National State Enterprises Bill: DPME briefing & processing; DPME, Brand SA, Stats SA Audit Outcomes; with Deputy Minister

Planning, Monitoring and Evaluation

11 October 2024
Chairperson: Ms T Mgweba (ANC)
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Meeting Summary

Video

In a virtual meeting, the Portfolio Committee was briefed by the Department of Planning, Monitoring and Evaluation (DPME) on the National State Enterprises Bill [B1-2024]. The Committee was also briefed by the Auditor-General of South Africa (AGSA) on the audit outcomes of the DPME, the Department of Public Enterprises (DPE), Brand SA and Statistics SA, for the 2023/24 financial year.

The Department said that state-owned enterprises (SOEs) had faced operational, financial and governance challenges. It was therefore essential for them to be strengthened to ensure that the state could effectively enable economic and social development. The DPME had received many recommendations from the Presidential Review Committee, the State Capture report, and the Presidential SOE Council. These recommendations advocated a centralised ownership model to apply to all spheres of government, sound and effective governance of SOEs, and establishing a state-owned holding company to house strategic SOEs and exercise coordinated shareholder oversight. The DPME had also received public comments which had been incorporated into the Bill. The public comments were related to three thematic areas -- the need for a clear state ownership strategy, the need to harmonise the relevant legislative prescripts applicable to the holding company and its subsidiaries and lastly, the need for transparent and appropriate governance and accountability mechanisms.

The Bill sought to provide for the development of a strategy for national state enterprises; to establish the State Asset Management SOC Ltd; to provide for the state as the sole shareholder of a holding company; to consolidate the state’s shareholdings in national state enterprises; to provide for the powers of the shareholder on behalf of the state; to provide for the phased succession of national state enterprises to the holding company; to provide for the holding company’s powers as the shareholder of subsidiaries; to provide for appropriate and effective monitoring and reporting mechanisms over subsidiaries; and to provide for matters connected therewith. The DPME took the Committee through the different clauses and schedules of the Bill.

Members felt that the DPME should not skim past the public comments that had been received, because it would be interesting to see whether they were positive or negative. Concerns were raised about moving away from the Public Finance Management Act, and about the hidden South African Post Office amendments in the Bill. The Committee was concerned that a centralised holding company dominated by dubious directors could be a recipe for state capture. It was suggested that the Bill should set out a clear, open and transparent process for all competent South Africans to apply to be directors of SOEs. Members identified gaps in the Bill, such as the linkage between the holding company and the sovereign wealth fund. The Bill also did not entail a provision for the establishment of new SOEs, and no definition of the state-owned assets to include various income-generating assets. Concerns were raised about the selection panel being too state-orientated. The Committee was interested in the conditions for transferring a SOE to the holding company. It was recommended that the Committee have a study group to discuss Members' issues regarding the Bill. The Committee decided to deal with the motion of desirability at a later stage. The Committee would complete the study group first, and immediately thereafter publish the advertisement for public comments on the Bill.

According to the AGSA, the overall audit outcome for the portfolio had remained stagnant. Brand SA had sustained a clean audit outcome due to the sound financial and performance management discipline and preventative controls in place. The DPME had regressed from a clean audit outcome to financially unqualified, with a material finding on expenditure management related to its failure to prevent irregular expenditure. The audit outcome for the DPE had remained unchanged as financially unqualified, with findings on performance information and compliance with legislation in the areas of procurement and contract management, annual financial statements, and expenditure management due to its failure to prevent irregular expenditure. Statistics SA’s audit outcome had also remained unchanged as financially unqualified, with findings on performance information, where a material inconsistency between an indicator and its set target had been identified. Material findings on consequence management and expenditure management were also reported.

Members commented that many of the issues stemmed from a lack of oversight. Concerns were raised about the fruitless and wasteful expenditure, and key vacancies not being filled at Statistics SA. Lack of consequence management was a huge concern. Vetting processes for the appointment of board members also needed to be clear. The Committee recommended that all departments and entities be required to present their audit action plans, and turnaround plans, including realistic timelines, to the Committee.

Meeting report

The Chairperson said the agenda for the meeting consisted of a briefing by the Department of Planning, Monitoring and Evaluation (DPME) on the National State Enterprises Bill [B1-2024], and the Auditor-General of South Africa (AGSA) briefing on the audit outcomes for the DPME, Brand SA, the Department of Public Enterprises (DPE), and Statistics SA for the 2023/24 financial year.

She mentioned the dissolution of the Department of Public Enterprises (DPE). She said that the functions had been transferred to the Office of the Presidency and the responsibilities delegated to the Minister of the DPME. A decision had been taken to move state-owned entities (SOEs) to the line departments. At the centre of the concerted efforts to construct a capable, ethical, and developmental state, was the role of the SOEs, which had a very important mandate as part of the continuous task of transforming the economy, consolidating the democratic project, and constructing a capable and developmental state.

As the Committee grasped the new shareholding model of the SOEs, there must be sufficient financially sound and well-governed enterprises, as outlined in the National Development Plan (NDP). This Committee had organised an orientation workshop on SOEs as a way of developing a deeper understanding of the new shareholding model, and the mandate of the SOEs. There was an induction workshop.

The National State Enterprises Bill remained the responsibility of the DPME, and would be introduced to the Committee in this meeting. Thereafter, the Committee would consider the Budgetary Review and Recommendations Report (BRRR) by the Auditor General of South Africa (AGSA) on the DPME, DPE, Brand SA and Statistics SA.

Deputy Minister's opening remarks

Mr Seiso Mohai, Deputy Minister of Planning, Monitoring and Evaluation, said he appreciated the opportunity to outline the processing of this critical piece of legislation. He submitted an apology for the Minister, who could not attend the meeting due to other commitments. The DPME team was present and was appreciative of the significance of processing the Bill.

The DPME regarded the Bill as a cornerstone of its commitment to revitalise and strengthen the governance framework of South Africa’s SOEs. It was the product of extensive consultations and the challenges plaguing the SOEs. The overriding objective was to ensure that this landscape of the SOEs contributes meaningfully to the national development priorities.

The Bill was tabled in the Sixth Administration of Parliament, and was revived in this term. Many of the SOEs had faced significant governance challenges such as inadequate oversight, inefficiencies, and other instances of financial mismanagement. This Bill intended to respond directly to these challenges by seeking to enhance transparency, accountability and efficiency in the SOE sector. This aligned with the recommendations from the Presidential SOE Council and the findings of the Zondo Commission. These reports highlighted the need for a consolidated governance structure and tightening accountability measures to prevent abuse, and to ensure that SOEs serve the public good.

The Presidential SOE Council had recommended a centralised stakeholder management model and establishing a holding company. The presentation would address this, and would also speak about the core objectives of the Bill, the key provisions and what model was being proposed. Government was committed to advancing a developmental state which had the capacity to intervene in the economy, and an SOE would enable these objectives. Transformation was critical in terms of dealing with these areas.

