Transnet and Denel: briefings

Meeting report

LABOUR AND PUBLIC ENTERPRISES SELECT COMMITTEE
19 October 2004
TRANSNET AND DENEL: BRIEFINGS

Acting Chairperson: Ms N Ntwanambi (ANC)

Documents handed out:
Transnet briefing
Denel briefing

SUMMARY
The two parastatals presented their employment and skills development programmes to the Committee. Members were concerned about Denel’s outsourcing plans and the effect it would have on employees. Maintenance of railway lines and security measures at ports and vandalism on the trains were also discussed. Gender equity and disability issues also featured during the Committee discussions.

MINUTES

Denel briefing
Denel’s Chief Executive Officer, Mr Victor Moche, led Denel’s presentation, focussing on gender, race and employment equity and skills development, as the Committee had requested.

He reported that Denel dealt with equipment manufacturing, which included design, development, manufacturing, marketing and support of products into world markets. The defence industry was made up of 2000 companies, most of them being Small, Medium and Micro-Enterprises (SMMEs). It was a major exporter of missiles and guided weapon systems.

It employed about 10 000 workers, of which 70% were artisans, technicians, engineers and scientists. The Commercial and Information Technology sector and some sectors of Denel would be outsourced and sold off.

Gender representation in the organisation stood at 74% male. Progress had been made at general management, corporate, and divisional management levels. Women had been targetted in all fields of recruitment and bursary allocations.

There had been some level of racial representation but the company still had a white male and ageing dominated workforce. Since 2003 there had been an increase of 36% to 60% at Executive Committee level and 33% to 43% at the divisional management level in the targeted groups. The company had been fully compliant with the Employment Equity Act.

Some developmental programmes had been introduced to deal with gender issues. Bursaries focussed on Science and Engineering and Technology and targetted female students as well. The chartered accountants’ training programme included one coloured female and two African males. Previously disadvantaged employees had been targeted for technological training in Sweden.

In addressing unemployment, the company had taken students through a one-year youth programme, giving them the necessary support to go through university. There was training for the company’s retrenched employees so they could start their own businesses and supported Small Medium and Micro-Enterprises (SMMEs) to create opportunities for displaced people.

Outreach programmes such as the Swartklip Needlework Program in Phillippi, would be handed over as an SMME project. Such programmes were run to assist various communities to create employment.

Transnet briefing
Transnet’s brief presentation, which was mainly around transformation issues, was led by the Group Chief Executive Officer, Ms Maria Ramos.

Transnet faced challenges around its core business and was unlikely to create jobs. Its role in job creation was to ensure an effective and cost-effective transport system. This would assist the economy to be competitive domestically and internationally.

The company’s operating profit was down 96% and capital and reserves were down 49%, meaning there was too much debt. Last year, the company had a turnover of R43.6 billion and expenses of R43.4 billion, which meant that the operating profit would be R187 million. The Transnet Group had shown a loss of R6.3 billion last year.

Part of the company’s losses resulted from decisions taken in previous years. The South African Airways, which was part of the Transnet Group, had bought many Airbuses at a Rand: Dollar exchange rate of around R11.82/R12 to the Dollar. Transnet had to recapitalise SAA by R10.1 billion.

The company was a very large conglomerate and had failed to focus on rail and ports. Despite having spent money on skills development, there had been still a misalignment of skills. It also had outdated infrastructure and an ageing labour force. There had been poor risk management and corporate governance.

Transnet was in the process of implementing a turnaround plan. Business would be re-directed, and balance sheets would be restructured. A new Board had been set up to look at strategic corporate governance policies, principles and implementation.

There had been significant shifts in top and senior management level and women occupied some of the positions at this level. There had been a challenge to increase the number of African employees. Transnet had managed to attract women to their engineering programmes, but needed to have female train drivers. In 2004, the racial breakdown was 53% African, 4% Indian, 33% white, and 10% coloured.

Discussion
The Chairperson commented that Members would be more interested in projects in the Western Cape. Although there had been improvements regarding gender equity, it was still not satisfactory. Most companies were based in Gauteng and there had been more growth there. She asked if Denel would possibly take a plant to the Eastern Cape. She also asked if outsourcing would affect the workers.

Mr Moche replied that Denel’s products needed to be placed in very remote areas where people’s lives would not be endangered. Outsourcing would be in non-defence products and this would have no impact on employment. The company was aware of the issue of gender equity and the youth development programme was expected to hit a 50% female mark.

Ms M Temba (ANC) asked for an indication of extending the Sediba project nationally, and when it would happen. There were young and capable women who could be identified from rural areas. Gender should also include disabled people.

Mr Moche responded that it depended on the available resources whether projects could be extended to rural areas, so teachers could be given the ability to teach Maths and Science. There had been no specific timeframes. Disabled people were employed on the basis of self-identification, they declared themselves disabled and special arrangements were made for their employment. They were mostly placed in areas were health and safety were not an issue.

Mr J Sibiya (ANC) asked for an indication of the gender allocation of Denel’s bursaries. He also enquired if there had been any African included in the females in the chartered accountants’ program.

Mr Moche said Denel was not actively recruiting these students - they took what the Auditor-General offered. He did not have the statistics for the gender allocation of the bursaries.

Mr K Sinclaire (NNP) asked if Armscor got a state subsidy and why Denel’s net loss was getting bigger.

Mr Moche’s response was that Armscor was part of the Ministry of Defence while Denel was not. It expected capitalisation by the shareholder. Losses had been higher because of the lack of operations. Another reason had been the impairment of assets.

Mr M Kolweni (ANC) asked if the 60% export sustained the company. He also enquired about the number of people affected by the outsourcing. He also asked about the number of women included in the engineering project and what racial equality meant.

Mr Moche said that higher exports translated to more employment and the sustainability of the company. About 1 200 people would be outsourced.

Mr D Gamede (ANC) asked if the disability issue around security and safety was further debated. He asked if there had been concrete plans for the two economies regarding unemployment. He also asked about the plans around Employment Equity.
Mr Moche said disabled people were employed on the basis of self-declaration. Working conditions were not neutral to the disabled, but the people were not used in highly hazardous areas. The company had to create jobs in the new economy. People needed to be re-skilled to cope in the new economy, which was largely capital and technology-driven.

The Chairperson asked who owned the railway houses and surrounding buildings She asked if there had been any plans to revive railway lines in the Noupoort-De Aar area. She also wanted to find out who was responsible for security at ports. Lastly, she enquired about the allegations that Board Members had been enriching themselves, and if there were any pending cases.

Ms M Ramos responded that Transnet owned property in different places and Spoornet owned some of the houses. Ports property belonged to the National Ports Authority. Transnet spent R3.5 million a year to repair the properties. It needed to generate economic returns to finance new infrastructure investment.

Mr J Sibiya (ANC) asked why rural people preferred not to use trains.

Ms Ramos said people preferred to go by road because it was cheaper to transport goods by road than by rail. There was more investment in the infrastructure and it was more efficient because less time was spent on the road.

Mr D Gamede (ANC) asked what plans there were to develop the port at Richard’s Bay to assist in job creation.

Ms Ramos responded that Richard’s Bay was an important investment, but the busiest port was Durban. The company was investing in the port but the focus was on making improvements to Durban.

Ms J Terblanche (DA) asked for the timeframes of the turnaround plans. Ms Ramos responded that they were looking at a five-year turnaround strategy, and by then, they would have put in place most of the strategies.

The meeting was adjourned.