DPE Q1 2023/25 Performance; Unbundling of Eskom update; Zondo Commission recommendations implementations; with Deputy Minister
Meeting Summary
In a virtual meeting, the Committee received a briefing from the Department of Public Enterprises (DPE) on the 2023/24 financial year and the progress that has been made regarding the restructuring of Eskom. The legal separation of the Eskom Transmission business into a subsidiary is at an advanced stage. The latest deadline to unbundle the National Transmission Company of SA is December 2022. But two crucial approvals are outstanding: Approval from creditors is needed because the unbundling will amount to a debt restructuring and meetings with creditors have been postponed ‘numerous times’. The other outstanding issue is approval from Nersa for licences.
The first quarter performance for the financial year 2023/24 was presented. The Department presented highlights for the quarter including interventions to reduce loss of State-Owned Entities (SOE) infrastructure through theft and vandalism, centralised shareholder model, Eskom compliance with debt relief package, energy availability factor, revitalisation of forestry assets, separation of Eskom, Denel restructuring and Transnet corporatisation. The Department achieved 63% of targets in the term under review.
The Deputy Minister, Mr Obed Bapela, was present. He echoed the words of the President and confirmed that the Department of Public Enterprises would cease to exist in the next administration.
On the matter of the restructuring of Eskom, he said that there were quite a lot of Boards that were established and all these boards that were being established were being overseen by the Presidential Council. If that was the case, can the Committee be sure that the Presidential Council has enough capacity and the capabilities to ensure that everything is being monitored so that all Boards and operations adhere to their duties and expertise
Members asked for updates on the Shareholders Compact Bill and asked that the Bill be finalised because it has been long outstanding.
Regarding the NTC's independence, Members asked what measures were being put in place to ensure that all stakeholders and investors would have non-discriminatory access to the transmission system. How would this be monitored, considering that Eskom made recommendations for the Board of the NTC over one and a half years ago? When can the Committee expect the board to be announced and how would the NTC's funding arrangements allow it to take on more debt? Would establishing the NTC mean that Eskom would be shifting from being a generation business to a transmission business that would be heralding the way for multiple independent entities to take over the generation role?
Members asked about the South African Airways (SAA) second equity partner and the R3 billion that has been promised, the Alexkor draft compact and the appointment of a permanent Board of Transnet.
The Committee also received a presentation on the recommendations of the implementation plan of the Zondo Commission. It was agreed this would be engaged further in future meetings.
Meeting report
Progress report on the restructuring of Eskom
Ms Nadia Valley, Acting Director-General, Department of Public Enterprises (DPE), explained to the Committee the timelines of government's Roadmap for Eskom's Supply from the year 2020. The roadmap commenced with the divisionalisation and relinking of Eskom, the establishment of divisional Boards, and the appointment of the various Heads. The functional separation of divisions was completed in March 2021, where transmission, generation, and distribution were prioritised. Lastly, there was the completion of legal separation in December 2021.
Ms Valley told the Committee that the legal separation of the Eskom Transmission Business into a subsidiary was at an advanced stage and that the National Energy Regulator of South Africa (NERSA) approved a license to operate only the transmission system (excluding the Trading and the Import/Export applications) within the national boundaries of the Republic of South Africa. The National Transmission Company of South Africa (NTCSA) was incorporated into a subsidiary of Eskom Holdings in December 2021. The appointment of the Board of Directors of this entity was underway.
She told the Committee that Eskom plans to commence trading by November 2023, but this was dependent on the approval of the trading license from NERSA and the lender's consent.
The financial progress of concern during the legal separation had also been discussed.
Ms. Valley told the Committee that the divisional balance sheet and profit centre were determined. Verification of assets with Eskom Holdings (EH) and an independent valuation of the said assets was done. A long-term financial model was put in place.
See attached for full presentation
DPE First Quarter Performance for the 2023/24 financial year
Highlights
Report on the interventions to reduce loss of State-Owned Entities (SOEs’) infrastructure through theft and vandalism
Ms Valley reported that the Department has signed a Memorandum of Understanding (MOU) with Eskom and Transnet to facilitate engagement on cable theft and infrastructure vandalism. The implementation of some initiatives to curb cable theft and infrastructure vandalism indicated that there had been a 33% reduction in the total length of cable stolen and a 30% reduction in cable theft security incidents in the previous financial year.