The Bill provided an opportunity for the state to develop a long-term vision and have a tighter approach to meeting strategic objectives. The Asian tigers were South Africa’s model for developing a holding company that would accelerate transformation and economic growth. Lessons had been drawn from China, Singapore, India, and other countries which had implemented this model. Line departments would continue to play a role in the direction of the SOEs, as not all SOEs would be part of the holding company. The holding company's direction would factor into the line department's objectives. He believed that a great and meaningful contribution would be made by this Committee.

DPME briefing on the National State Enterprises Bill [B1-2024]

Ms Jacky Molisane, Acting Director-General, DPME, greeted everyone in the meeting and thanked Deputy Minister Mohai for his comprehensive opening remarks. She said that Adv Melanchton Makobe, Deputy Director-General: State-Owned Companies Governance Assurance and Performance, DPME, would take the Committee through the comprehensive presentation. Other colleagues on the platform would assist in responding to the questions raised by the Committee.

Background

Adv Makobe said SOEs played a critical role in key sectors of the South African economy. They provide infrastructure and the services on which the economy depends, whether it be in the generation of electricity, commuter transport, water provision, freight logistics or telecommunications. It was essential that SOEs were strengthened to ensure that the state could effectively enable economic and social development. Bolstering these entities would not only enhance their operational efficiency, but also ensure that they continue to meet the vital needs of the nation, driving sustainable economic growth and development.

SOEs have been experiencing operational, financial, and governance challenges. State capture, corruption, and other factors exacerbated the severe deterioration of their operational and financial situation. The findings of the State Capture Commission illustrated this phenomenon. The absence of a separation of roles between policy, oversight and regulatory functions increased the challenges. The President had appointed the Presidential SOE Council to advise on the reform, repositioning and revitalisation of SOEs.

Presidential Review Committee

The Presidential Review Committee (PRC) on SOEs was established to examine the role of SOEs in a developmental state. The following recommendations were made:

  • Government should adopt a portfolio management approach to SOEs, particularly in commercial entities and development finance institutions; and
  • A centralised ownership model for commercial entities and development finance institutions and a decentralised ownership/shareholder model for statutory and non-commercial entities should be adopted.

Further, the ownership model should apply to all spheres of government, considering constitutional requirements. It must be included in the SOE Act, and must clearly delineate the separate roles of government as owner, policy-maker, regulator and implementer.

State Capture Report recommendations

The following recommendations were made:

  • The need for sound and effective corporate governance of SOEs and ensuring an appropriate, robust, and transparent board appointment process was established.
  • Ensuring that persons appointed to boards must have the necessary competence, capacity, experience, integrity and reputation.
  • Establishment of a body which would be tasked with the identification, recruitment, and selection of members of the board; and
  • Compliant procurement processes be instituted and adhered to in accordance with section 217 of the Constitution.

Shareholder management models

There were different shareholder management models. Globally, countries have been making use of a centralised model. This was where ownership responsibilities were centralised in an entity that may be independent or may fall within government. Several countries have created company-type structures to oversee and manage their SOEs. In recent history, successful models have emerged from other jurisdictions such as Singapore, China and Malaysia.

South Africa currently had a decentralised model where ownership responsibilities were dispersed among different line ministries. This model was not in line with global best practice in terms of corporate governance, because it results in conflict between ownership, policy-making and regulatory functions, and it undermines ownership focus, consistency in approach and accountability.

Presidential State-Owned Enterprises Council (PSEC) recommendations

The PSEC was established to reform, reposition and revitalise SOEs. The PSEC had noted the critical developmental role of SOEs, and had recognised serious deficiencies in the South African model and functioning of SOEs, including the dependence on the fiscus. The following recommendations were made:

  • South Africa should adopt a centralised shareholder model for the management of the SOEs,
  • A state-owned holding company should be established to house strategic SOEs and to exercise coordinated shareholder oversight. This would promote separation of the state’s policy-making, regulatory and ownership functions; minimise potential conflicts of interest and the scope for political interference and inappropriate influence.
  • There would be greater coherence and consistency in the application of corporate governance standards across all SOEs; and
  • There should be greater transparency in, and accountability for, SOE operations by enabling uniform oversight and performance monitoring.

Summary of policy perspective behind the Bill

A centralised shareholder model includes the establishment of a holding company to be named the State Asset Management SOC Ltd (SAMSOC). SAMSOC would house the duly selected subsidiaries. It would be established in terms of the Bill and incorporated in terms of the Companies Act. SAMSOC would be 100% state-owned and tasked with providing coordinated oversight and monitoring of performance and the responsibilities attributed to all subsidiary companies.

SAMSOC would perform the role of an active shareholder for its subsidiaries to:

  • Promote political insulation, professionalisation and transparency of subsidiary SOC operations;
  • Promote profitability and sustainability of subsidiaries;
  • Rework subsidiary capital structures to ensure subsidiary and group sustainability;
  • Strive to ensure that the state was afforded an opportunity to receive dividends in terms of a dividend policy on the utilisation of subsidiary profits; and
  • Ensure that subsidiary SOCs contribute to the state’s developmental objectives in a sustainable manner.

Public comments

The Bill was published for public comments on 15 September 2023. There was a great deal of interest, with 3 590 submissions received. The bulk of the comments related to three main thematic areas with associated issues to be addressed.

1. The need for a clear state ownership strategy for SOCs

- Had a process been set in place to articulate the overarching strategic ownership approach for SAMSOC and its subsidiaries?

- What criteria would be used for the selection of SAMSOC subsidiaries?

- How would the phased succession of these subsidiaries into SAMSOC be catered for?

2. The need to harmonise the relevant legislative prescripts applicable to SAMSOC and its subsidiaries

- Should the Public Finance Management Act (PFMA) apply to SAMSOC?

- What measures had been set in place to ensure that there was no conflict between the Companies Act, the PFMA and SOC-specific legislation?

3. The need for transparent and appropriate governance and accountability mechanisms to be set in place for both SAMSOC and its subsidiaries to ensure political insulation, to support and promote professionalisation, integrity, efficiency and effectiveness of SAMSOC and its subsidiary operations

- Was it appropriate for the President to be a shareholder of SAMSOC?

- Was it appropriate that such unfettered powers were granted to the shareholder?

- Had sufficient integrity of process been created for director appointments?

- Had sufficient integrity of process been created for senior executive appointments?

- Had clear and transparent SAMSOC performance reporting requirements been included?

-Are there clear and transparent SAMSOC financial management controls over SAMSOC and its subsidiaries?

- Were there appropriate mechanisms and safeguards to ensure that SAMSOC subsidiary capital raising did not place a drain on the fiscus?

The presentation set out a detailed table on incorporating the comments in the Bill.

