Election of Chairperson; Public Enterprises Budgetary Review and Recommendations Report

Meeting report

Election of Committee Chairperson
The Committee Secretary, Mr Disang Mocumi, facilitated the process for the election of Committee Chairperson. Mr Mocumi called for nominations.

Dr Z Luyenge (ANC) nominated Ms L Mnganga-Gcabashe (ANC) for Chairperson.

Mr R Tseli (ANC) seconded the nomination.

There were no further nominations and Members did not object to Ms Mngaga-Gcabashe’s nomination.
 
Ms Mnganga-Gcabashe gracefully accepted the position as Chairperson.

Ms N Mazzone (DA) asked whether Ms D Rantho (ANC) would continue chairing the inquiry into State Owned Enterprises (SOEs) that the Committee was engaged in.

Mr Mocumi said that the Chairperson would deal with the matter.

Mr Tseli suggested that the Committee deal with the issue of who would chair the Inquiry. He felt that it was unfair on Ms Mnganga-Gcabashe as the new Chairperson to chair the Inquiry. He proposed that Ms Rantho who had been the Acting Chairperson of the Committee continue to chair the Inquiry as it was a special project of the Committee. Ms Mnganga-Gcabashe could chair the normal work of the Committee.

Ms Mazzone seconded the proposal that Ms Rantho continue to chair the Inquiry.

Public Enterprises Budgetary Review Recommendations Report
Ms Rantho noted that members had raised issues with her and she proposed that the Committee agree not adopt the Draft BRRR in the present meeting. The Committee could affect changes to the document which the Committee Secretariat would incorporate. Thereafter the Draft BRRR could be adopted.

Mr Tseli agreed with the sentiments expressed by Ms Rantho.

Ms Mazzone agreed as well. There were many flaws and gaps that needed addressing. A great deal of work had to be done to the Draft BRRR. She wished to know by when the BRRR had to be submitted. She expected that many things would emanate from the Inquiry that the Committee was engaged in. These things would have to be incorporated into the Draft BRRR. Perhaps the House Chairperson could make allowances for the Committee to submit the BRRR late.  Permission could also be obtained for annexures to be submitted along with the BRRR.

The Committee was taken through the Draft BRRR page by page. Mr Mocumi, Mr Rodney Mnisi Committee Content Adviser, and Ms Lee Bramwell, Committee Researcher divided the task amongst themselves.

Some of the key policy issues of the DPE captured in the Draft BRRR were how SA performed in terms of inclusive growth, economic transformation through preferential procurement from local suppliers, key policy developments & legislative changes and also the lack of a Shareholder Management Bill.

On the performance of the DPE for 2016/17 it had spent 94.7% of its budget. For 2016/17 the DPE had managed to obtain a clean audit report. In the current financial year (up until June 2017), the Department had spent 18% of its budget. The DPE was considered to be fairly sound with the exception of it having a high vacancy rate. Mention was made that the DPE was not a service delivery department. It had to do monitoring and evaluation over its entities.  Detail was also provided on the audit outcomes for entities for various financial years. 

The Draft BRRR contained a list of recommendations by the Committee aimed at the DPE and the Minister of Public Enterprises which included:
-The Minister of Public Enterprises and the Department of Planning, Monitoring and Evaluation (DPME) had to discourage poor performance. The DPE had to ensure that punitive measures were in place where there was under performance.
- Appropriate financial management systems had to be put in place.
- The DPE had to urgently develop technical capacity in order for it to oversee its entities.
- The DPE had to have programmes to support Small Medium and Micro Enterprises (SMMEs). Rand   values had to be provided.
- The DPE had to address concerns of rating agencies over Eskom.
- There was a need to create black industrialists through State Owned Companies (SOCs).
- The Shareholder Management Bill had to be fast tracked.
- The DPE had to provide the Committee with Shareholder Management Compacts that it had entered into with its entities.
- The DPE had to ensure that SOCs did interim audits.
- The DPE had to finalise the strategic role of Alexkor and SAFCOL.
- The DPE had to address issues with SOCs.
- The Committee should be provided with quarterly reports.
There was also a smaller list of recommendations specifically geared towards the Minister of Finance which included that that National Treasury together with the DPE had to deal with going concern issues of SOCs and also to ensure a strategy on SOCs and government guarantees.

Discussion
Mr Tseli commended the Department of Public Enterprises for obtaining an unqualified audit report. He suggested that the previous year’s BRRR recommendations be captured before the current Committee recommendations in the Draft BRRR. On recommendations that were being made to the Minister of Finance he noted that it was problematic that the Minister of Public Enterprises had no role in those recommendations. He felt the recommendations should be made to the Minister of Public Enterprises and not to the Minister of Finance. The Minister of Public Enterprises could refer the recommendations to the Minister of Finance if need be. He suggested that timelines be attached to recommendations. The previous year’s BRRR had no timelines attached to them and they were not attended to. Nothing had been done over the Shareholders Management Bill and on agreements between the Minister of Public Enterprises and State Owned Companies (SOCs). Other matters not attended to in the previous year’s BRRR was the need for capacity for an internal audit function in the DPE, strengthening oversight over State Owned Entities (SOEs) by way of signing of shareholders compacts and the need for punitive measures for under performance against targets. All these recommendations should once again be added in the current Draft BRRR.