Eskom compliance with conditions of the Eskom debt relief package
Efforts to ensure Eskom’s compliance with the conditions of the debt relief package were still in progress. This is following a broad consultation (public participation) on the Eskom debt relief bill. The Bill was passed by the National Assembly and transmitted to the National Council of Provinces (NCOP) for concurrence on 25 May 2023 which was passed on 21 June 2023. The President signed the Bill on 05 July 2023 (Act 7 of 2023). National Treasury is finalising the strategic conditions for Eskom to comply with to enable the conversion of the loan into equity.
Percentage on EAF increased
There was an increase in the Energy Availability Factor (EAF) and it was also reported that Eskom continues to undertake robust implementation of the generation recovery plan. The plan aims to recover approximately 6000 MW and achieve 70% EAF by March 2025. In addition, the National Energy Crisis Committee is implementing the Energy Action Plan which will improve the reserve margin.
For the first quarter of the 2023/24 Financial Year, Eskom recovered a total of 835 MW from the Tutuka and Matla power stations against a plan of 1 045 MW. Ms Valley said that this under-recovery was due to additional boiler tube leaks identified during the return to service of unit four at the Hendrina station and the ineffective cleaning intervention on the fabric filter plant at the Majuba power station.
Three Eskom companies separated and operationalised
The National Transmission Company South Africa (NTCSA) was established, registered and incorporated as a wholly owned subsidiary of Eskom. The revised Transmission licence application was submitted to the National Energy Regulator of South Africa (NERSA) in September 2022 for approval.
On 27 July 2023, the Energy Regulator of NERSA approved a license to the NTCSA to operate the transmission system (excluding the Trading and the Import/Export applications) within the national boundaries of the Republic of South Africa. NERSA stated that Trading and the Import/Export applications will require further consideration before being submitted to NERSA’s Electricity subcommittee.
The process to assign the NTCSA as a designated Buyer of electricity in the country in terms of section 21(1) of the Electricity Regulation Act is underway. A letter had been sent to NERSA, confirming Eskom’s intent to assign the Buyer role to NTCSA. On 29 June 2023, The Department received a list of Board of Directors for the NTCSA. The appointment of NTCSA Board of Directors is underway.
The due diligence for the Generation Division was completed. The National Electricity Distribution Company of South Africa (NEDCSA) was registered and the PFMA 54 (2) approval for the sale and transfer of assets to the NEDCSA was granted by the Minister. Work is progressing on the conclusion of the sale and transfer of assets to the NEDCSA.
Progress on the implementation of Denel’s Restructuring Plan
The implementation of Denel's Restructuring Plan showed that the State Owned Company was making progress in implementing its turnaround. Denel is finalising the optimisation process of its property portfolio for disposal and commercialisation.
She said that there are monthly meetings with the Department of Defence, National Treasury, Armscor, and Denel to monitor progress as part of the conditions attached to the R3.4 billion capital injection. She added that the meetings are also critical in managing some aspects of the restructuring process that may have a direct material bearing on strategic and sovereign defence capabilities. The finalisation of the external audit by the Auditor General for the years 2021, 2022, and 2023 is currently underway.
The Department achieved 63% of targets in the quarter.
The total spending by the Department is 81.7% (R59.7 million of R73.1 million) of the projected budget. This resulted in lower-than-projected spending of 18.3 % or R 13.4 million.
All programmes underspent with Programme 1 highest, and Programme 2 followed. The under and overspending on the projection is due to the following:
Compensation of employees (COE): vacant posts within all three programmes
Goods and Services: the underspending is R5.6 million below projection for Quarter 1 of 2023/24 financial year. This is mainly due to operational expenditure such as Microsoft licenses that was expected to be paid in quarter 1. The invoice was received towards the end of the quarter and therefore will be paid in July.
The over-expenditure on Capital Assets is due to the purchase of computer hardware and related accessories which was above projection.
Progress: filling vacancies
The following HR strategy was approved to reduce the vacancy rate within the Department and there is continuous monitoring:
- Identified posts that had to be unfunded as part of the baseline reductions of the Cost of Employees budget.