(Please see slides 13-18 of the presentation attached for further information)

Adv Makobe explained the contents of the Bill clause by clause, from clause 1 to clause 25.

Some of the main clauses were:

  • Clause 1, which dealt with the definition of words and terms used in the Bill;
  • Clause 2, which provided for the objects of the Bill, which were to enhance the operational efficiency of national commercial SOEs, establish a holding company incorporated in terms of the Companies Act, transfer the shareholding of state enterprises to the holding company, to ensure proper governance of the holding company and its subsidiaries, and to promote the commercial sustainability of the holding company and its subsidiaries;
  • Clauses 3-5, which provide that the President must develop a national strategy, the contents thereof and review process;
  • Clauses 6-7, which deal with the establishment of a holding company and the objective of the holding company that has to advise the President on several things, such as corporate finance matters;
  • Clause 8, which covers the shareholder's power and duties, which include promoting and supporting the functions of the holding company and appointing a director;
  • Clause 18, which deals with the transfer of property between subsidiaries, providing that there must be an agreement to do so;
  • Clause 20, which provides for the Presidential Advisory Committee, which must consist of three members of the national executive, one person appointed by organised business, one person appointed by organised labour, experts appointed by the President in respect of sectors in which the subsidiaries of the holding company and the national commercial SOEs operate, and a representative of the holding company appointed by the board.

(Please see the presentation attached for further information)

Discussion

Mr D Bergman (DA) appreciated the presentation because it was very inclusive. He said that the Committee should not skim past the 5 000 public comments received. It would be interesting to note how many of those submissions had been positive, how many negative, and the basic sentiments towards the desirability of the Bill from a public point of view. He had noted the themes of the sentiments that were mentioned. He understood the Bill was based on the recommendations of the Zondo Commission, and that it was trying to guard against a state capture version 2.0. The recommendations that came out were to establish a panel that would identify recruits and select board members for SOEs, including selecting the chief executive officer (CEO) and chief financial officer (CFO). It seemed that this recommendation had been adhered to.

He said mention was made about good governance, independence and fit for purpose. The Bill was not clear on this. How would the selection board stay independent if it was placing members of the executive on the board? It was not necessarily legislating for the youth of people who were trained or experts in the industry to sit on this selection panel.

There was another strong recommendation for oversight. The Zondo Commission had recommended that if it legislates in the future, or for Parliament to work correctly, there had to be oversight mechanisms that were strengthened. It had recommended that there be oversight of the Office of the Presidency. When it came to a Bill like this, one would hope that it would legislate oversight or at least give Parliament a role in terms of appointment, but it almost seemed as if Parliament was redundant in the Bill. He found this very concerning. The word ‘oversight’ came up a lot, but the powers were given to the Office of the Presidency and the President himself. How could this be called good governance when it was moving away from the PFMA? It was not necessarily just the holding company, but any SOE that would fall under the ambit of this holding company would move away from the PFMA and be under the Companies Act. He found this problematic, and suggested guarding against creating a precedent. In the past, legislation was often prepared in a time when it could not predict the realities that this country had faced before in the sense of state capture. It was now creating a precedent of moving away from the PFMA. This was something that clearly needed to be considered.

The presentation made mention of four stakeholder management models and the fact that South Africa followed a decentralised model. The Committee was losing a lot of relevance, because this Committee should be the one determining the model or looking at the four models in their entirety in a Zoom meeting, or oversight meeting. It needed to look at the four models as well as other successful models around the world, whether they were under governments or businesses. The Committee would then bring more relevance and the recognition it deserved, considering the importance of what it had to deliver in terms of planning, monitoring and evaluation. This would allow the Committee to have enough answers at its fingertips to do oversight and guard this process coherently. He reserved his comments for now on the powers of the board and the national strategy. If there had to be independence and public participation, legislation had to be clear on that objective.

Mr A Trollip (Action SA) said he aligned himself with the sentiments expressed by Mr Bergman around state capture and the recommendations of the Zondo Commission. The presenter had spoken about the Companies Act provisions that would apply if it was not in conflict. He asked for an explanation of this statement -- it was either the Companies Act applies, or it did not. He asked the presenter to speak to the last page of the presentation, because he had gone through it so quickly. He had some concerns about the composition of the selection panel, with it being too state-orientated and not making full use of the expertise in the private and public sectors.

The presenter had made a statement that SOEs that were capable of being transferred would be transferred to the national state enterprise. On what basis did "capable" mean? Was this on a sustainability basis? Was this a condition for transferring SOEs to this body? He noticed that the South African Post Office (SAPO) was on that list because it was bankrupt and dysfunctional. Was the South African Broadcasting Corporation (SABC) board also on that list? He had a concern about the composition of the board which would include the CEOs of public enterprises who were currently CEOs of other public companies. He did not have any problem with having people that had experience. However, CEOs serving on multiple boards have been problematic. The Committee had seen some of these cases. It was ridiculous, because it was impossible for these people to have any real positive input, other than queuing up for their remuneration. What was the role of Parliament regarding oversight and accountability of this board and the SOEs it would manage? This would ultimately determine the success or failure of this planned initiative, if there was no proper consequence management, oversight, and accountability.

He also mentioned Mr Bergman's concern about moving away from the PFMA. He asked for clarity on this matter. There could not be any SOEs that were not part of the PFMA.

Mr S Gama (MK) said that the Committee needed an offline meeting to get together as a study group to deal with these issues. There were too many issues, like the Presidential Advisory Council, which conducts oversight but does not have a statutory position. There were just too many issues that needed to be dealt with, and the adverts for 8 November should not be rushed. He agreed with the observations that Mr Bergman had made.

Ms K Christie (DA) said that she agreed with both Mr Bergman and Mr Gama. There were too many issues with this Bill. The Committee could not just push this Bill ahead. This Committee must conduct a clause-by-clause analysis. The Bill did have a very noble objective, to prevent the excessive politicisation of the boards and the appointment of senior management of SOEs. However, this Bill was not a good idea because it was going in the opposite direction. The proposed Bill was there to centralise control of the shares of 13 SOEs. In this Bill, there were 120 national SOEs which could also be moved under the holding company. It would be centralising control of the shares in the hands of three to nine directors, who would also have the power to transfer property between the SOEs without parliamentary oversight. The Bill said that it was going to remove these SOEs from most of the provisions of the PFMA. This was highly risky, given the history of state capture. What if the SAMSOC board comprised of three to nine directors and these three/nine directors were corrupt and crooked, and they had all these powers? What if these directors were all friends of a future corrupt President, or it was surrounded by corrupt politicians? What if the President ignores or overrides the recommendations of the selection panel and puts his friends in to serve his interests? Mr Bergman also mentioned the ground zero for state capture. Some SOEs borrowed money without consulting Parliament, and then approached Parliament for bailouts of up to R300 billion in the Sixth Administration.

