Department of Public Enterprises: Budget Vote 2007-10 briefing

LABOUR AND PUBLIC ENTERPRISES SELECT COMMITTEE    
10 May 2007
DEPARTMENT OF PUBLIC ENTERPRISES: BUDGET VOTE 2007-10 BRIEFING

Chairperson: Ms M Temba (ANC, Mpumalanga)

Documents handed out:
Department of Public Enterprises Strategic Plan and Financial Overview 2007-2010 presentation

Audio Recording of the Meeting

SUMMARY
The Department of Public Enterprises briefed the Committee on its strategic plans for 2007 - 2010. Its particular contribution to political imperatives lay in strengthening State Owned Enterprises (SOEs) and departmental governance and administrative systems, management of SOEs, and overseeing an accelerated infrastructure investment programme. The department exercised shareholder management over nine state owned enterprises, and must ensure they met their corporate strategies and reflected government priorities. It also worked with other government departments to ensure coordination and service delivery. The key achievements included amendments to the structure to reflect greater focus, and various legislative and policy directives. The Department had now restructured into three main programmes. The total budget for the 2007-08 year was R2.38 billion. The planned activities under each programme were fully detailed.

Members raised questions on the extent of oversight over Eskom, the commercial viability of re-capitalisation, how the Department would ensure that disability plans were followed, identity and qualifications of board members of State Owned enterprises and their pay packages. The Department was asked to send details on State Owned Enterprises to parliament. Progress reports were requested in relation to SAA, the Transnet pension schemes, development of nuclear power by Eskom, and the role played in the initiatives of NEPAD, and the procuring of mining rights by communities.

MINUTES
Department of Public Enterprises (DPE) Strategic plan and budget vote Briefing      
Mr James Theledi, Deputy Director, Energy, Department of Public Enterprises, took the Committee through the role and functions of the DPE, its departmental strategies of the DPE, and its vision and mission. He set out the political basis that guided its strategy, pointing out that the imperatives included halving poverty and unemployment by 2014, which would require growth on average of 5%. DPE's particular contribution lay in strengthening State Owned Enterprises (SOEs) and departmental governance and administrative systems, management of SOEs, and overseeing an accelerated infrastructure investment programme.

DPE had nine state owned enterprises over whom it exercised shareholder management. DPE must ensure that these entities met their corporate strategies and reflected the agenda of the government of the day. The functions of the DPE included providing clear mandates, simple but effective governance systems and effective performance management. DPE's tasks included putting together the boards of the enterprises and approving their corporate plans and borrowing plans. The DPE also worked with other government departments to ensure coordination and service delivery.

The key achievements for 2006 included amendments to the structure to reflect greater focus, various legislative and policy directives that were listed, including amendments to the legislation covering Transnet pension funds, Infraco, SAA, SA Express, and a proposed restructuring of SAFCOL.

The DPE was moving away from a specialisation-based structure to a sector-based structure, with specialists incorporated in each SOE team. The three programmes would comprise Energy, Mining and Broadband, Manufacturing Enterprises and Transport Enterprises. Infraco would fall under Manufacturing and the Pebble Bed Modular Reactor (PMBR) to Energy. Legal, Governance and Secretariat was retained as a specialist function and the Risk function was incorporated into it. The new organisational structure was tabled.

Turning to the finances, Mr Theledi that the total budget for 2006/07 was R2.8 billion and for 2007 it was R2.38 billion. There was a substantial drop under Programme 2. No allocations had been made for Diabo Trust, Alexkor or Infraco and risk had been moved to the legal and governance programme.

The priorities and planned activities under each of the programmes were fully detailed in the attached presentation.

Discussion       
Ms J Terblanche (North West, DA) wanted to know the extent of the oversight of the DPE over Eskom, particularly with regard to electricity redistribution and electricity tapping.

Mr Theledi informed the Committee that the DPE monitored the investment programmes of Eskom, received regular reports from it and were aware that it had a number of interventions with shop owners to minimize electricity use.

Ms P Hollander (Northern Cape, ANC) wanted to know the commercial viability of re-capitalisation. She enquired how state owned enterprises accommodated disabled people.

Mr Theledi responded that for a company to be re-capitalised, it must be proven that the company would survive and cited the specific example of DENEL where a strategy was being pursued by the department.

On the question of disability, Ms Reneva Fourie, Parliamentary Services Unit, DPE responded that the DPE worked closely with SOEs to develop corporate plans which included gender and equity transformation, and that skills development programmes were in place to help the disabled. She stated that the DPE felt there was significant progress on these areas.

Mr N Hendrickse (Western Cape, ANC) asked the DPE to furnish complete details on SOEs to parliament.

Mr Hendrickse also enquired about the identity and qualifications of board members of SOEs, and questioned the high pay packages of Chief Executive Officers (CEOs) of SOEs.

Mr Theledi responded that the government stored a database of all board members serving in public enterprises and this information was disclosed in the annual reports of these enterprises. He further stated that the details about all SOEs were still being prepared and the information would be personally supplied by the Minister to parliament.

The DPE was preparing guidelines to govern the issue of CEO salaries, but stated that the current position was for the board of the company to approve the pay, subject to the approval of the Minister.

Mr Hendrickse asked for an explanation of progress in regard to SAA.

Mr Elvin Harris, Chief Director: Transnet, DPE, responded by informing the Committee that a renowned aviation world consultancy was already assisting SAA and information on the turn around should be available in the next six weeks.

Mr Hendrickse asked for details of what protection was being offered in respect of the Transnet pension scheme.

Mr Theledi responded that adequate provisions to deal with the issues were being put in place.

Mr Hendrickse wanted to know what was being done on the degrading state of the Karoos.

Mr Theledi responded on the issue of the Karoos that unfortunately, no provision was made for it in this year’s budget.

Ms S Chen (Gauteng, DA) asked exactly how much influence did the DPE exercise over SOEs.

Mr Theledi responded that the DPE approved the funding of these enterprises, developed their corporate plans, and exercised shareholder responsibility,  and the Minister met every quarter with CEOs on the coordination of strategic thinking.

The Chairperson wanted to know why the estimated budget reflected an increased figure on the compensation of workers.

Ms Sandy Hutchings, CFO, DPE responded that budget was done as a full establishment and what was reflected in the briefing might not necessarily reflect what would be practised by the end of the year.

The Chairperson also wanted to know what the DPE meant by the development of Nuclear power by Eskom and how SOEs played a role in the objectives of New Economic Partnership for Africa's Development (NEPAD).

Mr Theledi responded that there was a need to diversify energy to increase production and reduce heavy reliance on coal, which was bringing about environmental problems. He stated that a demonstration plant would first be built before the power plan was introduced. Eskom and Denel were the key enterprises that played a role in meeting the objectives of NEPAD.

Ms Motloela asked how mining rights could be accessible to the community by providing further information to the public on procuring the rights.

Mr Theledi responded that the DPE worked with leaders of the community on the transfer of mining rights and these rights could only be transferred to communities who showed financial and technical competence.
 
Ms Motloela also wanted to know why SAA was proposing to dismiss some of its workers.

Mr Harris responded that all dismissals complied with s 197 of the Labour Relations Act.

The meeting was adjourned.