- Headhunting/executive search for appointment in critical posts.
- Identifying priority posts which need to be filled and finalise recruitment processes for these priority posts
- Additional appointment to the establishment on short term contract to address capacity constraints and reduction of vacancies.
The following progress was made to fill vacancies:
- Identified posts that had to be unfunded as part of the baseline reductions of the Cost of Employees budget. 1 post unfunded (2023/24)
- Headhunting/executive search for appointment in critical posts – 4 posts
- Identified priority posts which need to be filled and finalise recruitment processes for these priority posts. – 17 posts
- Additional appointments to the establishment on short term contract to address capacity constraints and reduction of vacancies. – 6 appointments
The DPE advertised eight posts during the first quarter of 2023/24.
For the period 1 April 2023 to 31 July 2023, 10 appointments were made (two permanent appointments; and eight contract appointments). However, there were also seven terminations of service
(see presentation attached)
Discussion
The Chairperson thanked the Department for its presentation and allowed Committee Members to engage and ask questions.
Mr S Gumede (ANC) thanked the Committee Chairperson and the Department for its presentation and said that it does give them a little bit of progress on some of the aspects of the unbundling of Eskom and how there will be other parts that they will be very effective.
He told the Committee that he wished to concur with Ms Valley on the matter of the shareholder company and expressed his happiness that all of them were finalised and none were outstanding. It was the Committee’s motto to prepare for the seven SOEs.
On the issue of Denel and the R3.4 billion, the Committee has debated, on multiple occasions, that there be a return ship on expertise and that did not happen due to certain circumstances.
The only concern that Mr Gumede had was that many critical posts would have some experts hired temporarily. What could have prevented them from being permanently hired?
On the matter of the restructuring of Eskom, he said that there were quite a lot of Boards that were established and all these boards that were being established were being overseen by the Presidential Council. If that was the case, can the Committee be sure that the Presidential Council has enough capacity and the capabilities to ensure that everything is being monitored so that all Boards and operations adhere to their duties and expertise? He said that he understood that with Eskom, each company being established would have its own board where it would be expected that insight is fast-tracked.
The status of loadshedding is critical to the Committee and the nation, even though the Energy Availability Factor (EAF) seems to be improving.
He asked whether Eskom is getting closer to the target that the Department and the Committee set to achieve the District Development Model (DDM). The DDM was said to be excellent, and he wished that this performance would be extended to other metros and districts.
Mr Gumede explained that the Committee had started talking about the SOE bill when it first started being part of the National Assembly and now it was about to exit the 6th term in office. He asked that the Bill be finalised because it has been long outstanding.
He expresses that it seems as if the portfolio meeting clashes with Cabinet. It was very critical that the Minister be present when certain issues like the Denel issue were discussed.
Mr G Cachalia (DA) told the Chairperson that most of his questions would be on the National Transition Company (NTC). He said that the NTC is at least two years late and Cabinet's approval of the 2019 roadmap was done in 2019 and it was now four years later. Regarding the NTC's independence, Mr Cachalia asked what measures were being put in place to ensure that all stakeholders and investors would have non-discriminatory access to the transmission system. How would this be monitored, considering that Eskom made recommendations for the Board of the NTC over one and a half years ago? When can the Committee expect the board to be announced and how would the NTC's funding arrangements allow it to take on more debt?
Would establishing the NTC mean that Eskom would be shifting from being a generation business to a transmission business that would be heralding the way for multiple independent entities to take over the generation role? If this would be the case, when can the Committee expect the piecemeal generation? Between 2013 and 2022, only 4 300 or 4 347 kilometres of the new power lines were added to the grid. That amounts to 400 kilometres per annum. Eskom said it needed to ramp that up to 1 500 kilometres per annum, which has never been achieved to date.
Mr Cachalia asked how this goal would be met financially, operationally, and within the current regulatory framework that governs the infrastructure construction. How are the gaps between the lead time for renewables, which is estimated generally at three to five years and grid extensions, which is estimated to be five to seven years going to be met? Would Eskom not run out of runway as it were and what Bill or stability changes would be put in place? What will it cost to manage the grid's stability given that the rooftop solar explosion is in the order of 7.5 gigawatts? If and when loadshedding disappears, will the next challenge be maintaining the 50-hertz frequency that is crucial for the grid number?