A centralised holding company dominated by possibly dubious directors was a recipe for state capture. The Bill was modelled on systems adopted in centralised controlling and undemocratic countries elsewhere in the world, in Singapore and China. However, South Africa was not as brutal in its democracy at enforcing compliance. There was a lack of consequence management in South Africa for SOE directors and CEOs. This centralised model of giving a few people control over the shares and properties of SOEs would allow these people to get away with murder.

There had been many suggestions and submissions made at the Zondo Commission, including looking at successful models in the more democratic Organisation for Economic Cooperation and Development (OECD) and the Southern African Development Community (SADC) countries, with which the South African constitution and democracy were more much more closely aligned.

She was concerned about the SAPO amendments that were hidden in this Bill. It was very far-reaching and, for instance, compelled all levels of government to use their services only. She said that surely the Minister of Communications and Digital Technologies and his Portfolio Committee should be consulted on this. These clauses should be separate, and not form part of this Bill. Page 11 of the Bill sets out 13 SOEs and the ministries under which they fall, such as communications, energy, and transport. These were services that were vital for service delivery, and the well-being of South Africans, businesses, mines and farms. There would be implications for employment and the growth of the economy.

She spoke about performance management standards and goals. There was a way to secure the appointment of directors without political interference. There had to be a free, fair, and transparent process that provided a framework to assess director suitability. It was this conflict of interest and political interference of business and financial interests of politicians that had been taking the SOEs down. She suggested that the decentralised model and reporting to line departments be kept, but it must be ensured that the directors who were appointed were honest, competent, experienced and qualified. Highly qualified organisations recommended changes that would transform governance and management. For example, the Dullah Omar Institute at the University of the Western Cape did extensive research on SOEs.

The Bill needed to set out a clear, open, and transparent process for all competent South Africans to apply to be directors of SOEs. The President and Ministers would then be able to select directors from a pool of verified candidates whose qualifications, integrity, competence and experience had been pre-checked. There had been independent panel interviews that showed that many directors were friends of politicians. There was a lot of corruption in SOEs. One director served on 16 boards and earned a salary for each position. There was no doubt that the director was not able to maintain oversight of these SOEs. She said opening up the opportunity for South Africans to serve on SOE boards would allow the Bill to set out a transparent verification process to create a pool of available directors, in line with best practices internationally and the more democratic OECD and SADC nations on which the South African Constitution was more closely aligned. This could be the solution for protecting the SOEs from political interference, state capture, looting, thieving, and plundering by easily tempted board directors lacking integrity. In its current form, this Bill would take the country down further, and the Government of National Unity could not afford that.

Ms M Aphiri (ANC) said that the report presented to the Committee should be appreciated. She identified some gaps that should have been included in the presentation, but had not been. For instance, the linkage of the holding company with the sovereign wealth fund was critical. This was not included in the presentation or the Bill. The Bill also did not include a provision for the establishment of new SOEs, which was critical considering the shift in the means of production and changes in the economic composition of the economy. The Bill did not include the definition of state-owned assets to include various income-generating assets, such as shareholders in sole publicly-owned ownership of critical sectors, sectoral participation and strategy. The Bill also did not include the development of a linkage with the establishment of a sovereign wealth fund to direct the strategic orientation of the holding company. These were some of the gaps that were critical, and must be included in the Bill.

The Chairperson asked if anyone from the Parliamentary Legal Services wanted to say something. She noticed Mr Bergman had his hand up, and asked him to speak.

Mr Bergman said that in line with what Mr Gama had said about a study group, the Committee should have sight of what the PSEC had deliberated over. What was the PSEC's position regarding the Bill?

The Chairperson said she was confused about the study group suggestions by Mr Gama and Mr Bergman. The political parties usually had their own study groups as individual parties. Was the suggestion that there should be a study group of all political parties to discuss the Bill outside of this platform?

Mr Bergman indicated a thumbs-up emoji that suggested yes.

Parliamentary Legal Services' comments

Adv Aadielah Arnold, Parliamentary Legal Advisor, said that the purpose of the meeting was to get a briefing from the DPME on the Bill. There was also now a discussion around a study group. On the agenda was also the consideration of the motion of desirability for the Bill. In terms of Rule 286(6)(b) of the National Assembly Rules, the purpose of the motion of desirability was to determine whether the principle of the Bill was accepted, and whether there was a need for the Bill. If there was a need for the Bill, there had to be some discussion. If there was going to be a discussion offline, the Committee had to decide whether it was going to deal with the motion of desirability now, or postpone it to a later time. If the motion of desirability was dealt with now, the Committee would have to adopt a report on the decisions related to that motion of desirability.

DPME's response

Deputy Minister Mohai appreciated the fact that all Members of the Committee had underscored the significance of the restructuring that was proposed. This was needed to deal with the current challenges the SOEs faced. The DPME wanted to ensure the SOEs were properly positioned to respond to the country's challenges. The presentation looked into models across countries. It was not the DPME’s view that the Asian tigers were not providing better models in terms of transforming economies. There was evidence globally in terms of their contributions. No one was arguing against the fair implementation of the recommendations arising from the Zondo Commission. This was the starting position. Reviews and research have been conducted on how the country should be positioned. This would be very interesting in terms of moving forward. Members were right when they argued about what the role of Parliament would be. This was not a once-off event. This was a process, and there would be a deliberation of these issues to ensure that a much stronger Bill was produced. The gaps that Ms Aphiri had mentioned were matters that should also be considered as the process moved forward. He said that the DPME would always be available to take part in the process as it unfolds.

Ms Molisane said the public comments that had been received were mainly positive. The body of knowledge and empirical evidence showed that this was where it needed to go. In terms of global best practice and international best practice, this was the model. Many economies had adopted a centralised model, and this was evidenced by the performance not only of their SOEs, but also their underlying economies. This Bill had taken lessons pre- and post-Zondo to ensure that it would prevent state capture version 2.0. The DPME was advocating that the whole process be insulated and protected from political interference. When board members are appointed, it should be based on competence, experience, merit, and nothing else. In terms of fit for purpose, the DPME looked at other countries that had adopted the model, not only Asian economies. They had included the OECD countries to ensure that governance and oversight were done in terms of what was required to ensure that SOEs were fit for purpose, repositioned, revitalised and were a catalyst for economic growth. The appointment of the boards would be based on competence, and would draw not only from the public sector, but the private sector as well. The competitive process would be done in a transparent manner to secure the best of the best.

The DPME had realised that the time for experimentation was over, and would ensure that the Bill puts the right building blocks forward for the right trajectory. There would be a transparent process for accountability and oversight. The origin of the PFMA was from 1994, and hence there was a review of the PFMA. There were many commercial entities, and flexibility and agility were needed to operate in a competitive space where decisions needed to be made timeously. The Bill incorporated the best practices globally and home-grown.

