Policy impediments raised by Eskom and Transnet regarding PPFA, BBBEE & others hampering the developmental objectives of SOEs, with Deputy Minister
Meeting Summary
The Portfolio Committee on Public Enterprises met in a virtual meeting and received a briefing from the Department of Public Enterprises on its policy impediments that hinder State-Owned Companies (SOCs) from advancing their developmental objectives.
The Department informed the Committee that the approval of contract variations by National Treasury should be done away with, as it had contributed to a marked increase in the SOCs irregular expenditure, since some contracts had expired due to the additional timelines required for internal processes together with National Treasury’s final approval. This had an impact on the SOCs operations as well. The accounting authority was accountable for such transactions whether National Treasury approved or not.
Members expressed concern over that and stated that the presentation insinuated that legislation prohibits public institutions from forging partnerships. Members questioned why Transnet and Passenger Rail Agency of South Africa (PRASA) could not collaborate as state institutions to assist Government with its rail and transport challenges.
A Member said that it appeared from the Department’s presentation that Government did business with the private sector and ignored SOCs such as Denel, although it had advanced capabilities that could assist government to implement its developmental objectives. Members of the Committee said the Department of Defence (DOD), the South African Police Service (SAPS) and the Department of Correctional Services (DCS) procure security items that are imported that can be manufactured locally.
A Member asked about the competitive supplier development programme. The Department stated that some SOCs mentioned that meeting the minimum threshold for local content in some of the designated products proved difficult due to local manufacturers which were unable to meet the specifications required by SOCs. Contrary to popular belief, the DOD, SAPS and DCS procure security items that are imported, while Denel locally manufactures such products. How was the Department using competitive supplier development programmes to capacitate local manufacturers to ensure the reindustrialisation of the South African economy?
Considering that Denel and the South African defence industry were in a bad situation at this point, had the Department engaged the Department of Trade, Industry and Competition (DTIC) and Treasury regarding the designation of the defence industry for local procurement? The Committee understood the situation that Denel was facing at the moment. The Committee was talking about issues of local procurement, and it noted that SAPS, in some reports, when it came to ammunition, procured it somewhere else and did not procure with Denel. What was the plan thereof?
The Committee pointed out that there were products in high foreign and domestic demand that offered high returns on investment that some SOCs such as Denel had the capability to produce, but lacked working capital to produce such products. What was the Department doing to ensure that Treasury, as well as other government-owned Development Finance Institutions (DFIs), provided SOCs such as Denel with the necessary working capital to carry out their strategic objective? In most instances, competitive bidding processes denied some of the SOCs a base income necessary for both operational and financial purposes. The COVID-19 pandemic changed how the procurement processes work, because countries were encouraged to support their nascent industries that were affected by the lockdown restrictions. What was the Department’s alternative in ensuring that competitive bidding processes did not work to the disadvantage of SOCs?
On the issue of load-shedding, Members were of the view that Eskom’s Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) needed to brief the Committee and the country as the situation of load-shedding was detrimental to the economy. A Member also sought clarity on what the Department, Eskom and National Treasury were doing to overcome the challenges with Eskom. The Committee needed to understand the whole scenario, and give the public exact information on the situation.
Meeting report
The Committee Chairperson greeted and welcomed all Committee Members to the meeting, as well as all officials present from the Department of Public Enterprises. Apologies were read out and there were no apologies forwarded for the meeting.
The delegation from the Department of Public Enterprises (DPE) was led by the Deputy Minister and the Director-General.
Ms R Komane (EFF) wanted to speak, but she was having problems with her network connection.
The Chairperson explained to the Committee that it would be getting a presentation on policy impediments by the DPE. The Minister was not in the meeting, but the Deputy Minister was present, and would be doing the overview.
He then handed over to the Department to lead with its presentation.
Opening Remarks by the Deputy Minister
Mr Phumulo Masualle, Deputy Minister of Public Enterprises, made opening remarks. He said that SOCs generally found themselves having to observe both the Companies Act, which governed all private companies and the rigor of the Public Service Act that was applicable to the rest of the government departments. This presented an interesting challenge, which the Department was struggling to find a way around, so as to smoothen processes, so that the agility that those SOCs should have was not lost. It was common cause that owing to a number of approvals for any major decisions that SOCs needed to make, there was often a very long process that must take account of the requirements of procurement in the public sector, which tended to impact the time in which SOCs could deliver on the undertakings that they had. The Department was engaging with National Treasury (hereafter referred to as Treasury) to find ways in which whilst not going away from accountability and transformation with the goals that the Department had, it was done in a manner that did not deprive the SOCs the flexibility and speed with which they must respond to challenges. The presentation would speak to those elements, and regulations, which the Treasury would be engaged on.
Mr Kgathatso Tlhakudi, Director-General, DPE, introduced his colleague, Ms Vuyo Tlale, Chief Director: Industrialisation and Localisation, DPE, who would do the presentation.
SOC Procurement Legislative Challenges and Proposed Actions
Ms Tlale greeted the Committee and led the presentation.
Introduction and Context
• One of the main challenges in public procurement is the ability to strike an appropriate balance between operational efficiency and compliance.
• Whilst compliance minimises the risk of corruption and ensures impartial, equal treatment of bidders; efficiency seeks to ensure agility, speed of decision-making and attainment of the most economically advantageous outcome in respect of price, quality, etc.
• Major SOCs operate in a highly competitive and challenging environment. More agile and responsive decision-making processes are required.
• Public sector procurement operates in an environment of increasingly intense scrutiny driven by continuous technology changes, programme reviews, and public and political expectations for service.
• There are different experiences in the field of procurement within the private and public sector.
• State-Owned Companies have been highlighting procurement issues that in some instances undermine and compromise their ability to deliver on their strategic objectives.
• In terms of procurement rules, the time taken from issue of tender to implementation does not take into consideration the existing systems, the size of the organisation and the operational contingencies that need urgent attention.
• SOCs have increasingly received qualified audit opinions in relation to procurement and contract management as a result.
• The Department has been engaging with SOCs under its portfolio as well as with Treasury to try and find an appropriate resolution.
• A list of legislative challenges and proposed solutions were developed and submitted to Treasury for further consideration. The presentation details the challenges and proposals as submitted to Treasury.
• However, SOCs still need to ensure that all legislative prescripts must still be adhered to.
Generic Challenges faced by Public Procurement
Red Tape
• There are many documents guiding the procurement processes, i.e., the Public Finance Management Act (PFMA), Preferential Procurement Policy Framework Act (PPPFA), Broad-Based Black Economic Empowerment (BBBEE), etc.
• Public organisations belong to multiple jurisdictions, and their procurement practices must strictly be approved in line with Treasury directives. Challenges have been experienced with the directives as follows:
• The directives are issued with no proper or limited consultation with affected entities and organs of state.