Mr Cachalia asked how HoldCo would sit and monitor SOE performance concerning the commercial and developmental objectives with minimum reliance. Would developing a capital structure to ensure profitability and sustainability be considered given that there had been failure to do so in the past? What assurance can the Committee be given about the independence of the Board of HoldCo and when can the Committee have insight on the shareholder compacts which have been signed?
Mr Cachalia asked about the South African Airways (SAA) second equity partner and the R3 billion that has been promised. The Committee needs a clear understanding of when this would happen and how this partner would learn to deliver and fund its expansion, sustainably.
He asked what is being done to address the problem of the yearly decline of the EAF and an indication of what may have caused it.
Mr Cachalia asked about the appointment of a permanent Board of Transnet and what is being done regarding the road rail strategy as opposed to shoring up the trucking industry.
Ms N Mhlongo (EFF) asked the Department's representatives how the draft of the Shareholder Management Bill was proceeding and how many meetings had been held by the PCC with Ministers. Why is the Bill closely guarded as if it were a top secret? The Department has passed the formal policy process prescribed by government, namely the green paper and the white paper which is supposed to inform the Bill which the Minister and the Department bypassed. She asked about the whereabouts of the policy paper and the business case that has replaced this process. Have answers been provided on the capitalisation of the holding company? Is the government expected to foot this Bill and if so, what is going to be the going cost of footing the Bill?
Ms Mhlongo said that a Bill of this magnitude cannot be kept secret when it is meant to change the entire landscape of the country's SOEs. She recalled the President's State of the Nation Address (SONA), where he announced that the Department of Public Enterprises (DPE) would be closed down. How far is the Department in the process of achieving this? Have the employees been taken through the process?
Ms Mhlongo asked the representatives of the Department why a company from the Philippines was announced as a private sector partner to Transnet whilst the company had not fully completed proper due diligence. What were the interventions to reduce the loss of SOE infrastructure through theft and vandalism? How much did the Department spend on cable theft including replacing cables and disruptions of services? How many corridors are not operational due to cable theft and what is the impact on the country's economic activities?
Ms Mhlongo asked about the separated three Eskom companies and the Department's opinion on the analysis they hold. Has the Department considered section 156 subsection 1A of the Constitution of the Republic which gives municipalities the executive powers to distribute electricity and gas, instead of opting for forming a new Distributing entity? This would be taking into account that a local government is the face of service delivery and way closer to the people compared to Eskom.
An example of the waiting and frustration that comes with calling Eskom for repairs, is how the people of Winterveldt have been without a transformer for several months. The distribution function could be given to the City of Tshwane and other municipalities across the country could also be given full control of electricity distribution within their demarcation.
Lastly, on the issue of irregular expenditure, Ms Mhlongo asked why the Department could not follow employees who resign after their hands have been caught in the cookie jar because employees tend to move from one Department to another after stealing money from municipalities.
Mr N Dlamini (ANC) said that it was clear that Members of the Committee were married to their political party’s position and that did not benefit South Africans. He asked that they always remember to be biased toward the poor and those in the working class. Eskom supplies electricity to the entire country. The presentation mentioned something about converting debts into equity.
Mr Dlamini said that South Africans already live in a suspicious society and now there is the privatising of the SOE. He asked for an explanation of what this conversion meant and how it would help the country.
Eskom's biggest problem is that no revenue is generated by what it was producing, meaning that more people do not pay for electricity than the people who do. This has a direct impact on the liquidity of Eskom which is why government has intervened from time to time. How would these interventions address that part of ensuring people pay for electricity besides creating space for the private sector to sell a renewable source to the government?
Transnet has advanced in terms of creating space for the private sector to participate. Yet the question remains: if Transnet is not profitable, why would the private sector be interested in investing money into Transnet? What is the sector going to do to ensure that Transnet is profitable? How would this affect job security for the people employed at Transnet if an exercise is going to lead to job losses down the line? This will then create a problem with the workers of this country because once people are unemployed, they put more pressure on the government to provide for them.