The composition of the panel would be getting the best of the best -- it would not compromise on capability, track record, experience or competence. It would also look not only at the public sector but also at the private sector. The whole idea was that there would be a competitive process. There would be people with the necessary expertise from both the public and private space. There would be a fair and transparent process to ensure that there was the necessary expertise from all members of society. She agreed with the comment of including the sovereign wealth fund and it was going to be a precursor of what would be needed. This was something that would follow in terms of the operationalisation of this Bill.

There would be accountability and consequence management in this Bill, as alluded to by the Zondo Commission. The DPME had already started to do the work to ensure those people who were not acting in the public interest were held accountable. The DPME was ensuring that it was incorporating some of the best lessons, and declaring some of the directors delinquent. Some directors had been stripped of their qualifications due to their conduct not being up to speed. The country needed to embrace international best practices to ensure that there was accountability standardisation. This was the reason a centralised holding company was being proposed, so that when SOEs were measured, it was coordinated and standardised, and not different to other departments. When it was centralised, there was a much more coherent and visible way of assessing the SOEs in a very objective manner, like-for-like. This would assist with repositioning and revitalising many of the SOEs. Given the body of information by the PSEC and the Presidential Review Commission (PRC), this was indeed a game changer, as it was needed to ensure that South Africa’s economy was on a positive trajectory.

Adv Mokabe said that the President would appoint the board members. This was one of the recommendations set out in the State Capture Commission report, where it said that a panel should be set up. The majority of the members would be those who were not part of the executive team. A national strategy would be developed and would be tabled in Parliament. There was a requirement in the legislation that the shareholder must table a report on the commercial sustainability of the SOEs, including developmental objectives, annual reports, and financial statements. All of this would be tabled in Parliament, along with the subsidiaries. The Minister and the holding company could be called at any time to account. Accountability mechanisms had been included in the Bill.

There was a legal hierarchy of legislation. Sometimes, a decision has to be made as to which legislation precedes the other during conflict. This Bill was specific to SOEs, while the Companies Act was not. Clause 22 states that if there was a conflict between the PFMA and this Bill on issues of borrowing, accountability or reporting, the PFMA would supersede the Bill. Over the years, there have been complaints from SOEs about the PFMA because they were not able to be as commercially agile as they were supposed to be. These SOEs were not able to make decisions on time, especially those in the commercial environment. If these SOEs were supposed to be commercially sustainable and compete in the market, an enabling environment had to be created, but at the same time, there should be the necessary checks and balances to ensure accountability. There were a lot of accountability provisions in the legislation.

If one looked at the OECD countries, these countries were centralising and ensuring that the necessary checks and balances were in legislation to ensure that there was no centralisation of power and to ensure that there was no state capture version 2.0. The world was moving towards centralisation, and the DPME thought that this was the best model for South Africa. The sovereign wealth fund was used in Singapore, and was working well. In Temasek (Singapore), it had not been legislated but they were establishing it. There was nothing in this Bill or any other legislation in the country that prevented the establishment of the sovereign wealth fund.

Follow-up discussion

Ms Christie noted that the recording had stopped during the meeting. She asked in the chatbox whether the Committee Secretary would note the discussion that took place during the time that the recording had stopped.

The Chairperson thanked the DPME for the responses. She assured Ms Christie that all the proceedings were recorded, and there was also a YouTube link.

Mr Trollip asked what the conditions were for establishing whether a company was capable of being transferred. He said the SAPO was on the list because it was bankrupt. He did not see the SABC on the list. He hoped the DPME would speak about these two entities. He had wanted to serve on this Committee because of the idea of SOEs being put into one department so that there could be oversight, or so he could contribute to the prevention of state capture version 2.0. However, there had been statements made about SOEs being accountable to the line departments. Were SOEs going to have to report to one portfolio or department, or directly to their line function department?

Mr Gama said nothing prevented the Committee from having a study group on this Bill. He suggested that this was something that the Committee should definitely try to do. Some issues should be dealt with, even if they were just on what had been termed as the objectives of the Bill. More time was needed to look into the details of these issues, such as the developmental state and the sovereign wealth fund. The Committee needed to get into more details because it was the Committee that would need to make the laws and legislation. The DPME had given their inputs, but the Committee needed to get some more detail. The DPME could continue to advise the Committee on certain things. This was not something that could be done in a two- or three-hour session. If the Chairperson agreed, he suggested a study group for this Committee.

The Chairperson asked the DPME to respond to the question raised by Mr Trollip.

Ms Molisane said that the selection criteria for getting SOEs into the holding company would be based on financial viability, national importance, and growth potential. Mr Gma had mentioned SAPO and the SABC. However, before these entities could migrate into the holding company, they would have to undergo a due diligence process needed to ensure that they meet the necessary financial matrices for them to be eligible to be part of the holding company. The whole idea of having these entities was for them to be able to stand on their own feet, based on financial viability and sustainability. This was one of the best practices that the DPME had seen on the study tours that had been undertaken. This was based on the evidence gathered from the different jurisdictions across the world. The list was not exhaustive, but those entities that were not there would most likely reside in the respective line functions. It was only those entities that met the selection criteria that would be eligible to go into the holding company. This would ensure a much more coordinated, standardised, and very stringent way of holding entities to be fit for purpose, and not become a drain on the fiscus.

The Chairperson agreed with Mr Gama about making laws and legislation. The motion of desirability was typically passed after the public comments and submissions, and right before the Committee’s deliberations. This was where the Committee would discuss the principle of the legislation. The Committee had agreed to do its work until the comments had been consolidated, and thereafter the motion of desirability would be discussed.

Mr Bergman asked for clarity on the public participation process that had already taken place, and Rule 286 that Adv Arnold had mentioned. What was the process, since there had already been 5 000 responses?

The Chairperson asked that Adv Arnold assist with the matter around the 5 000 responses, and to comment on the processes. She understood that the prior public participation process had taken place at an executive level.

Adv Arnold said that the DPME had referred to those comments that took place prior to the introduction of the Bill. Section 59 of the Constitution provided for public participation in Parliament. Rule 286(6)(b) of the National Assembly Rules did provide for an invitation for further participation. The courts had explicitly expressed the view that the level of engagement depended on various factors. There had to be sufficient public participation, the participation had to be reasonable, and people should have the ability or capacity to take advantage of the opportunities for public participation. The prior public participation was separate from the round as mandated by section 59 of the Constitution.

One of the factors that needed to be considered was the nature and importance of the legislation. It had been established that the nature of the legislation was of great importance. The recent court judgment of Mogale and Others v Speaker of the National Assembly and Others 2023 (9) BCLR 1099 (CC) had touched to a great extent on public participation. It needed to look at what was reasonable, the public participation model, framework, facilitation of pre-hearing workshops, summaries of the legislation, that invitations for public hearings must be set timeously, and that the public hearings must be accessible to the public.

