Minister's report on DPE, SOE & Transnet performance and plans

Meeting report

The Chairperson announced that she had received a request from the Minister’s Office that Denel might not be able to make the presentation and the permission was granted. She welcomed Minister Pravin Gordhan and congratulated him on his new appointment.

Department of Public Enterprises Annual Performance Plan for 2018/19
Minister of Public Enterprises Pravin Gordhan and Ms Makgola Makololo, DPE Acting Deputy Director General: Energy, presented on
• Challenges of state owned companies (SOCs) and actions to address these challenges;
• 2018/19 priorities for the Department;
• Reversing the effects of State Capture;
• SOC Shareholder Compact performance targets (see document).

Minister Pravin Gordhan provided preliminary comments to give context to the presentation. His administration had been in office for less than two months and that was an important factor to consider in a context where most of the entities that reported to the Department of Public Enterprises where connected to state capture. The implication of that was that both within the Department itself and within the entities, there was the manifestation of the state capture phenomenon either in the people or the processes or in the structures or in the culture.

When President Ramaphosa delivered the State of Nation Address (SONA), he specifically mentioned the State-Owned Enterprises and said that they were experiencing severe financial, operational and governance challenges. The President said that there was a need for decisive intervention to stabilise and revitalise SOEs. That was the kind of action that had already been taken at ESKOM prior to the President's ascendancy, to strengthen governance, root out corruption and restore the financial position of the entity, which was what needed to be done to the other entities.

The President had said that the government should take further measure to ensure that all SOEs fulfilled their economic and developmental mandates. This was something that the Committee had examined in the Eskom context but needed to be equally examined for all other entities.

The President went further to say that there was the need to confront the reality that some of the problems faced by the entities were structural. This meant that putting in more money was not going to solve the problem and that SOEs could not borrow their way out of financial difficulties. It meant looking at the operating model or business model of these entities and find out if they were making enough revenue to cover their cost base.

As part of the state capture phenomenon, the target had been the SOE boards. Since 2011 and subsequently in 2015, changes were made to many of the boards to the extent that they would become willing partners in state capture and allow the extraction of state funds through one mechanism or another

The President said that he would remove board members from any role in procurement, and work with the Auditor General. Procurement was one of the principal ways through which the extraction process took place in all the entities affected.

As each of the entities appear before this Committee, it would be fair to ask them to what extent they had blocked the avenues of extraction. That existed and do exist in many of these entities.

As the Department addressed challenges in specific entities, work was to continue in ensuring that there was better coordination, oversight and sustainability. The Department was going to work on the establishment of the SOE council.

The President mentioned that 2018 was the years in which corruption was going to be fought, in the public institutions.

The Department and the Ministry had drawn on those sets of directives given by the President. The Department would ensure that it cut out, with the cooperation of management teams in various entities, wasteful expenditure and ineffectual boards to achieve the objectives that the President had set.

At some point the Department was going to look at the policy already adopted by government in late 2016 on private sector involvement in some of the activities of the public entities. However, DPE had first to get the governance and management of the entities right and get the orientation of these entities fixed before entertaining any other ideas.

The focus of the Department over the last few months had been to review all the boards. Some boards had been changed and other were yet to be changed. DPE also looked at the management capability and the senior management team in each of these entities and established the extent to which these management teams were implicated in the process of state capture and had collaborated with the processes of extracting public funds.

DPE was going to consider all the forensic reports that have been done in the past, instead of wasting resources duplicating that work, and establish the action needed based on the findings of the forensic already available. Where there were gaps, DPE was to seek assistance of other authorities or to initiate its own forensic investigations.

The kind of monitoring of the actual core business and finances of SOEs by DPE was generally weaker than it should have been. The reliance on quarterly reports of the entities only without closer understanding of the business, expenditure and revenue streams and the kind of decisions taken at the board and management levels that impact upon the efficacy of the entities were a set of areas DPE had a very weak handle on.

DPE was going to start monitoring not only based on the quarterly reports. With each entity depending on the nature of the business the entity conducts, monitoring would be based on more frequent reports on key areas of business so that where there might be inefficacies creeping in, DPE would be able to intervene at a much more appropriate time.

Within the state-owned enterprises, a culture had developed which required the management teams to think that the entities were independent entities and autonomous of the state. This results in weakened accountability to the board, the South African public and to DPE and to institutions like Parliament. As public institutions, it was important to create the right dynamic and transparency which ensured that there was an accountability factor and that management teams and board understood that they were dealing with public resources. The entities needed to continue adding value to the mandate they were given.

