Department Annual Report: briefing

PUBLIC ENTERPRISES PORTFOLIO COMMITTEE
14 November 2001
DEPARTMENT ANNUAL REPORT: BRIEFING

Chairperson: Mr B Martins

Documents handed out:
Department of Public Enterprises Annual Report 2000

SUMMARY
The Director General of the department briefed the Committee on expenditure and operations of the department. There had been an unauthorised expenditure of R26 million which the department had submitted to the Standing Committee on Public Accounts.

There had been an underspending of R12, 5million due to the inability to recruit appropriate personnel and to utilise professional services. 

MINUTES
Presentation by Director General Dr S Gounden
The DG told the Committee that the vision of the department was to restructure state owned enterprises in a globally competitive environment, promoting economic growth and a better life for all. The mission is to direct and manage the accelerated restructuring of state owned enterprises to maximise shareholder value.

Objectives included developing and directing a coherent approach to the restructuring and transformation of state owned enterprises; creating and implementing restructuring frameworks; developing a systematic method for monitoring State Owned Enterprises (SOE) performance. A final objective was to develop a comprehensive approach to alternative service delivery.

For the rest of the presentation please refer to attached document

Discussion
Mr H Bekker (IFP) referred to the unauthorised, wasteful expenditure of R26 million that had been referred to in the presentation. What steps has been taken against people who used government money  irresponsibly and without authorisation?

Dr Gounden replied that they have made substantive representations to the Standing Committee on Public Accounts (SCOPA) regarding this matter. All the relevant information and the context of this unauthorised expenditure was clearly outlined to SCOPA. Whilst the expenditure was unauthorised, their understanding is that services were rendered. He did not want to pre-empt how SCOPA would rule on the matter.

Secondly Mr Bekker asked why the department is using consultants so much. This should come to an end as soon as possible.

Dr Gounden said he thought they had scaled down the usage of consultants as they had developed an internal capability and expertise to be able to manage the restructuring programme in the department. They only confine the usage of consultants to specific transactions. For example if they were enlisting an entity they had to engage the services of investment banks with appropriate licences to be able to place such shares on the market. However, they utilize their internal capacity whenever possible.

Mr Bekker said money had been spent excessively on cell phones.

Dr Gounden replied that the Minister had responded to the issue of cell phones. The figures that had been presented appeared excessive but there were substantive reasons for this. There is a comprehensive cell phone policy, for instance all members of the department who utilise cell phones for private calls were expected to pay for that on a monthly basis.

The nature of the business in the department warrants an extensive use of telephoning. For example most of their transactions are global in nature and this involves officials travelling extensively abroad. They have two choices, the choice of using hotel costed telephoning or a cell phone. Generally speaking it is cheaper to use mobile phones than the hotel telephones. The other factor is that some calls need to be made after hours South African time because of the different time zones with other countries hence mobile phones are very useful in this regard.

However, Dr Gounden said they accept as management that they have a responsibility to ensure that there is prudent usage of cellular phones. He assured the Committee that they would constantly monitor the situation and ensure that the department adopt methods to satisfy the Committee that this it is not overused unnecessarily.

Mr M Maphalala (ANC) enquired if the establishment of HIV/AIDS and gender Committees were only operating in the department, not outside of it. Was it possible for the Committee to get information on the performance of those organisations with regard to these two areas that they were focussing in.

The DG agreed that they would make this information available to the Committee.

Mr Maphalala asked about the restructuring of the forestry sector, there was a mention of community involvement in the form of trusts. Does the department have a mechanism to monitor the structure for the benefit of communities from these trusts?

Mr Montana from the department responded that the trusts were established by law which provides certain mechanisms for accountability. The communities themselves have recourse to law, for instance if someone or a group of people decide to appropriate the funds for themselves they must be brought to book. The people involved must identify projects and programmes that would change the quality of life of people. These are autonomous bodies they are not extensions of the department, these projects are community controlled and are led by those communities.
 
Mr L Nzimande (ANC) asked about the factors that constitute the failure to use the R12 million that had been transferred to the National Revenue Fund (NRF). What would the future status of that money in terms of the new budget vote if it was not used?

Dr Gounden replied that the main reasons for the underspending were primarily two fold, the first was their inability during the period under review to recruit appropriate personnel. As a result the personnel budget was not utilised. The second issue was their inability to utilise what was called funds for professional services. This was because of the impediments that exist in the procurement regime within cabinet.

Their response to these challenges is that they have now reached 90% of their full establishment. In the last year they have made considerable progress in filling those vacancies. It is unlikely that they would have a substantial underspending on the personnel item. 

Mr Sibiya said on the forestry sector he noticed that in the report it said that the “Northern Province and Mpumalanga transaction was in the process of negotiation with final preferred bidders�. Who are those preferred bidders?

Dr Gounden replied that they have two shortlisted bidders, he said the names would be made available to the Committee at a later stage. The teams that have been working on this have reported that there were initially three bidders that were shortlisted. Unfortunately one of the bidders did not meet the technical compliance, so they were left with two bidders who competed against each other.

Mr Bekker stated in the presentation document the department had “developed a Board Appointment Policy as an instrument for good governance in State Owned Enterprises (SOEs)�. He reminded the Committee that they had a presentation on corporate governance some time ago and an indication was given that somebody would drive the process on behalf of the department for the people. Who was responsible for that and is there any progress made on the issue?

An official from the department replied that the issue of development of a Board Appointment Policy is found mainly in the protocol itself and the policy framework of the department. The policy had been developed in the department and it is being implemented. The Minister was using the policy as a basis for the appointment of boards. The policy is driven from the department.

The issue of co-ordinated approach to corporate governance was still a problem. He is aware that the Committee had submitted a report to Parliament on this aspect. They are driving the process within the department. 

In conclusion the Chairperson thanked the department for sharing this relevant information with them and said the Committee would want this vibrant working relationship with the department to continue.

The meeting was adjourned.