The motion of desirability did appear immediately after the informal discussion. Nothing precluded the Committee from first inviting public participation and thereafter holding the motion of desirability. There was no specific rule which stated that the motion of desirability must occur after this briefing. The motion of desirability could take place after the public participation process.

The Chairperson thanked Adv Arnold for the response. There were no further questions. She asked the team of the AGSA to start with the presentation on the audit outcomes for the 2023/24 financial year of the DPME, the DPE, Brand SA and Stats SA.

Audit outcomes for the DPME, DPE, Brand SA and Stats SA

Ms Nompakamo Matanzima, Business Unit Leader: Finance Portfolio, AGSA, said the DPME was one of the key portfolios that were important in this country. It dealt with the monitoring, planning, and evaluating government priorities such as the long-term plan, which was the NDP. This seeks to address the challenges that the country currently faces. The production of statistics, which was Statistics SA, was also important. The presentation would include the Department of Public Enterprises (DPE), although it had been dissolved. She said that due to accountability processes, the AGSA had to report on the 2023/24 financial year audit outcomes for the DPE.

The AGSA had embarked on its strategic plan which was aligned with the NDP 2030. The focus was more on the lived experiences of South African citizens. The AGSA wanted to use this strategy to see a shift in the public sector culture that was being characterised by the culture of performance, accountability, transparency and institutional integrity. The presentation would reflect on the performance and achievements of the medium-term strategic framework (MTSF) targets and annual performance targets.

Mr Siphesihle Mlangeni, Senior Audit Manager, AGSA, took the Committee through the presentation.

2022/23 recommendations

The following recommendations were still in progress:

  • Monitoring the implementation of the SOEs reforms;
  • Monitoring progress on audit actions plans/turnaround plans;
  • Monitoring vacancies to ensure stability of leadership and align restructuring with turnaround plans to ensure that institutions achieve their mandates; and
  • Monitoring the development and implementation of bailout conditions to ensure alignment with the turnaround plans.

The recommendation to follow up with entities that incurred irregular expenditures and fruitless and wasteful expenditures to ensure there was consequence management had not been implemented.

Audit outcomes over the administrative term

The overall audit outcome for the portfolio had remained stagnant.

Brand SA had sustained a clean audit outcome (financially unqualified with no findings). AGSA commended the accounting authority and management of Brand SA for sustaining a clean audit. This was due to the sound financial and performance management discipline and preventative controls in place.

The DPME had regressed from a clean audit outcome to financially unqualified, with a material finding on expenditure management related to failure to prevent irregular expenditure.

The audit outcome for DPE remained unchanged as financially unqualified, with findings on performance information and compliance with legislation in the areas of procurement and contract management, annual financial statements and expenditure management, due to its failure to prevent irregular expenditure. The annual financial statements of DPE had contained material misstatements related to cash flow statements (investments), and impairments of investments and guarantees (Eskom) primarily due to inaccuracies in the underlying information. These misstatements had been subsequently corrected, resulting in DPE receiving an unqualified opinion.

Statistics SA’s audit outcome had remained unchanged as financially unqualified, with findings on performance information where a material inconsistency between an indicator and its set target was identified. Furthermore, material findings on consequence management and expenditure management were reported at Statistics SA.

Key root causes for stagnation in audit outcomes

  • Slow response by management to address deficiencies and findings from previous years;
  • Inadequate review of the performance reporting documents (annual performance report) to ensure consistency between planned and achieved targets (DPME);
  • Inadequate review of the annual performance plan to ensure that it includes all relevant indicators and targets, and that indicators and targets were useful (Statistics SA and DPE); and
  • Vacancies in key positions weakening the control environment (Statistics SA).

Best practices for sustaining a clean audit at Brand SA:

  • Sound financial and performance management discipline, which was continuously monitored and enforced; and
  • The use of internal audits for quarterly reviews of performance information and financial reports, and implementation of their recommendations.

Strategic focus areas

All the Ministers completed their performance agreements during the 2023/24 financial year. In the current year, several specific focus areas were prioritised with the DPME’s role as a coordinating institution. The DPME, in collaboration with other departments, monitored progress towards service delivery programmes and encouraged accountability, which would assist in improved service delivery and overall improved quality of life for South Africans. The DPME’s planning and monitoring activities had been largely effective, and some best practice recommendations had been expanded on in the coordinating ministries section.

Quality of financial reporting

Statistics SA had an overdraft of R1.12 billion, and had also incurred unauthorised expenditure amounting to R128 million due to overspending on programmes one, three and six. The operational budget overspending was mainly from leased vehicles and fleet services used for the income and expenditure survey, the census 2022 post-remuneration survey, and dissemination-related expenditure attributable to budget cuts implemented because of the fiscal challenges.

Sound internal control environments were maintained, leading to continued unmodified outcomes for Brand SA, Statistics SA, and DPME in terms of the quality of financial statements submitted for auditing.

 Material misstatements identified had resulted in material non-compliance at DPE. Over-reliance on the audit process to identify errors in the financial statements could compromise the quality of in-year decision-making by management and those charged with governance and oversight (DPE).

Performance planning and reporting's impact on service delivery

Insofar as the DPE was concerned, reporting on performance was not credible and some indicators and targets were not relevant. This had not been corrected. The DPE did not have an indicator relating to the Department’s mandate and core functions to be tracked and reported on. There was also an inadequate review of the annual performance plans to ensure that they included all the appropriate indicators and targets. The response to rectifying the recommended changes had been slow.

The DPME had inconsistencies between the planned and reported targets, which were subsequently corrected. There were inadequate reviews of the performance reporting process.

Stats SA's set target did not relate directly to the indicator, which was not corrected. It had an inadequate review of the strategic planning documents to ensure that the performance management system and related controls were adequate and effectively described how the performance planning, monitoring, measurement, review, reporting and improvement processes were conducted and managed.

Performance against targets

The DPME had achieved 91% of its targets, whereas the DPE achieved only 54% of its targets. Brand SA achieved 94% of its targets, and Statistics SA achieved 90% of its targets. The non-achievements of the DPME were related to several progress reports addressing network infrastructure challenges that were actually produced in the 2022/23 financial year, earlier than targeted. The DPE did not achieve some targets relating to the Transnet roadmap not being finalised, and the memorandum of incorporation for the National Ports Authority not being finalised. Brand SA did not achieve the eight domestic perception research studies due to procurement delays because of organisational constraints. The non-achievement for Statistics SA related to not achieving a report on life circumstances, poverty and inequality, a report on the South African Multidimensional Poverty Index, and reports on documented immigrants. This was due to human resource constraints, scope changes and dependency on external stakeholders for data, respectively.

Compliance with key legislation

There were no material findings for Brand SA in the 2023/24 financial year, but there were material findings for the DPME, the DPE and Statistics SA. The DPE’s non-compliance is related to procurement, contract management, and the quality of financial statements. The DPME, DPE and Statistics SA also had non-compliance related to preventing irregular, unauthorised, and fruitless and wasteful expenditure. Statistics SA also had non-compliance with effecting consequence management.

