Department of Public Enterprises 2023/24 Annual Report; National State Enterprises Bill: briefing & discussion; with Ministry

Meeting report

Introductory remarks

The Chairperson welcomed all Members, the Minister, the Deputy Minister, and their team. She noted apologies from Mr I Subrathie (ANC) and Mr N Buthelezi (IFP). Ms M Aphiri (ANC) moved the adoption of the agenda, and was seconded by Ms A Kumbaca (ANC).

The Chairperson said that the purpose of the meeting was to receive the presentation of the 2023/24 annual report of the former Department of Public Enterprises (DPE). Parliament had already appropriated a budget for the Department in the last financial year, and it was Parliament’s responsibility to scrutinise the report in line with the Auditor-General's (AG's) report. She acknowledged that the AG had presented a report to the Portfolio Committee. She mentioned issues raised in the report, including key observations and recommendations concerning the former DPE.

The second item on the agenda was the presentation of the National State Enterprise Bill, which had been introduced to the Committee and referred by the Speaker on 2 August. It was formally introduced by the Minister and their team on 14 August. She said that Members had raised concerns and issues, and the Portfolio Committee had emailed these concerns to the Minister and the Department to ensure they were addressed in preparation for the meeting. She highlighted the Portfolio Committee’s decision on 11 October, which was to convene a workshop as part of scrutinising the Bill to gain more clarity on its clauses and related legislation.

She emphasised to the Minister the importance of addressing certain issues raised by the Committee, including the public participation process conducted by the Department. She requested that this be covered during the clause-by-clause presentation. She mentioned that the report highlighted issues concerning public participation, the composition and independence of the selection panel, the recognition of Parliament’s role as the ultimate oversight body in the legislation, the application of the Companies Act and the Public Finance Management Act (PFMA), and the shareholder management model. She acknowledged that multiple models were presented in the report, noting the adoption of the centralised model, and asked the Minister to elaborate on this during the presentation. She also raised the criteria for transferring state-owned entities (SOEs) to a holding company, and pointed out critical aspects that had been excluded from the legislation.

Minister’s remarks

Ms Maropene Ramokgopa, Minister of Planning, Monitoring and Evaluation in the Presidency, reminded everyone that around June, when the President announced the Government of National Unity (GNU), it was also declared that the DPE would cease to exist. The responsibility of the executive authority of the DPE would be transferred to her Department (Ministry in the Presidency). She said the DPME was further tasked with advancing the establishment and finalisation of the National State-Owned Enterprise (or National State Enterprise) Bill. She explained that the state-owned companies (SOCs) had been returned to their respective line or policy departments, providing her Department with the opportunity to focus on the Bill, ensuring it was handled effectively and with adequate engagement.

She assured the Committee that her Department was still actively working and was not idle. She mentioned that the National Macro Organization of Government process was underway to ensure the Department continued supporting policy Departments until all staff had been transferred to the relevant Departments. She clarified that no officials from the Department would lose their jobs, as the Government was committed to placing all employees in receiving Departments. This assurance was in response to concerns that had been raised.

DPE's 2023/24 performance

Minister Ramokgopa addressed the DPE’s performance, as the Chairperson had indicated it was the first presentation of the morning to the Portfolio Committee. She outlined the Department’s shareholder oversight during the 2023/24 financial year, which included oversight over Alexkor, Denel, Eskom, Transnet, the South African Forestry Company Limited (SAFCOL), and South African Airways (SAA). She highlighted notable achievements, such as Eskom's generation recovery plan, which had positively impacted loadshedding. By the end of the financial year, there had been 100% uninterrupted power supply, marking a significant milestone with 230 consecutive days of uninterrupted power. She noted, however, that Eskom now reported to the Department of Electricity and Energy. She also mentioned that the unbundling of Eskom had continued as planned, and Members were already familiar with this progress.

She continued by highlighting a significant milestone -- the National Transmission Company of South Africa had been granted an essential import and export licence. She described the appointment of the board of Transnet and the National Ports Authority as a step toward transforming ports and enhancing port capacity. She acknowledged the prior stagnation at the ports, which negatively impacted the economy, and emphasised the importance of addressing these challenges. She credited the leadership of Transnet management for resolving the clogging of the ports, a development acknowledged by economists.

She spoke about SAFCOL's resilience, commenting that it remained a vital part of the state-owned company (SOC) portfolio. Alexkor’s financial performance had improved due to lower operational costs, and Denel continued implementing its turnaround strategy. She expressed optimism about Denel's future, highlighting its three-phase stabilisation, sustainability, and growth approach. She mentioned discussions with Denel about strengthening international relations and units, particularly to penetrate the international market, attract funding, and enhance their capabilities while safeguarding national sovereignty.

She reported that SAA had resumed operations, reopening routes to South America and the African continent. Additionally, she noted the Department’s active role in combating cable theft and infrastructure damage.

While celebrating these achievements, she acknowledged areas requiring further monitoring and intervention. She said that the Department had spent 93.9% of its allocated budget of R275.3 million, explaining that the under-expenditure had resulted from difficulties in attracting skilled officials. She said the Department’s focus on overseeing industries and sectors necessitated highly specific skills, which were challenging to find.

She identified irregular expenditure of approximately R46.5 million over two years, and fruitless and wasteful expenditure amounting to R18 492 as ongoing concerns. National Treasury had condoned two of the five cases, with outcomes pending for the remaining cases. She assured the Portfolio Committee that such anomalies would not recur, underscoring the Department's commitment to clean governance. She tied this commitment to the decision to support a centralised model.

She said that the Department complied with the recommendations of the Auditor-General of South Africa (AGSA) regarding performance information. She explained that arrangements had been made to involve AGSA in the review process during the planning of the 2024/25 period and the re-tabling of the 2023/24 annual performance plan.

She concluded by emphasising the importance of planning, requesting assistance where needed, and collaborating with institutions such as the Auditor-General. As the Department transitioned toward closure and a new model, she reiterated the commitment to transparency, effectiveness, and clean governance.

Mr Edwin Besa, Acting Chief Financial Officer (CFO), DPE, presented the 2023/24 annual performance report and strategic initiatives for the draft Medium Term Development Plan (MTDP), covering the period from 2024 to 2029. The report emphasised the DPE's critical role in providing oversight and strategic direction to SOCs to enhance their operational efficiency, financial sustainability, and contributions to South Africa's economy. Key highlights included the development of the National State Enterprises Bill, aimed at centralising SOC oversight, and significant reforms at Eskom, including its restructuring into three subsidiaries -- generation, transmission, and distribution. The National Transmission Company of South Africa (NTCSA) had been operationalised, securing essential licences, while Eskom's generation recovery plan had achieved a notable reduction in load-shedding and over 100 consecutive days of uninterrupted power supply.

The financial performance of several SOCs had improved despite economic challenges. For instance, SAFCOL remained financially stable, Alexkor achieved cost savings, and Denel continued its three-phase turnaround strategy despite liquidity issues. Efforts to enhance infrastructure security, such as implementing the metal trade system and collaborating with stakeholders, had successfully reduced cable theft and vandalism incidents. Governance improvements were highlighted, with the National State Enterprises Bill advancing to Parliament after extensive public consultations. Furthermore, the DPE had ensured compliance with financial reporting requirements, with Eskom fully adhering to its debt relief conditions, though challenges in addressing historical audit findings persisted for some entities.

In the energy sector, critical progress has been made in operationalising the Koeberg nuclear power plant's life extension program and corporatising energy distribution entities. However, the energy availability factor (EAF) had declined due to unplanned outages. In the transport sector, efforts to increase rail efficiency had faced setbacks, including locomotive shortages and declining rail volumes, but initiatives to return idle locomotives to service showed promise. Financially, the DPE had spent 93.9% of its final appropriation, with under-expenditure attributed to vacant posts and project delays. The Department also addressed irregular and wasteful expenditures through disciplinary action and legal measures.

The DPE reaffirmed its commitment to creating an enabling environment where SOCs add real economic value by achieving operational excellence, financial viability, and developmental objectives such as industrialisation, job creation and skills development. Looking forward, the Department emphasises its focus on securing energy supply, modernising infrastructure, and fostering economic transformation to ensure a resilient and sustainable South African economy.

See attached for full presentation

Discussion

Mr D Bergman (DA) thanked the presenter for highlighting the key issues and said that despite the long agenda, it was important to interrogate some of the outstanding information, particularly as it marked the close-off and end of an era for the Department. He commented that oversight and monitoring the state's activities had always been one of the biggest issues. He questioned how to ensure the establishment of the right model to oversee SOEs, pointing out that the Department’s purpose, as stated in its preamble, was to provide oversight and input into the formulation of policy, legislation and regulation.

He expressed concern over the fact that many issues associated with state capture and the resulting debt burden were allowed to occur within public enterprises. He stressed the need to avoid creating what he termed "state capture version 2.0." Using the ZAM contract or ZAM project as an example, he said that despite searching for information, he could not find any mention of such a company online, suggesting that it might be an internal project name or part of a joint venture. He was troubled that this was the first time such a project had been mentioned in a report to the oversight Committee, especially post-Zondo Commission, and called for clarification on its origins, purpose, and the identities of its directors.

He also raised concerns about issues related to SAA, referencing a MoneyWeb article. He said that the Deputy Minister was aware of his interest in investigating state affairs, and highlighted the ongoing case involving Mantelli’s Biscuits. He mentioned allegations of fraud and non-payments on a judgment, describing the matter as unresolved despite appearing to favour Mantelli’s. He questioned what steps could be taken to ensure such cases do not recur as public enterprises transitioned under the Department of Transport.

He linked these issues to the delays in finalising financial statements, suggesting that cases like this might have contributed. He specifically mentioned Air Chefs, which operates under SAA, and questioned how group financial statements could be signed off if Air Chefs’ financial statements were not finalised. He requested clarification on whether the MoneyWeb article’s claims were true or not, stressing the importance of closing such cases definitively.

Regarding Alexkor, he requested an explanation of the R45 proclamation and its implications for Alexkor's future sustainability, noting that this had been raised as a concern.

Finally, he addressed the Minister directly, emphasising the need for clarity on the model being adopted under the new bill. He asked whether the transition was akin to "jumping from the frying pan into the fire." He questioned whether the new model would allow effective oversight and meaningful input into policy, legislation and regulation. He underscored the importance of ensuring that oversight powers resided not only with a centralised board, but also with the boards of individual SOEs, as required for effective governance.

Mr M Gana (Rise Mzansi) acknowledged that the meeting marked what he referred to as the "close-up report" for the Department, noting the significance of scheduling the National State Enterprises Bill discussion alongside this report. He observed that while the Department was being closed, a new structure was simultaneously being created, with many of the entities that previously fell under the Department now transitioning to the framework of the Bill. He described this phase as an "interim arrangement," where the enterprises had been moved to their respective line departments.

He highlighted two major entities, SAA and Eskom, for which financials remained unavailable. He pointed out that SAA, in particular, had experienced persistent delays in financial reporting over several years. He commented that while the report painted a generally positive picture of the Department’s performance, closer scrutiny -- especially regarding governance -- revealed significant challenges. He commended the Minister for her work, recognising that she had inherited a difficult situation during the reconfiguration process.

He emphasised the persistent governance and oversight issues with SAA and Eskom. He mentioned past challenges at Eskom, including the controversial appointment of the previous CEO and board members, which many argued had been stumbling blocks in addressing electricity blackouts. Improvements had begun only after changes in Eskom’s board and management. He stressed that governance and oversight remained critical issues, particularly as they related to these two entities.

Turning his attention to SAA, he referred to his involvement in the Portfolio Committee on Transport, which would be reviewing the Budgetary Review and Recommendations Report (BRRR) of the Department in the coming weeks. He expressed concern that a proper review of SAA would be impossible without access to the entity's financials. He sought clarification from the team present, many of whom had been part of the Department prior to the elections, regarding the state of SAA. He specifically asked about the Department’s current level of involvement with SAA, especially given the reconfiguration. He also raised questions about SAA's operational practices, including its use of wet leases, and invited the Minister and her team to comment on these matters.

Ms M Chauke-Adonis (ANC) acknowledged that the DPE was in the process of being collapsed, and asked what lessons could be learned from its operations. She suggested creating a summarised list of these lessons to develop intervention or mitigation strategies and avoid repeating the same mistakes with the new adoption. She highlighted the importance of ensuring that even though SOEs would continue to exist under a different framework, the same issues did not persist.