Mr F Essack (DA) asked about compliance and for someone to give more information on the timeline for the strategic conditions for Eskom to comply with as well as the report of the conversion of the loan into equity. He asked about Alexkor and the draft compact that has been put in place. What are the specific details in terms of this review and the future state of the entity?
Ms J Mkhwanazi (ANC) said that other Committee Members had already asked most questions, but she would like to ask the Department if there is a system to check or a system to indicate the performance of circuits before the end of the financial year to show how far the targets are. She asked if the Director-General and the Deputy Minister would elaborate on consultation processes and Board appointments and the capacity of these Boards. When would National Treasury finalise the conversion of the loan into equity? Does the conversion imply that the Debt Relief Bill will be amended as key elements of the Bill include the proposal that National Treasury advance amounts to a loan on the date determined by the Minister of Finance?
DPE Responses
Ms Valley started by assuring the Committee that it intends to finalise the shareholder compact before the end of the financial year. The R3.4 billion capital injection was used to settle legacy debts, which is one reason why Denel is using temporary positions instead of permanent ones. An engagement was had with Denel, where this was discussed so that the entity begins to generate revenue and becomes profitable. Its profits would enable it to fund its own operations and hire people permanently. She added that the Department wished for Denel to regain its former glory.
Ms Valley said that what set the Department back from submitting the Bill to Cabinet was the recent court rulings needing legal opinions and reports. Submitting the Bill to Cabinet without the necessary documents would have been sub-optimal. It was necessary to get certification and to go through the necessary processes within the government to secure the necessary documentation before the Bill was tabled to Cabinet.
The Bill has been in the making for the longest time but the Department has made strides and will submit to Cabinet before the end of the financial year. Ms. Valley indicated that they want the Bill to be a priority even though it is already at an advanced stage.
The loan that would be given to Eskom has conditions that National Treasury set and the loan will only be converted to equity only if those conditions are met. So if in the event Eskom does not meet some of the conditions that Treasury has set out for Eskom, then it follows that that loan will not be converted into equity and that is why the Department monitors the progress of meeting these conditions every month to ensure that at the loan can be converted into equity.
Ms Valley also told the Committee that her Department was working quite actively to ensure that it minimises the impact of load shedding. She indicated that it has made strides to do so especially since the winter period is over. However, Eskom can come out of the winter period comfortably with lower levels of load shedding. The Department is still working closely with government in making some interventions on the issue of demand and supply by encouraging people to switch off appliances during peak hours. This is to minimise the impact of loadshedding nationwide.
Illegal connections are still a big issue and Ms Valley said that people need to pay for their services. There is free basic electricity that has been provided for poor people but for those who can afford it is important that they pay for their services. There needs to be an aggressive rollout of smart meters so that people pay for the electricity they consume.
Mr Donald Nkadimeng, Chief Director: State Owned Companies (SOCs) Financial Oversight, DPE, told the Committee that he would be responding to the question on the delays associated with the restructuring of the transmission on the debt allocation. He highlighted that when the roadmap was developed, it was developed with timelines in terms of how the restructuring would unfold. The process of executing the roadmap was at a time when there was a realisation that there were a lot of dependencies that were out of Eskom's control. The delays that were experienced were associated with dependencies that are mostly out of Eskom's control.
Concerning the transmission, the aim was to have the transmission company legally separated by December 2022. That did not happen because some requirements that needed to be met when restructuring were not met. One of them is that legal consent was needed from the lenders of the entity. The process to acquire this has been unfolding and the anticipation was that the legal consent from the senders would be acquired by the end of August.
The Portfolio Committee meeting was on 30 August and the Department had since not received the anticipated response from the lenders. Mr Nkadimeng told the Committee that the lenders were engaged and they had since recommended the matter to their credit committee, then a decision would be made.
Another issue is obtaining the license from the regulator which is needed to establish a transmission company as a separate entity as a subsidiary of Eskom. The process of obtaining this license began last year and was eventually approved by the regulating body. However, the license obtained does not cover everything Eskom applied for. Out of the three activities Eskom had applied for, it was only approved for one. The main reason for that was that a transmission company at present is not yet operational. Arrangements to operate as a transmission system operator will be made after the finalisation of the Bill, which Parliament is now considering.
