Department of Public Enterprises Budgetary Review and Recommendations Report

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Public Enterprises

16 October 2013
Chairperson: Mr P Maluleka (ANC)
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Meeting Summary

The Committee met to consider and adopt the Budgetary Review and Recommendations Report for the Department of Public Enterprises and its entities. The document described the mandate of the Committee, core functions of the Department, provided an overview of the key relevant policy focus areas and an overview and assessment of financial and service delivery performances. The Committee’s key findings and recommendations were also outlined in the report.

The Committee provided comments and corrective recommendations to the report which would be inserted in the final draft. The general sentiment expressed by the Members was that the report was well prepared and covered most of the relevant issues.

Members insisted that the creation of the project Management office should be included in the report.  Members also noted that with regards to State Owned Enterprises (SOEs), there was no consistence as to the number of SOEs which were under the supervision of the Department of Public Enterprises. At some points in the report, 8 were mentioned and at some other points, mention was made of 9 entities. There had to be consistency. There was also need for consistency as to how the entities were called. Were they State Owned Companies (SOCs) or State Owned Enterprises (SOEs)? A Member from the DA noted that the report did not state that there had been extensions in the operations and consequent spending and budgetary increases in the Medupi project. This was very important and had to be included in the report. With regards to the South African Airways turnaround strategy, Members insisted that the report must state that only part of the strategy was presented to the Committee. Many targets were not met both by the DPE and the SOEs. The report had to recommend that the DPE should set achievable targets. The Committee expressed concern that the report did not express enough dismay at most of the negative issues raised in it. The wording used in the report was often soft and not painting the right picture.

After further grammatical, technical and content corrections, the Committee adopted the report with amendments.
 

Meeting report

Introduction by the Chairperson
The Chairperson welcomed the Members of the Committee and the Committee staff. He proposed that the meeting could start even though two additional Members were still required to form a quorum. After confirming that all the Members present had been provided copies of the draft Budgetary Review and Recommendations Report (BRRR), the Chairperson asked the Committee Secretary, Mr Disang Mocumi to take the Committee through the document.

Department of Public Enterprises Budgetary Review and Recommendations Report
Mr Mocumi read out the entire 37 page BRR Report. The report was prepared and compiled by the Committee’s support staff comprising of the Committee Secretary, the Committee’s Content Adviser and the Committee Researcher.

The document described the mandate of the Committee, core functions of the Department, provided an overview of the key relevant policy focus areas and an overview and assessment of financial and service delivery performances.
These were the key findings of the Committee:

Technical issues
The reporting of performance information in the Annual Report was a concern as it did not align to the performance management information format presented in the Annual Performance Plan (APP). This was evidenced in the fact that in the APP the Department gave a table of what it planned to achieve in the Administration programme. In the annual report the Department did not report on this table, but only gave an overview of what was achieved. The APP and Annual Report should be similar in presentation. Thus the achievements in the Administration programme in the Annual Report could not be linked back to the APP.

Governance and operational issues
The Department had been able to stabilise boards of SOCs. Most of the policies relevant to State Owned Companies (SOCs) resided in other policy Departments. The Department must in consultation with policy Departments develop a framework in which they are able to effectively contribute to the implementation of SOCs’ strategy and objectives. In this regard a legal framework to support and enable SOCs’ performance should be developed.

Service delivery performance
The Department had contributed to the performance of SOCs but it could not achieve more than 68 % of its planned targets. The Department needed to improve its strategic planning capability. There was a need for the Department to set targets that were achievable. In this regards, evidence of the achievement of targets should be ready for presentation when required. The Department must clarify its targets and deliverables in line with its vision and mission. These should be easy to institutionalise and should resonate within the organisational structure. 

Financial performance including funding proposals
The Department needed to improve on Financial Management. There was no relationship between the spending and achievement of targets. This misalignment pointed to weaknesses in planning and performance management systems. The Department must allocate appropriate non-financial targets and demonstrate appropriate relationship with financial performance in line with the reporting requirements.

Concerning Recommendations, the following were enumerated in the document:

The Committee recommended that the Minister of Finance should consider:
●allocating the necessary resources to ensure the successful implementation of the South African
Airways’ Long Term Turnaround Strategy;
●allocating additional funding to capacitate the Department and address the human resource constraints
that the Department still experience, considering the distinct shareholder management responsibility of
the Department.

