Department of Public Enterprises 2019/20 Annual Performance Plan; with Deputy Minister

This premium content has been made freely available

Public Enterprises

03 July 2019
Chairperson: Mr K Magaxa (ANC)
Share this page:

Meeting Summary

The Committee was briefed by the Department of Public Enterprises (DPE) on its 2019/20 Annual Performance plans. DPE it was revealed by the Deputy Minister has plans in motion this July that will comprehensively deal with its ailing SOEs. SAA even in the midst their problems are introducing new fleets in its bid to become sustainable and profitable again. As for Transnet, an investment to the tune of R153 billion is being envisaged to be made by the entity and these points to the company’s resilience in the midst of its difficulties.

The appointment of a Chief Restructuring Officer for Eskom is now in an advanced stage and this is a deliberate turn-around strategy being pursued to return the entity to good financial shape. Other plans in the offing are expediting the Shareholder Management Bill for all SOEs.

The Department detailed its external and internal challenges and also gave an outline of its recommendations. These included investigating and taking action against all board members and executives of SOCs implicated in corruption, even those who have resigned from the companies. The recommendations also talked to the development of a framework that would prohibit SOCs from challenging litigation cases that are not winnable. DPE is also -Consider working with the Department of Trade and Industry (DTI) and National Treasury in addressing localisation strategies.

Members suggested that a lifestyle audit for board members of all the SOEs, senior management of the Department and even of the Portfolio Committee Members should be carried out. Others asked what progress the anti-fraud hotline has made in terms bringing people to book. Questions were also asked of the plans the Department has to reduce the number of people employed in an acting capacity and in filling vacancies in the Department.

Meeting report

Overview by the Deputy Minister

Mr Godfrey Masualle, Deputy Minister of Public Enterprises (DPE), thanked the Committee for the invitation and said that plans are being put in place this July to deal with ailing SOEs and a committee is being put in place to accelerate its implementation. Even in the midst of its challenges, SAA is introducing new fleets in its bid to becoming sustainable and profitable. Denel was in the news of recent pertaining to liquidity; the matter has since been addressed and it now has a turnaround plan which given pledged investments, will soon be back on its feet again. Transnet is in the process of making investment to the tune of R153 billion for the next five years and this is a sign of resilience in spite of the difficulties. On Eskom, the President in the SONA debate made further announcement towards assisting the entity to becoming commercially viable so it can discharge its responsibilities. Very soon the Finance Minister will come to Parliament to make further announcements relating to more support that has been agreed to with regards to Eskom. The appointment of the Chief Restructuring Officer (CRO) seems to have been concluded and this will see a longer term turn-around strategy focused on getting Eskom in a good financial health. Eskom recently had one of its terminals at Medupi power station brought back on stream, and that is contributing towards averting load shedding during this winter months. The Department is thus providing support and leadership and working vigorously with all the entities under its portfolio to steady the ship.

Presentation of the Annual performance plans and budget

Mr Thuto Shomang, Acting Director-General, DPE, said that the year 2019 marked the end of the five year planning cycle. Normally the Department would be expected to table its new Strategic Plan by April 2019 for the next planning period (2020-2025), however the MTSF process will be concluded later in the year. The Strategic Plans will be tabled in the next financial year and will cover the 5-year period of the Sixth Administration. The process and discussions on the Department’s strategy has started and there is a general agreement that DPE should re-look at its strategy.

 Role of SOCs

-SOCs are used by the State to intervene in the economy to fulfil the social and economic development objectives of the country.

-Economic growth and creation of sustainable jobs are key government priorities where SOCs have a critical role to play.

-Review and reposition SOCs as well as improve their current architecture in order to fulfil their mandate.

-SOC Reform: enhancing the State’s SOCs oversight capacity through an overarching strategy and governance framework

Challenges faced by SOCs (External)

-Strategic role to be played by the SOCs as a sector and individually not clearly defined

-Conflicting and misaligned mandates given to SOCs by different stakeholders

-Limited clarity on the roles of various stakeholders and lines of accountability

-Lack of uniformity in the oversight model and weak oversight by shareholder Departments

-Policy gaps and misalignments

-Uncertainty and poor quality economic regulation of SOCs

-Limited fiscal resources to invest in SOCs and negligible appetite for private ownership

-Lack of clarity on where the government should own SOCs dispersed resources widely

-Funding model to cover the cost of non-commercial development mandates not clear