Ms Mazzone stated that the Draft BRRR mentioned that there were reports that the Committee had received from Vietnam, Kenya and India. She had not seen the reports and asked to be provided with it. Under recommendations to the Minister of Finance she stated that there were issues that had not been clarified ie the Denel-Asia issue where Denel was having an open fight with National Treasury. She felt that it was not good enough to in the Draft BRRR merely note that SA Express Airlines had not submitted an Annual Report. She also felt that the current controversy concerning Transnet and the Eskom pension fund payouts issue should also be captured in the Draft BRRR.  She added that the Office of the Auditor General of SA (AGSA) had stated that Denel had not accepted their audit report. It was Denel that had submitted an Annual Report which was incorrect and had gone against the instruction of the AGSA. She felt that Denel had showed contempt against the AGSA.

Dr Luyenge suggested that the Committee under findings in the Draft BRRR include something to the effect that government departments and entities did not fill vacancies. He proposed that positions needed to be filled within three months. Also under findings he suggested that something be said about governance gaps that existed at SOEs. The DPE should present to the Committee a method in which it would monitor and evaluate all boards of SOEs. This too should be done within three months. He noted that President Jacob Zuma had encouraged localisation when it came to procurement. The requirement was 75% but he had heard that it had come down to 30%. He was not sure about the 30% figure. There had to be a plan or strategy in place. He said that the Committee needed clarity over the issue of Denel and the AGSA. It was concerning that a Chapter 9 institution like the AGSA was being challenged. The DPE had given no explanations on why Denel had acted in the manner that it did. The matter needed to be investigated.

Mr P Gordhan (ANC) raised some general points. The Committee was dealing with an inquiry into issues that went back to 2015/16. The Draft BRRR did not reflect what had motivated the Inquiry. The issue was about how to ensure that there was governance and regulatory compliance when boards were appointed. How for example had the Director General of the DPE been appointed? He observed that there was a general phenomenon of capture, especially as it related to the appointment of boards and officials of the DPE. He stated that one could also not look at State Owned Companies (SOCs) like normal SOEs.

On localisation, Mr Gordhan observed how the process of diverting SOCs had implications for Broad Based Black Economic Empowerment (BBBEE). The money was going elsewhere to enrich a few people. He agreed that the Draft BRRR was silent on the Transnet locomotives and cranes deal. He also felt that the Draft BRRR should indicate who the auditors of entities like Denel were and if mistakes were made had mistakes happened elsewhere. He pointed out that in the Draft BRRR there were a few areas where there was confusion on the correctness of financial years that were captured. He also felt that the recommendations to the Minister of Finance needed to be more specific. The AGSA’s report on the DPE with regards to compliance with laws and regulations alluded to the fact that its financial officer had not done basic work. There were also material misstatements. It showed poor financial recording by the DPE.

Further, Mr Gordhan asked how the controversies of entities in the public domain were reflected in the Draft BRRR. An example would be the Denel issue. He asked how Transnet could obtain an unqualified audit report given the revelations that had come out. He pointed out that there were certain areas in the Draft BRRR that needed to be reformulated. The Draft BRR needed to mention that the manner in which SOCs were managed and mismanaged was a huge burden on the fiscus. On expenditure by Eskom there were several areas where additional expenditure had resulted in additional expenditure to the consumer. For example costs went up when the decision was taken to transport coal by road rather than by rail. Other costs that consumers had to bear were the paying of consultants for services rendered or not rendered. Transnet did not account for basic things like procurement. The continued risk of capture of SOEs was concerning. The fiscal stability of SA was a key risk as well. The recommendations to be captured in the Draft BRRR had to reflect the sentiments that he had expressed.

Mr Marais was concerned about SA Express Airlines. It was a disgrace to SA. The Committee needed to meet with its management. There seemed to be no checks and balances for Chief Executive Officers (CEOs) of SOEs. He felt that the Shareholder Management Compact Bill needed to be fast tracked. He urged the Chairperson to look into the matter. He noted that he had three months earlier requested a report by Transnet and Portnet about expenditure at Saldanha.

Mr M Dlamini (EFF), on procurement by SOEs, said that complaints received were that contracts were still going to white owned companies. The AGSA’s audit report of the DPE had shown that things were being run by clowns. The Minister of Public Enterprises Ms Lynne Brown did not know what was happening. He felt that she too was a clown. He said that on daily basis media reports revealed issues around the DPE. There seemed to be no leadership.

Dr Luyenge did not think it was proper for Members of Parliament and members of the Executive to be referred to as clowns. Persons could not be called clowns unless it was tested.