The governance in many of the institutions had also been seriously compromised because of the appointment of compliant boards and management team so that there is a self-sustaining between board and management teams that keep each other alive. The presence of a compliant political office made it better from the point of view of those that had state capture as their aim.

Transnet on its performance targets for 2018/19
Mr Siyabonga Gama: Group Chief Executive of Transnet, presented the performance targets.

The Corporate Plan was prepared on an annual basis by the Transnet Group Leadership Team and was approved by the Transnet Board of Directors on 22 February 2018 and submitted to DPE of Public Enterprises and National Treasury on 27 February 2018

The Corporate Plan details the strategy, objectives and plans in line with the requirements of the Shareholder as agreed in the Statement of Strategic Intent and the Shareholder’s Compact as well as provides important information to stakeholders, including investors and funders, in their assessment of Transnet’s financial standing and their evaluation of the risks faced by each of the Operating Divisions and the Company, as well as associated mitigating actions.

The Corporate Plan preparation follows a structured process and flows from these activities in Transnet:
• The setting of strategic direction, associated objectives and targets using and informing the requirements of the Shareholder’s Compact;
• The alignment of volumes based on inputs from customers, financial plans, funding requirements, operational plans, capital investments and risk management strategies across the Company through a strategic planning and budgeting process;
• Various cross-divisional and cross-functional workshops, reviews and approval sessions with key stakeholders including the Board of Directors and the Group Leadership Team of Transnet; and
• A process to obtain the commitment from internal stakeholders to clearly define deliverables for the performance agreements to be concluded for 2018/19

The following business assumptions are included in the financial plan:
• TNPA and TPL will not be corporatised during the corporate planning period (National Ports Act amended). The requirements of the Integrated Coastal Management (ICM) Act that expropriates National Ports Authority assets will be amended;
• Tariffs for both National Ports Authority and Pipelines will continue to be regulated. The Ports Regulator of South Africa (PRSA) will grant National Ports Authority an increase in line with expectations and National Energy Regulator of South Africa (Nersa) will continue to grant TPL tariff increases in terms of the established tariff methodology;
• Freight Rail and Port Terminals are free to set market-related tariffs without any economic regulation;
• The R1.4 billion debt owed by the Passenger Rail Agency of South Africa (PRASA) will be paid and settled in full during 2018/19 (+120 days: R1 040 million)
• Execution of the Capital Investment Plan is efficient and effective at optimal cost levels (capital cost optimisation) and in line with budget.
• A change in any of the assumptions will require a change in the Financial and Funding Plan execution to ensure the gearing and cash interest cover ratios are not breached.

Discussion
Mr O Sefako (North West) said that the state capture phenomenon seemed to have caused an irreparable damage. He asked the Minister to quantify the damage in monetary terms. To what extent can the damage be estimated?

Mr Sefako asked if, in 10 years time, public entities would be able to sustain themselves without expecting bailouts from elsewhere.

He suggested that classification should be made so those entities that were doing well could be identified.

Mr Sefako wondered what DPE’s position was on local content and procurement. He asked to what extent DPE was involved in empowering those that where marginalized historically.

He asked DPE to elaborate on Moody’s rating based on sovereignty and explain how the rating was affecting the entity in terms of costs.

Minister Gordhan replied that in terms of the direct impact of state capture, Transnet had lost about R5 billion rands through commissions and pricing of locomotives that were yet to be investigated. In Prasa, billions of rands had also been stolen. In Eskom, the damage had not yet been quantified but the possible areas of damage were in relation to coal supplies and consultancy fees.

Generally, state capture caused a huge cost to the country in terms of its reputation as a good place for investment. In recent years, the country had established a reputation of instability within SOEs, on the one hand, and rampant corruption on the other hand. However, the Opposite was the case now. Things seem to be done differently and some of the problems of the past were beginning to be rectified.

Minister Gordhan said that these corrupt activities could have an impact on the operations of a business. This was because people were now focusing on how much they could take out for themselves, their friends or their families rather than focusing on how the business could be run as efficiently and effectively as possible. How to measure the cost of this was something that DPE was going to get on top of.

Minister Gordhan said that once the capability is destroyed in an institution, it is not easy to recover it. If experienced people are chased away and everything is left to amateurs, the entity does not get the right combination in terms of skills and experience mix. This affects the quality of what is produced.