She emphasised the need for clarity on consequence management and accountability measures. She asked how those entrusted with responsibilities would be held accountable, and how the performance of SOEs would be managed in the future. She sought details on the process for setting and measuring targets for SOEs, stressing that oversight, planning, monitoring, and evaluation would remain key responsibilities of the Portfolio Committee.

She called for a clear and streamlined framework for accountability, including a hierarchy or organogram that explicitly outlines who should be held accountable -- from the top leadership to the operational staff. She noted that accountability often unfairly fell on those at the bottom of the hierarchy, while those at the top escaped responsibility. She stressed the need for this to be rectified in the new system.

Reflecting on past challenges, she pointed out persistent budget constraints and asked what the Minister and Deputy Minister would require from the Portfolio Committee to support their efforts moving forward. She highlighted the importance of empowering the Minister and Deputy Minister to successfully reinforce their mandate, suggesting that the Committee could lobby on their behalf to ensure they had the capacity and authority needed to implement their agenda effectively.

Mr A Trollip (Action SA) began by referring to the irregular expenditure of R42 million and the R18 000 write-off for fruitless and wasteful expenditure mentioned in the report. While acknowledging that these amounts were relatively small compared to the billions lost in SOEs in the past, he used them as cautionary examples for a Department with a history of significant financial losses. He commended Eskom for maintaining an uninterrupted power supply for a considerable period, highlighting the contrast to the country's prior experiences with severe load shedding.

His first question focused on Eskom’s achievement of sustained power supply. He asked how this had been achieved, and why similar results had not been possible over the last five years.

Next, he addressed the Minister’s statement about the reinvigoration of SAA, expressing surprise. He commented that SAA did not service flights from Cape Town to the Eastern Cape, which is the route he frequently travels. However, on a recent SAA flight from Cape Town to Johannesburg, he had observed that all branding and writing on the aircraft were in a foreign language, suggesting the plane was rented. He asked what had happened to SAA’s own aircraft.

Regarding the National Ports Authority, he referred to the report’s mention of a newly appointed board tasked with transforming ports to improve capacity. He questioned what had been done to improve performance and productivity, commenting that South Africa’s ports, including the two major ports and one smaller port in the Eastern Cape, already had sufficient capacity. He emphasised that the real issues lay in performance and productivity, citing the World Bank's assessment of ranking South Africa’s ports among the worst-performing globally. He asked whether the board had made any progress in addressing these issues.

He then raised the issue of economic sabotage, associating it with treason due to its severe impact on the country. He mentioned the recent statements about revitalising urban rail, but questioned the lack of focus on rural rail systems, particularly in areas like the Northern Cape to the Eastern Cape, where manganese transportation had shifted from rail to road. He described the consequences of this shift, including the destruction of road infrastructure and frequent accidents, and criticised the apparent sabotage of rail networks for the benefit of trucking interests. He expressed grave concern at the state of rail infrastructure, describing widespread vandalism and theft of rail tracks, sleepers, and sidings. He questioned how such large-scale theft could occur in broad daylight, emphasising the logistics involved in dismantling and exporting stolen infrastructure.

Referring to the report’s mention of collaboration with recyclers and metal traders through the National Rail Crime Combating Forum (NRCCF), he asked what tangible results this collaboration had produced. Despite not mining copper locally, he highlighted the alarming fact that South Africa exports more copper from its ports, such as Cape Town, than Zambia. He asked how such activities could occur under the authorities’ watch.

Mr L Montana (MK) expressed concerns about the report and its omissions. He criticized the Acting CFO for presenting a report that left out key issues, noting his shock at hearing the CFO take credit for keeping the lights on while later attributing the inability of Transnet and Eskom to implement their turnaround strategies solely to cable theft. He pointed out that cable theft had been a longstanding issue, and argued that the non-implementation of turnaround strategies required a deeper analysis.

He then voiced his broader disapproval of the current path of restructuring and reforming state-owned enterprises (SOEs). He argued that SOEs were critical resources for a democratic state, not just to grow the economy but to strategically position it and improve the lives of citizens. He criticised the new model being adopted, stating that it failed to address these strategic objectives, and made it clear that he did not support the direction being taken.

Commending the Department for achieving 93% of its targets, he quickly noted that such achievements were insufficient if they focused solely on processes rather than outcomes. He argued that the true measure of success lay in the impact on the economy and people’s lives, not in the completion of procedural goals. He said that "people don’t eat processes," emphasising the need for tangible outcomes that directly benefit citizens.

Shifting focus to specific entities, he highlighted the importance of financial transparency, particularly with SAA. He criticised the lack of financial statements from SAA, arguing that a proper understanding of its financial position -- including its income, equity, and liabilities -- was essential for effective restructuring. He warned that decisions could lead to undervaluation and potential "giveaways" of public assets to private sector partners without accurate financial data. He requested assurance from the Minister that no invitations to private equity partners would occur without first obtaining solid financial numbers to support such decisions.

He underscored the significance of Eskom and Transnet as the "two big guys in the economy," noting that their performance was directly linked to the country's economic health. He said that Eskom’s performance often served as a true indicator of the broader economy, with Transnet numbers reflecting the ripple effects of Eskom’s success or failure. He emphasised that managing these entities was about more than financial metrics -- it was a strategic issue of national importance.

He urged the Minister to provide clear assurances about the Department’s approach to private sector involvement, emphasising the need for transparency, accountability, and strategic thinking in managing the nation's critical SOEs.

He continued by referring to his recent participation in a meeting of the Standing Committee on Public Accounts (SCOPA) and the Portfolio Committee on Transport, where Transnet's performance was scrutinised. He said that Transnet had achieved only 28% of its targets, which he described as deeply concerning. He suggested that the economy had been sustained in recent years more by road freight than by Transnet’s operations. He remarked that Transnet’s performance, due to issues like low volumes and ineffective strategies, resembled a "Ponzi scheme," because it was not generating sufficient income. He pointed out that Transnet’s volumes were far below expectations, noting a drop from 220 million tons to around 142 million tons, which he said indicated systemic problems.

He criticised the current strategy for Transnet, claiming it was destroying value rather than creating it. He emphasised the critical role of the shareholding function in managing Transnet during the transition to the Department of Transport. He warned that relying on financial restructuring alone to address Transnet’s challenges would worsen the crisis instead of resolving it. He raised concerns about Transnet’s mounting debt and its deteriorating financial position, emphasising that Transnet had historically raised funds based on its strong balance sheet and cash flows. He highlighted the decline of the Durban container terminal, which once ranked as a top-performing port, but now lagged behind competitors like Tanzania. He questioned how the government would address the maturing loan covenants and ensure Transnet’s viability.

Turning to energy, he acknowledged the government’s success in maintaining over 200 days of uninterrupted power supply. However, he also urged government to take responsibility for the extensive damage done to the economy and the significant job losses caused by years of load shedding and delayed maintenance. He criticised the three-year delay in addressing the energy availability factor, emphasising the importance of balancing credit with accountability.

He then addressed the issue of port congestion, referring to Transnet management’s efforts to resolve the problem. He brought up the original draft of the National Ports Authority (NPA) Bill, which envisioned the NPA as a standalone, state-oriented entity. He observed that the current strategy seemed to lack clarity, as evidenced by inconsistencies in tariff implementation and spending, which contributed to inefficiencies in port operations. He expressed concern that government appeared uncertain about its long-term goals for port management and regulation.

He concluded by reserving further comments on restructuring and the broader model for the next discussion. He said some of these issues might also be addressed during the upcoming debate and declarations. He emphasised that critical issues, such as Transnet's performance, energy management, and port strategy, should have been included more prominently in the report and discussions.

Mr S Gama (MK) acknowledged the Minister's role as inheritor of the DPE, using the analogy of inheritance to emphasise that one takes on everything -- good and bad. Similarly, the Committee had inherited the responsibilities and legacy of the now-collapsed Portfolio Committee on Public Enterprises. Part of this legacy included the unresolved SAA issue, which had to be finalised. The officials likely had all the necessary data and information, and he urged the Minister to ensure this matter was brought to a close.

Turning to the Department’s performance, he drew on a cost accounting analogy to highlight that while historical data might not directly inform future decisions, it served as a lesson on what to avoid. He criticised the Department’s underperformance, noting that it had achieved only 54% of its key performance indicators (KPIs), which was particularly disappointing for a small department.

He addressed the CFO directly, rejecting the notion that the Department bore no responsibility for Eskom’s performance. He argued that as the shareholder representative, the Department and the Minister must take accountability for both successes and failures. He criticised the tendency to claim credit for successes, such as 230 days of uninterrupted power supply, while distancing from failures. He emphasised that full accountability was required.  

He then spoke about repurposing the Komati power station, which he called a "spectacular failure." He pointed out that the station’s 2 000 megawatts of capacity had been lost, leaving citizens without power, regardless of the goals of the Just Energy Transition (JET). He commented that South Africans were concerned with having electricity, not the broader objectives of the JET. He expressed concern about the lack of power availability, particularly its impact on industrialisation and attracting investment.

He referred to comments by the Minister of Electricity in recent media articles, emphasising the need to reassess the energy strategy. He criticised global pressures to move away from fossil fuels, pointing out the irony that many countries advocating this transition continued to use fossil fuels themselves. He also highlighted the existence of technologies that could reduce coal emissions by up to 80%, arguing that South Africa, with its abundant coal reserves, should capitalise on this resource. He emphasised that coal remained the cheapest energy source and could be crucial for the country's energy security and economic development.

He continued by emphasising South Africa's vast coal reserves, stating that the country had 500 years of coal beneath the ground from Soutpansberg (Limpopo) to Ermelo (Mpumalanga). He argued that coal remained the cheapest energy resource and should be utilised, especially given the existence of technologies that could reduce coal emissions by up to 80%. In a light-hearted remark, he noted his agreement with a statement by Donald Trump about the drawbacks of windmills, such as their impact on wildlife, expressing his surprise at aligning with Trump on this matter.

Turning to governance issues, he criticised the process of board appointments, citing the AG's findings that individuals were often appointed before undergoing proper vetting. When adverse security clearance reports were later issued, no corrective action was taken, and operations continued as if nothing happened. He stressed the need for thorough vetting before appointments were finalised.

He then addressed what he described as "self-inflicted" issues, such as the 47% decrease in rail volumes, calling it a predictable consequence of poor decision-making. He likened the situation to someone inflicting harm on themselves and then lamenting the resulting injury, arguing that the Department’s actions had led to its own failures. He criticised the 2018 board appointments, describing them as a "spectacular disaster." He accused the board of creating false narratives that ultimately undermined the SOEs they were meant to support.

Specifically referring to Eskom, he highlighted the appointment of a lawyer as a leader during a crisis, despite their track record of reducing the value of Nampak by 87%. He argued that crisis situations required crisis managers, not leaders suited for stable periods, and called for better decision-making in appointing leadership for SOEs.

He concluded by emphasising the need to draw lessons from these failures as a country. He said that there was much to discuss in the next session, and expressed his hope that the current discussion would be completed promptly, allowing the Committee to focus on forward-looking issues in the future.

Ms M Aphiri (ANC) referred to irregular expenditure, and said she thought they had heard there were five issues, of which two had been dealt with, while three remained. She suggested that assurance be provided on whether the remaining three issues would be addressed so they could discuss achieving a clean audit. On the matter of vandalism and cable theft, she acknowledged that these problems had existed previously, but noted that they had now become national crimes. She asked whether there was a way to mitigate or address these problems effectively. She also pointed out that the Department was being disestablished while the AG had raised some abnormalities, and she wanted to know how the audit findings would be addressed or resolved, considering the Department's disestablishment. She also noted that the Department had achieved 58% of the predetermined objectives, and inquired about the view on the outcome indicators that depended on the entities.

Ms K Christie (DA) said her focus was on Eskom and Transnet, stressing that their performance directly affected the socio-economic rights of South Africans, particularly in areas such as energy, food and jobs. She commented that Eskom and Transnet were two of the 13 national SOEs listed under Schedule A, which the proposed bill suggested transferring to a holding company, and said it was important to scrutinise these entities closely.