• Practicality of the directive vs. reality is a different matter, it is basically a “Top-down instruction”.
• Instructions are sometimes not suitable for the operations of the SOCs.
Automation and Reporting Lines
• Full Automation and streamlining can help optimise the process even with many steps along the way.
Ms Tlale added that the challenges that SOCs had found were that there were different automated systems across Government, and SOCs had their own systems that they were using. Sometimes there was no alignment and streamlining. The Department needed to look at how it could assist SOCs in the automation process.
• Procurement function reports to the Chief Financial Officer (CFO) and its functions clearly articulated in legislation and regulation. This limits the agility of the Supply Chain Management (SCM) function (as it had to strictly adhere to the legislation; failure to adhere would lead to audit findings).
Central Supplier Database
• Use of the Central Supplier Database (CSD) does not support tactical to strategic procurement needs for the following reasons:
• Know Your Supplier (KYS) fundamental process is not practiced
• Proper due diligence is not done
• Supplier visits are not done
• Supplier 360° is not done
• Supplier capability matrix is not done.
Ms Tlale added that there was a view that if the SOCs had their own supplier databases, all of those principles would be able to be applied to the suppliers on the database.
• Using preferred vendors helps decrease the time spent in the procurement process. Other practices include supply chain management, supplier relationship management, inventory management, segmenting suppliers, etc.
• The CSD does not allow for that currently.
Ms Tlale added that since the CSD did not have those capabilities, SOCs had to “do the work twice”.
Competitive Bid Process
• Standard Bidding Documents (SBDs) are compulsory and if not completed will disqualify the response.
• This has led to delays in procurement processes as there is no provision to allow for bidders to amend documentation and resubmit.
Committee System for Competitive Bids
The established committee system for competitive bids consists of at least:
• Four standing Bid Specification Committees (BSC).
• A Standing Bid Evaluation Committee (BEC).
• A Standing Bid Adjudication Committee (BAC).
• A Standing appeals committee; and
• Standing SCM Officials within the SCM Unit expected to be members of each committee.
• Over and above committee formalities, each step may contribute to the delay in the procurement process taking into consideration the complexity of the need, more days can easily be added at times, lack of availability and commitment by committee members.
• A recommendation was that the Department should be looking at appointing appropriately skilled supply chain professionals. These professionals should be duly mandated and delegated to do bid specification and evaluation. The Bid Adjudication and Standing Appeals Committees should include one independent member.
Legislative Challenges and Proposed Actions
Ms Tlale summed up this section as follows: When the Department entered into the legislative challenges and the proposed actions, the discussion between its SOCs and the Treasury looked at the legislative requirements that were a hindrance, defined the challenges, and put forward a proposal of how to manage the challenges. (See the attached presentation for the full details.) Twelve challenges in total were presented.
For challenge nine (geographical set-aside/local contracts), Mr Tlale made the following example. The South African Forestry Company (SAFCOL) operates its plantations in some of the most rural areas in Mpumalanga and Limpopo, where it would have a farm across the street or two kilometers down the street that was able to provide it with milk. It was unable to make use of such a farm because of the procurement requirements that it had to go via the CSD to procure milk, for instance, and the milk would come from Johannesburg. That would lead to that particular supplier in the area not being able to participate in the SOC procurement.
Conclusion
• SOCs are willing to work with Treasury to reach workable solutions to the challenges.
• Some of the current provisions are prohibitive to efficiently conducting business and responding to crises.
• The recent court ruling by the Constitutional Court (Con Court) will require a review of certain legislative prescripts.
• A draft amendment by Treasury set to be issued for comment the week of 7 March 2022.
• In the meantime, SOCs have been requested to apply to Treasury for exemption to the areas under contestation.
• DPE will continuously work with SOCs to address any challenges impacting on empowerment of designated groups through BBBEE requirements.
• Certain exemptions, for example in respect of Independent Power Producers (IPPs), need to be reviewed to develop local capacity and empowerment of companies owned by designated groups for future IPP contracts and to strengthen the renewable energy sector.
The DG pointed out that colleagues from the SOCs were present in the meeting, and asked them if they wanted to make any comments in relation to the presentation. He asked if the delegates wanted to add anything in terms of practical experiences that they had to deal with. He thought that points around the use of Original Equipment Manufacturers (OEMs) for maintenance and support of a required system were important.
Mr Disang Mocumi, Committee Secretary, requested that meeting participants who had not renamed their gadgets please do so. There were participants who were just named as numbers. The Committee needed to know who the people in the meeting were.
The Chairperson confirmed that that was important. Participants in the meeting had to be known.
Mr Vuledzani Nemukula, Chief Procurement Officer (CPO), Transnet, made some contributions. The presentation reflected the challenges that Transnet has. The usage of OEMs was critical from the point of view of where Transnet was sitting at that moment. It had different OEMs, to the extent that when it went to the market, and issued a Request For Proposal (RFP), it would get a different OEM that would supply it with the products and equipment it was looking for. After five years when it issued the RFP, it would get a different OEM. That on its own was giving Transnet a bigger challenge from the maintenance of its equipment point of view, within the port infrastructure. Such maintenance was quite difficult as one had multiple OEMs. Having multiple OEMs would mean that in terms of inventory holdings, it would keep duplicating inventory, to ensure that at any specific point in time, whenever there was a breakdown, it would be able to get the spares that it was looking for. That on its own was increasing Transnet’s inventory unnecessarily. If it could be allowed to get to a position where it used a process that scientifically addressed the challenges, and it could get one OEM that it could work with across the port system, or across its requirements for the technical side, that would help it a lot in ensuring that going forward Transnet was able to maintain its infrastructure. He said that the maintenance regime that it had would then be standard across the rest of the organisation.
Over and above that, one element which was critical in line with the issue regarding the standardisation across the organisation, would be that Transnet, when it started to look at the local content, could then start to support a specific industry. It would be able to support a specific industry because all of its requirements would be standardised, and then it would be able to have an idea of what it was going to need in the next few years. That on its own would make it easier for Transnet to make sure that at least its procurement plans were easily managed across the port system. Mr Nemukula confirmed that Ms Tlale was correct to say that Transnet had requested an exemption from the PPPFA, which was given on 11 March 2022. Transnet was currently in the process of implementing that, which necessitated the need to change some of the policies within the organisation, as well as some implementation manuals in terms of the process of procurement. However, with the bigger exemption that Transnet had requested, it had not received anything else as yet. It believed strongly that working together would help Transnet find a solution that would be sustainable. That would also make sure that in the long run, Transnet would be able to compete with the private sector, which it was supposed to compete with at the moment.
