Restructuring of State-Owned Enterprises: briefing

Meeting report

LABOUR AND PUBLIC ENTERPRISES SELECT COMMITTEE
19 August 2002
RESTRUCTURING OF STATE-OWNED ENTERPRISES

Chairperson: Ms C Nkuna

Documents handed out:
Presentation by Department

SUMMARY
The Department of Public Enterprises indicated that restructuring of state-owned entities is important so as to ensure macro economic benefits and Government remains strongly committed to restructuring as an integral part of its economic and social transformation. In this briefing it advanced the reasons for its restructuring policy and outlined the eight forms of restructuring it had adopted. Finally it evaluated the progress made in the last two years and the key challenges it is facing. It was maintained that government has been very carefully to minimise job losses in the process.

MINUTES
Mr M Gantsho, the Head of Performance Monitoring and Evaluation of State-Owned Entities (SOE), indicated that the government remains committed to the restructuring of SOEs as an integral part of economic and social transformation. The department is focused on accelerating the restructuring processes in the 2002-03 fiscal year. It is hoped that sectoral policies will be finalised soon and interaction with organised labour on issues of restructuring will be maintained and improved. The department indicated that significant progress has been made as from May 2001 in terms of key sectoral policies, such as telecommunications, energy, mining and ports. These policies and legal frameworks lay the basis for accelerated restructuring this year and beyond. Last year saw also a concentrated emphasis on non-core assets, such as Aventura, Alexcor, and Air Chefs.

The Department is also pleased with the headway it has made in developing a culture of corporate governance in SOEs through the strengthening of boards, conclusion of shareholder compacts, and a framework for managing shareholder interests. The functioning of the National Framework Agreement (NFA) has also been strengthened and this has seen greater participation of labour in the development of restructuring models in the energy and transport industries.

Mr Gantsho said that despite global uncertainties and challenges, restructuring remains on track. For the past financial year the department achieved an unqualified audit report, which reflects prudent financial management systems and controls , in compliance with the Public Finance Management Act.

He noted that the department still faces crucial challenges such as how to continue to make a meaningful contribution to the government's macro-economic objectives. The department also has to find ways of maintaining continuous engagement with labour and achieving meaningful black empowerment.

Questions
- Can you please tabulate the SOEs that you are restructuring? (Chairperson)
- In terms of the restructuring processes who really benefits and how? (Mr Z. Kolweni- ANC)
- Apart from parliamentary hearings what other efforts is the department making to promote public awareness of the restructuring process. (Mr Z. Kolweni- ANC)
- Does the department have any concrete plan to mitigate job loses? (Mr T.Setona- ANC)

Response
- Most, if not all, of the SOEs are being restructured. Denel, Spoortnet, Metrorail and Aventura were listed as examples.
- Mr L Montana, (Dept Director: Parliamentary Services), indicated that one could say all people are reaping benefits. Benefits might be measured in terms of the economy as a whole. When the Transnet Pension Fund Amendment Act of 2000 was passed, Transnet recorded positive results. Five years ago Transnet would not have been able to invest in Coega. But because of the restructuring process, Transnet was able to invest a substantial amount of money in the project. Another example was the electrification initiative. Before 1994 only 30 % of households had electricity and now the figure stands at 70 %.
- Various meetings are being held with communities. Radio stations have also been used to get the message to people. Adverts have been posted in various newspapers.
- Mr Montana said that the time has come that some misconceptions be cleared around the issue of restructuring. He observed that there is there view that restructuring equals job loses. Although not denying that there has been job losses as a result of restructuring, he believed that where job losses have occurred, they occurred because this was inevitable. He indicated that there has been job losses even before 1994.

Ms S Botha (DP) agreed with the Department on this issue. An example was given of Transnet which, between 1989 and 1993, had reduced its workforce from over 100 000 to about 70 000 employees. It had also been indicated that in some take-overs, such as with that of Aventura, existing jobs would not be lost. The same had happened in the Defence industry.

The Chairperson commended the Department on work in process and thereafter adjourned the meeting.