She brought the discussion down to the constituency level, explaining how Eskom and Transnet's behaviour impacts ordinary South Africans, including the elderly, children, unemployed youth, and citizens who may have lost trust in the government. She criticised the boasting about Eskom keeping the lights on for a few hundred days, pointing out that it had come at a vast expense. She mentioned that Eskom applied to the National Energy Regulator of South Africa (NERSA) for a 40% tariff increase, which would burden consumers. She criticised Eskom for inefficiency, ineffectiveness, and lack of competitiveness, attributing the rising costs to these issues. She also condemned the board of directors for incompetence, dishonesty, corruption, theft, vandalism, and a lack of accountability.

She shared an example from her constituency in Khayelitsha, where she was learning IsiXhosa. A grandmother (gogo) told her she spends R30 a day on electricity, supporting her grandchildren on a grant of just under R2 000 a month. The grandmother expressed concern about Eskom's proposed 40% increase, which would raise her daily cost to R42, forcing her to make even tougher choices between food and electricity. She used this story to illustrate the desperate need for reform in SOEs.

She argued that the centralisation of decision-making and poor appointments of board directors had disastrous consequences, leading to significant financial losses and eroding public trust in SOEs and the government. She called for the implementation of clear and firm standards to ensure transparency in board appointments, emphasising that these boards were responsible for holding CEOs and CFOs accountable. She cautioned against adopting the proposed bill, warning that it could lead to even worse outcomes, likening it to jumping from the frying pan into the fire, as alluded to by her colleague.

The Chairperson said the recommendations of the AG's 2022/23 report had indicated that the Department's key performance indicators or functions were not adequately tracked. In their inputs, she said that the Members also agreed that the Department's performance was significantly below 90% of its targets, resulting in poor quality performance indicators and targets.

She requested that the Minister and the team address how these issues would be rectified, particularly in response to the points raised by Members. However, she emphasised that the responses should focus solely on the issues outlined in the annual report for 2023/24. She suggested setting aside other issues, noting that they pertained to the next agenda item.

She clarified that the Minister and the team were present to address these matters thoroughly, and that all other issues related to the shareholding company, the proposed models, and associated views could be addressed in the next agenda item, during which the team would provide their responses. For the current discussion, she insisted that the focus remain exclusively on the annual report.

Department's responses

Mr Seiso Mohai, Deputy Minister of Planning, Monitoring and Evaluation, expressed satisfaction that the discipline of engagement in the meeting had been addressed, and acknowledged that discussions had already begun to overlap with the next agenda item. He said that upfront positions on the issues had been indicated, and believed the process would proceed accordingly, subject to further clarifications.

He referred to the recent strategic reviews of government restructuring initiatives that had led to the decision for the DPE to cease to exist. He stressed that the issues currently being managed would not be lost in the system, highlighting the importance of systematically deferring unresolved or strategic areas of work to appropriate line function departments to ensure they were not overlooked.

He said discussing these matters in light of South Africa's current economic and socio-economic challenges was important, commending the Committee for its approach. He remarked that while certain performance standards might be reflected positively on paper, there was a need to address substantive areas of achievement rather than merely processes. He emphasised that failures to address previous audit findings and governance issues, such as irregular expenditure and associated risks, should be taken seriously, reflecting their impact on governance standards.

He underlined the importance of ongoing restructuring and reforms of SOCs and enterprises, acknowledging their relevance and the urgency required to address developmental challenges facing the country. He concluded by supporting the proposal that the technical team address these issues, with the Minister providing closing remarks as suggested.

Adv Melanchton Makobe, Deputy Director-General: State-Owned Companies Governance Assurance and Performance, began by addressing the question related to the project that led to irregular expenditure, stating that the Department had cancelled the contract because they believed the service provider was not appointed appropriately. The Department had conducted a "self-review" to cancel the contract and was now in the process of reclaiming the funds paid to the service provider, emphasising that corruption would not be tolerated within the Department.

On the issue of Alexkor, he said that proclamations had been issued regarding past activities, and the Special Investigating Unit (SIU) was currently addressing the matter.

He said that most SOEs had already been transferred to policy departments, as indicated by the Minister. However, SAA had been delayed in finalising its financial statements due to being under business rescue. During this period, the business rescue practitioner assumed control, with powers surpassing those of the shareholder, leaving the board effectively out of office. This resulted in no financial statements being produced during that time. Once the company exited the business rescue, the process of preparing financial statements had to be retroactively addressed. He suggested that this was a significant lesson for the Department, and should be considered in future reforms.

He then discussed the need for a new shareholder management model, acknowledging that the existing model was ineffective. He advocated a centralised model with uniform governance standards for all SOEs in the country. He stressed that inconsistent governance standards contributed to the collapse of SOEs, and cited global lessons supporting this view.

In terms of performance management, he explained that a new clause had been introduced in the shareholder compact. This clause stipulated that if SOEs failed to meet 80% of their targets, there would be no salary increases or bonuses for executives. He described this as a way to hold leaders accountable by tying performance to financial incentives. He also clarified the accountability hierarchy: the shareholder holds the board accountable, the board holds management accountable, and management is responsible for holding the staff accountable. This structure aimed to ensure accountability at all levels.

Adv Makobe reaffirmed the Department's commitment to reclaiming the funds related to the irregular expenditure, stating that the matter was currently before the courts and would be determined there. He acknowledged that legal proceedings, such as the case in Montana, often took time to resolve under the National Boards Act. However, there had been progress with the appointment of boards, particularly as SOEs transitioned to policy departments, and he expressed optimism about future developments in this area.

Regarding SAA, he reiterated the challenges posed by the business rescue process, highlighting the limitations it imposes on regular operations, such as the preparation of financial statements. He mentioned that multiple valuations of SAA's assets had been conducted, and suggested that further discussion on these matters could take place later, as previously indicated.

He also addressed concerns raised by the AG regarding board appointments. He emphasised the importance of transparency and a structured, legislated process for appointing SOE boards. He linked this to the need for uniform governance standards across SOEs, stating that without clear regulations, board appointments could lack consistency and accountability. He expressed confidence that the proposed changes would be transformative in ensuring a fair and effective process for appointing SOE boards.

He further reflected on the need for alignment between the performance of SOEs and the performance of the department overseeing them. He said there had been past discrepancies, with departments achieving high performance levels while associated SOEs performing poorly. He emphasised the importance of holding boards accountable to ensure the performance of SOEs mirrors that of their respective departments. While acknowledging that SOEs were no longer under the Department's direct oversight, he said that this alignment was an issue that could be addressed moving forward.

Mr Besa addressed the question regarding Transnet's performance and the impact of cable theft, noting that while cable theft had been an ongoing issue, the number of incidents had significantly increased. He provided data showing that there had been 1 709 incidents in 2016/17, which had risen to 5 500 incidents in 2021/22, illustrating how the problem had escalated. He acknowledged a Member's observation that the situation was spiralling out of control. Given its impact on SOE performance, he emphasised the need for collaboration among government and stakeholders to curb cable theft.

He added that other factors, such as flooding in two significant incidents, also affected performance. He also pointed out the impact of COVID-19 on SOEs, commenting that performance had suffered from 2020 to 2021 as volumes declined. He explained that SOEs had since been trying to recover and improve performance. A turnaround plan was in place, and early indications showed an increase in volumes, providing optimism for improved performance going forward.

Addressing the question about wet leases, he said that SAA had had to surrender almost all its aircraft and essentially start over during the business rescue process. Operations resumed in September 2021 with six aircraft, which had since grown to 12 aircraft. He explained that as passenger volumes and demand increased, both fleet size and operations were expected to expand.

He acknowledged, however, that challenges remained, which was one reason for seeking a strategic equity partner. The intent was for the partner to provide funding to help SAA grow its fleet and operations. Unfortunately, the process to secure such a partner had failed, and efforts were ongoing to identify alternative funding sources to expand the fleet.

He highlighted the difficulty of securing aircraft, which had led to challenges, including the branding of some aircraft not meeting expectations. For example, some planes available to SAA carried foreign language markings. He assured the Committee that efforts were being made to address these issues, at least up until the point when SAA was transferred to the Department of Transport.

Ms Kubeshnie Bhugwandin, Deputy Director General (DDG): Energy Enterprises, DPE, addressed the question on Alexkor, starting with its proclamation and the way forward. She explained that Alexkor operates as a joint venture with the Richtersveld Mining Company under the Alexkor-Richtersveld Mining Company pooling and sharing joint venture agreement. This agreement stemmed from the land and mineral settlement concluded in April 2007 between the government and the Richtersveld community. She outlined that Alexkor owns the marine mining rights and holds a 51% share in the joint venture, while the Richtersveld Mining Community owns the land mining rights and holds a 49% share.

She said that in the last financial year, a study on Alexkor's optimal operating structure had been conducted, and had proposed four models for its future role: 

1. Retaining the status quo. 
2. Stabilising the status quo. 
3. The shareholders exiting from Alexkor. 
4. Establishing a community-focused holding company. 

She said these recommendations would require extensive consultations with government and stakeholders. Alexkor was now transferred to the policy department, which would determine its future role.

She continued by addressing the loadshedding issue and the measures taken to resolve it. The focus had been on ending load shedding. To this end, the presidency established the National Energy Crisis Committee (NECOM) to oversee the implementation of an energy action plan. The private sector was also brought in to support Eskom in these efforts.

She said a generation operational recovery plan was initiated in January 2023, focusing on improving performance at the eight poorest-performing power stations. The goal was to recover 6 000 megawatts by March 2025, and as of now, 3 266 megawatts have been recovered under this plan. Additional interventions had also been implemented, including a new spare parts strategy, leadership changes -- such as the appointment of a new executive officer and board chair -- and increased financial allocations for refurbishment, maintenance and operations.

She said new capacity had been added to the grid to improve generation capacity. For instance:

• The failure of Kusile Units' 1, 2 and 3 chimney stacks had been addressed, and these units were brought back online.
• An additional 799 megawatts was added under the new grid program.
• Kusile Unit 5 was also brought online.
• Since November 2023, Koeberg Unit 1 was brought online, contributing an additional 900 megawatts.

 She also mentioned legislative interventions, such as increasing the country's photovoltaic (solar energy) penetration as part of broader efforts to enhance energy capacity.

On the matter of the Komati power station and the just energy transition, she acknowledged that this process had provided key lessons. She admitted that Eskom had been slow in implementing the transition, but emphasised the shift in strategy. The approach now involved decoupling the decommissioning of power plants from the just energy transition, ensuring that community interventions and job creation efforts begin much earlier. She said that both provincial and national interventions were now being implemented to better support affected communities and create significantly more job opportunities as part of the transition.

Follow-up discussion

 Mr Trollip raised further concerns about the issues of economic sabotage, cable theft, rail theft, and the stripping of rail infrastructure, stating that his original questions on collaboration efforts had not been fully addressed. Specifically, he mentioned collaboration with recyclers, the metal trade system, and other stakeholders, emphasising that shutting down points of sale or purchase could significantly mitigate cable theft.

He acknowledged the response that cable theft incidents had increased five-fold from 2021 to 2023, but asked what measures had been taken since then. He pointed out that load shedding created a predictable timetable for thieves, enabling them to strip infrastructure without fear of immediate detection or intervention. He suggested that keeping the lights on could effectively deter such thefts.

He expressed doubt about the effectiveness of collaboration efforts within the broader network of stakeholders, highlighting the logistical challenges and the apparent ease with which this theft occurs. He contrasted the hidden activities of Zama-Zamas (illegal miners) operating underground with the visible stripping of infrastructure above ground, which continued despite being in plain sight. He remarked on the astounding scale of these activities and questioned why more effective action had not been taken. He reiterated his desire for a more detailed response regarding the collaboration efforts and strategies to combat this widespread asset stripping.

Mr Gama began by building on the points raised by the previous speaker, emphasising that running more trains would naturally reduce cable theft because the longer lead times between trains created opportunities for theft. He argued that simply increasing train frequency would make a significant difference, and similarly, keeping the lights on would deter cable theft. He asserted that ensuring the system works efficiently would help return theft levels to what they were in 2017.

He noted the importance of collaboration among key entities such as the Passenger Rail Agency of SA (PRASA), Eskom, Transnet, the South African Police Service (SAPS), and Business Against Crime, pointing out that such partnerships had been effective in the past. However, he suggested that these collaborative efforts might have weakened, and called for them to be revived to address the current challenges.