Ms Jainthree Sankar, Acting Chief Procurement Officer, Eskom, contributed by saying that Eskom was in the same position as Transnet. To reiterate, Eskom was trying to reduce the amount of non-value-adding suppliers; it was trying to reduce the overall cost of procurement; and it was opening and reopening existing contracts to get better than market-related prices, taking into consideration its purchasing power, etc. It had quite a bit of work it had to do, e.g. its transmission and other infrastructure projects. It wanted to have relationships with suppliers in the long-term to build its industry and be able to develop the economy. She shared the sentiment of her colleague from Transnet in terms of standardisation and the use of spares and commodities across Eskom's fleet. Eskom had the same issue where new suppliers came in and needed to deal with an old fleet that Eskom had to keep inventory for, for multiple units of similar items, etc. There were specific areas where Eskom needed support. The expectations of local communities, where their definition of local was different from the "local" definition of South African, was a challenge in terms of set-asides geographically to help communities in which Eskom operated. Some of the challenges were highlighted in the instruction notes, etc. Eskom was working closely with Treasury and the DPE. It was engaging with those two on a regular basis to deal with applications. The volume and the number of items that had to be ongoing was also a considerable strain on the Treasury and its resources. Post-state capture, Eskom put in several controls on the procurement and contract management side, which showed that the accounting authority board, and Executive Committee (Exco) were looking at expansions, deviations and other transactions. Eskom felt strongly that it could manage those, and provide monitoring information to Treasury and other authorities. Eskom also felt that it would be able to give itself the flexibility and agility in its operations that was necessary to also demonstrate to lending organisations that it could conclude contracts and conclude procurement in a shorter space of time, and complete projects timeously, so that it could be given the additional funding and requirements that had become available for South Africa.
Eskom had also applied for an exemption, and it had done so shortly after Transnet. Eskom was working with Treasury to get exemptions from provisions of the PPPFA, and in terms of some of those regulations and instruction notes that would be repealed. It was looking forward to Treasury’s feedback on those notes, such as the PFMA note that had come out.
Mr Tlhakudi said that the DPE had been working very well with Treasury in raising some of the challenges that some of the regulations and instruction notes were having on the entities, including their competitiveness. SOCs were operating in a space where they had to compete with other players, especially those in the private sector where procurement, for example, had been simplified. There were quite a lot of means of automation, so decisions were made very quickly. With the process that the DPE had had, especially the deviations that had to go through Treasury, it took a long time to procure, and that could have quite a detrimental impact on the competitiveness of the DPE’s entities. Those engagements had been well-received, and the DPE was seeing good results from the exemptions that Transnet had referred to, which had come through the previous Friday. The DPE had been speaking about the guidelines on irregular expenditure to say that that should be reported in the annual report, but not included in the Annual Financial Statement (AFS). Such inclusion was creating havoc, especially with historical irregular expenditure that the DPE had with some of the contracts that, for instance, were subject to the Zondo Commission. Such irregular expenditure stayed on the books of the SOCs. In some instances, one would find a number of contracts that SOCs had to go through to determine the extent of irregular expenditure. It required an unbelievable amount of money versus the benefit that was going to be derived. As a result, the Department asked if a better way to deal with those particular matters could be found, while ensuring that those who had been found wanting were dealt with through both internal processes and the involvement of the criminal justice system. Good progress had been made.
In conclusion, he went on to explain that the intention of the presentation was also in anticipation of the engagement that the Committee would be having with the Department of Trade, Industry and Competition (DTIC) and Treasury on the legislative challenges. The Committee would have had an opportunity to hear about the experiences of the DPE and its SOCs, so that those engagements would be enhanced by that.
Discussion
The Chairperson said that there were still gadgets with only a number identifying them. He requested the Committee Secretary to take such gadgets out of the meeting. People must identify their gadgets, so it could be understood who they were.
Ms J Tshabalala (ANC) said that she was comfortable with the presentation, and what was detailed in the plans. She said that the Committee wanted to commend the Department’s work. She asked about the Competitive Supplier Development Programme (CSDP). The Department stated that some SOCs mentioned that meeting the minimum threshold for local content in some of the designated products proved difficult due to local manufacturers who were unable to meet the specifications required by SOCs. Contrary to popular belief at that point, the DOD, SAPS and the DCS procure security items that are imported whereas Denel locally manufactures such products. How was the Department using CSDPs to capacitate local manufacturers to ensure the reindustrialisation of the South African economy?
Considering that Denel and the South African defence industry were in a “dire situation”, had the Department engaged the DTIC and Treasury regarding the designation of the defence industry for local procurement? The Committee understood the situation that Denel was facing at the moment. She was concerned about intellectual property. What would be done about that situation? Talking about issues of local procurement, the Committee noted that when it came to procuring ammunition, in some reports it was said that SAPS procured it somewhere else and did not procure with Denel. What was the plan thereof?
Ms Tshabalala said that there were products in high foreign and domestic demand that offered high returns on investment that some SOCs such as Denel had the capability to produce, but lacked working capital to produce such products. What was the Department doing to ensure that Treasury, as well as other Government-owned Development Finance Institutions (DFIs), provided SOCs such as Denel with the necessary working capital to carry out their strategic objective?
In most instances, competitive bidding processes denied some of the SOCs a base income necessary for both operational and financial purposes. The COVID-19 pandemic changed how the procurement processes work, because countries were encouraged to support their nascent industries that were affected by the lockdown restrictions. What was the Department's alternative in ensuring that competitive bidding processes did not work to the disadvantage of SOCs should Treasury decide not to provide a removal or amend the competitive bidding processes?
Ms Tshabalala said that the Committee could not leave Eskom to what it was, without addressing the issues happening in it. One was not happy with the management at this point, primarily because of load-shedding that South Africa was experiencing. As a result, businesses were losing revenue, and people were losing jobs. When Eskom switched off the lights, what then happened to the economy of South Africa? She asked about the financing of Eskom from Treasury – what was the commitment thereof? The management of Eskom needed to take the Committee seriously, and take the country seriously. The situation could not be left unattended. The Committee needed to get the CEO and CFO of Eskom to come and tell the Committee what the right story is in terms of the scenario of switching off and switching on the lights, and the fact that South Africa was unable to meet the demand. Right now South Africa was seized with a crisis, and the conflict that was happening. The Committee wanted to understand what the regulations or law would be that would be able to assist when there were crises out there. What was the law that would assist South Africa to ensure that there was delivery when there was a demand on the table? An example was the issue of coal. At the moment, there was demand, but South Africa was unable to meet the demand, which it knew would assist its economy. What was the DPE’s sister Department, be it Treasury or others, doing to assist when it came to the issue of Eskom?
Ms Komane wrote in the chat: “We need to ask how does the Department intervene regarding the issue of Denel where other Departments buy goods from elsewhere and leave the same from Denel. Is there no communication in this regard?”