Minister Gordhan said that in entities like Eskom and Transnet, what is done within them was not just an internal matter to the entity as it impacts on the economy. For instance, the load shedding phenomenon had been seen to have had an impact on economic growth around 2010 and 2011 and subsequently.

Having locomotives manufactured overseas rather than in South Africa, caused damage to some South African companies. The damage had not been quantified yet, but it was known that three thousand jobs or more were lost due to the decisions made. DPE was going to investigate who made the decisions and what incentivized them to make such decisions.

This investigation was necessary to ensure that the objectives of local content, localization, production enhancement, manufacturing as a key sector in South Africa, and contributing to innovation and R&D, all of which are critical to advancing the economy are properly addressed.

Minister Gordhan replied in 10 years time, there will be better sustainability and no bail out. This had to be the case otherwise the entity was not going to be around or the sovereign was going to be in trouble.

To empower businesses, there was a need to multiply the number of start-ups and grow them into medium sized businesses. It was important to ensure that the same people were getting contracts all the time. It would be better for a R10 million business to move to be a R100 million business rather than to have 10 businesses of R10 Million each. Scale mattered in certain cases. However, the question being asked was, does DPE begin to favor a few at the expense of the many?

Minister Gordhan stated that once the sovereign is affected, all entities are affected and vice versa. The ratings picture would also be affected if one of the entities begins to default on a loan. President Ramaphosa had been able to swing the mood, not only as an individual but as a government and as an organization, and there was a need for DPE to play whatever roles it could to support the new dawn, the new narrative and to build confidence in the economy and the institutions. This would then begin to show in the ratings and lower the cost of borrowing.

Mr Gama replied that the drop in ratings meant there was probably an additional cost of about R1 billion rand. The normal cost to service interest was about R8.5 billion per annum which would increase to R9.8 billion because of the ratings. Transnet intends to be able to access the international market where it could get slightly cheaper financing because the domestic liquidity market had contracted due to the ratings.

Mr Gama replied that Transnet looked at local content in terms of the totality of the capital investment programme which ranges down the infrastructure programme. On projects dealing with ports, the entity looks at local content as well as the involvement of local communities in each of the projects.

Mr Gama replied that there were local content challenges that relate specifically to the build programme for locomotives. However, Transnet was responsible more for supplier development whereas Trade and Industry, through SABS, was busy with local content. Transnet’s preliminary view was that the level of local content needed to be achieved might not be reached. However, those programmes were continuing and they continued to look for more local content. On enterprise and supplier development amongst the SOEs, it is believed that Transnet had the best programmes. Transnet had continually achieved more than 105% of BBBE in terms of the DTI code over the past four to five years. This was within the scale and parameters that DTI measures those. There were many programmes which Transnet continues to be involved in so that SMMEs across the spectrum can be impacted.

Mr Gregg-McDonald replied that the total debt was around R125 billion and the cost of debt in the corporate plan last year was 9.9% but had now gone up to 11%. The downgrade triggered loan covenants on R30 million worth of debt which meant that it had to be repaid, however Transnet managed to negotiate with its lenders and it was no longer a risk. Going forward, there was need to source more cost-effective sources of borrowing. With the new borrowings, there were negotiations that they look at Transnet’s standalone profile rather than a rating agency determination.

Ms N Mazzone (DA) reminded the Minister that he had worked with the Committee through a great number of state capture enquiries. What was positive about his being minister now was that he knew the Committee's intentions and it is bona fide in raising concerns the Committee had with DPE.

Ms Mazzone expressed her opinion that there was a lag as a Committee when it comes to finishing up its duties on state capture. She asked what the Committee could do to help DPE to help strengthen the turn around and the massive change that was needed so desperately at DPE.

Ms Mazzone said that Members of Parliament were daily receiving messages about SA Express. This was because the short distance flights of SA Express were now being cancelled and the resulting economic stagnation is almost irreparable. The alternative flights available only flew once or twice a day. There seemed to be no end in sight and it seemed like the most impossible situation. She asked for an explanation of what was expected going forward. In the short term, what kind or relief would come from the government side in getting the airline to operate effectively while keeping safety standards as high as possible.

Ms Mazzone asked DPE if it had taken any disciplinary action against staff members and if so, roughly how many and what was expected going forward from people that worked specifically within DPE. The public needed to be assured that serious change was being made at DPE. It was known that there were people at DPE who were strongly involved in state capture.

Ms Mazzone said that reports in the media were absolutely damning for Transnet and Prasa. It was known for sure that state capture was real, it had been proved. It was known that state capture was a plan that was so intricate in its nature and so very well thought out that it went from one entity to another.