He also criticised attributing the decline in rail volumes to COVID-19, stating that while COVID-19 had impacted volumes in 2020 and 2021, the decline during that period was only about 5%. He pointed out that the more recent decline was much more severe, with rail volumes dropping from 200 million tons to approximately 148 million tons -- a reduction of over 33%. He asked for a clear explanation of this significant drop, emphasising that it was unrelated to COVID-19 or the 2008 recession.  The focus should be on understanding the reasons for the sharp decline in the 2023/24 annual report compared to 2022/23.

Mr Montana clarified that his previous question had been misunderstood, explaining that he was not denying the existence of cable theft and had seen the data confirming its rise. He acknowledged receiving updates from the police-coordinated team tracking these incidents. However, he pointed out that the causal link being made between cable theft, and Transnet and Eskom's inability to deliver on their restructuring plans, seemed flawed. He said that while cable theft was a contributing factor, it should not be considered the sole or primary cause. He suggested that the matter was more strategic in nature, and called for the Minister to address it from a policy and strategy perspective.

Turning to Eskom, he expressed concern over the government's approach, describing it as counterproductive. He criticised the government for metaphorically tying its own entity to a chair and asking it to fight -- providing resources to adversaries instead of enabling its own operations. He suggested that this approach was central to the challenges Eskom faced, and highlighted the need to rethink the balance sheet management.

He argued that the current approach to restructuring and reforms was overly focused on financial aspects without fully considering the broader value embedded within the balance sheets of entities like Eskom. He pointed out that different models for assessing value could yield vastly different outcomes, but the government seemed fixated on one approach.

He raised concerns about Denel, noting its objection to conditions related to the disposal of its non-core assets, as mentioned in the report. He emphasised the importance of understanding the interdependencies among entities, explaining that these organisations were built on vertically integrated models. For example, trying to rebuild SAA without its technical division would undermine its effectiveness.

He continued by urging a more holistic and integrated approach to balance sheet management and reforms. He acknowledged the Deputy Minister's earlier point about the current period being one of significant global change, reinforcing the need to adapt strategies to reflect this shifting context.

He emphasised the need for a broader approach to making changes, stating that there was not a single solution to the challenges faced by SOEs. He suggested running different models and changing assumptions to explore various outcomes. For instance, he proposed examining scenarios that include both core and non-core assets to understand their broader implications, not just for the companies but also for the regulatory environment.

He referred to the 40% tariff increase mentioned earlier, and highlighted a key limitation in Eskom's regulatory framework -- its inability to use non-core assets to cross-subsidise costs. He questioned why a model suited for highly developed, densified European cities was being applied in a developing country like South Africa, arguing that such an approach did not align with local realities.

At a higher level, he acknowledged the Minister's availability to engage with the Committee, and urged her to guide their approach. He warned against taking a narrow, financial-only perspective on balance sheets, stressing the importance of exploring alternative methods of addressing the challenges. He cautioned that without such a shift, the Committee would continue to revisit the same issues without meaningful progress, and the problems would worsen.

He acknowledged that while government and the entities may not necessarily agree with his perspective, he and others were contributing to the discussion in good faith. He urged the government to fully consider and evaluate alternative approaches, rather than relying on a one-size-fits-all model, which he believed was causing harm to the country's progress.

Mr Bergman said that recapitalisation was essential to freeing up the balance sheets of SOEs. He pointed out that the financial strain on entities like Transnet and Denel was largely due to their debt burdens, particularly the interest repayments, rather than operational inefficiencies.

He said that during earlier discussions, there was consensus on the need to restructure the debt rather than resorting to repeated bailouts. The aim was to alleviate the financial pressure caused by high interest obligations. He referred to the Presidential State-Owned Enterprises Council (PSEC). He mentioned its inaugural meeting, noting that during a prior session, the Committee had requested a report back on the outcomes of that meeting. He speculated that discussions in the Council might have included recommendations on which SOEs should be fully privatised or sold, though he admitted he was not privy to the exact details and welcomed clarification.

Shifting to specific responses, he expressed some confusion regarding earlier statements about the ZAM project and the R45 million mentioned. He sought clarification on whether the involvement of the SIU pertained to the R45 million or the ZAM project, indicating he was unclear about the connection.

Lastly, he noted that there had been no response regarding the Mantelli’s Biscuits issue, which he had raised previously. He stressed the importance of receiving a full and clear response to ensure proper closure on the matter, and requested that this be addressed comprehensively.

Department's responses

Minister Ramokgopa acknowledged that the Chairperson had indicated that some of the issues being raised belonged to the next discussion. She clarified that the discussions and responses from her side were based on the current presentation, as they were meant to address the specific matters outlined within it. She expressed her appreciation for the valuable inputs being brought up, commenting that they would be instrumental in shaping solutions and guiding progress moving forward.

She asked Adv Makobe to address the specific confusion mentioned in the questions, indicating that she would respond to the remaining issues afterwards.

Adv Makobe addressed the issue of collaboration, confirming that there was ongoing collaboration within the government where SOEs and law enforcement authorities work together. He said that during the time when SOEs were still under the DPE’s oversight, discussions had been held about classifying cable as a "precious metal" under the Precious Metals Act. This measure, aimed at deterring cable theft, was in progress and showed promise, although he did not have the most recent updates since the SOEs had since been moved to policy departments.

Regarding locomotives, he acknowledged their impact on declining rail volumes. He highlighted that issues with locomotives remained unresolved, which had contributed significantly to the drop in volume.

He also clarified the matter concerning the ZAM projects. He explained that the Department, not the SIU, was conducting a self-review of this issue. He stated that Mr Zam was an individual trader with a company specialising in events management. The Department had contracted this company during a previous period to arrange events, with payments running into millions of rands. However, due to concerns, the contract had been cancelled, and the Department was now in the process of reclaiming the money paid to him.

Minister Ramokgopa reiterated that several forums had been established at the presidential level and were led by various departments, though not necessarily by her Department. She referred to the forum led by the Department of Trade, Industry, and Competition (DTIC), highlighting its role in addressing the challenges faced by SOCs. However, since the SOCs now fell under the policy departments' line functions, reports and participation on these forums were now handled within those respective departments until further updates were brought back to the Committee.

She emphasised the shared recognition among stakeholders that the current model and operations of SOCs were not effective. She argued that this acknowledgement should lead to constructive discussions about solutions, rather than focusing on limitations. She encouraged the group to shift the conversation towards identifying and implementing viable solutions, rather than simply stating that the current system was not working.

To address this, she said that the Department had engaged with the Organisation for Economic Cooperation and Development (OECD) to explore global practices and standards for improving SOC efficiency. The OECD has provided various models that have proved effective globally. She highlighted that the current discussions were informed by these models, and while multiple approaches existed, there was consensus that a centralised model was the most effective option.

She also emphasised the need to adapt and "domesticate" the centralised model to align with South Africa's unique challenges and priorities, ensuring that it balances the dual objectives of commercial viability and advancing the nation's developmental agenda.

She continued by emphasising the importance of constructive dialogue regarding the centralised model being proposed. She encouraged Members, if they believed the model would not work, to identify specific sections of the bill that require adjustments or "tweaks." She underscored the need to adapt the proposed model to South Africa's unique context, ensuring it serves its intended purpose.

She acknowledged the expertise within the Committee, highlighting the value of input from Members who had worked with SOCs before. She commented that as politicians, their perspective was complemented by the support of officials, allowing them to balance operational realities with their political responsibilities. She called for a shift from outright rejection to a focus on addressing challenges collaboratively, urging Members to base their critiques and suggestions on evidence, science, and successful examples from other contexts.

She stressed the importance of a shared vision that aligns government actions with the needs of the people of South Africa. She reiterated that the primary goal of SOCs was to ensure the economy functions effectively, benefiting the public through the services these entities provide.

She said the bill, having gone through the Cabinet process, was now presented to the Committee for detailed input. She invited Members to zoom in on areas they believed would not work, propose mitigations for identified risks, and help refine the bill. She encouraged the Committee to also provide a vision for the framework of regulations and policies, even if drafting them was outside their scope.

She then highlighted the purpose of the bill -- to introduce a differentiated model that clarifies the roles of government as regulator, policymaker, and owner of SOCs. This approach, she explained, was intended to ensure these roles were better defined and more effectively executed.

She continued by emphasising the need for clear differentiation of roles within the governance structure of SOEs. She explained that without such clarity -- such as distinguishing between regulatory, pricing, and decision-making roles -- confusion could arise about who was responsible for what, and which decisions carried more weight. Differentiating roles would ensure that matters like service delivery, developmental priorities, or operational decisions lay within the appropriate department or entity best equipped to handle them.

She expressed optimism about the Committee's ability to discuss and define a viable way forward. She encouraged Members to propose models or frameworks that could guide the implementation of the bill. She urged Members to consider global best practices and past experiences while adapting them to South Africa’s unique context. She stressed that the bill must advance, to prevent history from judging their inaction as a factor in the economy's underperformance.

She invited the Committee to discuss specific components of the bill, such as how boards should be constituted, the nomination process, and supervision mechanisms to ensure the financial and commercial viability of SOEs. She reiterated that instead of rejecting the proposed solutions outright, Members should pinpoint what they believe would not work and propose alternatives.

 She acknowledged that capacity issues within SOEs had been a significant challenge, agreeing with the Members’ concerns. She said that simply injecting money into SOEs would not solve the problem if there was inadequate capacity at both board and executive levels to tackle complex challenges. Without capable leadership and expertise, meaningful resolution of issues would remain out of reach.

She expressed her hope that the discussions would result in practical solutions aligned with the shared goal of strengthening SOEs and improving the country’s economy.

She emphasised that the purpose of the proposed centralised model was to free SOEs to operate more effectively and competitively in a market-oriented environment. This approach would enable decisive action when SOEs failed to perform, including the ability to terminate underperforming leadership. She stressed the importance of accountability, stating that there should be clear consequences if an SOE was tasked with specific deliverables and failed to meet them.

She highlighted the need for the model to include mechanisms for both incentivising success and penalising failure, drawing from lessons learned in international contexts, such as China, where such systems were integral. She argued that the regulations should explicitly address these dynamics to ensure that the model supports both performance and accountability.

She expressed enthusiasm for the collaborative process, noting the diverse skills and experience within the Committee. She conveyed optimism that this expertise would contribute to developing a robust bill capable of addressing the challenges faced by South Africa's SOEs and advancing the country's broader economic goals.

Follow-up discussion

Mr Bergman expressed full agreement with the Minister's remarks, emphasising the need for clarity and strategic direction in addressing the challenges faced by SOEs. He acknowledged the importance of developing a bill that aligns with the Minister's vision and ensures both the independence of SOE boards and effective oversight mechanisms.

He pointed out that the current draft of the bill lacked sufficient provisions for oversight, and suggested starting afresh to create a comprehensive framework that incorporates the necessary accountability and independence. To facilitate this, he proposed forming a study group to review the bill in its entirety, assess its gaps, and incorporate the required changes before proceeding further.

He noted that the bill stemmed from the previous term and may not fully reflect current needs or perspectives. By working as a study group, they could ensure the bill incorporates valuable input from those with expertise and valid concerns regarding independence, sustainability, and effective governance.

He concluded by suggesting that this collaborative and deliberate approach would be the most productive way to move forward, ensuring that the final bill aligns with the Minister's vision and effectively addresses the country's challenges with SOEs.

The Chairperson acknowledged the proposal for a study group, and reiterated that the Committee had already agreed to hold a workshop where the bill would be presented clause by clause. This would ensure that all Members gained a deeper understanding of the bill's content and implications.

She emphasised the importance of allowing the current presentation to proceed, and deferred the discussion about convening a study group to a later stage. She clarified that the study group would be organised outside of the Portfolio Committee, facilitated by the whips of political parties. She highlighted the distinction between a study group and the Portfolio Committee, noting that while the Portfolio Committee addressed formal matters and processes, the study group would provide an informal platform for further discussion and input.

She concluded by encouraging Members to focus on the current presentation and proceed with the next agenda item, ensuring that the scheduled discussions on the bill remained on track. She reassured Members that the study group would be convened subsequently to delve deeper into the issues and proposals raised.

Mr Trollip commended the Minister for her remarks, particularly her emphasis on identifying specific areas of concern if there was scepticism about the viability of the National State Enterprises Bill. He appreciated her openness to constructive input.

However, he raised a concern about the concept of "domesticating" best practices. He cautioned that diluting proven global standards to fit local contexts could weaken their effectiveness. He stressed the importance of directly implementing best practices, whether from China or other countries, without compromising their principles. He pointed out that in countries like China, accountability was enforced decisively -- if a board failed, it was replaced. He warned that domesticating such practices could result in a lack of meaningful action or accountability.