It was indicated to the Committee that at present, the NTC of South Africa, as a subsidiary of Eskom Holding, is going to get a license to operate as a transmission company, however with the finalisation of the Bill, there is a transitional arrangement now to afford it the opportunity to operate in the interim until the establishment of the transmission system operator that deals with the delays.
Regarding the transmission company, one of the critical issues was the debt overhead in the balance sheet, which was at the time around R450 billion when the restructuring process started. The biggest question that everyone, including lenders, asked was how Eskom would deal with the debt because it would not be the best idea to want to restructure the entity or establish subsidiaries, not knowing how it would be dealt with. Eskom developed a methodology in which it was going to allocate the debt to all the companies which are generation, transmission, and distribution. The board approved this methodology.
Mr Nkadimeng responded to the questions from multiple Boards. He said that the Department needs to consider that the DPE is the shareholder department responsible for the oversight of Eskom. Nothing but the corporate structure of Eskom would change. Instead of having divisions, Eskom will now have three business subsidiaries as a holding company.
The three subsidiaries of Eskom would be 100% owned by Eskom Holdings, whereas the state owns Eskom Holdings. The process of Board appointments will be the responsibility of the Minister of Public Enterprises, in which the Eskom Board will come up with their own list. The Minister needs to assess the list and satisfy himself that the board does have the prerequisite skills and expertise to run that company and then make the pronouncement.
A representative of the Department was asked to answer questions on Transnet, road to rail and Transet being private sector participants. He said that it was important for the Committee to reflect that Transnet's volumes have been falling over time, mostly because of the ongoing shortage of locomotives, the deteriorating quality of the rail infrastructure, and the levels of cable theft and vandalism which remain high.
Government has established the National Logistics Crisis Committee as a special intervention to try and improve the situation and start to turn that trend around. He explained that the National Logistics Crisis Committee has been set up as a special committee to work with Transnet and the private sector under the auspices of business for South Africa to try and identify the root causes of the declining performance.
These separate entities would jointly devise interventions that would quickly start to arrest the decline in rail volumes, so five priority corridors have been established under the National Logistics Crisis Committee. The corridors are as follows: coal, iron ore, and manganese between Gauteng and Durban, and the last one being Clchrome and magnet.
Permanent task teams have been created for the corridors. These task teams consist of members of the business of Transnet and government. They all meet weekly to identify challenges, diagnose problems, determine priority interventions and then track the progress of these interventions. It is anticipated that through this collaboration, they are going to start to see the trends being reversed.
A DPE official told the Committee that it was important to note that the container strategy that Transnet has developed is trying to position a part of Durban as a container hub. The whole reasoning behind that is if a port can be positioned as a hub, bigger ships will be attracted to the port, resulting in a lower unit cost for container traffic coming in and out of the port. Ultimately, this will contribute to a reduction in the supply chain costs for imports and exports.
What needs to be done is that, to deliver on that hub strategy, the Durban port is linked to a broader international network of terminals. The request was to find bona fide International Terminal operators with existing networks and arrangements with the shipping line. That was the key requirement when Transnet looked for a partner which was found in the partner from the Philippines. The alternate options are the Singaporean Port of Singapore Authority, Hutchinson Port Holdings out of Hong Kong, and the Dubai ports.
The issue of jobs is not well founded because the idea behind bringing the partner in is to help accelerate growth in container volumes and when that comes to pass, more jobs will be required because of the increased growth in in containers.
A representative from the Department responded to Mr Cachalia’s question about the Strategic Equity Partners (SEPs). The Competition Tribunal granted approval and the next step is to go to the Air Services License Council. There is a project plan that is continuously monitored to ensure regulations are being followed.
SOEs need to be commercially viable and sustainable to reduce their reliance on these entities on the fiscus. Those that need to be stabilised and restructured must do that so they can move to HoldCO.
A DPE official said that the Department has noted that there are people who were dismissed or those who resigned to avoid consequence management. The said individuals would resurface in other areas of government. There has been an attempt by the Department, to develop a centralised database where employee details will be kept.
Mr. Obed Bapela, Deputy Minister of Public Enterprises, commended that the Committee Members asked very important questions and hoped that they were all answered. He addressed the matter of the Bill and explained that it was not a secret and had to go through certain transparent processes like all the other Bills. It took longer than expected but will be pushed to be a priority Bill before the national elections.