The Minister of Public Enterprises should:
●review the annual performance plan of the Department to ensure that the pre-determined objectives are measurable and quantified;
●ensure that there was a direct correlation and alignment between the annual performance plan and the annual reporting format;
●capacitate the internal audit function in the Department to ensure an improved record keeping and compliance with the legislative framework;
●consider introducing relevant systems as well as considering evidential requirements during the annual strategic planning process in order to ensure that all predetermined targets are achieved.
●increase oversight over state-owned companies through robust and regular interaction with CEOs, Board Members, Audit Committees, regular visits to the construction sites of major infrastructure projects as well as to offices and sites of the entities.
●ensure that emphasis was placed on monitoring that the SOCs’ implementation of Government’s policy objectives was realised, especially their outcomes as they had an impact on peoples’ lives.
●consider introducing the Shareholder Management Bill which would empower the Department to carry out its oversight responsibilities over state-owned companies more effectively, especially in providing guidance on how to align SOCs’ strategic priorities with government policies.
●consider providing the Committee with shareholder compacts signed with state-owned companies in order to enhance the oversight role of the Committee.
●consider institutionalisation of the recommendations of the Presidential Review Committee on SOCs.
●ensure that there were improvements in integration, harmonisation and alignment of planning and implementation across all three spheres of government and state-owned companies.
●ensure that the guiding frameworks for SOCs were completed timeously and implemented so as to provide a stable working environment. The Department should ensure that the SOCs comply with these frameworks.

[See attached BRR Report]

Discussion
The Chairperson thanked the staff for a very good report and called on the Members to engage on the report.

Dr G Koornhof (ANC) remarked that the report was a very huge input and he was not sure how the Committee planned to go about the interactions and engagement with the report. Were Members going to give general comments or pose questions on particular issues? The Chairperson had to guide the Members on the appropriate method to be followed.

Mr A Mokoena (ANC) said that the report was a high level one and required thorough engagement. He suggested that the report should be given to all the political parties for investigation and discussions. On specific issues in the report, it was important to note that the Auditor General could not report on impact assessments as it was a normative issue. He recommended that the findings in the report should include details about the creation of the Project Management Office at the Department of Public Enterprises (DPE). It was a very good initiative and was not supposed to be left out of the report.

The Chairperson sought clarity on the views of Members was in terms of the method of engagement on the report.

Mr C Gololo (ANC) said that the report was a very good one and the Committee staff had to be commended.

Ms N Michael (DA) said that with regards to the question by Dr Koornhof, the Democratic Alliance was in the habit of caucusing on this kind of report especially considering the issues raised in the document.

Mr Mocumi suggested that the Members could make general and particular comments on the report and the staff would incorporate them for a formal report to be adopted next week. He was aware that the deadline for the adoptions of BRR reports was 18 October 2013. However many other Committees were applying for extensions and the Committee could do the same. He suggested that the Committee request for an extension and adopt the report in the coming week.

Dr Koornhof replied that if what the Committee Secretary was saying could apply, then Members could give both general and particular comments on the report.

The Chairperson called on the Members to go ahead and comment on the report.

Mr Gololo noted that with regards to State Owned Enterprises (SOEs), there was no consistency as to the number of SOEs which were under the supervision of the DPE. At some points in the report, 8 were mentioned and at some other points, mention was made of 9 entities. There had to be consistency. There was also need for consistency as to how the entities were called. Were they State Owned Companies (SOCs) or State Owned Enterprises (SOEs)?

Dr Koornhof said that in terms of rural development impact assessments, only two SOEs, namely SAFCOL and Alexcor were mentioned in the report. It was important to make sure that the other six SOEs had not done those kinds of programmes before the report was finalised. If they had done similar programmes then this had to be included in the report. This could serve as a motivation to request more funding from the National Treasury for those rural development programmes.

Dr Koornhof was glad that the Presidential Review Committee (PRC) was now mentioned in the report. However, the report did not talk about the PRC recommendations. The recommendations had to be included.