He also reflected on the new legislative environment in Parliament, noting that it had become more challenging to pass legislation than in the past. He welcomed this change, as it allowed for more rigorous scrutiny and the potential for better legislation. However, he urged the Committee to use this process effectively to avoid producing legislation that faces strong opposition when it reaches Parliament.

He expressed concern about the potential branding of opposition to the bill in Parliament, where dissent might be labelled as being "anti-transformation" or against progress. He emphasised his willingness to engage in a thorough process to achieve better legislation, including presentations, workshops, and study groups. However, he reiterated his belief that best practices should be applied as they are, without domestication, to ensure their success and avoid inaction.

Ms Christie expressed her appreciation for the collective alignment within the Committee, acknowledging Pravin Gordhan for his significant contributions, including his fight against apartheid and his stance against state capture in the Treasury and the South African Revenue Service (SARS). However, she candidly stated that his record with the DPE from 2019 to 2024 had not been exemplary and should not necessarily serve as a template for the way forward.

She emphasised the need for actionable solutions and propositions, aligning with the Minister's call to focus on what works by exploring global best practices. She referred to the OECD countries as examples of frameworks for transparent and open processes for appointing board directors, ensuring opportunities for all talented, qualified and experienced South Africans.

She then cautioned against directly transplanting models from countries like China, Singapore or Malaysia into South Africa's context. Using a metaphor, she likened it to attempting to grow an English rose in the Kalahari Desert, where only baobabs thrive. This highlighted her belief that such models, while successful in their original contexts, would not necessarily be effective in South Africa.

She briefly pointed to the structural and systemic differences in governance and socio-economic conditions between China and South Africa to illustrate why domesticating the Chinese model would not work. She reiterated the importance of developing solutions tailored to South Africa's unique challenges and environment, ensuring they were rooted in practicality and relevance rather than mere adaptations of foreign examples.

The Chairperson proposed arranging a visit to one of these countries as part of the Committee's efforts to address the bill effectively. She said she would communicate with the Office of the House Chair to facilitate this visit, ensuring the Committee could gain firsthand insight into the practices and models under discussion.

National State Enterprises Bill [B1 – 2024]

Committee issues for consideration

The Chairperson addressed some key issues raised by the Committee during the previous meeting on 11 November and in a letter sent to the Minister for attention. She briefly summarised these points to ensure they were considered during the presentations and responses.

She began with the matter of public participation, noting the significant number of public submissions --around 3 000 -- that had been gathered during the executive’s public consultation process. She emphasised that, in addition to this, Parliament must conduct its own public participation process, as it was a separate and essential part of parliamentary procedure. She underscored the importance of advertising and gathering submissions independently, which would then be presented physically before the Portfolio Committee for deliberation. She made it clear that shortcuts in this process were unacceptable, as proper parliamentary procedures must be followed to evaluate the bill.

Next, she touched on the composition of the selection panel and its independence, which had been raised as a concern by Members. She acknowledged that the Minister had addressed the political dimensions of this issue, but reiterated Members' concerns about the potential for government over-representation on the panel. She said this could compromise the independence of the proposed shareholding campaign.

She also highlighted the third issue -- the role of Parliament as the ultimate oversight body. She stressed that this role was not adequately recognised in the legislation, and as the primary oversight institution, Parliament must ensure that its authority over government and its entities was upheld. She stated that Parliament’s responsibility to oversee departments and entities at all levels was a fundamental aspect of the legislative process and governance.

She referred to concerns about the application of the Companies Act and the PFMA in the proposed framework. These legislative instruments' integration and application in the context of the bill would need careful consideration to ensure alignment and compliance.

She continued by noting additional points raised by the Portfolio Committee, and emphasised the need for further clarity on these issues. She highlighted the following:

Application of the PFMA:

She noted that Section 47 and Section 48 of the PFMA had been discussed in the initial presentation to the Committee. However, Members had requested a deeper explanation of whether the PFMA would apply to the proposed shareholding company. If not, she asked for clarification on the reasons for its exclusion.

Shareholder management model:

She acknowledged that the Committee had noted the proposed shareholder management model, but requested more detailed explanations. She referred to the Minister’s remarks about the visit to China and the discussions comparing the Chinese model with those of other countries. She emphasised that it would be the responsibility of the Portfolio Committee to decide collectively on which country or model to study further. She proposed discussing this in future Committee meetings to ensure all Members could learn from international best practices.

SOE criteria for transfer to the holding company:

She referred to the representation of 13 SOEs within the proposed shareholding structure and the importance of understanding the Schedule A and Schedule B classifications. She urged for clarity on which SOEs fell under each schedule, and their roles in contributing to the GDP, noting that the 13 listed SOEs contributed approximately 35% of the GDP. She raised concerns about the remaining SOEs not included in the shareholding company, referencing earlier debates about the total number of SOEs (approximately 700) and the criteria for their inclusion or exclusion.

Important aspects excluded from the legislation:

She pointed out gaps in the legislation that Members wanted addressed. These included:

• The link between the shareholding company and the sovereign wealth fund.
• Provisions for the establishment of new SOEs.
• The definition of state-owned assets, particularly to ensure income-generating assets, was included.

She reiterated that the legal services team had identified these gaps, though their role in this workshop was limited. She stressed the importance of addressing these omissions to strengthen the legislation.

Finally, she prepared to hand over to the Minister, stating that the Minister would address some of these issues, with the presenting team covering others during their session. She concluded by expressing confidence that she had effectively captured and represented the key issues raised by the Portfolio Committee.

Minister's overview

Minister Ramokgopa expressed gratitude for the opportunity to provide insights, and gave a brief overview of a recent visit to the People's Republic of China, emphasising the lessons learned.

She highlighted the importance of the Portfolio Committee's role in refining the proposed bill, stating that it must address the challenges facing SOEs to be meaningful. The public participation process would also contribute valuable perspectives to improve the bill, ensuring it met the country's needs by the time it was adopted and enacted.

She shared insights from the visit to China, where they had engaged with SASEC and its subsidiaries. She underlined a key takeaway -- the foundation of a centralised model for SOEs, as endorsed by the OECD, was the commercial viability of the enterprises. Without commercial viability, it would be impossible to effectively address developmental or security objectives. She stressed that achieving developmental goals depended on the ability of SOEs to sustain themselves commercially.

She pointed out that when the process of centralising SOEs began globally, fewer than 30% of countries had adopted the centralised model, but today, over 50% of countries with SOEs are moving toward this approach. This shift validated the relevance and effectiveness of the centralised model.

From China's experience, she noted that bringing in a holding company structure did not succeed if political involvement in SOEs remained prevalent. For example, listing on a stock exchange -- an aspect associated with holding companies -- could not achieve its purpose if political interference undermined operational independence and efficiency. She highlighted China's long-term commitment to this process, which began in 1978, emphasising its sustained focus and consistency over decades.

She then affirmed that the lessons learned in China provided valuable insights for refining South Africa's approach to SOEs and adopting a centralised model. This approach should align with both global best practices and the country's unique developmental challenges.

She elaborated on the lessons learned from the reform process in other countries, emphasising the importance of enabling SOCs to operate independently on market-oriented principles. She explained that government's role should be as an investor and supervisor, setting clear targets and expected returns while allowing SOCs to compete with their peers to achieve commercial viability.

She connected this principle to the broader goal of establishing a sovereign wealth fund, which would rely on returns from SOCs to support the country’s developmental agenda. She clarified that SOCs should focus on economic development, leaving social development responsibilities to the sovereign wealth fund, thus unburdening the SOCs and allowing them to excel in their economic role.

She addressed misconceptions about the "Chinese model," explaining that it was not exclusive to China but reflected a global best practice used in countries like France and Norway, based on OECD standards. She stressed that "domestication" of the model did not mean diluting its principles, but adapting it to align with South Africa’s legal and cultural context. For instance, while some countries may impose harsh penalties like capital punishment, South Africa emphasised corrective measures consistent with its domestic laws.

She described how the proposed centralised model would function, with a supervisory board overseeing SOCs. This board would report to Cabinet, which in turn would report to Parliament, ensuring accountability and oversight at every level. She stressed the importance of allowing SOCs to operate as companies, free from excessive dependency on the fiscus, enabling them to compete effectively and avoid perpetual financial reliance on the government.

She acknowledged potential risks associated with implementing the centralised model, and emphasised the need to address these risks by refining the bill. This would ensure that when the legislation was finalised, it was robust and well-designed to meet its objectives. She expressed confidence that the Portfolio Committee, through its oversight role, would ensure the bill's effectiveness.

She mentioned the presentation made to the Presidential State-Owned Enterprises Council, highlighting that while their work on a core model was appreciated, the proposed listing of a holding company alongside individual SOCs on the stock exchange was problematic. This approach, she argued, would complicate supervisory roles. She concluded by inviting the presenter to walk the Committee through the processes undertaken so far, and the rationale behind the proposed framework.

She explained that the points she had raised addressed some of the issues that had been brought up, such as how the PFMA works, how accountability was maintained, and the process of appointing a board of directors. She elaborated that the appointment process involved the industry nominating candidates, alongside nominations from the policy department. This ensured that the supervisory role over SOCs on behalf of government as owner and shareholder, was filled by individuals representing a diverse range of interests, rather than being based on personal relationships or favoritism.

She emphasised that appointments should be grounded in empirical evidence of the candidates’ ability to perform the required tasks. Additionally, she stressed the importance of avoiding the bloating of SOC boards, as an overly large board could slow down decision-making and the implementation of corrective measures. Instead, she advocated focusing on hiring skilled individuals to work within the SOCs, and maintaining a manageable board of directors at the SOC level. She clarified that while boards at higher levels of governance might need to be larger and more inclusive, SOC boards should remain efficient and manageable. This approach would enable accountability and provide mechanisms for both incentivising success and addressing poor performance within the SOCs.

She also noted that the issue of reforms was ongoing, stating that reform efforts could not be a one-time activity but required continuous attention. As part of a centralised model, a dedicated unit should be focused on reforms, tasked with analysing global practices, benchmarks, and the current economic and governance models, to ensure they remain effective. If shortcomings were identified, research should guide further reforms to achieve the desired results.

Further, she highlighted the need for a research institute to build research capacity. This institute would not rely solely on employed personnel, but could also collaborate with external experts, such as academics. She provided an example from a visit to China, where academics had pointed out that one of South Africa’s key mistakes was allowing excessive political interference in SOCs. She commented that this had contributed to their failures, and suggested that SOCs should have been allowed to remain market-oriented and operate independently.

She explained that government should simply receive returns from SOCs and allow them to operate independently, with the government providing only policy and regulatory frameworks. Policy departments should handle industry-specific policies and regulations, while a designated institution should focus solely on managing and supervising the SOCs. This structure, she argued, would help streamline operations.

She then raised the question of how to manage the 700 SOCs in the country, noting the sheer scale of the challenge. She provided an example from China, which reportedly had around 40 000 SOCs, but strategically managed only 98 of them. The rest were categorised as subsidiaries of larger SOCs or delegated to other entities, such as local or provincial governments. She suggested a similar approach for South Africa, where all 700 SOCs would be subject to uniform policies and regulations, but might be managed at different levels or under different spheres of governance. A strategic focus could be maintained on a select number of key SOCs, while the remainder operated within a broader framework of delegated oversight.

She emphasised the importance of establishing a differentiated role for government in the management of SOCs, cautioning against the conflict of interest that arises when the government simultaneously acts as referee, policy maker, regulator and owner. She explained that such overlapping roles created inherent conflicts, such as the government wanting to raise prices to meet operational needs while needing to regulate those same prices to protect public interest. She called for a clear delineation of roles to avoid such contradictions, ensuring each entity operates according to its specific mandate.

In closing, she stressed that the current gathering’s purpose was to refine the bill under discussion to ensure it would function effectively. The bill, she asserted, could not simply be passed in its existing form; it required adjustments and fine-tuning based on the input of stakeholders and the public. She highlighted the importance of public participation in shaping the bill, noting that further revisions might be necessary even after initial consultations. Ultimately, she underscored the need for a well-guided model to ensure the bill's effectiveness in practice.