Mr Tseli agreed with Dr Luyenge. Mr Dlamini would not like it if someone called him a clown.

The Chairperson urged members not to call people names. It was unacceptable.

Mr Dlamini said that the facts spoke for themselves. The clowns were not aware of what was happening. Things needed to be confronted as they were. People on the ground had to bear the brunt. The state was collapsing.

Ms Nobanda stated that members of parliament could not call people clowns. There was leadership in the DPE.

Ms Rantho agreed that people could not be insulted. The Committee should not lose sight of the problems at SOCs and the DPE. Members should try to fix things.

The Chairperson urged members to deal with issues.

Mr Dlamini stated that there seemed to be contradictions around the issue of nuclear when it came to Eskom. He suggested a joint presentation by the DPE and the Department of Energy. He sat on the Portfolio Committee on Energy. He suggested that a recommendation be included in the Draft BRRR that the boards of SOEs should be subject to oversight by Parliament. The recommendation could be directed to Minister Brown. Boards were not accountable. Boards approved pension payments and payouts as they deemed fit. Could the appointment of boards be subject to parliamentary scrutiny?

Ms Rantho stated that the DPE was a shareholder in the SOCs. The DPE complained that it did not have teeth to take action against SOCs. There were problems at SOEs as well. The Committee needed to change policy and legislation to give teeth to the DPE. She suggested that the Committee closed gaps that were there. She proposed a meeting with the DPE, Denel and the AGSA to get to the bottom of the AGSA’s report on Denel and the reason why Denel had reacted the way it did. It was the only way in which the matter would be clarified. Denel provided the AGSA with the documentation yet complained that the AGSA’s finding was incorrect. On the matter of the Committee’s Inquiry the last presentation that the Committee had received on pension funds, members were told that Brian Molefe had been paid out by Eskom. These types of actions had happened before. The Committee needed to be provided with information on SOEs. She emphasised that the strategy of the DPE to monitor boards of SOEs had to be strengthened. The DPE had to present its strategy to the Committee. Speaking to the Standing Committee on Public Accounts’ (SCOPA) Report on SA Express, she noted that it seemed as if there were airlines that did not even know how many aircraft they had. If mergers between South African Airways (SAA), SA Express and Mango were to take place they should themselves know what was being merged.     

Ms Nobanda stated that timelines attached to recommendations were necessary. Real timelines were needed.

The Chairperson urged members to attach timelines to their recommendations.

Mr Tseli said that the Committee could in principle agree that the Committee Secretariat should attach timelines to recommendations captured in the Draft BRRR. 

Mr Nobanda pointed out that some of the recommendations contained in the Draft BRRR were repeats of previous years. Timelines needed to be exact. She felt that the DPE Bill should brief the Committee on the Shareholders Management by March 2018.

Ms Ranto said that recommendations that were carried over from previous years needed to get immediate attention. The DPE needed to account as to why recommendations of the Committee had not been given attention. The DPE alleged that the Shareholders Management Bill was at an advanced stage. She proposed that the Committee invite the DPE to a meeting in the first two weeks of January 2018 before the State of the Nation Address (SONA) 2018 to brief the Committee.

The Chairperson agreed that the DPE should brief the Committee on the Shareholders Management Bill by March 2018. She stated that Ms Rantho would chair proceedings over the Committees Programme for the Inquiry into Eskom and for the adoption of outstanding minutes.

Ms Rantho took over as Chairperson

Draft Programme for the Committee’s Oversight Inquiry into Eskom
The Draft Programme was placed before members for consideration. The inquiry would resume on 31 October 2017 and three meetings were scheduled for that week.

Committee Minutes
Minutes dated 4 October 2017 was adopted unamended. Minutes dated 11, 17 and 18 October 2017 was adopted as amended. 

Ms Rantho stated that the issue around the BRRR was when it was to be tabled. She suspected that it should be finalised by the following week. She proposed that on Wednesday 1 November 2017, the Committee meet at 8:30am to adopt the BRRR. Annexures could also be submitted on the BRRR. The Inquiry was scheduled to start at 9:30am.

Mr Dlamini said that Ms Rantho had just said that the deadline for the BRRR was most probably the following week. At the start of the meeting members had stated that the BRRR would not be rushed.

Dr Luyenge supported the suggestion by Ms Rantho to deal with the BRRR on Wednesday 1 November 2017. He asked the Committee Secretariat to provide members with the final copy of the BRRR by Monday 30 October 2017.

Ms Rantho noted that if the Committee was granted an extension on the BRRR then members would be informed.
 
Mr Gordhan suggested that the Committee schedule a whole day meeting for the Inquiry.

Ms Rantho said that the Committee would check if it was possible.

The Committee Secretary asked whether interested parties to the Inquiry could be given copies of transcripts of the inquiry.

Mr Dlamini felt it best to obtain legal advice over the matter.

Ms Rantho agreed that legal advice would be obtained.

The meeting was adjourned