Consequence management

The closing balance for irregular expenditure continued to increase from R154m in the 2019/20 financial year, to R942m in the 2023/24 financial year. The top contributor to irregular expenditure not dealt with constituted R840.8m (89%) of the R942m. The irregular expenditure was R840.8m for Statistic SA; R46.4m for the DPE; R31m for Brand SA, and R23.6m for the DPME. The reasons for the irregular expenditure not being dealt with were due to investigations and awaiting condonement (DPME, DPE, Brand SA); the investigation was still in progress (Stats SA: R515.1m for old cases that were taking long to finalise due to vacancies the department); and not yet investigated (DPE: R4.35m and Stats SA: R325.7m).

The closing balance for fruitless and wasteful expenditure continued to increase, from R14.1m in the 2019/20 financial year to R14.3m in the 2023/24 financial year. The top contributor to fruitless and wasteful expenditure not dealt with constituted R14.1m (99%) of the R14.3m. The reasons for fruitless and wasteful expenditure not being dealt with were due to investigations still in progress (Brand SA: R179 000, DPE: R23 000; DPME: R20 000; Stats SA: R4.4m), and some not yet being investigated (Stats SA: R9.7m).

Governance and stability

Brand SA did not have a board from November 2022 until March 2024. This resulted in a governance vacuum, as the acting CEO had assumed the role of accounting authority. The absence of the board had resulted in delays in filling key vacant positions, such as the CEO and CFO, which had been occupied by acting incumbents for more than two years. Notwithstanding this instability, AGSA commended the entity for sustaining a clean audit outcome. The AGSA also commended the executive authority for appointing a fully constituted board of trustees.

Statistics SA had key positions that were vacant during the 2023/24 financial year, which necessitated acting appointments in those positions. Two deputy director-general (DDG) positions and the chief financial officer position were vacant as of 31 March 2024. The position of DDG: Corporate Services, had been vacant for six years, while the position of CFO had been vacant for more than two years. AGSA had recommended that the accounting officer maintain ongoing discussions with the National Treasury to explore potential funding solutions for the Department.

The DPME did not have an audit committee for eight months (1 August 2023 to 31 March 2024) in the 2023/24 financial year due to delays in the process of recruiting new members.

(Please see the presentation attached for further information)

Discussion

The Chairperson said that these were the audit outcomes of the DPE, DPME, Brand SA and Stats SA. The AGSA had pointed out key findings and recommendations. She asked if Members had any questions or comments.

Mr Bergman said that he was going to beat the same drum and stated that many of the issues that had come from this excellent, open, and honest presentation stemmed from a lack of oversight. Many meetings were taking place online, or were sometimes moved at the last minute, which was no fault of anyone here. He suggested that this Committee be recognised for the fact that it had to do oversight, and that during a week of oversight, it should not be staying at home when there was a lot of work to be done. The Committee had to find an appropriate day in the week to do this, and meetings should not be cancelled at the last minute. There were mini-plenaries on Fridays, which rendered the Committee useless because Members had to be in online meetings, and then lend an ear to two different meetings. He asked the Chairperson to speak to the Chair of Chairs to try and accommodate the Committee on a day to have meetings where it would not be disrupted, that were physical and more regular, and allowed for oversight.

If one looks at the Announcements, Tablings and Committees (ATC), it seems as if all the SOE's financial statements were going to be late and delayed, and this was acceptable for this year. South African Airways' (SAA's) financial statements had been delayed since 2020 -- there was a constant issue with their financial statements. Trying to get this information was like pulling teeth from a hen. No one seemed to have these specific documents from 2020. Statistics SA had fruitless and wasteful expenditure of R14.1m. Someone had to take accountability for that. The fact that R230 000 had been identified for travel cancellations seemed to be disrespectful of time allocation and diaries. What had specifically led to the R840.8m in irregular expenditure not being dealt with? What were the main areas that had led to the fruitless and wasteful expenditure of R14.1m at Stats SA? If there was a material finding on the information given for the performance reports, should a concern over the accuracy of some of the reports be raised?

Mr Gama echoed Mr Bergman's sentiments that there needed to be some kind of stability regarding the Committee’s work. He recognised that it was not the fault of the Chairperson that things were falling through the cracks. He hoped that there would be some rhythm when meetings moved to either a Tuesday or Wednesday going forward. Brand SA did not have a board from November 2022 to March 2024. There were key vacant positions at Statistics SA -- two DDG positions and the CFO position were vacant as of 31 March 2024. The position for DDG: Corporate Services had been vacant for six years. This position was either required or not.

He noted that it was mentioned during the presentation that many people were being poached by other countries. He implored the executive authority responsible for these issues to help the Committee to deal with them. Consequence management was a huge concern. There was R840.8m worth of investigations that needed to be concluded. Some of these investigations had started long ago, but no progress had been made. What measures were being taken by Statistics SA to rectify this situation?

He noted the reports on the board appointments of SOEs such as Transnet and Eskom. There was a narrative called state capture that took place, and the departments were dealing with those issues. After the proclamation of the state capture investigation, the performance of those institutions had worsened. Was this because of a deeper state capture that was currently taking place? It had always been maintained that if people were stealing, if thieves were putting their hands in the cookie jar, law enforcement had to deal with them. The AGSA could also assist with this by pinpointing who had done what.

The DPE would be sharpening their pens when it looked at the board appointments at Transnet and Eskom. It would appear from this report that it was a case of the pot calling the kettle black, or talking from both sides of the mouth. The vetting process for appointing board members should be clear, and the performance of the SOEs should monitored. There was a lack of forecasts on appointing appropriate people. Such strong allegations were made in the Sixth Administration of Parliament when mandates were not being met. The DPE itself had achieved only 54% of their key performance indicators. A lot of governance issues seemed to have fallen into this trap. What was going to happen going forward to ensure that these issues were dealt with? The DPE was relatively small and should not have had these kinds of issues. The appropriate personnel with the necessary skills should be appointed to the board. These people should be vetted prior to the appointment. Why had the performance gone down, despite the people identified in the state capture being removed? What had been done? Was it worse than one thinks it is?

Ms A Kumbaca (ANC) appreciated that the deficiencies and factors that hindered the progress in various departments had been identified. She recommended that all the departments present to the Committee. Audit action plans with realistic timeframes, including turnaround plans, should be presented to the Committee. The Committee should monitor these reports during oversight to ensure that there is progress and that departments and entities are moving in the right direction.