Committee's comments

Mr Gana said that while he appreciated the work that had been done, there was something the Minister had mentioned that had caused him to question the current situation. He said the Minister had visited China, drawn lessons from the visit, and subsequently made a submission to the Presidential State-Owned Enterprises Advisory after the elections. This process led to the bill being tabled in January. However, he expressed concern that, based on the Minister’s own admission, the current bill was inadequate to fully incorporate the lessons that had been learned.

He said he would contribute to discussions on specific clauses during the workshop, but emphasised that the overarching issue was the need for a reworked bill. He pointed out that the Minister’s presentation had introduced numerous aspects and lessons that were seemingly not considered at the time the bill was drafted. As a result, he questioned whether it was appropriate to proceed with the current bill, given the significant gaps that had been identified.

Using a metaphor, he compared the situation to having a bicycle when what was needed was a bus. He argued that the workshop seemed to be attempting to modify a bicycle into a bus, rather than starting with a bus and making necessary adjustments. He stressed that this was not merely a matter of making minor tweaks, but rather required substantial work to address the serious gaps in the bill as it stood.

In conclusion, he acknowledged that his perspective might be “offside” and deferred to the Chairperson for guidance. However, he maintained that his observations, based on the Minister’s comments and his own notes, highlighted the need for a more thorough revision of the bill to ensure its effectiveness.

Ms M Dunjwa (ANC) began by asking for understanding, and commented that it was her first day attending this meeting in its full setting. She also mentioned having missed several earlier presentations, including one by the Higher Education sector, and she had intended to sit quietly and listen attentively. After going through the bill herself, she humbly proposed that the group allow the presentation to proceed as planned, given that the bill originated from the executive, who was present to guide the process. She emphasised that their role as Members was clearly outlined and would involve their own deliberations at a later stage.

However, she admitted that the presentation had triggered a thought she had been reluctant to raise previously. She explained that, as a former trade unionist, she tended to analyse situations from a worker’s perspective, and expressed her concern about whether workers had been adequately exposed to the bill. She stressed that ensuring workers were informed and engaged was important so they would not later claim ignorance or oppose the bill. Acknowledging her limited understanding of legal and parliamentary processes, she asked to be corrected if she was overstepping.

She went on to highlight a critical issue -- the lack of empowerment and formal skills among the country’s workforce, a legacy of historical inequities. She pointed out that most workers relied on experience rather than training, which posed challenges. Using a metaphor, she argued that one could not simply assign someone to a highly specialised role, such as nursing, without the necessary training and preparation. She urged the ministry and the Department to address this issue as part of their efforts, warning that failure to do so could lead to significant distrust and resistance from the workforce, ultimately creating chaos.

She also reflected on the broader role of the Committee, noting its importance in improving the lives of citizens. She said she had told her colleagues that oversight should not be about competition or showing who was more knowledgeable, but about collaboratively working to create meaningful change. She acknowledged that their ideological views inevitably influenced their work, but stressed the need for these views to contribute constructively to their shared goals.

In conclusion, she reiterated her agreement with a previous speaker that the Minister had raised significant points during her remarks. While she expressed some discomfort with the idea of introducing entirely new elements into the process, she advocated proceeding with the presentation and later addressing their concerns within the established parliamentary rules. She emphasised that the workforce issue remained a key concern for her and was central to her reflections.

Response

Minister Ramokgopa clarified that the discussion did not deviate from the content of the bill, which focuses on establishing a centralised model of government ownership of SOCs. She explained that her earlier remarks were based on lessons learned during a study tour and were not intended to critique the bill itself but to highlight the shortcomings of previous approaches. She emphasised that the bill was necessary precisely because the centralised model it proposes was absent in past governance structures.

She noted that the only potential adjustment might involve terminology, such as deciding whether to use the term "HoldCo" (holding company) or to call it a commission. However, she stressed that this was merely a naming issue and did not affect the substance of the bill, which remained centred on the centralised model. She reiterated that even in its earlier drafts, the bill had drawn on the governance models of countries like China and Singapore, which provided valuable insights into centralised ownership structures.

She further explained that her detailed comments during the discussion were meant to address operational aspects learned from the study tour, particularly from China, and to respond to questions about implementation and governance. These operational insights were not necessarily included in the bill itself, but were intended to provide context on how the model could function in practice.

She affirmed that the bill's principles and content aligned with international benchmarks, such as the OECD standards for centralised ownership models. The only significant difference might lie in whether the entity was referred to as a company or a supervision model. Regardless of this detail, the underlying model, principles, and objectives of the bill remained consistent with the centralised approach it aimed to introduce.

Presentation on National State Enterprises Bill

DDG Makobe led the Committee through the presentation on the National State Enterprises Bill, which provides a detailed framework aimed at reforming and centralising the governance of South Africa's SOEs to address longstanding challenges of mismanagement, inefficiency and corruption. SOEs played a critical role in key sectors such as energy, transport, water and telecommunications, serving as essential drivers of economic and social development. However, their effectiveness had been undermined by governance conflicts, fiscal dependency, and the legacy of state capture. The bill sought to strengthen these entities, enhance operational efficiency, and ensure their long-term sustainability while reducing their drain on the national budget.

The foundation of the bill was built upon recommendations from the Presidential Review Committee and the State Capture Commission, which advocated a shift to a centralised shareholder model. This approach aimed to separate the state's ownership function from policy-making and regulatory roles, to minimise conflicts of interest and promote transparency, accountability, and professional governance. Drawing on global best practices, the presentation highlighted successful centralised models such as China's SASAC and France's APE, along with principles from the OECD, which emphasise the benefits of consolidated oversight and clear governance structures.

At the core of the bill was the establishment of a centralised entity to manage commercial SOEs, ensuring uniform governance and performance monitoring. This entity would be tasked with driving profitability, reworking capital structures, and aligning SOEs with the state’s developmental objectives. The bill proposes measures to professionalise SOE leadership through rigorous board and executive appointment processes, requiring candidates to demonstrate skill, integrity and experience. The bill also outlines requirements for transparent financial reporting and operational accountability, including the publication of annual reports detailing SOE performance against targets, significant transactions, and corporate governance practices.

Public engagement had been a key component of the bill’s development, with over 3 500 submissions received during the consultation process. The feedback shaped critical areas such as governance mechanisms, legislative harmonisation, and criteria for SOE inclusion in the centralised model. The presentation also set out a phased implementation timeline, with the bill expected to become law by March 2025, with full operationalisation beginning in April 2025. By adopting this centralised model, the bill seeks to insulate SOEs from political interference, ensure their sustainability, and position them as effective contributors to South Africa’s developmental goals for future generations.

See attached for full presentation

Discussion

Mr Bergman expressed the opinion that there was no need to rush the process at this stage. He pointed out that the current approach, as set out by the President, aligned with a decentralised model and seemed to be safe in terms of oversight. He referred to the Minister’s earlier remarks, agreeing that the government could not simultaneously play the roles of player, referee and spectator. Instead, there must be clearly defined roles to ensure effective oversight while avoiding interference in the normal functioning of the market environment.

He acknowledged the Minister’s explanation of the model, noting that she had not prescribed a specific structure for the holding company, but had instead shared insights from China and the feedback they had received. He suggested it was crucial to revisit the foundational questions that guided their research: which countries South Africa initially compared itself to, what shortcomings those countries had faced, and what lessons could be drawn from those comparisons. He emphasised the importance of identifying the countries South Africa aspired to emulate, such as France, China, Singapore, or Malaysia, and understanding the environmental and systemic factors necessary to support that aspiration.

He cautioned that it was not enough to adopt models from other countries without the ability to enforce them or replicate the enabling factors that made those models successful. He referred to the PFMA, noting that while some best practices had been adopted, elements of the PFMA that hindered the effective functioning of SOEs had been removed. However, he stressed the need to reflect on past failures, describing the current situation as having moved from a disastrous system to a second, transitional model.

 He elaborated on his earlier point, questioning why the existing decentralised model, where oversight was vested in ministries, was not being given adequate time to prove its effectiveness. He suggested that the model should be observed for at least a year to evaluate its outcomes before rushing to legislate a new approach. By monitoring the decentralised model in action, stakeholders could identify lessons and make informed adjustments, ensuring that the final legislative framework was both practical and effective. He emphasised that such a cautious approach could prevent the repetition of past mistakes and provide a stronger foundation for governance.

He added that if there was still a need to legislate after thorough evaluation, other frameworks, such as the Harvard model, could be revisited. He proposed an in-depth engagement process, which might include visits to SOEs to understand their perspectives, or cost-effective virtual meetings with representatives from countries that had implemented centralised models. This would allow for learning about the challenges these countries faced before implementing their centralised models, how the models currently operated, and any shortcomings they had encountered.

He cautioned against rushing into legislative action, noting the importance of ensuring a motion of desirability before proceeding. He expressed concern that the current environment, with some stakeholders leaving early or focusing on other priorities, was not conducive to such a motion. He suggested that instead of hastily finalising the legislation, there should be an opportunity to refine it, including adding stronger oversight clauses.

He pointed out that the current draft legislation disproportionately empowered the Cabinet to provide oversight, but offered little leverage for Parliament to do the same. This imbalance, he argued, undermined the principle of separation of powers. He advocated the inclusion of mechanisms in the legislation that would enable Parliament to exercise effective oversight without interfering in operations. Such mechanisms would allow Parliament to step in or make recommendations to the executive when signs of potential failure arose, ensuring proactive intervention.

In summary, he reiterated his concerns. First, he argued against rushing the process given the untested nature of the current model. Second, he called for a dedicated forum or study group within the Committee to critically engage with the legislation clause by clause, not in a formal or rigid manner, but through open discussion. He emphasised the need for a balanced, well-considered approach that would produce legislation that was effective, adaptable, and capable of preventing governance failures in the future.

Mr Gana began by acknowledging that the session was a workshop and noting that legal experts would eventually need to contribute to the process. He outlined several key points he felt needed to be addressed.

First, he posed the fundamental question: why did SOEs need to be reformed? He explained that starting with this question helped to make subsequent actions logical and purposeful. He argued that the primary reason for reform was that many SOEs were currently a drain on the fiscus and failed to fulfil their intended purpose. He attributed this to a misunderstanding of the concept of a developmental state, noting that many interpreted it to mean that SOEs did not need to be commercially viable. This mindset, he asserted, had led to the current challenges.

He emphasised that the purpose of the proposed centralised company or holding entity would be to ensure that SOEs became profitable while simultaneously achieving developmental goals. He rejected the notion that these objectives were mutually exclusive, highlighting the importance of integrating both profitability and the developmental impact into the reform. Drawing a parallel to debates about the Reserve Bank’s mandate -- such as whether it should target inflation or employment -- he argued against viewing mandates as an "either/or" scenario.

Regarding the centralised holding company, he indicated that while its potential role in the reform process could be explored, the broader focus should remain on the reform of SOEs as a whole. He stressed that the strategic nature of SOEs meant that their failure had significant economic implications, underscoring the critical need for reform to safeguard their role in the economy.

 He highlighted the importance of aligning SOE reform with both profitability and strategic developmental goals, cautioning against simplistic or binary approaches that could overlook the complexities of balancing these mandates.

He continued by pointing out a critical issue with the governance of the 700 SOCs -- the absence of a standardised approach to the appointment, dismissal, and management of boards and executive teams. He highlighted a specific example involving a standoff between a CEO, a board, and a minister, illustrating the challenges caused by unclear or conflicting lines of authority. For instance, he referred to the Road Accident Fund (RAF) taking the Auditor-General to court despite opposition from the Minister, resulting in costly legal battles. This, he argued, reflected a broader issue in the governance of SOEs.

Mr Gana acknowledged earlier suggestions about revisiting sections of the PFMA to address such challenges. He emphasised that if certain legislative provisions had inadvertently created obstacles, they must now be reassessed and amended. He said that while the creation of a centralised holding company could help, the concept was essentially a reconfiguration of entities previously under the DPE, which had since been discontinued. He added that some proposed entities for the holding company, such as the South African National Roads Agency Ltd (SANRAL) and Air Traffic and Navigation Services (ATNS), were historically part of other arrangements, reflecting the complexity of restructuring efforts.

Using Eskom as an example, he discussed the overlapping and conflicting roles between ministers responsible for public enterprises, energy, and electricity. He warned that even with the creation of a holding company, these conflicts might not be resolved. The legislation currently granted the President the authority as the state’s sole shareholder to delegate responsibilities to Members of the Cabinet. This flexibility could lead to further conflicts if the President assigns overlapping responsibilities to different ministers. For example, the President could choose to have a minister of electricity while also designating another minister for SOEs, perpetuating the existing challenges.