Internal challenges

-Weak, inexperienced and compromised boards and management

-Negligible sanctions for poor performance and corruption

-Limited direction, oversight and leadership from the boards

-Strategies that do not keep up with rapidly changing competitive environment

-Poor alignment of strategy to national objectives

-Limited SOC collaboration leading to overlaps and duplication

-Failure to keep pace with technological improvements in certain industries

-Delays and cost overruns in the delivery of capital expenditure programmes

-Weak or corrupt procurement

-Operational inefficiencies

-Weak balance sheets, with unsustainable debt levels

-Unviable business models

-Financial burden of unfunded non-commercial activities

Budget overview

The Department's budget decreased from R6.5 billion in 2018/19 to R332 million in 2021/22. The Department’s oversight activities are funded mainly in programme 2 and 3. The combined budget for these programmes is expected to decrease at an average annual rate of 71.4% over the MTEF, from R6.4 billion in 2018/19 to R146 million in 2021/22. This is due to additional funding of R5 billion allocated to SAA and R1.2 billion allocated to SAX during the 2018/19 adjustment budget. Spending on compensation of employees, which is set to increase at an average annual rate of 7.1% from R171.4 million in 2018/19 to R211.2 million in 2021/22, constitutes the Department’s largest cost driver. The expenditure on Goods and Services and Payments for Capital Assets is expected to increase from R97.5 million in 2018/19 to R120.8 million in 2021/22 to support the Department’s priorities outlined in the APP.


The Department is cooperating with the SIU to ensure that the execution of the proclamation into Eskom and Transnet runs smoothly; and that the two companies fully cooperate with the investigations into their respective affairs. Furthermore, processes are unfolding to have the President authorise a proclamation that will investigate the affairs of SAA and Denel. The Department reviewed 65 SOC forensic reports in the last financial year. Relevant matters have been referred to the boards of the SOCs with the view to ensure that the Department’s findings are addressed. These include the need for SOCs to fully implement recommendation contained in the reports, which inter alia include civil recoveries, opening of criminal cases with law enforcement agencies and disciplinary proceedings being instituted where allegations of wrong doing have been confirmed.


-Investigate and take action against all board members and executives of SOCs implicated in corruption, even those who have resigned from the companies.

-Consider fast tracking the Shareholder Management Bill to empower the Department to execute its shareholder management responsibility and oversight over SOCs

-Ensure issues relating to the going concern of South African Express Airways are addressed

-Develop a framework that would prohibit SOCs from challenging litigation cases which are not winnable

-Consider working with the Department of Trade and Industry (DTI) and National Treasury in addressing localisation strategies


Ms J Mkhwanazi (ANC) emphasised the activities associated with programme 1, which are centred on administration and corporate management. She wanted to know if there are plans to shorten the implementation period. Is the Department capable of ensuring that internal processes such as the public participation procedures are properly handled? This will improve the process and ensure it is well monitored. If the process is shortened, the Committee should be able to avail themselves so that whatever bills that is passed will have the desired impact in addressing the issues on the ground. The establishment of anti-fraud and corruption hotline is commendable; what progress has been made since its establishment in terms of people being brought to book as result of the hotline? Hope has to be restored to systems to reassure people that what went wrong was being addressed. What has been recovered so far from activities relating to the hotline and otherwise? The Deputy Minister has asserted earlier that it is not all doom and gloom and congratulation is in order for the DPE strategic planning officer Ms Nokubongwa Mdlalose who has been applauded as one of SA’s 200 trailblazing young South Africans of 2019. This rekindles hope and makes us believe that our country is in safe hands.

Ms C Phiri (ANC) welcomed the overview of the Deputy Minister and his honesty in acknowledging the Department’s challenges. What plans are afoot and at what speed is the Department moving towards filling the vacancies? The number of people employed at an acting capacity has to be addressed. The indicators mentioned in slide 19 as it relates to Denel’s report on restructuring plan are unprofessionally captured because the indicator for 2019 is the same for 2020 too. Indicators for 2020 should capture expected progress made in 2019. What is the preliminary audit outcomes based on internal audit conducted in 2018? It is important so as not to be surprised by the Auditor-General’s own findings. What assurances are you giving this Committee that your restructuring plans will work?