Mr G Cachalia (DA) said that with regards to local supply of key components for Eskom and Transnet, it was clear that some accommodation was required in that regard, but it needed to be managed very carefully, and there needed to be clarity on that, as well as on areas adjacent to that. There were other aspects that required attention that arose from the presentation, and that referred to what he just said. The first aspect was Annual Financial Statements (AFS). Given that SOEs were required by legislation to prepare and submit AFSs within five months of the end of the financial year, what was being done to effect that without excuses? With the presentation’s reference to leveling of playing fields and tipping the scales, the PPPFA sought to level the playing fields by tipping the scales in favour of previously disadvantaged individuals and Small, Medium and Micro Enterprises (SMMEs), as stated. That tipping of the scales and procurement issues were intertwined, and at the heart of the many problems faced by SOEs. Ring-fencing of historical issues apart, Mr Cachalia said that it seems as if we have fashioned a rod to beat ourselves. The Committee should be seized by that in view of what was going on. It was one of the main challenges to seek an appropriate balance between compliance and efficiency. The question was – who would govern and monitor the proposed discretion to delegate deviations and compliance from bidding processes, why and under what circumstances? That was absolutely crucial. The same applied to the proposal from SOEs to restrict suppliers. Proper oversight was required. South Africa had been in very muddy waters before, and it needed clear policy on that issue.
Regarding the matrix proposed on slide 13, the Con Court abolished the Minister of Finance’s promulgation of key regulations of the PPPFA. Given that, how were the current proposals, such as BBBEE in the matrix, deemed to be compliant? Could the Committee get an explanation on what the effects and remedies to deal with that were? How exactly were the DPE and Treasury dealing with that? What was the validity of any deviations proposed from the Con Court’s determination on that? While it was needed for smooth processing and to balance compliance and efficiency that should not be used to run counter to the Con Court’s determination. Could the Committee receive unambiguous assurance?
Mr Cachalia said that there was the question of ring-fencing and condonation. Ring-fencing and condonation were required to minimise the impact on audit outcomes and debt governance. But the shareholder was constant, and was responsible historically and now. How would that be managed? He asked the Department to answer, with respect to AFS, the level playing field and tipping of the scales issue, ring-fencing and condonation, the managing of the exemption and clear application of policies, and revision of these policies, rather than opening the door to the minefield of exemptions. He hoped that the minefield of regulations, exemptions, delegation, and control was clear to all because that was what got South Africa to where it was. Could it really use the same levers to get it out of there? He said that there must be serious application of the mind to legislation and policy.
Ms Tshabalala asked about BEE. She wanted to understand from Treasury, where one would locate the issue of BEE and beneficiation, to ensure that there were other people able to participate, so that South Africa did not get rid of existing laws and pretend that those laws did not exist.
Did the Department, given where it was with Treasury, have an appetite to look at unspent budgets? Money had been allocated, and the Committee was always seeing an unspent budget that needed to go back at the end of the financial year. What would be done to ensure accountability on the part of the Departments on the issue of unspent budget? She thought that there needed to be something in place that spoke to that. Money could not be given, and then people did not spend that money. In turn, the money went back to Treasury, and there needed to be reallocation of those finances. She thought that it was something that needed to be looked at.
Ms Komane said that her network was not good and that she would send her questions in writing.
Mr S Gumede (ANC) said that the presentation was well-researched and well-articulated. It looked as if the Department was clear on what it was looking for.
His view was that it was going to be appropriate for Treasury to be represented in that debate because, with the type of questions that were being posed, the DPE might not correctly and articulately respond to those questions, because it required a note from the side of Treasury. He noted how the presenter, Ms Tlale, had talked to the reporting structure. However, that was what Mr Cachalia and Ms Tshabalala raised, that in certain instances, for example looking at legislative processes, such reporting was put as part of the annual reporting, rather than having the report done quarterly. It made reporting versus implementation a critical issue. Did the Department go ahead and implement, not having satisfied Treasury, and still awaiting the response on whether it was happy or not happy, and then respond? But if it was factored in as part of the annual reporting, that was fine. It did make sense in that process. However, there were fears that at times there were SOEs that were not even producing annual reports. What would then be done in such instances where there were no reports?
He was hoping that in these discussions, there was nothing hostile in the discussions between the Department and Treasury. There would be quite a lot of movement with defined responsibilities, and some of the responsibilities that had been taken care of by Treasury may in fact go down and be augmented to the Department. The Department was to recommission some of the people who would do the work of that nature.
Mr Gumede suggested encouraging and mandating the Department to proceed with negotiations between it and Treasury, with the hope that Treasury would understand the sentiments of the Department. His understanding of what it should have been was that no one should be crippled when it came to competitive bidding. He wanted to believe that there was a consolidated approach or initiative for unifying all those procurement processes and procedures. Once there was a gap, it was no longer competitive bidding, and others might be disadvantaged in the process. When the report was complete, and Treasury had given a response, he wanted to see if the SOEs were able to implement what the agreement was between SOEs and Treasury.
Mr N Dlamini (ANC) said that the report gave a clear picture of the challenges that the Committee had discussed. For him, that was a start, because there seemed to be some inconsistency in the laws that had been passed. Were these laws enabling enough, or would they become a hindrance at some point? He gave Black Economic Empowerment (BEE) as an example. BEE’s purpose was to address issues of redress to achieve some level of equality in opportunities given to previously disadvantaged individuals. One had the PFMA, which was not assisting the process going forward. He suggested seeing how Treasury responded and taking it from there. There was still more work to be done, and that was a step in the right direction, which he thought the Committee must commend and support moving forward.
Ms J Mkhwanazi (ANC) said that some of the colleagues had covered her questions on the report. For her, the report was clear, and talked to the issues and elements that the Committee was looking for. She wanted to support what Ms Tshabalala proposed on the issue of Eskom. As much as Eskom was not on that day’s agenda, she thought that the Committee was the relevant platform to raise the matter, and take the matter up. Could the Committee arrange a special meeting with Eskom, the DPE and Treasury? Such a meeting would also need to address the issue of communication, especially for Members, because there was so much distorted and fake information out there. It would be helpful if Members could keep abreast of information from time to time, and the issue of what was happening and what the relevant Departments were doing.
Regarding the issue of load-shedding, she said that she was uncertain whether South Africa was winning with the challenges. What were the Department, Eskom and Treasury doing? The Committee needed to understand the whole scenario. Members of the Committee were public representatives, and needed to give the public both hope and exact information. The Committee needed to communicate very clearly to the public what it could contribute to save the situation, or to improve it.
Ms V Malinga (ANC) asked, given what was happening between Russia and Ukraine, was Eskom going to be able to keep the lights on in South Africa because Eskom relied on diesel to operate the turbines? Are we sure that we are not going to find ourselves in the dark?
The Chairperson said that the intention of the presentation was for the Committee to be apprised on the policy impediments, and to engage the Department and its entities, so that the Committee would be informed on the way forward for its next engagement with the relevant policy and Departments. There were one or two issues that he did not find in the presentation. Which legislation prohibited public-private partnerships?