She asked how many people in Transnet were facing disciplinary hearings currently?
- if DPE had civil or criminal charges against any Transnet present or previous board members, executive members, managerial staff, and staff in general?
- what changes were being implemented at Transnet to rebuild what state capture had stolen from the country?
- if Transnet could share a few examples of state capture that were found and actions taken to rectify it.

Ms Mazzone said that according to the media the Constitutional Court case between Transnet and Transnet pensioners had been concluded. Transnet pensioners were suffering daily. At an alarming rate, people were falling ill, suffering and there was no end in sight. For years, the Committee was told that mediation was going ahead and that something was being done. All the talk simply resulted in people suffering and it is the most vulnerable people of society that were suffering. She asked what Transnet intended to do about this court case and the alleviation of suffering of the Transnet pensioners.

Ms Mazzone said that Eskom had a meeting with the Committee not too long ago. Very positive change was happening there. However, something that they could not do on their own was to address the municipal debt crisis and it was causing a great deal of uncertainty. She asked if DPE had plans in place such as setting up a war room with Finance and COGTA to see how the municipal debt could be alleviated?

Ms Mazzone said the country was concerned about the narrative that the country was running out of coal. There had been assurances from Eskom that they were not running out of coal and yet media reports insisted that coal shortage is imminent. This was causing very shaky grounds for the country. She asked the Minister to address this.

Dr Z Luyenge (ANC) said that any kind of relationship between SAA, SA Express and Mango that would ensure that they were managed cost effectively was appreciated. He asked if there were any timeframes for when SAA would be moved from the care of National Treasury back to the Department of Public Enterprises, in terms of accounting to this Portfolio Committee.

Dr Luyenge asked DPE to quantify the extent to which the Gupta link within SOEs has drained the state. What was the intention of the Ministry for all affected individuals and companies that had been part of the corruption, including those that were not Gupta related.

He said that the Committee had been getting information and reports about corrupt activities from institutions including the Auditor General but that people tend to reregister companies, change names, and continue corruptly somewhere else in the state. Was there a mechanism the Minister would employ in the DPE to blacklist individuals and companies?

Dr Luyenge said that it was good to hear that the Ministry was implementing the notion of lifestyle audits.

Dr Luyenge asked for more detail on the Transnet supplier development strategy to ensure its mandate that the disadvantaged in South Africa could produce quality and compete in all spaces.

Dr Luyenge wondered if through its social responsibility, Transnet was considering assisting harbours such as at Port St Johns and Lusikisiki. These harbours were there without activity. What improvement can be championed by Transnet without endangering its mandate?

Ms C Labuschagne (DA; Western Cape), said the presentation indicated that SOEs reported not a quarterly basis but on a weekly or bi-weekly basis. The Minister also said that DPE would get assistance from the Auditor General to review the financial reports. SOEs report on key performance areas all through the year and in spite of that, state capture happened. The understanding was that increasing the frequency of reporting would help. She asked if there was any other way, instead of just focusing on key performance areas, that DPE would be able to implement to ensure the prevention of these problems.

Ms Labuschagne said that Richtersveld had remained mainly unresolved since 2014. She asked the Minister to consider, not only the Gupta element in that aspect, but the whole settlement deal where the Department of Mining did a detailed settlement and the Departments of Rural Development and Land Reform and Agriculture did not. One could clearly see in that community the difference. Everything agricultural that was left there as fully developed and economically viable, nothing left of that. It was a destitute community and if it was not for the mining, nothing would happen there.

Ms Labuschagne said the SAFCOL land restitution claims of 61% was a big issue and had an influence on the stability of SAFCOL in the way they do business and the way people perceive them and the attitude of people working nearby those communities.

Mr S Swart (ACDP) said that state capture of the Guptas was just one element, other corruption and fraud existed. It was a broad issue that would need a broad discussion. To consider it would take time but the Committee was very positive that the new dawn, the new turnaround was starting to address the problem. Urgent action that needed to be taken now. There was no need to wait for the commission of inquiry, which was helpful, as urgent action needed to be taken now such as replacement of boards and holding people accountable. He suggested that there was need to have board directors, who lacked sufficient oversight, declared as delinquent directors.

Mr Swart said that it was important not only to hold people accountable but to recover the assets as well. He encouraged that urgent steps be taken. It was known that the criminal justice sector was acting and had obtained preservation orders. However, if they succeeded with those orders, those funds were going to the Criminal Assets Recovery Account and not to the state-owned enterprises.

