Department of Public Enterprises on Budget and Programme: briefing

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Public Enterprises

26 February 2002
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Meeting Summary

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Meeting report

27 February 2002

Mr A Martins (ANC) (Portfolio Committee)
Mr S L E Fenyane (ANC) (Select Committee)

Documents handed out:
Minister Radebe's PowerPoint Presentation
Media Statement on Spoornet Restructuring (Appendix)

Minister Radebe briefed the Committees on the planned and ongoing activities of the Department of Public Enterprises. He discussed the progress of restructuring State Owned Enterprises with particular reference to the Transport, Energy, Telecommunications, Defence, Forestry, Mining, Aventura and other restructuring projects. Finally, Minister Radebe outlined the Budget for 2002-2003.

There were very few questions put to the Minister by the Members present. Issues discussed include the ownership of Spoornet, the financial viability if Alexkor, the promotion and retrenchment of South African Airways pilots and the future of Luxrail.

Mr Martins welcomed Members of both Committees and the Minister of Public Enterprises, Mr Jeff Radebe. Mr Radebe briefed the Committee. [Please refer to the PowerPoint Presentation].

Dr S E Pheko (PAC) thanked the Minister. He asked how many shares the Government had in Spoornet as he felt it was necessary that Spoornet be accountable. He also asked what percentage of shares in State assets were being sold to foreigners, a term that he put in inverted commas. He said that he was asking the question because of the need of ordinary South Africans to have ownership in the State.

Minister Radebe informed Dr Pheko that the State owned one hundred percent of the shares in Spoornet. Complete State ownership was important in the light of recent rail disasters which necessitated that Spoornet be accountable. With regards to percentage of foreign ownership of State Assets, Minister Radebe said that there was no universal figure dictating the amount of shares sold to foreigners. Rather, each transaction is considered on its own merits, with black empowerment being encouraged as far as possible.

Mr C T Frolick (UDM) asked what the time frame was for Luxrail to be concessioned to a private operator. He also said that the decrease in the amount of jobs lost at Spoornet was welcomed and asked how soon the job losses would occur.

Minister Radebe said that the process of concessioning Luxrail to the private sector would begin shortly. He added that there would be government teams appointed to ensure that the process was transparent.

Mr W A Odendaal (NNP) asked exactly how the government was planning to make better use of road and rail systems

Minister Radebe replied that the Department of Transport had a strategy detailing the shift from road to rail and that they would have the details.

Mr Odendaal asked if the Department was confident that idle railroads could be kept going.

The Minister replied that they were confident and would do everything in their power to ensure it.

Dr Nel (NNP) said that in the past, thirteen to seventeen years experience was needed by pilots in order to be promoted to flight captains at South African Airways. He said that recent newspaper reports had suggested that flight captains would be appointed at pilot level. Pilots older than fifty years would be retrenched. He asked if the Minister could do something about this.

Minister Radebe replied that he did not manage South African Airways and was therefore not in a position to comment on such an issue. He said however, that he would look into the matter in order to give Dr Nel a properly informed reply.

Mr Odendaal asked the Minister about the financial status of Alexkor.

Minister Radebe said that diamonds were still being mined there and that investors were still interested. The Department aimed to bring in people with expertise and financial muscle in order to explore and develop the area further. Mintek was assisting the Department to ensure that things were done properly.

The Select Committee Chairperson, Mr Fenyane noted that there had been few questions put to the minister. This could be positive, as perhaps it was an expression of confidence in the Department by the Committees.

The meeting was adjourned.

27 February 2002
(This statement has been complied jointly by Government, SALSTAFF,

In March 2001 representatives of labour in Spoornet met with Minister Radebe and Omar to discuss the future structure and ownership of Spoornet. The two Ministers expressed the view that they were open to further discussions about the divergence of view on the future of Spoornet. The meeting agreed to establish a Task Team to investigate and discuss certain options. It was agreed that the Task Team should comprise representatives of the three trade unions recognised by Spoornet (Salstaff, SATAWU and UTATU), and officials of the NDOT and DPE.

The task team then co-opted members of Spoornet management and formed a
Technical Working Group (TWG) that reviewed the restructuring options facing
Spoornet. TWG then developed recommendations as to the restructuring of Spoornet.

Government and labour have reached agreement on the recommendations of the Task Team that set out the final model for Spoornet Restructuring.

Principle feature f the model are the following:

1)Â Â Â Â Â Â Â Â General Freight Business (GFB) and Coal should Link remain part of an integrated (Spoornet - SATAWU) rail freight operation, and the current reporting structure of Orex to Spoornet would be maintained. The parties have agreed that there will be further engagement on the future restructuring of Orex.

2)Â Â Â Â Â Â Â Â The parties have agreed that consideration should be given to combining Shosholoza Meyl, Metro Rail & South African Rail Commuter Corporation (SARCC) in one state owned, Subsidized passenger operation.

3)Â Â Â Â Â Â Â Â The parties have agreed that Luxrail is a non-strategic operation that is first and foremost a luxury hotel operation, and should therefore be concessioned to a private operator with expertise in the hospitality sector.

4)        The parties have agreed that consideration should be given to establishing a two­tier system of management of the low-density lines. The challenges associated with these lines require maximum local consultation of stakeholders, and possibly a decentralised form of management. To this end the parties have agreed to establish a Task Team comprising representatives of labour.  Spoornet management and Government to investigate the current status of low-density lines, in order to ascertain the viability of a two tier operational and management structure for high and low density rail lines.

5)Â Â Â Â Â Â Â Â The parties support the option for an extended network size of 15 800km that includes a selection of light density lines, with expanded volumes up to 2020. To ensure the viability of this network, the current efficiencies and productivity should be improved to the required levels and be supported by the required levels of investment.

6)Â Â Â Â Â Â Â Â In order to deliver improved rail freight services to the country, it has been agreed that a range of turnaround strategies and projects will be implemented by Spoornet Management. Government, being the shareholder, will hold Spoornet accountable for delivering on agreed service improvements.

7)Â Â Â Â Â Â Â Â The parties have agreed that a mechanism should be put in place to audit and evaluate the implementation of efficiency measures, within Spoornet, including initiatives to increase volumes.

8)        On the basis of the agreed model it is projected that approximately 8000 employer-induced retrenchments will occur in the period ending 2006. This is substantially less than those envisaged in the original plan. The parties agreed to establish a task team comprised of labour Spoornet Management and Government that should identify innovative ways to mitigate job losses at Spoornet by identifying alternative employment and income-generating activities for retrenched workers.

9)Â Â Â Â Â Â Â Â The parties have agreed that the National Department of Transport shall develop policies and policy instruments that help support the movement of freight by rail where appropriate.



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