Why could Transnet and PRASA not collaborate as state institutions? Government was seized with rail and transport challenges. The nation was being frustrated with those challenges. Could Transnet assist PRASA to build trains? That issue emerged after the Committee embarked on an oversight visit to Transnet, where it was exposed to huge infrastructure challenges there. That question still needed to come up as it was a policy issue. To what extent was the Department creating a situation where Transnet could assist PRASA? In turn, there would not be another Chinese locomotive that was still sitting unused. All of the SOEs were not designed to prosper. The manner in which South Africa did business was setting the SOEs up for failure. Legislation favoured the private sector every time. After that, when SOEs were frustrated, the private sector became the first shark at the door expecting to benefit from the carcass of these same SOEs. Something needed to be sharpened policy-wise in that process. That process must help in dealing with the constraints that were a serious factor in the improvement of operations in those entities. Such help included a review of the PFMA, specifically how to make the PFMA assist government. In the past, flaws in the PFMA were used to advance corruption and state capture-oriented shenanigans.
Mr Mocumi, read out Ms Komane’s written questions. What was the Department doing to assist entities to be able to do business with other government departments? This question spoke to what the Chairperson had raised about government departments doing business with the private sector. With Denel, for example, Departments could be buying things from Denel. It was the same thing of public-public partnerships that the Chairperson was speaking about.
The Chairperson clarified that he was not making an attempt to bash the private sector, but as things were, it seemed that the private sector was having more advantage over the public sector. Policies needed to be designed to protect those entities, because those entities were central in the execution of transformation in South Africa. The private sector had failed to accomplish small things such as BEE. The private sector was still dominated by white people who were not willing to share their wealth with the rest of the South African population. Therefore South Africa could not rely on such people for improving the quality of life of South African people.
Responses
The Deputy Minister said that he would let the DPE team speak to the technical aspects of accountability in the procurement environment, reporting requirements and the declarations, etc. The meeting was for, the DPE to deal with the regulatory environment impacting SOCs as it related to procurement. How does the DPE navigate the space between the requirements of the Companies Act, and the requirements of the PFMA, etc.? How did those policies impact the effectiveness and efficiency of the entities? With some of the questions, the Department might need to come back to them in another form; e.g. the issue of funding for Eskom, or funding for any of the entities. The DPE had come to deal with the issues that impeded effectiveness.
Ms Mkhwanazi’s suggestion was that a different kind of meeting be arranged in which Treasury could also be present, wherein some of the challenges that SOCs face could be discussed. The DPE was open to that kind of meeting, whether it was with the Portfolio Committee on Public Enterprises, or the Standing Committee on Appropriations. That also applied to how the Department had to manage procurement in SOCs. There was also the question on the challenges that Denel faced, where there could be items that SAPS, for example, could get from Denel. The procurement environment required that certain conditions must be met. SOCs still needed to go out on a competitive process that should then give them a good price. How the Department looked at the way SOCs reinforced each other, etc., was a matter that the Department could come back to. Such a matter would have its own impediments.
Mr Tlhakudi took the liberty of responding to Ms Tshabalala’s question regarding the supply development programme. That programme was designed by DPE with the DTIC’s support. The programme was intended to improve localisation through identifying specific subsystems on the various public programmes that the DPE undertook, be it on the locomotives, the power station build programme, etc. This programme would detail how the DPE would improve local content that acted as a “hedge” to maintenance and support costs going forward. The DPE’s experience had been that because South Africa had a currency that had depreciated against major currencies over time, the costs of supporting those systems in the long run increased on the basis of whether that support was being sought from outside the country. The programme had had some successes, but the DPE had also identified weaknesses in the programme in a study it did about two years ago. The current reality was that one of those weaknesses was the question of how the programme fits within the procurement system as a whole. It would require one to favour someone who was producing in South Africa, which would also be a factor when one would want to leverage that to enable new manufacturing and maintenance enterprises to come up in South Africa. How did one include that in the value system without creating problems for oneself? With regard to that, Mr Tlhakudi said that it was one of the areas of irregular expenditure in which the Department found itself wanting with that programme. The Department discontinued the programme, and decided to rely on other programmes, which might not be perfectly designed for what it sought to do with its SOEs, but the overall objective was the same. For example, the National Industrial Participation (NIP) Programme was run by both the DTIC and the DPE. The DPE would then use that as the basis for ensuring that localisation and industrialisation objectives were still attained. As an overall objective, the DPE had not moved away from what the CSDP represented for the DPE. With regard to actually expanding the list of products that were designated, for example, the DPE made particular reference to security upfront. There was work that was ongoing. One of the DPE colleagues was quite involved with the Armaments Corporation of South Africa (ARMSCOR), and the National Defence Industry Council (NDIC) to look at, for instance, small arms and ammunitions associated with that would also form part of that designation decision made on that. Colleagues within the Department were working very hard on that, and the initial engagements with policy departments that were responsible, had been positive and the DPE was looking forward to that happening. The DPE needed to see how to expand that list, so that it also ensured it protected some of the strategic industrial capabilities that had been built up over the years in South Africa. As had been seen in the case of ammunitions and security forces from a Municipal level to a national level, those were being procured outside the country; whereas there was Pretoria Metal Pressings (PMP) in Pretoria West, which was part of Denel, and was attuned to producing the same product.
On the protection of intellectual property, Mr Tlhakudi confirmed that it was a matter that the Department was very much seized with and that it knew that there had been weaknesses in that area. It knew that there were some data files, for instance, at Denel that were downloaded irregularly, and that the Special Investigating Unit (SIU) was dealing with the matter. Some of the culprits involved had been identified, and were being traced. There was currently an ongoing discussion between the Department, ARMSCOR and Denel to ensure that there was an appropriate system in place going forward, so that those kinds of incidents did not happen in the future.
Responding to the question about leveraging DFIs to help local production and industrialization he said that there was quite a lot of effort in that area, including funding that had been allocated to enable that. Colleagues from the SOCs might want to speak to that as part of their own endeavors and supplier and enterprise development efforts.
There was a question on the impact of the pandemic on the country’s production capacity, and how to direct the Department’s budget to get those activities going and increase the tempo in that regard. Mr Tlhakudi agreed that this question was an important one. A Member asked how Treasury’s frameworks were attuned to enable the Department to achieve that. When Treasury was in the same meeting as the Department, it might be helpful if that question was posed to Treasury.
On the issue of local industry, the same principles that apply to industrialisation and localisation would apply in that particular case. For instance, with some of the major purchases that government does, such as on the healthcare side, there is the question of how to move that spend from being a foreign spend to a local spend. There had been efforts led by the Department of Science and Innovation (DSI) in producing local vaccines” and other forms of treatment. On the Department’s side, Denel did produce a prototype of a ventilator, and it was not successful in getting that taken up. But he knew with the DTIC and the solidarity fund other suppliers were identified to push that effort and ensure that in the future the country was a lot more self-sufficient than that in that particular area.