He emphasised that while legislative reforms were necessary, they could not resolve the core issues alone. He argued that the fundamental problem lay with people, rather than laws. Governance failures and the inability of SOEs to turn a profit were not due to prohibitive legislation, but rather to leadership, work culture, and accountability deficits. He noted that there was no legislation preventing SOEs like SAA from being profitable, yet poor decision-making and mismanagement had led to failures like the collapse of SAA Express and Mango Airlines.

To achieve the success seen in countries like Singapore, Malaysia, and China, it was not enough to draft laws; there must also be a transformation in ethics, leadership, and organisational culture. Effective governance and a commitment to excellence were as critical as the legislation itself in ensuring the success of SOEs.

Mr Gana continued by reflecting on the premise of the proposed legislation, addressing the Minister directly. He acknowledged the insights gained from the Minister’s experiences in China and research into other governance models, but suggested that the foundational assumptions of the legislation, dating back to 2022 and 2023, were flawed. He clarified that this critique was not about legal errors, but rather about an incorrect starting position for the legislation.

He raised concerns about the governance structure under the proposed centralised holding company model (referred to as "HoldCo"). While the legislation focused on establishing HoldCo and its subsidiaries, such as Eskom, he questioned the lack of clarity regarding who would appoint the boards of these subsidiaries and how consistent governance standards would be maintained. He emphasised that simply creating a holding company while allowing subsidiaries like Eskom to operate under their existing frameworks of incorporation did not constitute meaningful reform. He argued that this approach perpetuated the current governance issues, rather than addressing them.

He also turned his attention to development finance institutions (DFIs), pointing out the inefficiencies in their operations. He criticised the fragmented approach of allocating small amounts, such as R5 000 or R10 000, while overlooking the vast sums of money funnelled into these institutions. He suggested that government should focus on significant, impactful initiatives instead of this piecemeal funding, potentially consolidating DFIs under a holding company structure similar to that proposed for other SOEs. This could streamline operations and amplify their developmental impact.

He acknowledged that there was still much to discuss and analyze within the legislation. He agreed with a previous speaker that further engagement was necessary, highlighting the complexity of the issues and the need for deeper deliberation to ensure that any reforms would lead to substantive improvements in governance and efficiency.

Mr Gana continued by addressing the critical issue of remuneration and governance standards in SOEs, citing Singapore as an example of success. He explained that Singapore's system worked because it standardizes remuneration structures and governance processes. By contrast, discrepancies arise in the current South African context because CEOs negotiate their remuneration independently with their boards. This created situations where CEOs, who often influence board appointments, had disproportionate power, leading to governance challenges.

He emphasised that board appointment processes must be explicitly legislated, rather than left to transitional mechanisms or subjective discretion. He pointed out that while the current draft legislation proposes a panel for initial board appointments, subsequent appointments would rely on a nominations committee within the board itself. He argued that this would perpetuate the problems plaguing SOEs, as boards and executives could return to opaque practices once the transitional phase ends.

Drawing a parallel to the appointment of the police commissioner, he suggested that the same level of transparency and accountability should be embedded in the legislation for SOE board appointments. He proposed that a panel system for appointing boards -- overseen by independent bodies such as retired judges -- should not be transitional but a permanent feature of the governance framework. He said the lack of transparency in board appointments had been highlighted in the State Capture Commission’s recommendations, underscoring the importance of ensuring that reforms address this weakness.

He also argued for standardisation in how senior managers and operational directors were appointed, emphasising that this should be a function of the holding company. The holding company should play a role in setting governance standards for all subsidiaries, not just the initial entities under its purview. He pointed out that the existing draft lacked clarity on how the remaining 682 SOEs would be governed under the new model, calling for the inclusion of a standardised framework that extends across all SOEs.

He praised the DDG’s earlier remarks about being clear on what was expected of SOEs, reiterating that this clarity should be reflected in the legislation. However, he pointed out that while the Minister’s articulation of the holding company’s intended role was compelling, it was not adequately captured in the draft legislation. He urged that these broader goals and principles be explicitly written into the bill to ensure they guide its implementation. He acknowledged that further work was needed on the bill to refine its provisions and address these gaps.

The Chairperson commented that she had observed Members beginning to provide input on specific clauses of the bill. She reminded them that this was not the appropriate stage for such detailed contributions. In Parliament, she explained, input on clauses was typically made after the bill had been advertised for public comments. At that point, the process involved consolidating public submissions, presenting them to the Portfolio Committee, and scrutinising the contributions. Organisations and individuals who had submitted comments were then called upon for further engagement, and their inputs were reviewed and consolidated once more. Only after this comprehensive process did the Committee begin to analyse and refine the bill by addressing specific clauses.

She emphasised that during workshops like this one, the focus should remain on broader issues rather than delving into clause-by-clause input. Drawing from her experience as a Whip and a Chairperson of the Portfolio Committee of Public Service and Administration, where she had worked on two bills, she explained that this procedural distinction ensured that the legislative process was conducted in an orderly and methodical manner.

She requested that Members restrict their contributions to discussions on overarching issues rather than specific clauses. She reminded them their responsibility to engage with the clauses in detail would come later, after the public consultation phase, as part of their formal legislative duties.

Ms Kumbaca commended the intention to limit ambiguity in the contents of the bill itself. She also praised the inclusion of the in-year review, emphasising its importance, especially as it would be a new process. She also expressed approval for the independent board assessment.

However, she had a few questions. Firstly, she noted that the centralised ownership model did not cover the entire SOE landscape of the state in relation to national entities. She asked what differentiated the entities that should fall under the centralised holding company from those that would remain under the custody of line departments as shareholder representatives.

She also raised a question out of curiosity, noting that 53% of countries followed the centralised model. She wanted to know the common denominators or dominant problems those countries were attempting to solve, and whether there were similarities to the issues faced in the current local context. Lastly, she inquired about the impact of the new ownership model on enhancing public participation, particularly through the publication of the national strategy.

Mr Gama said that, first and foremost, they welcomed the presentation, which drew from models in different countries, as well as the insightful and incisive input of the Minister regarding the direction she believed it should take. The direction was clear and coherent in terms of implementation.

He said that when examining the bill, it seemed to come from a policy vacuum or lacked strategy articulation. He suggested that while the intent was already somewhat captured in the bill, it needed to be expressed more clearly, though this should not take too long. He emphasised the importance of adopting a centralised model to separate policy and regulatory matters, leaving such responsibilities within policy departments, if that was the correct term.

He raised the issue of the shareholder perspective, emphasising the need to address it. He attributed the current challenges faced by SOEs -- such as their inability to operate independently, be commercially viable, support a developmental state, borrow on their own balance sheets, or declare dividends -- to political interference. He said that political interference was the primary issue, asserting that clear legislation was needed to direct these entities effectively.

He highlighted the importance of appointing industry CEOs with credibility and track records to ensure commercialisation and proper governance. These individuals would understand the significance of fiduciary duty, which he believed had been undermined by interference. He criticised the practice of removing accounting officers who stood their ground, which often led to the collapse of entities. He stressed the need for board members who could promote and develop entities effectively, without succumbing to interference.

Mr Gama commented on the value of drawing lessons from China, referring to the strict accountability measures there. He contrasted this with local challenges, where hearsay and misinformation often obstructed governance. He argued for a straightforward approach to addressing issues, such as dealing with fiduciary breaches directly and transparently, instead of mischaracterising problems or interfering unnecessarily.

He continued by suggesting that ministers should succinctly write down the policy direction and put it on paper, ensuring the bill was accompanied by a clear strategy. He remarked that the strategy had been discussed and understood during the meeting, making it something that could be supported. He proposed that this new framework could even replace the old DPE, envisioning it as a portfolio capable of handling mergers, and acquisitions, and identifying new markets for SOEs to explore. This would include conducting global environmental scans to determine where SOEs should operate to fulfil their developmental role.

He added that if dividends from SOEs were paid into a sovereign fund, it would allow government the flexibility to decide how to use those funds. However, he cautioned against creating unnecessary bureaucracy, pointing out that excessive bureaucracy often led to inefficiencies. He reflected on past experiences, such as with the PFMA, where decisions made by knowledgeable boards were delayed or overturned by individuals who lacked expertise. He highlighted how such delays, often caused by bureaucratic layers, could result in missed opportunities.

He advocated minimising bureaucracy to create agile institutions capable of responding rapidly to opportunities. He emphasised that if the proposed entity was to have an investor role, its functions should be clearly defined as investing and supervising, without any regulatory responsibilities. He argued that regulatory roles should be handled by specialist departments to avoid conflicts of interest, such as being both a referee and a player. Policy should remain the purview of the ministerial level.

Mr Gama continued by expressing concern that the bill, as it stands, overburdens the President with responsibilities that could be delegated to a minister. He pointed out that the bill frequently stipulates that "the president does this and that," questioning where the President would find the time to manage all these duties given his numerous responsibilities. He suggested that it was unrealistic to expect the president to handle such detailed tasks, comparing it to the role of the president in China, who likely does not engage in such operational matters.

He urged that these responsibilities be located within the relevant ministry or assigned to a named ministerial position. He suggested engaging with the President to clarify where such responsibilities should reside, advocating upfront devolution to avoid the inefficiencies of requiring presidential action for routine matters. Specifically, he questioned provisions in the bill that require the President to appoint an advisory board and decide whether or not to heed its advice, describing such processes as unnecessarily complex.

He called for the framework to be simplified, agile, and business-oriented, emphasising the importance of SOEs being commercially viable and operationally agile. He stressed the need for clear checks and balances to be built into the system without overloading it with bureaucratic hurdles. He warned that excessive bureaucracy could entangle processes, leading to inefficiencies and unresolved problems. Ultimately, he argued that the key issue to address was preventing political manipulation and interference, which he saw as the root cause of many challenges faced by SOEs.

Mr Montana said that while the Committee was not at the stage to delve deeply into the matter, he wanted to address the Minister and Deputy Minister directly. He acknowledged that the choice presented in the bill was clear, and commended the bill for capturing this effectively. He also appreciated the explanation provided at the beginning of the meeting, which he felt painted a comprehensive picture. He expressed satisfaction with what had been presented to the Committee in principle.

Building on a point raised by a previous Member, he shared additional thoughts and experiences. He highlighted the importance of addressing where the country currently stands when answering questions objectively, as this was critical to informing policy decisions. He said the bill presented solves certain problems, but emphasised that it did not address all the challenges faced by SOEs. He suggested that this understanding was essential to manage expectations and guide discussions.

He further clarified that not all of the 700 entities referred to were SOEs -- many were administrative bodies or public entities that were not commercial in nature. He stressed the importance of distinguishing between these categories to avoid conflating the discussion.

He welcomed the bill, and emphasised its significance. Reflecting on the past, he mentioned that the DPE had previously developed a policy on SOEs. This had been a lengthy process during which the country had faced significant pressure to privatise its SOEs. To find a balanced approach, delegations were sent to countries like China, Russia, and several others in Europe and Africa, including Ghana, to study their experiences. The result was a policy framework tailored to South Africa’s needs.

He suggested that the Minister revisit that policy framework and adapt it to the current environment, as it involved critical trade-offs and decisions. He pointed out that at the time, there had been significant pressure on developing countries to liberalise their economies, but South Africa had determined that full-scale privatisation was not in its best interest. He emphasised the need for similar thoughtful deliberation and trade-offs in the present context.

Mr Gama continued by acknowledging the significant changes in the world today, noting that the global landscape had shifted even further in light of recent events, including the U.S. electoral results, and emphasised the pace and magnitude of these changes. Referring to the U.S., he commented on how the victory of certain policies, such as tariffs introduced under the Trump administration to drive industrialisation, had opened opportunities for developing countries that did not exist 20-30 years ago.

He highlighted the current dynamics in West Africa, where smaller economies were navigating difficult positions and relying on the support of larger nations like South Africa to sustain their efforts. He emphasised the interconnected nature of these global economic and political developments.

He also discussed the resilience of countries like Russia, China and India, which had successfully built their own economic capacities to withstand sanctions and external pressures. He stressed the importance of analysing such strategic global issues to inform the policy decisions and choices South Africa must make regarding SOEs.