AGSA's response

Ms Matanzima thanked the Members of the Committee for their questions and comments. She said that the fruitless and wasteful expenditure of R14.1m from Statistics SA was the amount that had accumulated over the years. The main reason for this was due to travel cancellations, as well as the changing of flights. The current amount for the cancellation/changing of flights was R230 000. The amount had accumulated throughout the years. The current irregular expenditure for Statistics SA has now accumulated to R804.8m. Slide 19 shows how irregular expenditure increased from 2019/20 to the 2023/24 financial year. The main reasons were non-compliance with supply chain management prescripts, procurement without obtaining the minimum required quotations, and payments made to suppliers with non-compliance tax status. The main reason for the accumulation of the amount was related to non-compliance with the laws.

She noted the comments made by Mr Gama around the critical vacancies at Statistics SA, which includes the CFO position. There had been discussions with National Treasury to ensure that these vacancies could be filled. National Treasury had agreed to fill seven critical vacancies, including the CFO. It was waiting on the executive authority to make those appointments. A lot of vacancies had caused capacity constraints from a consequence management perspective.

It would be appropriate for the DPME to respond to why some of the vetting processes for appointing board members had not been followed. She agreed with Ms Kumbaca's sentiments. After the AGSA report, departments and entities were expected to have a root cause-based action plan that addresses the audit findings, and this must include timelines. The AGSA also reviews these action plans to ensure they respond to the root causes and the AGSA findings. It was really important the recommendations were also there. She echoed the same sentiments regarding the Committee's monitoring of the action plans.

Ms Madidimalo Singo, Business Unit Leader, AGSA, said that one of the critical comments Mr Bergman made was about the importance of oversight, and the AGSA could not agree more. The role of both the DPME and the DPE was to ensure a capable state and to improve the lived experiences/realities of the people.

The SAA financial statements had been delayed, which had impacted the concept of accountability. If financial statement submissions were delayed, it meant that the AGSA would not be able to executive its responsibility in terms of auditing those specific entities and ensuring that Parliament holds these institutions to account. She advocated that there must be some level of consequence management related to the delayed submission of financial statements to ensure that entities could be held to account. This was something that would come from the Committee to take forward, to ensure that financial statements were finalised and submitted. There must be a level of accountability among the various institutions. The AGSA had completed the audit for SAA from 2018 up until 2022, and those financial statements should be available to the Committee. If not, they could be obtained from the auditing authorities of those institutions. The AGSA was busy with the 2023 audit report, which should be completed by the end of October. As soon as the report was tabled in Parliament, oversight structures would be available to interrogate and hold institutions accountable. The outstanding 2024 financial statements were something that the AGSA was continuously engaging with, to ensure that the audit process was analysed.

The AGSA was aligned with the comments from Mr Gama related to accountability, oversight and governance regarding the appointment of board members. For those areas, there needed to be a formalised process, frameworks, and policies for the appointment of board members. As the Committee takes this forward, it should engage with the different departments for a commitment to put these frameworks in place. It was important to be compliant with the framework, because it allowed those who were charged with the responsibility of oversight and holding departments and their entities accountable to ask critical questions, such as why they did not adhere to the frameworks. When a framework was put together with the Department of Public Service and Administration (DPSA), it did not look only at the frameworks not being adhered to, but also at what other consequence management needed to be in place.

Ms Kumari Naicker, Deputy Business Unit Leader, AGSA, said that on slide 19, the information regarding irregular expenditure for Statistics SA was set out. For the 2021/22 and 2022/23 financial year, the amount accounted for over 50% of the R840.8m irregular expenditure. This was mainly related to the census-related project. It was noticed that when these big projects were being conducted, there was a spike in terms of irregular expenditure. There were also procurement processes that were not entirely adhered to, which resulted in non-compliance. The responsibility and the oversight of the procurement-related processes relate to the role and function of the chief financial officer. This position had been vacant for some time, and had had an impact on the veracity of that oversight process.

The Chairperson thanked the AGSA for the presentation and responses. The Committee would be interacting with the DPME and its entities in the next meeting to get some of the key findings from this report, and the recommendations by this Committee and the AGSA. The Committee would raise some questions with the DPME and its entities.

Members had raised concerns about meetings taking place on Fridays. This was the day given to the Committee by the House Chair and the National Assembly because of different responsibilities. She said that an effort would be made to try and change the Friday meetings to Wednesday.

Advertisement for public comment on the Bill

The Chairperson asked Mr Rodney Mnisi, Committee Content Advisor, to go through the advertisement for public comments on the National State Enterprises Bill. She also asked him to clarify some of the issues regarding the motion of desirability and the way forward.

Mr Mnisi went through the advertisement, which indicated that written submissions should be emailed no later than 1 November, and that organisations and individuals should indicate their interest in oral submissions.

Mr Bergman said that there had been a recommendation that the Committee should hold the study group first, and then the Committee would look at the advertisement for public comments. This was what he had heard, and thought that the topic was closed.

Mr Gama echoed Mr Bergman's sentiments. The initial advertisement had indicated 8 November, and it had now moved forward to 1 November. He said he was not sure why it had been changed. Had the 5 000 responses that the DPME received on the Bill been factored into this draft of the Bill? Was it going to add another 5 000 responses without incorporating the 5 000 ones already received? The motion of desirability would be dealt with at a later stage. It would be good for the Committee to do what it needed to do. Deputy Minister Mohai had already indicated that there ought to be some kind of study group for the Committee to deal with this. He hoped that the Committee as legislators would give itself enough time to do this. Many conundrums and idiosyncrasies needed to be ironed out before public comments could be received, such as the type of models and whether or not a holding company would assist in driving the developmental nature of SOEs, including the sovereign wealth fund. There were a lot of issues, and it would be good if they were dealt with in the next week before the advertisement for public comment was published.

The Chairperson said that the advertisement that was received had initially said 8 November, and she was not sure why this draft said 1 November. The DMPE had responded to the question regarding the 5 000 responses received at the executive level. However, before the advertisement was published, the Committee would have a consultation and discussion offline regarding the Bill.

Adv Arnold said nothing was stopping the Committee from having a study group -- an offline discussion around the Bill. The Committee could decide to have the study group first and then publish the advertisement. The processes could also run concurrently, but the Committee could make the decision because there was no rule stopping the Committee from doing so.

A DPME official said the Department had never received 5 000 comments on the Bill. The correct amount was 3 590, and this had been covered in the presentation. The presentation had set out the thematic themes incorporated into the Bill. For example, the national strategy was not in the Bill, and this was one of the public comments that had been included. The Committee could check the presentation for information on this. However, the public comments had been incorporated into the Bill.

Mr Mnisi said that from Parliament’s side, there must be a public participation process when processing legislation. The Committee should interact with the public in line with legislative development to enhance the work that needs to be done. There would have to be a public participation process to ensure that the process of the Bill was aligned.

The Chairperson said that there were no issues with the advertisement. The Committee would have a study group first to further discuss issues from the Bill, and take each other into confidence. The advertisement would go out immediately after the Committee’s consultation. She thanked the Members, DPME and the AGSA for participating in this meeting.

The meeting was adjourned.

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