While Eskom was encouraged to get an order against McKinsey to recover the R1 billion, no action was taken. However, after the Asset Forfeiture Unit had now gotten the preservation order, the Eskom board started claiming that they had a right to that R1 billion and that resulted in a big dispute. The Eskom example showed there was the need to get the money back to the SOE.

He asked how DPE was going to recover money internationally. For a lawyer, there were certain challenges particularly when there was a lack of an extradition treaty with certain countries such as Dubai. That was a challenge that needed to be addressed as there were billions of rands missing.
 
Mr Swart encouraged Transnet to started looking at contracts that were suspicious. The Committee fully supported the notion of lifestyle audits as there was need to stop employees doing business with companies. He would like to see all contracts over a certain level being reviewed. When Minister Brown was the Minister of Public Enterprises, she had to approve from only a threshold of R1.5 billion from Eskom. He encouraged the Minister to look at that and lower that threshold.

Mr Swart stated that in February the Transnet Board had disputed the findings of the Werkmans Report on the procurement of 1 064 locomotives. He asked for an explanation of what action had been taken following that report. Had any further action been taken on that matter.

He asked Transnet to try and resolve the pension fund challenge as quickly as possible. It was known that the Constitutional Court was dealing with it, but vulnerable South Africans were affected by the problem.

Mr E Marais (DA) was saddened that Transnet pensioners received R1200 per month which was almost like the state old age pension. The amount seemed little for service of more than 30 years. He asked the Minister to look into the court case and mediation on the problem that had to end now after so many years.
 
Ms D Rantho (ANC) said that the settlement deeds were long due to the people of Richterveld. She encouraged the Minister look at the process and ensure that the R45 million was to be given to the community. She encouraged the Minister to look at the interest from 2014 as the interest could have helped the community if it was given to the community. She asked DPE to explain who was being enriched with the money of the community.
 
Ms Rantho said that none of the DPE entities was doing well. In one way or another, all of them were captured. She told the Minister that he had a lot of work to do to correct and bring about their sustainability.

Ms Rantho said that the Ministry should monitor forensic investigation appointments being done by DPE. People would be appointed to do the forensic investigation, not a machine. People can create relationships with other people and these relationships may grow to point where it might be hard to see if anything was wrong there.

Ms Rantho said the Auditor General had reported a clean audit for DPE. However, she asked the Minister to encourage its entities to hand in their reports in time to the Auditor General as the entities had a tendency of not submitting their reports on time.

Ms Rantho said that there was need to look at the status of diamonds at Alexkor. People of Richtersveld found it difficult to accept the fact the they could not mine diamonds anymore. She asked if it was true that they were no longer able to mine diamonds on land or in the sea? Alexkor was now planning to move from diamonds to coal. This was sad because there was still diamonds under the water and the ground which could take 50 to 60 years for them to mine it. Alexkor wants to shift their focus from diamonds to coal. She asked the Minister to consider this.

Ms Rantho said that ordinary people on the ground had been complaining about the Transnet pension fund. As much as Transnet was doing well according to the books, what the Committee got from outside was different. There was need for Transnet to interact with the people.

Ms Rantho said that the CEOs of SA Express had a tendency of presenting very good turnaround strategies that were never implemented. SA Express needed to be monitored to ensure that the strategy was implemented. SA Express had many problems. Flights were cancelled and others were late and many people complained. She asked how many of the aircraft are being used by SA Express?

Ms Rantho said that even though there were legal departments in each of the entities, corrupt activities were still happening within them. She asked what DPE going to do about the people that allowed these illegal things to happen?

Ms Rantho said that Transnet was having a problem with developing or reactivating South African railway lines. However, Transnet was saying that it was doing well in its African strategy while in its South African strategy, there were still problems. She asked Transnet to explain what the problem was in reactivating the line for freight and to leverage the load that is on the roads. The roads always had big potholes because of the big trucks with heavy loads. Previously, Transnet had spoken of the 30% of freight that was going to be taken from road to rail. She asked how much of that had already been done. If so, she asked if Transnet was considering moving another percentage from road to rail.

Dr Z Ncitha (ANC) said the report on DPE identified the problem of inaction against those involved in corrupt activities. Now that it had been identified as a challenge, what was DPE currently doing about it?

Dr Ncitha said that according to DPE, there is no uniformity in terms of the oversight model. She asked what plan is in place to ensure that the problem is corrected? She pointed to the irregular expenditure that continued to happen at the entities. She asked what plans DPE had in place to curb the problem and what consequences for those found to be causing this.