He asked his colleagues at the SOCs to speak to Mr Cachalia’s questions on the balance between ensuring that there was quick decision-making, versus creating opportunities for people that did not mean well to cause the kind of damage that South Africa had in recent times at its SOCs. That was an important point. What the Department was asking Treasury was regarding the accounting authority to be given the power for instance on how the Act was originally printed, and what had happened through the regulations, where Treasury had taken on those powers because there were instances, either in the SOCs or within Government, including at a local level, where people were misbehaving. Now in touting that there had been unintended consequences there for instance, what was being asked was about giving the authority where it should be, and obviously in instances of wrongdoing, it needed to be ensured that appropriate action was visited upon those people. In turn, the minority-led to a general rule being created and really slowing down the whole procurement system because it has a direct impact on the economy as well. If one was not spending fast enough, then those resources were not given an opportunity to circulate in the economy and ensure jobs are created, and lead to increased economic activity. Ultimately, South Africa would have a better Gross Domestic Product (GDP) performance every year. On the DPE’s side, there was no intention to undermine the decision of the Con Court. Government had generally, in all instances where there had been a decision of the courts that had found that either any regulations or legislation that was put in place were not constitutional, always acted very fast to rectify that to ensure that it put better medicine in place going forward. The ultimate intention in ensuring that more of South Africa’s people were brought into those spaces remained.
As the Committee knew, South Africa was a very unequal country, and unfortunately the inequality that was there during apartheid had just continued post-1994. It was important as government that it always looked for ways to ensure that it rectified that. Sometimes one got worried when you know the private sector was emphasised. Who is going to participate if a decision is taken to outsource and privatise activities that need to be undertaken by the SOCs? It was going to be the private sector and the consequence of that would be that the wealth distribution in South Africa would get worse. What the DPE and SOCs knew was that it had been able to open up opportunities that people – whether as professionals or entrepreneurs – would ordinarily never have gotten access to. The reality of South Africa was that the private sector was not doing so well in terms of promoting the social cohesion or social transformation messages that were what was intended to be some of the outcomes of the effort to bring about the changes in the talks that preceded the 1994 talks, specifically that all should work together – government and the private sector – to ensure people are given greater opportunities. One just had to look at, for instance, the representation of historically disadvantaged people, including women, on the boards which were at the echelons of those entities. People coming from those sectors of South Africa’s community were still underrepresented. The glass ceiling had literally not moved. Mr Tlhakudi said “We should just be careful as we use that language that we are not actually closing even more opportunities for our people to play a meaningful role in this space”. One should not lose sight of the important imperatives in normalising society that had to be undertaken.
He noted that Ms Tshabalala’s second set of questions would be useful in the engagement with the DTIC and Treasury. The Department agreed with what she had raised about BBBEE and beneficiation. He said “We cannot lose that because that's how we are going to ensure that more of our historically disadvantaged communities are participating in this economy”. But most importantly, it would ensure that such people were also owners of those means of production. The Department was looking forward to the discussion on the matter of how to use legislation and regulations to ensure that those objectives are not compromised.
On the issue of spend budgets, one of the objectives that would be achieved by what the Department was seeking to do, was to fast-track procurement because unspent funds were also a product of the process. When the Department did the procurement, it went through a certain number of steps, and in some instances, it had to go to Treasury, which could take a couple of weeks to get a response. There was a whole lot of effort to also get the colleagues on that side to understand what the decision that was being sold meant, and what the realities on the ground were. That took time, and that had a direct impact on when the Department was able to spend.
He thanked Mr Gumede for his comments and said that credit needed to go to Ms Tlale and colleagues at the SOCs for the work that they had done. The colleagues had been great in terms of supporting the effort of the DGs and the Group CEOs in ensuring that the Department addressed the challenges that were outlined in the presentation. The point that Mr Gumede made on reporting was important. How the Department saw things going forward was that once those powers were taken back to where they were in the beginning, nothing stopped Treasury from going to the SOC, and asking to see the deviations that were undertaken in the last month. It could also look at anything that caught its eye, and for which it wanted a better explanation. The Department would be released to play more of a value-adding role in those entities, in terms of either improving understanding of those regulations, or ensuring compliance with the regulations. With annual reports, it was important that if the system was going to be relied on, the Department complied with those requirements. It was important that entities prepared reports on time, and the reports were put before Parliament within the timeframe that was referred to. The challenge had been on what basis did one prepare an AFS if the entity was insolvent? The Department would then be waiting for an entity to be recapitalised, so that the statements could be prepared on a going concern basis. If the Department rushed that process, it did have unintended consequences.
There was no hostility between the DPE and the DTIC. The two worked very well together and understood that they were part of one government. There was a team of DG’s and Group CEOs that had been set up to address problems. That had worked quite well. Mr Tlhakudi agreed with Mr Dlamini; that conversation had to be sustained, with the intention of ensuring association with the Departments that allowed them to achieve the objectives set out.
No legislation stopped the private sector and the public sector from working together. There was a policy that the Department worked together with Treasury to put in place measures to look at how to leverage the expertise, and sometimes capital, in the private sector to ensure that the Department improved the efficiency, capability, and effectiveness of its entities. Colleagues at Transnet were doing that to increase capacity at the ports and it was a good example of how those sorts of partnerships could be leveraged. The Department also wanted to see more public-public partnerships and SOC collaborations, where SOCs also looked to their fellow SOCs to source products and services. Denel had been cited many times as an example of an entity that could benefit from such collaborations. South African Airways (SAA) could do with being preferred by Government and SOCs for air travel. SAA was now a much more efficient organisation, and it was smaller than it should be. That support would go a long way in ensuring that SAA was able to help the South African public, especially with the challenges seen with Comair over the weekend. It was an essential service. South Africa was a big country with large distances between economic centres. Air travel then became essential for people to work. Mr Tlhakudi said “We want our people to travel in this country, so that there are no enclaves, and no people who feel they are separate from the rest of the country; it was important for people to feel that cohesion, and that they were part of one state”.
Speaking to the question on Transnet helping PRASA, he said that there was a new policy, namely the National Rail Policy, which was intended to address that particular point as well. With Transnet Freight Rail (TFR), work was being done on separating operations from infrastructure. That brought up the question of how to look at bringing the two infrastructure businesses together – one business was freight, the other was passengers. The Chairperson brought up the issue of Transnet helping PRASA with building and manufacturing. There was a very good business set up in South Africa, as a result of some of those localisation strategies. The company’s name was Gibela, and Mr Tlhakudi encouraged Members of the Committee to visit the company. Passenger train sets were being produced there. It was a world-class facility run by young people from the surrounding communities. The company had taken young artisans from those areas, and they were now running that factory. When walking around the factory, one would find young black women and men who were responsible for various aspects of producing a train. There were many areas where Transnet needed to help PRASA. One area of collaboration between the two would be with the factory producing trains.