Dr Koornhof referred to the Department’s responses to questions and requests by the Committee and stressed that it was very important for the report to indicate that the Committee had not received the shareholders compacts which had been requested from the DPE.

Dr Koornhof further referred to the overview of financial performance and asked who was supposed to do the financial impact assessment. The question to be asked was whether an assessment had been done, who was supposed to do it and what were the results. The report should report should have these details in the recommendations. He asked if an assessment had been done on the filling of vacancies in the DPE. The report was supposed to include a statement indicating whether there was value for money considering the budget against the policies of the DPE. The report had to state if after all the money spent, the objectives of government were being enhanced. This applied to both the DPE and all the SOEs.

In the overview of service delivery, the performance was fine but there had to be a link between the performance, mandate and finance in the report. The report also had to state how the DPE reacted to the overall performance. There were some practical tools used for BRR reporting which were not used in the report. These included the self-assessment by the Department, the recommendations by the FFC and the Department of Performance Monitoring and Evaluation. 

Dr Koornhof further proposed some grammatical changes to the report.

Mr E Marais (DA) noted that the report did not state that there had been extensions in the operations and consequent spending and budgetary increases in the Medupi project. This was very important and had to be included.

Ms Michael remarked that the report showed both the good and the bad sides of the performance of the DPE and its entities. It was however important to insist that the Minister should provide the Committee with all the shareholder compacts as Dr Koornhof had requested. She did not understand how the report could state that SAA and SA Express had made profits when their financial statements had not been submitted to the Committee. If any reference had been made to the financial performance of those 2 entities, it was baseless as the financial statements had not been audited and confirmed by the Auditor General. She also requested that the report should not seem to be certain on aspects which were not certain. She gave an example of Broadband Infraco which was said to be geared for growth. She asked what would happen if the Committee report said that the company was geared for growth and a few years down the line the company had not grown. The Committee could not take responsibility of such a situation. With regards to the SAA turnaround strategy, she insisted that the report must state that only part of the strategy was presented to the Committee. Many targets were not met both by the DPE and the SOEs. The report had to recommend that the DPE should set achievable targets.

At this point of the meeting, there was a power failure and the Committee room was without lights.

Ms Michael noted that the report did not express enough dismay at most of the negative issues raised in it. The wording used in the report was often soft and not painting the right picture. She further proposed some grammatical corrections.

Mr Gololo said that he was aware that there was free wi-fi in and around Tshwane. He asked if Broadband Infraco had made any contributions to the free wi-fi project. 

Mr Mokeana replied that there was no free wi-fi in Tshwane. The Mayor had only made an announcement that there was going to be wi-fi and it was not going to be free.

Mr Gololo said that the Corporate Social Investment (CSI) budgets of the SOEs were very small. The Committee had to recommend that these CSI budgets should be increased so that SOEs could better help communities.

The Chairperson noted all the comments which had been made but reminded Members that this was not the final report. He suggested that Members should go back a look into the report for further consideration.

Dr Koornhof asked if the general and particular comments which had been made were to be taken as proposals from the Committee as a whole or were they to be considered as questions and comments from individual members.

The Chairperson replied that it was the Committee staff that was best placed to answer the question posed by Dr Koornhof.

The Committee Researcher explained that the impact assessments were supposed to be done by the Auditor General. However, the staff was still going to confirm it and that was going to be included in the final report. With regards to the style and format of the report, there had been changes to the template provided by Parliament for BRR reporting but the content was the same. The Committee staff was going to incorporate the comments made by the Members into a final report which was going to be adopted by the Committee.

The Chairperson asked the Members what was the best way to proceed.

Dr Koornhof replied that subject to the rules of the National Assembly, the Committee should adopt the report with amendments. If there was an issue which was not clear in the comments or recommendations, the staff could seek further clarity.

The Chairperson asked if there was any other suggestion from the Members.

Dr Koornhof reminded the Committee staff that there were the two financial reports from SAA and SA Express which had not been given to the Committee. This had to be included in the report.

Adoption of BRR Report
The Chairperson called for the adoption of the report.

Dr Koornhof moved for the adoption of the report with amendments.

Mr Mokoena seconded the motion.

The meeting was adjourned. 
 

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