He urged the Minister to consider the opportunities presented by the current global environment to reimagine the role of SOEs. He suggested updating previous policy frameworks to reflect current realities, asking critical questions about what changes were possible and what policy directions would be most effective. He emphasised that these decisions would have wide-reaching implications and should align with the broader strategic and economic landscape.

He continued by addressing the challenges faced by government policy, particularly the frequent emphasis on lacking capital and the reliance on the private sector. He stressed the importance of understanding the specific problems that needed to be solved and aligning goals accordingly. Using aviation as an example, he commented that entities like SAA might have a policy objective of being sustainable, rather than necessarily profitable. This distinction, he argued, should guide how such entities and their assets were managed.

He expressed surprise at certain contradictions in the presentation. While there was a stated intention to "unlock" potential, the final slides appeared to impose constraints that undermined those objectives. Specifically, he questioned the rationale behind limiting the scope of flexibility by tying the initiative to "three to nine" stakeholders. He argued that this approach seemed to perpetuate the very challenges the reforms were intended to resolve. He suggested that such considerations should be revisited to ensure they did not defeat the purpose of the proposed changes.

Regarding the PFMA, he pointed out that it was originally introduced to modernise financial management across the board, but applying it universally might not always be appropriate. He emphasised the need for tailored mechanisms to guide the policy direction of SOEs. He called for flexibility in exploring new models and approaches for SOEs, advocating an open mind about creating new entities where necessary.

Building on comments from other Members, he referred to the mining sector and other industries as examples of areas where innovative thinking and a willingness to adapt could lead to meaningful reform. He stressed that any new approaches should be grounded in a clear understanding of policy objectives, and designed to address existing issues effectively.

Mr Gama continued by reflecting on past policy decisions, such as the attempted privatisation of forestry in 2001. He said that while there had been a clear direction toward privatisation at the time, the sector remained partially state-owned and now competed with private entities, showcasing the complexities of such policy decisions.

He brought up the importance of SOEs as entities that ensure security of supply, especially in critical times. He emphasised that SOEs were not just commercial ventures, but served as entities of last resort, crucial for safeguarding the economy and national interests during crises. He cautioned against dismantling this strategic role of SOEs, noting that while they may not always have a social mandate, they played a vital strategic function in protecting the country and the economy.

Referring to the Chinese model, he highlighted how it had evolved since the late 1990s and early 2000s, showing the importance of ongoing reform processes. He commended the presentation for acknowledging the continuous nature of reform, and cautioned against tying strategic objectives to fixed timelines, like the five years mentioned in the presentation. He argued that global changes often unfolded over a decade or more, suggesting that strategy should guide the implementation of the bill rather than the other way around.

He stressed that the bill should serve to operationalise policy, leaving policy choices to the executive branch. He noted that the proposed shareholder management model aligned with the issues being addressed, but emphasised the need for further clarity on strategic choices. He suggested that the Minister should clarify policy directions to the Committee before further engagement to avoid unnecessary conflict over policy matters. He emphasised that any disagreements should be rooted in substantive policy debates, rather than personal issues.

He also underscored the need for SOEs to play specific strategic roles in the current global context, advocating a collaborative approach where the Minister and Committee worked together to refine the policy framework and ensure that SOEs fulfil their intended purpose effectively.

Mr Gama continued by emphasising the importance of clear policy choices, stating that the Committee's role was to assess whether they agreed with the direction being proposed. He said they did not want to argue over structural decisions, such as creating a national state enterprise to manage SOEs, but instead sought clarity on the policy vision. For instance, if there was an opportunity to establish a new entity in a specific sector, they wanted to know the government's policy stance on such a move so they could evaluate and potentially support it.

He acknowledged that while funding was often highlighted as a challenge, it was not the entirety of the problem. Using Eskom as an example, he explained that even if given its balance sheet, his approach to resolving its issues might differ from current strategies. This underscored the need for policy to guide decisions, rather than focusing on granular details at the legislative level.

He discussed the importance of competitiveness in certain sectors, like aviation, and the role policy should play in shaping outcomes. Referring to the South African civil aviation sector, he said that the market could not sustain more than two or three operators. He pointed out the contradictions in current strategies -- while there was an "open skies" approach in inviting global players like American Airlines, there was also a simultaneous desire to make SAA commercially viable. He argued that these tensions should be addressed at the policy level, rather than through legislation.

He highlighted the need for innovative thinking to support the proposed bill. While welcoming the introduction of the bill and supporting its intent, he stressed that decisions about commercial viability must be policy-driven. He observed that historically, many major projects in the country were not commercially viable at inception, indicating that the government must make deliberate choices about how policy guides the sustainability and role of SOEs in the broader economic landscape.

He continued by reiterating that the Committee welcomes the bill and views it as moving in the right direction. He clarified that their feedback was an indication of their stance, emphasising that while the bill would go for public comment, the Committee’s position on various issues was already forming. He stressed the importance of understanding the policy choices the Minister and Cabinet had made, noting that the Committee would engage transparently -- supporting some aspects, opposing others, and providing constructive feedback where necessary.

Mr Gama drew comparisons with international examples, particularly China's developmental trajectory, to illustrate how deliberate policy choices and strategic planning could build a sustainable state. He highlighted China's decision under Deng Xiaoping to prioritise infrastructure such as rail networks despite the lack of technology. By collaborating with countries like Japan and Europe, China had been able to acquire and adapt technology, eventually creating its own advanced systems. He contrasted this with South Africa’s approach, noting instances like PRASA's collapse and the challenges faced by Transnet due to unresolved issues and a lack of evidence in addressing corruption allegations.

He emphasised the need for South Africa to learn from these international models while adapting them to its own context. For him, the focus should be on underlying policies and key success factors, such as preconditions for success and transparency in building SOEs that could drive development. He called for open communication from the Minister to avoid misunderstandings or surprises in the implementation process. He encouraged the Minister to proceed to share with the Committee what they had so far, and stated that the timelines that were presented could be realistic. He said the process of finalising legislation was now more rigorous than in the past, which required a focused and collaborative approach.

Addressing specific aspects of the bill, he criticised provisions such as the President tabling annual reports, arguing that the President should focus on broader national issues rather than operational details. He agreed with previous Members who had pointed out the need to allocate responsibilities appropriately to ensure effectiveness and efficiency.

In conclusion, he reaffirmed the Committee’s support for the bill and the overall direction it proposes. He emphasised their commitment to providing detailed, thought-out feedback at the appropriate time to help refine the legislation and ensure its successful implementation.

Ms Dunjwa began by seeking clarity on the composition of the panel outlined on page 46 of the bill, particularly regarding the representation of the National Economic Development and Labour Council (Nedlac). She questioned why only two chambers of Nedlac were included, leaving out the third, given that the issue fundamentally involved communities. She expressed confusion about the context of the discussion, noting that while the bill had been tabled and received, Parliament’s role was to initiate its process of public consultation. She reminded the Committee that communities and other stakeholders would still present their views to Parliament, even if they had already engaged with the ministry. The process would also involve input from state law advisers.

She emphasised the importance of separating the current discussions from the formal deliberations yet to come. Drawing on an analogy, she said that while the Committee had been empowered by the presentations from SOE leaders, it must avoid "putting the cart before the horse." She proposed that the Committee acknowledge the valuable points raised, but avoid treating this initial engagement as the start of the deliberation process.

She also highlighted the constitutional responsibility of the Committee to conduct oversight, stating that this duty did not need to be explicitly included in the bill. She clarified that the same applied to regulations, which would be developed after the bill was finalised and may address some of the issues raised during the discussions. She warned against conflating this preliminary workshop with the formal deliberations that would follow.

Acknowledging that some Members were new and unfamiliar with parliamentary processes, she assured them they would be empowered and guided as the process advanced. She proposed that the Committee and presenters park the points raised during the workshop for future reference. This would allow the Committee to revisit these points during the formal deliberations, hold stakeholders accountable for their previous statements, and seek further explanations as necessary.

In closing, she underscored the importance of maintaining clarity, structure, and patience as the Committee moved through the various stages of engaging with the bill and the public consultation process.

The Chairperson said that the previous Member had largely addressed her points, particularly regarding the importance of adhering to parliamentary procedures and not deviating from the established rules. She emphasised the need for Members to stick to these guidelines. She then indicated that she would allow the team to respond to one or two issues before handing the discussion back to the Minister.

Ms Dunjwa continued by reassuring the Members that they were entitled to request a mandate from the Chairperson to embark on a strategy tour to learn about best practices. She explained that this could be done after the debates and discussions were concluded, emphasising that it was within their rights to undertake such an initiative. She clarified that this was not a matter of mistrusting the Minister, but rather an opportunity for the Members to independently explore and gain insights from other countries that could inform their decisions. She encouraged Members to understand that such a time would come, and that it was part of their broader role in the process.

Department's response

Adv Makobe expressed his excitement about the significant processes and discussions taking place globally, emphasising the importance of policy reflections and a clear statement of intent as the process unfolds. He acknowledged the comments and feedback received, agreeing that they would contribute to improving the legislation. He appreciated the wealth of information shared during the discussion.

Addressing questions raised, he said that the comparisons with other countries were informed by global models that had proved effective, particularly those highlighted in OECD reports. As part of their research, they studied the experiences of Malaysia, Singapore, China, Norway and France, recognising that SOEs in these countries served as catalysts for development.

He also responded to concerns about the role of the panel and its involvement in board appointments. While the initial intention was to follow company law provisions, they were open to the suggestion that the panel could remain involved in subsequent board appointments. However, given the large number of SOEs, he noted the practical challenges, suggesting the possibility of multiple panels to manage the appointments. Based on this feedback, he emphasised the importance of refining the board appointment processes.

Regarding the centralised model, he clarified that it would focus on strategic SOEs, with criteria defining their inclusion in the model. He highlighted that the strategy would also address private sector participation within SOEs, an issue raised during the discussion.

He acknowledged the omission of the Community Development Chamber, and accepted that it should be included in the framework, thanking the Members for raising the point. Concluding his remarks, he reiterated the importance of the feedback received and its role in shaping the next steps of the process.

Minister's comments

Minister Ramokgopa expressed gratitude for the valuable inputs provided, commenting that they were deeply insightful and historically grounded. She remarked that the session reminded her of the transformative processes undertaken in China, referring to their historical progression from the 1940s through 1978, which provided a framework for understanding long-term development. She suggested that it would have been beneficial to allocate two days for such discussions, given the depth and quality of the contributions.

She emphasised the importance of these discussions in shaping the articulation of the process, explaining that the differences in perspectives stemmed from the complexity of the unfolding processes. She expressed hope that Parliament would continue its deliberative process, allowing for collaboration between the executive and the Portfolio Committee to refine and parallel their efforts with other necessary processes.

She stressed the need for alignment among all stakeholders to ensure a unified approach as the process progresses. She said that once the executive's role was complete, the media and the public would direct their questions to the Committee, highlighting the importance of the Committee’s guidance and direction in navigating these discussions. She assured the Members that the executive would adhere to the guidance provided by the Committee to finalise the process effectively and with trust.

She acknowledged the ongoing nature of the process, emphasising the importance of systems and structures that ensure alignment and oversight. She expressed confidence that the Committee's contributions would help establish a solid foundation for oversight and implementation.

Concluding, she thanked the Committee for the learning opportunity, humorously admitting that while they had intended to "workshop" the Committee, they had found themselves being "workshopped" instead. She expressed appreciation for the collaborative and enlightening engagement.

Chairperson's concluding comments

The Chairperson said that based on the inputs received, there was consensus among Members to support the bill presented. However, she emphasised the importance of adhering to standard parliamentary procedures. She reminded the Members that during the next meeting on 22 November, an amended programme would be presented and emailed to all Committee Members in advance.

She highlighted that one agenda item on the 22nd would be reviewing the advert for public comments and submissions, which had previously been presented but had encountered issues. She also mentioned that the forum would engage in activities between meetings to maintain mutual confidence and alignment on the process.

She said discussions had already begun with Committee staff about organising a study tour to one of the countries identified as having best practices in managing SOEs. The choice of the country would be discussed in the forum, ensuring it aligned with the Committee's objectives.

She extended her gratitude to the Minister, the Deputy Minister, and their team for their leadership and input. She also thanked the Committee Members, colleagues, and the support staff, recognising their ongoing role in advising the Committee and ensuring the process was carried out effectively.

The meeting was adjourned.