Ms Tlale said that the DG had responded comprehensively to the questions. What was left to add was the areas that Mr Cachalia and Ms Tshabalala had raised. That was still ongoing work, and the Department was engaging with Treasury. She was appreciative, and took all the questions and comments that had been given. The Department would assure that the comments and questions were addressed in its communication with Treasury, so that when it came back and responded, it would address those specific questions. The questions also helped the Department in doing the work that it was doing. Specifically, Mr Cachalia raised some risks that the Department needed to be cognisant of. Once the Department was done with the discussions and there was an outcome, it would be able to come back to the Committee and give a report-back.
The Chairperson said that he was referring to public-public partnership. That was the policy that he was asking about when he asked which policy that was. In the presentation, there was an insinuation that it was not encouraged for there to be partnership between public-owned entities. That was why his question referred PRASA and Transnet. He acknowledged that Mr Tlhakudi referred to the PRASA-Transnet partnership. But Mr Tlhakudi said that there was no policy in relation to private-public partnerships. That was not what the Chairperson was trying to say.
Ms Portia Derby, Group Chief Executive (GCE), Transnet, replied to questions. The issue of public-public partnerships was a really big problem that needed to be resolved. It was difficult, if not nearly impossible, to work between two SOCs. The Municipal Finance Management Act (MFMA), specifically clause 16, enabled intergovernmental relations. That clause enabled numerous innovative things, for example, if a particular municipality had a problem, which was the same as another municipality’s problem, and that other municipality had solved the problem and found a service provider, then the second Municipality was able to ride on that contract and that process to appoint the same company. In the case of SOEs, it was impossible. Transnet had cases where it tried to work with two entities. With one, it had permission to work with that entity for two years only as an implementing agency. Transnet tried to argue with Treasury that it was beneficial that government was working with that entity. The first case was working with Coega Development Corporation (CDC). Those Members who were from the Eastern Cape would recall that CDC, as well as the corporations running Special Economic Zones (SEZs) throughout the country, often went through a period where they had financial constraints, because they were jointly funded by the DTIC and the Province (in most instances). Transnet was asking CDC to provide project management services. Transnet could ask CDC to undertake that (because CDC was cheaper than the private sector), or it could put it out to the private sector. Treasury had a preponderance to frown on that. Treasury preferred that Transnet went to the private sector. Transnet said that firstly, CDC was cheaper. Secondly, CDC was the state at the end of the day. For Transnet, the issue of public-private partnership was an issue that had to be dealt with.
Transnet was still in a constant battle with Treasury on the issue of the Council for Scientific and Industrial Research (CSIR). CSIR was an institution that belonged to the state, and was supposed to look after the scientific research capability. The CSIR also had the added responsibility of being the institution that disseminated technology, especially to the class of citizenry that the DG was talking about, namely black manufacturers who wanted to get into the space and get intellectual property for themselves. Transnet was trying to work with CSIR, because it too, like CDC, often went through periods when it had funding issues. Transnet wanted CSIR, because its specialist skills would help Transnet in ensuring that when it specified locals to buy in the case of security, it specified in such a fashion that it enabled the South African industry to have a competitive advantage. Every time that Transnet tried to work with the CSIR, Treasury said no and specified that Transnet should put its request out into the market and make it competitive. She thought that that was an area that definitely needed to be reviewed. That issue needed to be dealt with in an upfront way, and to her mind, required a very clear and simple policy statement that was similar to the MFMA.
Ms Sankar wrote in the chat: Chair, the National Treaury Instruction note 3 of 2016/17 does not allow for procurement hierarchy i.e. cannot use subsidiaries or other SOC. Therefore we need permission to use for example CSIR.
In everything that Transnet had raised with the DPE, Treasury, and the Committee that related to the structures and constraints it faced as an SOE, Transnet wanted to remain accountable and transparent. It also wanted to report to every single body that it needed to report to. The only exception it was arguing for was that there needed to be due recognition that as an SOE, Transnet was a company, which was no different from any other big company in South Africa. The fact that South Africa talked about its own companies in a fashion which was disparaging was its own problem, which needed to be dealt with. But as a company, Transnet needed to be able to engage with Bidvest, Anglo American, etc. at the same speed. That was taken away from SOCs. One then ended up finding an unfair statement against SOCs that said they were inefficient, ineffective, etc. without due recognition of the constraints that they had. With the original verbiage of the PFMA, Transnet had said many times that it had absolutely no problem with the PFMA as an Act. The problem was the series of Instruction notes and regulations that had since been shoved into the PFMA, which made it not the original. Going back to the original would simplify all of our lives. Secondly, there was the Companies Act. The Companies Act had a chapter on the governance and oversight of SOEs. If that was implemented, there would be a significant simplification, and the market would be able to engage with SOEs on the same basis. The point that the DG raised on BEE was that if South Africa were to implement BBBEE as implemented by the private sector, life would be a lot easier. The PPPFA as it currently stood, and the pricing advantage that it purportedly gave to black-owned companies was not true. Very few black companies were able to benefit from the PPPFA and win business. Such companies were new entrants, and did not have the volume, so they were never, ever able to compete on pricing. But if one was able to ensure that in SOCs BBBEE was implemented in the same way as the private sector, then there would be much better outcomes out of the participation of SOCs in driving transformation in the South African economy without creating new special projects.
Addressing local content, Ms Derby said any company which was trying to ensure that it had a short supply chain, that was cost-effective, and that was rand-denominated, would always buy local. The problem in Transnet’s case was that it was forced to create uncompetitive companies in South Africa. Then with the progression of time, SOEs unfortunately drove that in part, because they also did not procure from local companies. But because from the get-go some companies were not competitive, they were never going to be able to compete and export their production, and as a result, they died. Two critical suppliers were in the intensive care unit that Transnet needed to buy from. In one instance, the supplier did not have a valid tax certificate. The law did not allow Transnet to buy from that company without a valid tax certificate, yet it was a provider of a critical import for Transnet’s wagons, which it had a shortage of. As Government thought through and wrote those policy statements, it may be able to use a little bit more of the experience it had garnered to ensure that whilst it supported local manufacturing, it also ensured that it did not create unnecessary instability.
Ms Derby said that she was behind the proposals that had been made by the DPE.
Ms Nkululeko Dlamini, Group Chief Financial Officer (CFO), Transnet, added that in relation to PRASA, there was a strong team between the Transnet and PRASA leadership to deal with all the matters that needed to be closed out. Transnet and PRASA already had a working relationship.