Ms J Tshabalala (ANC) wanted to know the role and responsibility of the envisaged SOE council? Have appointments been made towards that and is there a budget for them to function? The challenges with regards to employment equity are noted. In 2015 the Department was at 2.4% but has since regressed by 1.7%; what are your plans to mitigate this? Looking at the trends, the Department is way behind in filling up vacancies. What are the plans towards that? Could we get a picture of the percentage of acting appointments in the Department at national level especially at key strategic positions? This is because the problems at Transnet are because it is not filling up vacancies at key strategic positions. When is the Department planning to fill those critical vacancies? The Department according its APP is also under spending on compensation. Why is that? Part of the Department’s draft legislation is the tabling of the Management Bill; what other legislation is to be tabled this year considering that 2019 is a short legislative year? Have the SOEs board members declared their financial interests and are there conflicts of interests for those that have done so? What was the Department’s expenditure without transfers to SOEs for 2018/19? Which units spent less than 50% on goods and services in the budget? How is the Department working with HR to ensure that units that spent less than 50% are held accountable? The President made some pronouncements regarding Eskom especially on municipalities owing Eskom billions. Is there bailouts planned for Eskom after August? Are we to be reassured that beyond August the lights will be on and SA will not run into another round of load shedding?  Are there plans to ensure that Eskom is able to finance and service its debts? What is the turnaround strategy as it relates to Eskom? We are aware that municipalities such as Soweto owe Eskom a lot of money and they are not in a position to force them to pay because most of the residents there are living in dire and destitute economic circumstances. We are also aware that some part of Soweto has been without electricity for over four weeks and those residents has indicated that they are willing to pay a flat rate of R150. Is there a way to keep the lights on for them because businesses and households are suffering?

Mr S Gumede (ANC) was of the opinion that Members of the 6th Parliament are entrusted with the role of being change agents who have been given the mandate to turn things around. Things have happened but there is comfort that judging from the presentation that screws are being tightened. We are starting from a clean state and have to concur that we have to get our house in order. For a start, this Committee has to push for a timeframe to get the confirmation of all acting appointments in the Department. How can we avoid things that happened in the past from ever repeating itself again? We all want to pride ourselves for putting in our best when we leave this Parliament. What measures should we put in place to make sure we do not repeat the mistakes of the past? Whose responsibility was it in the past that led us into this shambles? Did our predecessors not play their oversight role correctly? Are we ready to face the storms that will come to us in this Committee? Is the lifestyle audit suggestion a decision that binds every Member of the Committee as well?

Ms D Dlamini (ANC) wanted to know the Department’s plan to improve its balance sheet? Is it in the interest of the Department that board members were previously changed all the time?

Ms N Mazzone (DA) was happy to be back and said the Committee could benefit from her institutional memory. This Committee has shown the country what could happen if all work as a unit to protect all the citizens. State capture happened because the level of oversight that the Committee was allowed to do was hampered. For example the Committee would visit Eskom at Megawatt Park and board members would say how many employees they have, give number of middle management, explain the board structure and how they function. Bizarrely the Committee would then be taken for a walk to show what Megawatt Park looks like. These were all deflection tactics from the board members so that Committee Members would not know what is happening in the entity and the same tactics were employed by Denel board. In Denel you could be taken to a hanger that has a few young engineers that is part of the programme that Denel has to educate the youth. We would look at that as something impressive but what they would not tell us was that Denel has no money to pay workers’ salaries at the end of the month. Then the Minister has to intervene to obtain a loan of which the contents of that loan agreement are shrouded in secrecy. This might sound brash and defensive and it has to be because the Chair of the Commission on State Capture has admonished us by saying that if we do not executive our oversight functions correctly; we are in infringement of our constitutional duties and that is tantamount to a criminal offence.  From now henceforth, we must force the Department to tell us the truth no matter how ugly it might be. Another tactics employed to cover their tracks was employing persons in an acting capacity and when they have too much information that poses a threat to the State Capture project, they are fired and some of this employments lasted only for six months. We have now to fight to ensure that those employed in acting capacities are confirmed so that we can hold them and the entities they represent into account. The Committee has to fight so that lifestyle audit is conducted immediately without exception on all board members in SOEs. The same should apply to all Members of this Portfolio Committee. Twice the Committee visited Soweto where it met Soweto residents. The most frightening thing was pensioners who came to the oversight tour said they were willing to pay electricity accounts but when they buy R100 electricity only R84 worth of electricity appears on the machine and their basic service grants which they are entitled to never loads. Eskom and the Department staff with the Committee in this visits promised to rectify the mistakes but a year later when the Committee visited again that R84 has gone down to R78 and yet no service grant was loaded. These are some of the issues the Committee found and this Committee has to decide how these issues will be resolved. In this presentation just given, there was no mention of loans and from whom these loans were obtained. The answer could be that the commercial sensitivity of these loans rests with the accounting officer of the SOE. With this state of affairs DPE would not be unable to exercise their own oversight functions because the SOE will tell them it is commercially sensitive and the fighters amongst us will have to go to court and lay charges at the police against these entities’ financial officers to find out what is so sensitive about those loans.