He said the Department wished for Denel to return to its former glory and be profitable. The industry that Denel falls under has very stiff competition, which further complicates matters. The Department is working very hard to support it to ensure that they make some profit.
The privatisation of Eskom is something that he and government are firmly standing against. He said that he was aware that some Members were championing the privatisation of Eskom, regardless of their political ideologies. This would not happen as the Cabinet by the governing party has decided against it.
Deputy Minister Bapela added to that by saying that the Department of Public Enterprises would not exist in the upcoming administration, in response to the question asked by one of the Committee Members after she heard the President's announcement on the matter in SONA.
Quarterly Report on Parliament’s Implementation Plan to give effect to the Recommendations in the Report of the Judicial Commission of Inquiry into allegations of State Capture, Fraud in the Public Sector, including Organs of State
The Committee content advisor told the Committee that on 31 January 2023, the Speaker of Parliament referred to several Committees the implementation plan on the Zondo report dated 03 November 2022. The Committee has interacted with the report and its implementation plan.
The Commission found state capture in Alexkor, Denel, Eskom, SAA, and Transnet. The content advisor said that he would present to the Committee the progress undertaken since the implementation of the Commission.
The Special Investigating Unit (SIU) has completed its investigation on Transnet’s procurement and award of contracts for 1 064 locomotives. Litigation was brought jointly by Transnet and the SIU for civil recovery of R4.2 billion. He told the Committee that the inquiry found an overpayment of R189 million to Regiments. Transnet has settled with this entity, but no payment has been made as Regiments is in liquidation.
The reinstatement of Siyabonga Gama and the payment of approximately R17 million for the benefit of Gama was still being investigated. However, the State Capture recommended recovery of approximately R17 million unjustifiably paid to Mr Gama from the board who supported the settlement.
The content advisor told the Committee that Eskom continues to participate in the tracing and recovering funds led by Trillian liquidators. Eskom is pursuing civil recoveries to recoup losses attributable to the General Manager for their conduct in the transaction. The entity is still actively pursuing the amount of R1.2 billion in which it was overcharged by Econ Oil.
SAA entered into a potentially inflated contract of R1.1 billion, where corrupt payments amounting to R66 million were made. Most of the matters relating to SAA were referred to the SIU for investigations and outcomes were still pending.
The content Advisor told the Committee that Denel recently reported an update on investigation on matters related to fraud, corruption, and state capture to the Standing Committee on Public Accounts. Improper or unlawful conduct by Denel officials or employees for contracting or awarding without the procurement process being followed was found. The appointment of VR Laser was found to be unlawful and invalid in terms of section 2 of the Constitution because the procurement process was not compliant with public sector procurement regulations.
A report has been completed and presented to the Audit Committee and will be legally reviewed for implementation of the recommendations once finalised,this was after Denel provided financial assistance to LMT Holdings without following the requirements of the Companies Act.
See full update attached
Discussion
The Chairperson suggested that the presentation be engaged with in another meeting because of their limited time.
Mr Cachalia and Ms Mkhwanazi said that the content advisor merely read the update to the Committee in a torturous fashion, preventing engagement.
Ms T Siweya (ANC) suggested that the SIU come before the Committee to present its progress report. She added that that would assist the Committee to understand the actions taken beyond reporting.
The Chairperson agreed with Mr Cachalia, Ms Mkhwanazi, and Ms Siweya and suggested that the content advisor ensure that the next presentation is more conducive to enable the Committee Members to engage with the presentation in a confident manner. He suggested that the content advisor get assistance from representatives from relevant entities to reinforce what is being presented. This would allow Members to engage confidently with what the progress report contains.
The meeting was adjourned.
Documents
Present
-
Magaxa, Mr K Chairperson
ANC -
Bapela, Mr KO
ANC -
Buthelezi, Mr EM
IFP -
Cachalia, Mr G K
DA -
Dlamini, Mr NE
ANC -
Essack, Mr F
DA -
Gumede, Mr SN
ANC -
Malinga, Ms VT
ANC -
Mhlongo, Mr TW
DA -
Mkhwanazi, Ms JCN
ANC -
Phiri, Ms CM
ANC -
Siweya, Ms RT
ANC
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