On the finalisation of the financials on time, in relation to compliance to the Companies Act, Transnet was generally ready to report on time. It had other bodies such as stock exchanges that required that Transnet report to them earlier than the five months that was required by the PFMA. Transnet had certain requirements to report in four months. It believed that the request it was making to Treasury would assist to separate. What it found when it did the financials was that what tended to delay it was trying to do as much as it could in cleaning up in relation to the PFMA requirements. As Transnet was still going through that transition, a lot of work needed to be done by both the auditors and management, but the separation in reporting from the AFS into the annual report would allow Transnet to focus on compliance with the Companies Act, but also the International Financial Reporting Standards. Transnet believed that it would take it a long way in reporting much earlier than it had been able to do.
Mr Nemukula addressed Mr Cachalia and Ms Tshabalala's questions on what Transnet was doing as an SOE in localisation and reindustrialisation. Transnet had a new strategy, which took into consideration the fact that there was a need to identify specific industries where it would have an impact, while also taking into consideration Transnet's demand. The challenge Transnet currently had was that whenever it identified a specific industry that it would need to support to reindustrialise, it needed to get an investor that was willing to put money into the country. From that point of view, Transnet was continuing to work with Treasury. The current requirement was that if it identified a service provider, supported it, and gave it a contract of five years, then after five years, it could not go ahead and confine that business to a specific service provider; it would need to go to the market. That had an impact on the investors' ability to recover the money that it had invested, because it did not have any certainty that it would be able to receive business. From where Transnet was sitting, it needed to start looking at contracting with people who would invest in South Africa for about ten years and beyond. For Transnet to be able to do that, it needed to make sure that it got support from Treasury. Over and above that, it was critical that when Transnet started to look at that kind of long-term relationship and partnership, it was not necessarily only looking at the requirements from Transnet; it was looking at the requirements from other SOEs. Over and above that, he suggested looking at the requirements from neighboring states, so that South Africa could make sure that going forward, it did not get to a position where it created an industry that would be put in ICU.
Ms Sankar said that Ms Derby could equally have been speaking on Eskom’s behalf in terms of its understanding of the procurement rules. On supplier review, she said that sometimes it was obvious that there were blatant transgressions of ethics and other issues. If there was not an expedient process to restrict suppliers, they could continue in terms of the same public procurement process to not be excluded from future procurement. Many of those processes took months or years, and in that process, suppliers continued doing business in Eskom. That was what Eskom was saying with being able to restrict in the first instance, companies that had been found guilty through its supplier review process. A follow-up process could take place with restricting such companies into the wider SOCs.
Regarding monitoring and reporting, Eskom had already done work to put additional controls in its adjudication, to put in leadership from the Exco and Board level on expansions and deviations. Those numbers were moving in the right direction, which demonstrated that the controls Eskom put in place were working. That was why Eskom was more comfortable with asking for leeway, not just from the Companies Act, but from its ability to run its mandate. It was in a position where it was much healthier in its current transactions to be given that leeway to look at materiality and volumes, etc. that were going to Treasury. She thought that the main issue with the regulations was that it was a one-size-fits-all solution. Even if one had condonation of R10 000, had gone through the processes, built a loss control function, had everything done, the condonation still had to go for a check and balance. The same thing applied to a second tender cancellation. It did not make sense if there was not a responsive market. There was nothing that Treasury could do other than look at why there were no responses in actually approving such a cancellation. When Eskom was saying that there were instances when it needed to move back to the company, other than just the mandate and Eskom’s ability to execute its operation, there was not much value-add that could come in that approval process.
Ms Sankar said that Eskom would give a response in writing to the question about diesel operations. It was monitoring the situation regarding Ukraine and Russia and supply chains. Eskom highlighted upfront that it had a major risk in its supply chain as well, but was monitoring the volumes and the prices going up.
Mr Tlhakudi said that the Department wanted to have single source procurement arrangements between the entities, with the blessing of various authorities, so that the Department could help to preserve the capabilities that it had in those entities. The example of CSIR that Ms Derby referred to was a classic one. The Department was really shooting itself in the foot with some of the decisions that it had made in that area.
Further discussion
Mr Cachalia followed up on his question about AFS. The required practice was that when an entity did not prepare an AFS on a going concern basis, it shall disclose that fact, together with the basis on which it prepared the financial statements, and the reason why the entity should not be regarded as an ongoing concern. That needed to be done. There was no way around it, even if a SOC was practically bankrupt and insolvent, as many of the SOCs are.
South Africa had a long way to go with redress, and there were issues that required redress. The problem was that the levers that were used in the past (and present) to ameliorate this chronically unequal society had been faulty (to say the least). Those levers had in fact empowered elites and that needed to end. South Africa could not repeat that.
He looked forward to hearing about the Department’s engagement with Treasury.
On Ms Derby's comments, Mr Cachalia said that he heard what she was saying, and he agreed with a lot of it, however transparency was needed. For example, there were entities and individuals poised to position themselves, for example in the new dispensation in the ports in Durban and elsewhere. Full transparency was needed. There was a need to dig behind the scenes, because otherwise, South Africa would end up, wittingly or unwittingly, becoming party to the same old madness.
The Deputy Minister said those were the remarks given by Mr Cachalia in response to the response he got to his question. If the meeting proceeded in that way, it would be an ongoing thing. He thought that the points Mr Cachalia made were noted.
The Chairperson said that he gave Members a chance to make follow-ups. Unfortunately, it did not go that way.
The Chairperson agreed with Mr Gumede that the presentation was very interesting and that it was an eye-opener, and would help the Committee in the sense of opening its mind to understand broadly what it was dealing with, and the constraints, opportunities, etc. He hoped that that process would help to resolve policy problems, and that it would improve the proper functioning of entities. The Committee had a responsibility to play an oversight role as part of the legislative arm of the state.
Adoption of Draft Minutes
Wednesday, 2 March 2022
Mr Cachalia said that the minutes did not state which Members raised what. For accurate record-keeping, the names of the Members needed to be put next to what was raised. He thought that was important for historical purposes.
Ms Malinga disagreed with Mr Cachalia. She said that was not how minutes were kept. In minutes, one captured the proposal and the agreement. It was only when the minutes were adopted that the name of the person would come into the minutes. That was not how one wrote minutes.
The Chairperson asked Members not to argue about that. He suggested agreeing that at least the person who actually adopted and seconded the minutes would be captured.
Mr Dlamini moved for the adoption of the minutes and was seconded by Mr Cachalia on the basis that at a later stage, names were added to the minutes.
The meeting was adjourned.
Documents
Present
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Magaxa, Mr K Chairperson
ANC -
Cachalia, Mr G K
DA -
Dlamini, Mr NE
ANC -
Gumede, Mr SN
ANC -
Komane, Ms RN
EFF -
Malinga, Ms VT
ANC -
Masualle, Mr PG
ANC -
Mkhwanazi, Ms JCN
ANC -
Nemadzinga-Tshabalala, Ms J
ANC -
Phiri, Ms CM
ANC
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