The Chairperson wanted assurances that all the SOEs under DPE have boards that are efficient with non-corrupt individuals. Do we have a list of cases already referred to the law enforcement agencies? Could that list be provided to the Committee? Listening to the Zondo Commission, the feeling one has is that SA has lost a lot capable professionals; some forced by their superiors to do wrong things therefore are victims but there also those that lost their jobs because of their refusal to toe the line. Is there a provision for those people to be re-engaged? Are their processes in place to standardise SOE salaries both for boards and executives? We know that salaries of executives at SOEs are very high while that of low skilled workers are very low. What are the plans to narrow the gap? Lifestyle audit though supported should also look at those that are paid well but are suffering from socio-economic conditions that still haunt them.


In response, the Deputy Minister said the Committee should be assured that the Department will stand with them at all times in seeking to ensure that all SOEs live up to their mandates, that they are effective and efficient in the discharge of their mandates. The Department will be positioned in such a way that it would be able to provide that assurance. There is a proposal already that the Department will come before the Committee to report on the interventions and progress in respect of SOEs and efforts is being made to stabilise the effectiveness of SOE boards. The schedule for a meeting where the overall well-being of the SOEs will be discussed will soon be presented to the Committee with the Minister in attendance. The recommendations flowing from the Presidential Review Commission as it concerns DPE are being implemented as it pertains to the appointment of boards and the processes underpinning it. The appointment of CEOs and other critical management positions and the remuneration policy forms part of the recommendations too. Measures have already been agreed to by Cabinet on how they should be approached. Where we should up the tempo is in the processes leading to having the Management Bill passed. It is in the programme but anticipated to be completed over a longer time, so the Department will brainstorm on this to see if it could be done within a shortened period. One other recommendation was the establishment of the SOE council and the President chairs that council. The Department is working as a secretariat of that council to have it convened because an overall strategic direction for all SOEs will flow from that council and the council composition is presently being finalised. Likewise, expediting the Shareholder Management Bill will flow from that council as well. The Department agrees with the Committee that corruption, malfeasance and other forms of dishonesty must be rooted out wherever it manifests and efforts will be made to enhance the overall effectiveness of the committee in its oversight functions. On the Eskom and its Soweto customers, efforts will be made to ensure that consumers pay for services received because bailouts to SOEs still comes out of government purse and certain services have to be sacrificed to redirect such funds. The President has issued a call that consumers should all be encouraged to pay for services. A workable solution is been worked out between Eskom and consumers as we speak and the Department will follow up with such deliberations. The crux of the matter is that there is no way Eskom will continue to provide services when there is no payment.

Mr Shomang further added that the Shareholder Management Bill will surely be fast tracked. Information regarding number of incidents the Department has received on the fraud and corruption hotline will be compiled and made available to the Committee. The Department is pleased that one of its own made the list of top 200 young people in SA. On filling of vacancies, because of the reconfiguration of government, the Minister will soon initiate the process with filling the position of a DG in a permanent basis and that of senior managers in the Department will follow. Most positions have been on an acting capacity and this will soon be done away with now that there is certainty at the Department. Adverts to that effect will soon go out and we encourage qualified South Africans to apply. The Department welcomes suggestions on the report on Denel restructuring and they will be used to improve performance. The suggestions made to improve the APP from Committee Members are also welcomed and they will be incorporated into the revised report and it will reflect the Department’s interactions with the Committee. On the internal preliminary audit outcomes, the Department is in the process of being audited and the findings of the internal and external auditors will be tabled at the end of this month and then a date will be fixed to present it to the Committee. On the question of assurance, the reason we highlight the challenges that are faced by SOEs under DPE supervision is to bring to the fore their challenges and it will take some time to resolve this issues. For instance, SAA has a legacy debt to the tune of R16 billion and if that is not dealt with, the organisation cannot function sustainably. As of today, SAA is unable to repay that debt and most of the SOEs under DPE have legacy debts that must be dealt with. Eskom is on focus because of the amount of debt it has accumulated and they are currently unable to service and repay those debts. The operational structure first has to be dealt with before Eskom could turn itself around. On the state of the entities, when the Department will return to give feedback to the Committee, these will be comprehensively discussed. The risk assessment tool will be looked into so that they reflect the challenges faced by the entities. On the recruitment of persons with disability, the Department has to be honest that it has not recruited anyone in this category in the last three years and it will be looked into going forward. Regarding under spending on compensation, this is likely to happen in the report to be tabled mostly because of the vacancies that has not been filled. With regards to goods and services under spend, the Department shelved spending in this category when it is not established that they will add some tangible value to the Department’s needs. Such a review on expenditure contributes to under spending. The Department holds AGM with boards of SOEs annually and in that meeting the board members have to declare their conflicts of interests. On debts owed by municipalities to Eskom, Soweto owes Eskom R18 billion and others owe R12 billion. On acting roles, the Department has endorsed that it acting positions has to be confirmed because officials that occupy this positions need certainty about their jobs. The risk assessment tools will be revisited so that they can respond to challenges faced by the Department and its entities. On lifestyle audit for the Department, financial declaration will continue to be carried out by all so that a sense of financial standing of Department’s officials can be ascertained. The lifestyle audit framework is developed by the Department of Public Service and Administration (DPSA).

