation of the country. Such theorists will be rolled out from the opposition in this debate. The solution lies in the following models that work and these can be summarized as follows: Firstly, partnering between the Public and Private sectors whose focus should be given to collaboration and alignment of government entities in capital infrastructure programmes. This model has proven to be very successful in developing countries such as China, India and Brazil. Secondly, South Africa as part of the BRICS family, SOE`s should lead and forge strategic commercial partnerships with experienced state owned entities to lead in the infrastructure development opportunities in the continent. Thirdly, SOC`s should be required to collaborate through public-public partnerships that plan and implement strategic programmes of the Developmental State. The joint efforts should first serve to satisfy the absolute need for increased long-term planning to guide the coordination, project selection, and effective execution of investment programmes. Fourthly, strategic programmes and projects developed for roll-out by SOC`s should reserve a role for the relevant DFI to act as financial "lead arranger" to arrange financing of such programmes. We should consider to debate further the recommendations of the African summit of the World Economic Forum (WEF) which ended in Cape Town last Friday, with specific reference to the role that public institutions must play. The question is whether we should talk about competition or rather how do we complement each other? Infrastructure and Industrialisation In terms of ANC policy two pillars that are driving our economic growth and development of our economy are the infrastructure and industrialisation programmes. The infrastructure programme, which is within the National Development Plan vision, is based around strategic integrated projects that will have a catalytic impact on job creation, unlocking resources, developing the poorest regions of our country, overcoming spatial inequalities and developing the region. The Industrialisation process should seek to construct a new comparative advantage based on our natural resources, in the context of stronger regional integration. This requires us to ensure the competitive pricing of key resource inputs to our downstream beneficiation activities, including measures to address import parity pricing. Industrialisation is rooted in investment in the productive sectors of the economy. The New Growth Path and Industrial Policy Action Plan (IPAP) provide important building blocks to achieve the objectives in the NDP. Within this policy framework, achieving industrialization and shifting to the employment creating growth trajectory is critical for achieving the National Development Plan (NDP) vision. In supporting the implementation of the NDP, the Department of Public Enterprises will: Ensure the alignment of the investment plans of State Owned Companies with the NDP, Pursue improvements to the legislative framework to effectively provide oversight to SOC`s; and Promote the financial viability of SOC`s We are pleased that the Department of Public Enterprises is playing a central role in supporting these two pillars of infrastructure and industrialization programmes. There are practical demonstrations of this work to be found in the work of Transnet, one of our best managed State Owned Companies. Transnet is the main repository of specialist skills and expertise necessary to execute the mammoth infrastructure programme. The negotiations with the National Skills Fund to source additional funding to increase the numbers of learners in the State Owned Enterprises has led to R175m being approved for Transnet to expand the level of artisan training over the next three years. With regards localization and procurement which is critical to the jobs creation programme, Transnet has set the local content requirement of 65% in its tender for locomotives as part of its R300 bn Market Demand Strategy. This tender applies to the 1,064 electric and diesel locomotives. With regards tanker wagons, the order of these to transport fuel to Botswana stands at 70% local content. Transnet`s capital investment programme has benefited a local locomotive manufacturer which has and is producing over 70 locomotives. The extensive localization drives of Transnet in the acquisition and construction of locomotives and train coaches has meant the revival of our train manufacturing capabilities and a direct contribution towards industrialization of the economy. In respect of transport and logistics, Transnet is well on its way in improving capacity and efficiencies on rail and ports. Significantly, this year the upgrading of some of ports as well as improvements of efficiencies on rail through scheduled trains has taken place. The expansion of rail and port capacity will create even more jobs. Transnet has indicated that it shall announce a new capital expenditure plan and a revised capex timeline. This will to implement critical projects such as the road-to-rail migration, develop the Waterberg rail link and the rail link between Swaziland and South Africa, which will ease the rail congestion in Ermelo and facilitate more coal transportation to Richards Bay. The improvement of locomotives and updating the fleet with more powerful and environmentally-friendly locomotives are positive developments. The move is from mere replacement of the aging fleet to adding capacity. In the past three (3) years Transnet has for the very first time moved freight volumes on rail to just over 205mt, with over 18% improvements in efficiencies. Transnet has grown its market share in rail freight volumes, and has made significant improvements in efficiencies, which has strategically positioned the country in international trade through the ports infrastructure and regional freight rail operations, including in the SADC region. Significant improvements have been made, although more can still be done in improving service levels with more predictability to the end user and at a cost effective level that meet the needs of freight users. Over the past three years, Transnet`s focus has evolved from being a financially sustainable State Owned Company (SOC) into being a catalyst and a key enabler of the South African economy. This has been evidenced by the introduction of the Market Demand Strategy (underwritten by a R300bn capital expansion program) which commenced in the 2012/13 financial year. Transnet has spent approximately R67.8bn in capital expenditure over the past three years. Transnet`s revenue also grew by an annual average of 9.6% over the three past years, which was mainly driven by volume increase. SAA Air transport to, from and within South Africa creates three distinct types of economic benefits. Firstly its contribution to GDP, secondly jobs and thirdly tax revenues generated by the sector and its supply chain. The connections created between cities and markets represent an important infrastructure asset that generates benefits through enabling foreign direct investment, business clusters, specialisation and other spill-over impacts on an economy`s productive capacity. It is common cause that the working capital of the airline was depleted presenting an immediate risk of the company not being able to meet its obligations. The deterioration of the debt equity position of the company required the intervention of the Shareholder to stabilise the company. The Turnaround Strategy has been submitted in April 2013 and is being evaluated. What is less spoken about is that the airline has performed satisfactorily in the regional and domestic market. Not once has SAA been grounded during this period! In support of the government strategy to promote regional integration and promote South South Cooperation, SAA commenced the operation of 5 new routes in Africa (Kigali, Ndola, Bujumbura, Pointe Noire, and Cotonnou) as well as Beijing to complete the link between China and Brazil, which are major economies in the BRICS states. The national carrier plays a critical role in that it is responsible for the significant share of international and regional arrivals to South Africa. In addition to this, it plays a significant role in the current airlift of Southern Africa and plays a critical connectivity role in the global economy. South African Express The airline experienced its first major challenge in 2011/12 when the misstated Annual Financial Statements for 2010/11 were withdrawn. The Economic downturn affected the airline`s planned fleet replacement programme. In terms of achievements SAX commenced a cost cutting exercise towards the end of 2011/12 financial year to reverse the losses and liquidity challenges. The airline achieved savings of R129 million by the end of March 2013 from the cost containment exercise. Over the medium term, focus will be placed on establishing Durban as a regional hub. Operations between Lusaka and Durban, and Harare and Durban have already commenced. The airline will also continue focusing on managing costs while increasing revenue. The airline has also taken delivery of 9 next generation Q400 aircraft and awaits delivery of additional aircraft which will be used as replacement aircraft. Conclusion The role of SOC`s is to underpin the role of the State in directing National Economic Development through mobilisation of domestic and foreign capital and other social capital formation or partnership to achieve stated economic and developmental goals. State Owned Companies are powerful instruments for economic transformation and should remain firmly in the hands and control of the state in order to respond effectively to the developmental goals of the ANC government. ANC policy on SOCs seeks to advance the key objectives of economic transformation, and advance the ANC programme of New Growth Path. Therefore the overall objective and mandate of SOC`s is to advance the socio-economic and political agenda of a developmental state, promote social cohesion, creation of decent jobs, skills and training development. In this regard the vision of the Nation Development Plan plays a central role. The ANC supports the Budget Vote on Public Enterprises