Response
Mr Gama replied that Transnet would come back to the Committee to report on the matter of pension funds. The Transnet Pension Fund which was separate from Transnet itself had been paying many bonuses to pensioners on an annual basis from 2008 to date. There were different issues about the pensioners especially for those before 1990. One of the key issues was the fact that people that worked for Transnet, especially black pensioners, did not really have a pension and so there was no pension to speak of. Some pensioners had been mistaken that there might be some pension which is due to them.

Mr Gama said that supplier development challenges are well noted. Transnet does go beyond the call of duty in doing what is required from a regulatory perspective. Transnet believed it has one of the best supplier development programmes within the sector.

Mr Gama said that the fishing ports fall under Department of Agriculture, Forestry and Fisheries. Transnet had only eight commercial ports that it dealt with.

Mr Gama said that Transnet's South African and international strategy was making very good progress on an annual basis. It could report very good progress even on the carbon emissions. In 2015/16, 10.7 million tons were moved from road to rail. Transnet was expecting a further 12.8 million tons for 2018/19. Over the years, Transnet had moved from a share of 16% in terms of transportable GDP to 22% and the target is to reach 30%. Transnet was planning to move more rail friendly cargo from road to rail. There had been many truck companies that have closed because of the success with this strategy. However, it was going to be very difficult to achieve that if Transnet did not provide a reliable rail service.

Mr Kgathatso Tlhakudi, Deputy Director General: Manufacturing Enterprise at DPE, replied that there was need for a joint session at some point with colleagues from Rural Development to look at the progress at Richtersveld. The responsibility of DPE included the revitalization of the mines. That work had been done. The work to ensure the mining town's incorporation into the local municipality had largely been concluded. There was just the need to repair the roads because it became necessary to redo some of the roads due to the amount of time it had taken to transfer the infrastructure to the local municipality. There was a joint task team with COGTA to ensure that the town was properly incorporated in to the local municipality and the target date was 1 July when the municipal year starts.

Mr Tlhakhudi said that the payment of the R45 million required that the deed of settlement be amended. However, that required a court order. Transnet, DPE and Rural Development brought in the services of senior counsel to help with that process. The challenge was that that the senior counsel said that until the Communal Property Association (CPA) is properly constituted, there was not enough grounds to seek this amendment. The deed of settlement was an undertaking between the government and the Richtersveld community and without the other part being properly constituted, there was a challenge. Rural Development was responsible for ensuring that people were properly elected onto the CPA. That process had come to a halt because the community demanded to be paid the R45 million before that process. However, the R45 million could not be given out without amendment of the deed

Mr Tlhakhudi said that there were still some areas on the marine side that are not fully exploited for diamonds. There are still plenty of diamonds being recovered in that area. There was still a lot that could be done in that area and there are plans in place to do that. The mining of diamonds on the land had been largely depleted. There was a new exploration programme to find out if there were more areas were diamonds could be recovered. In terms of the deed of settlement, the rights to the marine diamond deposits remained with Alexkor. However, the land rights were transferred to the community. Going forward, there was need for a plan to ensure that the community had a sustainable livelihood.

Minister Gordhan replied that the Werksmans Report included three individuals who should have been suspended and investigated. However, the Transnet Board did not do that deliberately.

Minister Gordhan said that South African Express had about 22 airplanes in its possession. Only half of them ever get off the ground. Frequently they hired planes from other companies. There had been some improvements in the last couple of months but it was not adequate.

He said the Committee will be informed on actions taken against individuals in the Department.

On Eskom running out of coal, Minister Gordhan replied that there is a problem. However, the problem was not a load shedding problem. Some of the problems arose from the fact that there have been cuts on capital expenditure. Eskom believed that there was enough coal to work with and that they would compensate for some of the shortfalls they had.
 
Minister Gordhan replied that in terms of the decreasing demand for electricity, Eskom business and planning had to deal with the matter. When the next version of the Integrated Resource Plan comes out, it would have to ask and answer the questions on from where the energy supplies were obtained, how the energy industry was changing worldwide and what the renewable energy factor was doing.

Minister Gordhan replied that the recovery of assets was something that DPE had just started thinking about. Clearly, it was possible to do that with the right cooperation and legal instruments. However, there was some arrogance in the responses from some of the people concerned who said nothing could be done to touch them. That was a challenge to South African law enforcement agencies that they had to take on and show that they had the muscle and the intent to do what needed to be done.

The meeting was adjourned.