Ms Nokubongwa Mdlalose Strategic Planning Officer, DPE, on the question on remuneration stated that Cabinet has approved a guideline on how to remunerate executives and boards in government which takes into account the size of the entity, the sectors they function, the level of revenue and asset base. Most importantly, a linkage has to be established between the performance of the entity in their shareholder compact and their executives’ compensation all these were not historically there before.  Further on the life style implementation, the framework is being developed by DPSA and they will standardise the modalities for the respective board members and officials. In terms of the hotline, the Department have dedicated staff assigned to it they are tracking the progress and this will be reported to the Committee in due course.

Ms Mkhwanazi asked whether the Department is comfortable with its risk management plan as presently developed. Is it bearing fruits or needs to be enhanced? If not, are plans in motion to address it? A properly developed risk management plan will help the Department to carry out its oversight duties properly. How is the Department working on producing an efficient electricity services in the light of it an aging infrastructure? Is the environmental, legal and affordability issues considered when dealing with this issue? Is the Department winning and if not what needs to be done and what interventions is needed from Parliament? What interventions are needed to recover monies owed to Eskom by the municipalities and what do you want Parliament to do in facilitating this process?

Ms Phiri wanted to know if the Department has a good working relationship with its SOEs.

The Chairperson asked if there are legislations that are hampering the Department in smoothly running the affairs of its entities.

Ms Tshabalala would want the organogram of the Department that highlights the critical vacancies that needs to be filled and introduced to who occupies what position. The Committee would want to see all the heads of the SOEs in Parliament when it is dealing with progress reports.

The Deputy Minister responded by saying that in scheduled meetings that requires a specific reporting; the Department will endeavour to be as detailed as possible. The Committee has the right to invite anyone they wish to appear before it and it just has to inform us how it seeks that to be done. If it wants all seven entities to appear before it all in one day, it is its prerogative.  There are no hiccups in the relationship between the Department and its entities and the Shareholder Management Bill when passed will solidify the relationship even more. The Department has a mutually supportive relationship with its entities and the Department always work towards the sustainability of the entities. On the organisational structure, the Department will compile a list of approved staff establishment though the Minister has stated some inadequacies in this list, at its current form a review might be needed to bring in some missing competencies that is required by the Department. These gaps will be shared with the Committee so it is made aware.

Ms Mazzone wanted to know who the parliamentary liaison officer (PLO) reports to.  Is it to the Minister and Deputy Minister or to DPE? If a Member of Parliament wants to meet with the Minister, will the liaison officer or DPE set up such an appointment? What is the current protocol?

The Deputy Minister said that the design is such that the PLO facilitates the interface between Parliament and the Department. They therefore report to the Department/Ministry.

In summation, the Chairperson thanked the Deputy Minister for his presence and the Department led by the DG and hope that this engagement will continue in good spirits and consolidate the good works being done. We are all change agents working towards ensuring that our SOEs are primed to assist in economic growth and also become profitable once again. The priority now is not to visit them even though that will be in the offing later but for them to come one by one to Parliament to account on the work they do. Even though Members of the Committee belong to different political parties their collective duty is to work as a team and assist the Department to execute it responsibilities to the people of South Africa.

The meeting was adjourned.

Download as PDF

You can download this page as a PDF using your browser's print functionality. Click on the "Print" button below and select the "PDF" option under destinations/printers.

See detailed instructions for your browser here.

Share this page: