Department of Public Enterprises Annual Report 2007 / 2008

Meeting report

Department of Public Enterprises (DPE) Annual Report 2007/08
The Chairperson welcomed all members and stated that it would have been preferred if the Annual Report could have been handed out earlier so that members would have time to peruse the documents. She then asked whether the Director General would provide an explanation regarding the Eskom loan before proceeding with the presentation.

Ms Portia Molefe, Director General, Department of Public Enterprises, apologised for not handing out the documents in advance. She said that in the budget speech made by the Minister of Finance, there was an application for the recapitalisation of Eskom, by way of increases in tariffs. This was initially to be over a five year period. After that application, it then became evident that in fact Government would need to fast track an injection of funding into Eskom, in cash, to enable it to do the necessary infrastructure upgrades. She stated that the injection of funding would be by way of a loan, which would be an instrument of equity, and which would be provided over the next three years.

Ms Molefe then proceeded with her presentation on the Annual Report for 2007/08 of the Department of Public Enterprises (DPE). This would cover the performance over the past year,  the organisational structure, statistics, performance review, and annual financial statements.

She said that over the past year, several key achievements occurred: The draft Government Shareholder Management Model was completed. With regards to SA Express, the terms of the transaction were concluded between DPE and Transnet. The Richtersveld community land claim was completed in the past year. DPE was in the final stages of completing the Competitive Supplier Development Programme (CSDP).The emergency recapitalisation of South African Airways (SAA) had been facilitated. The shareholder compacts with Eskom, Denel, SAA and SAFCOL were signed. The DPE’s  Employment and Skills Development Agency was approved, with the consent also of the Department of Labour. The year started off with a National Electricity Emergency Response Plan and was handled fairly well. A report would be written by the end of the year on what lessons had been learned. It was noted that the DPE had become energy efficient and had implemented a programme, with measurements being done on a monthly basis.

Ms Molefe then gave a brief explanation of the organisational structure (see attached presentation for details).

The Chairperson asked whether Ms Molefe could provide a name to the positions in the organogram, and this was done.

Ms Molefe then proceeded with the DPE statistics. The total posts in the establishment were 157 positions, and of these 138 were filled posts. Problems were experienced with some positions that were really difficult to fill. Salaries in the public sector were a real constraint in terms of hiring. The vacancy rate was 13.49% as at 31 March 2008. The staff turnover rate was at 17.4% as at 31 March 2008.

With regards to the employment equity targets, Ms Molefe said that DPE had done generally well. It was having some challenges in ensuring that people with disabilities were accommodated in the workplace at executive level. With regard to the gender equity statistics, males accounted for 55.81% and females for 44.19%. Ms Molefe said that the DPE might reach the target of complete equality in gender by 31 March 2009. From a demographic point of view the DPE was quite well balanced, but could have more coloured and Indian male representation.

She stated that there were 27 interns appointed in DPE, some of whom were employed within the Department itself. The quality of the interns had improved phenomenally. The interns had an intensive training programme. Four students were sponsored at honours level, with the specific aim of specialisation.

Ms Shireen Crosson, Director: Corporate Services, DPE, spoke about planning, monitoring and evaluation in administration. She said that the business and strategic plans were approved, with quarterly reports being produced. In terms of the Chief Investment and Portfolio Management (CIPM), the dashboard was implemented and quarterly portfolio reporting to the DPE Board was introduced. The Government Shareholder Management Bill was submitted to Cabinet for consideration. The Komatiland Forest (KFL) transaction assessment had been done in relation to Safcol.  In terms of the Richtersveld settlement agreement, movable assets were transferred to the Richtersveld community in April 2007. The claim of R2.2 billion by Umthunzi against government and Transnet was ongoing.  

On the human resources side, Ms Crosson said that the focus was on training and retention strategy.  She added that retention was a critical issue. The Department struggled with losing skills to the private sector.

With regards to communications and international relations, the highlight for the year was the Annual Report which was tabled in parliament, but other publications were also made on CSDP. A celebratory event marking the land claims settlement between Alexkor and Richtersveld was hosted. She noted that in the area of information management, there had been IT upgrades to improve the technology in DPE.

In terms of finance, DPE had achieved the fourth successive unqualified audit. All financial procedures and regulatory compliance requirements were met. The internal audit unit had an approved Risk Register in place, after an in depth process that required plenty of workshopping.  That formed part of the performance review of Deputy Director Generals and Management. The electricity consumption reduction project that started in March 2008 had achieved considerable savings in terms of kWh.

Mr C Forlee, Acting DDG: Energy and Minerals, DPE, said that there was a 50% reduction in electricity consumption. One of the outputs was the introduction of private sector participation, which, in the future, would play an important role in supplying electricity. In the past financial year, Cabinet had resolved that Eskom be the designated single buyer of power. In a recent press release, there were 27 bidders who were pre-qualified. He noted that 4500 megawatts of power was needed. Contracting would be finalised by the end of 2009. The DPE co-authored the Cabinet-approved National Electricity Emergency Response Plan, and many of the programmes were targeted at residences. The Eskom Build Programme went to Cabinet for approval but the programme had been changed and therefore needed to go back for re-approval at Cabinet level. 

Mr Forlee said that Eskom’s strategic intent statement was issued and signed. This essentially identified, reviewed and benchmarked the strategic key performance indicators (SKPIs). 

With regard to nuclear enterprises, Mr Forlee said that the Pebble Bed Modular Reactor (PBMR) tabled its first Annual Report in parliament and was given a hot commissioning licence for the Advanced Coater Facility at Pelindaba. There was also approval of a Strategic Framework for the market development of PBMR’s intermediate temperature reactor for process heat applications in the North American market. They were also involved in the Next Generation Nuclear Plant (NGNP) and were busy with phase 2 of the NGNP contract.  PBMR had also secured 100 000 accident free operating hours at the Helium Test Facility.

In respect of broadband enterprise, the Infraco business plan was updated. Infraco was recruiting permanent employees and had a 10% vacancy rate. 

Mr Phahlani Mkhombo, Chief Director: Legal Counsel, DPE, said that a Memorandum of Agreement with the Department of Land Affairs, in respect of compensation to Alexkor for the assets used for restitution, was completed. He added that a further Memorandum of Understanding had been entered into with the Development Bank of South Africa (DBSA) in preparation for the handover of the Alexander Bay township development project to the DBSA as implementing agent. The broadbrand Infraco and South African Express (SAX) Bills were promulgated and came into effect on 1 February 2008. The transfer of Full Service Network metropolitan assets and network operations facilities to Neotel was completed. The Promotion of Access to Information Act (PAIA) Manual was also completed. Furthermore he said that the addendum on Aventura was also concluded. He added that DPE had drafted and developed the guidelines for the Employee Share Ownership Programme (ESOP).

Ms Molefe added that Aventura remained unclosed and was regarded as an unfinished transaction. The core issue was to try to find records that had been left out of the transaction.

Mr Mkhombo noted that the matter of Nabera versus Alexkor and Government had been held in abeyance. The Pahapur Londoloza Consortium against the Minister ,and Safcol’s contestation of the decision to terminate the Komatiland transaction had been finalised. Under general governance matters, he noted that Eskom, SAA, Safcol and Denel compacts were signed. The Governance Frameworks and tools to contribute to effective monitoring and management of State Owned Enterprise (SOE) corporate governance were completed. The Governance Audit Template was in the process of finalisation.  The Board Induction Toolkit and Training was completed and signed off by the Minister. The internal process for the Generic Founding Documents for all SOEs was completed. The Review Remuneration Guidelines were approved by Cabinet.

in respect of risk, Mr Mkhombo said that the Risk Management Framework for shareholder level risks was completed. The MOU in respect of the Significant and Materiality Frameworks in respect of Denel, Infraco, SAA, SAX and Safcol were completed and in the process of implementation. DPE had processed and monitored 38 applications under Section 54 (2).

Ms Molefe suggested that Mr Mkhombo should explain what a Section 54(2) application was.

Mr Mkhombo said that this was the section that required the SOEs to apply for approval from the Minister before entering into significant transactions.

Mr R Nogumla (ANC) intervened to seek clarity on what was the Significant and Materiality Framework.

Mr Mkhombo said that it was a tool that was developed by the Department to act as a guideline and to supplement the section 54(2) process, and that it set out the limits of certain transactions that SOEs could enter into. It also prohibited certain transactions.

Ms Molefe added that under normal companies with shareholders, issues were resolved by shareholders. The Significant and Materiality Framework essentially created limits and determined what would have to go to the shareholders (government) for final approval.

Mr Mkhombo then continued with section on risk. The SOE risk reporting dashboard was developed and the establishment of the 2010 risk task team was ongoing.  

Mr Mkhombo said the transaction guidelines for the Komatiland Forest transactions were concluded. The framework for the transfer of minority shareholding was completed and in the process of implementation. The Employee Share Ownership Scheme, which related to Komatiland, had completed all remaining transfers to employees. 

Mr Mkhombo then listed the outputs of the Secretariat (see attached presentation).
 
Mr John Morris, DDG: Manufacturing , DPE, continued with the presentation, focusing on manufacturing enterprises. He noted that in the area of defence, an amount of R933 million recapitalisation tranches to Denel was completed. DPE also had to assist Denel with short term borrowing, in an amount of R1.3 billion, with the guarantee application made in November 2007. The first tranche was agreed to by the Minister of Finance in June, for R888 million and the second tranche, an amount of R420 million, was agreed to in August 2008. The Defence Sector Strategy (DSS) was approved by Cabinet and DPE initiated discussions with Department of Trade and Industry (dti)  to develop a Customised Sector Programme for the industry. Further work with the Department of Defence was ongoing. Denel’s further restructuring and consolidation was focusing on four areas where further intervention was required. That report was finalised in April 2008 and presented to Cabinet in June. Furthermore, regarding the Defence Evaluation Research Institute (DERI), Armscor finalised the study on the corporate form with DPE assisting. A CEO was appointed by Armscor.  In support of large strategic exports, an agreement was reached with Export Credit Insurance Corporation (ECIC) and dti would take that process forward with National Treasury.

The ten year Research and Development strategy had to be re-prioritised due to the amount of work that went into the Denel end-state. Safcol’s specific role in forestry was reviewed, the decision went to Cabinet and transaction guidelines were developed for the disposal of the Komatiland Forests. Complexities had arisen around the resolution of the land claims, which accounted for 60% of land on which KLF operated and issues around furthering competition in that sector necessitated a longer timeframe for the disposal,  particularly for a model that would benefit the local communities. He added that the land settlement model would go hand in hand with the disposal model. That process would be undertaken jointly with the Departments of Land Affairs, and Water Affairs and Forestry.

The Chairperson asked whether Mr Morris was speaking about the initial targets, or whether what he was speaking of took into account the change that was brought into Safcol’s mandate by the Minister, which had referred to a five-year plan. 

Mr Morris said that he was speaking about the objectives that were set at the beginning of the year. He agreed that the Minister had indicated a period of five years and that Safcol had submitted a five year plan in September 2008, that had been assessed by DPE.

The Chairperson asked whether it was approved and finalised.

Mr Morris said that it was not approved and that there were certain specifics that needed to be ironed out.

Ms Molefe explained that there was a five year development programme because that could possibly be the length it could take to resolve the land claims issue. Once the land claims were resolved, a reassessment would then be done.

The Chairperson then stated that on a recent visit to Safcol, given Safcol’s options on land claims, the Members had been presented with interesting ideas on how people could be brought into the forestry industry and continue to be owners of their plantations. The Chairperson wanted to know what approach would be taken regarding the land claims, between the Department of Land Affairs and DPE.

Ms Molefe believed that various interventions could be made. In the interim, DPE would approve what Safcol had planned, although there were some questions around it.

The Chairperson said that she would like to receive input into that process from the Department.

Mr Ibrahim Seedat, Acting Deputy Director General: Transport, DPE, continued with the presentation, focusing on transport enterprises. Under Transnet, the Minister had approved the framework for the Private Sector Participation for Ngqura. The final port and rail master plans were approved by the Minister. The objective was to plan fifty years ahead, with the demand based on the growth of the economy. The review of the Ports Act and Regulations was completed, and its purpose had been to determine the obligations of the Department of Transport and the Minister of DPE. The business valuation on the transfer of Shosholoza Meyl was completed. The definition of the core network and branch line was approved for branch line restructuring.

The turnaround aviation strategy was going according to plan. The 2007 / 2008 profit before restructuring would have been R123 million, and after restructuring it would be a loss of R1.3 billion.  The forecast for 2008 was a break-even situation. Had the fuel prices not increased, SAA would have achieved its objectives of 7.5% on turnover after restructuring. SAA had received its R1.56 billion capital injection into recapitalisation. The closure of SAA would have a devastating effect on the economy because SAA accounted for the largest inflow of foreign tourists into South Africa. The medium term role of SAA, SAX and Mango, were determined and the new mandates were incorporated into SAA and SAX Corporate Plans. SAA was defined as an African carrier with limited connectivity on the intercontinental destination, SAX as a regional air service carrier and Mango as a low cost carrier. He added that International Air Transport Association (IATA) was appointed to advise on the long range aviation strategy and that it would evaluate SAA’s performance over its long- haul route and draw comparisons to its competitors.

Ms Molefe added that the R1.56 billion was a guarantee and not a cash injection.

Mr Seedat said that the strategic overview of State involvement in the airline business was completed. The role of SAA in provision of cargo operations was defined and the African Aviation Strategy was developed.

Mr Mehleli Mpofu, Acting Deputy Director General: Joint Project Facility, DPE, said that under the Competitive Supplier Development Programme (CSDP), a number of procurement boot camps were held. A supplier benchmarking programme was developed and had been implemented with the United Nations Industrial Development Organisation (UNIDO).  In addition the South African Power Project was implemented, which was trying to localise the build programme. That strategy was developed and accepted by Cabinet in February 2008. The Employment and Skills Development Agency (ESDA) was to facilitate the placement of Further Education and Training (FET) graduates within Eskom, Transnet and their suppliers. With regard to the property project, after the lifting of the moratorium on SOE non-core property in the previous year, Broad Based Black Economic Empowerment (BBBEE) guidelines were re-aligned to dti’s code and those were made available on the website. Furthermore, a number of transactions were concluded, as fully listed. The projects in the rest of Africa were initially conceptualized to contribute to the infrastructure projects across Africa and DPE had identified various stakeholders in neighbouring countries. African countries were also approached to implement joint suppliers’ development programmes and DPE had partnered with UNIDO to implement a supplier benchmark programme.
 
With regards to the ICT programme, potential clients for the call centre project were identified. However, the initial design for the source of capital for the project did not materialize. DPE was in the process of revisiting the funding model for the project and unfortunately would not continue with the programme. 

In respect of environmental issues, he reported that the Strategically Important Developments (SIDs) were given special consideration in the Environmental Impact Assessment process. In terms of nuclear legislation, recommendations were made to Department of Environmental Affairs and Tourism (DEAT) and Department of Minerals and Energy (DME). DEAT’s capacity strengthening was done through the SOE Fund and the development of Sector guidelines were being funded through the SOE fund as well.

Discussion
The Chairperson asked the Department to define what was the role of the Regulator in the nuclear and environmental legislation.  

Ms Molefe said that there was an arrangement between DEAT and the mining authority on human responsibility, in terms of which the latter was responsible for safety, and DEAT for environmental matters.

The Chairperson said that one of the problems that faced the country was a looming energy crisis. She added that there was a wonderful Build programme that could assist with the crisis.  A lesson to be learned from Eskom was that if there was not timeous action, then this would cause further problems.  A report would be given to the Minister on the recommendations made by the Portfolio Committee.

Ms Molefe agreed. She questioned whether the MOU was sufficiently binding when it was taking someone else’s words and attempting to use this to give cover. She questioned whether it would not be more efficient to assign responsibility in a proper fashion.  

The Chairperson said that special arrangements should be made because of the current crisis, and that it could not be expected that all problems could be solved through a MOU.

Mr L Gololo (ANC) wanted to know what challenges were facing the Department.

The Chairperson noted the question but said the presentation should continue.

Continuation of presentation
Mr Mpofu said that there was a key initiative to build an aerostructure industry. With regards to Denel, the technology review led to their focus on wing to fuselage faring, which allowed Denel to enter further work with Embraer.

The Chairperson asked Mr Mpofu to explain what he meant by fuselage faring.

Mr Mpofu said that the fuselage was the long tube in the middle of the plane, and was a structure of support.

In terms of the joint project facility with Belarus, the aim was to identify areas of cooperation specifically in the area of defence and trips were undertaken to Belarus. Unfortunately, there was no feedback from Belarus and therefore the project was put on hold.    

The Chairperson wanted to know where Belarus was situated.

Ms Molefe said that it was next to the Ukraine. She added that it was very unfortunate that DPE was not able to do work with Belarus, as it was in a similar situation to South Africa. The real divide was around the issue of language. Belarus had good capabilities and would have been a good strategic partner.

Mr Mpofu said that the Research and Development strategy was developed and the framework was accepted by the Minister. This strategy was used by Denel to re-align strategy and business.

Ms Sandy Hutchings, Chief Financial Officer, DPE, spoke about Departmental expenditure trends. She said that there was an increase of R1.7 billion in the annual appropriation from R2.9 billion (2006 / 2007) to R4.6 billion (2007 / 2008), and this was mainly as a result of increased transfer payments. Under -spending amounted to R1.1 million, and arose through R74 thousand in the operational budget and R1.031 million in respect of funds for Denel / SAAB indemnity. She added that the Department achieved its expenditure well within the 2% benchmark. She then detailed the spending per programme. There had been substantial amounts on the Richtersveld celebration and the energy saving project within the Department. In Programme 2, operational expenditure increased mainly as a result of the Department’s participation in the national energy saving campaign and the SA Power Project. Under programme 3 (legal, governance and risk), expenditure for the year amounted to R21.1 million compared to R16.5 million in 2006 / 2007, mainly because of the legal costs incurred as a result of the Alexkor / Richtersveld land claims settlement as well for the drafting of the Infraco and SAX Bills.  Under programme 4 (manufacturing enterprises), expenditure for the year amounted to R3.7 billion compared to R1.8 billion in 2006 / 2007, due to the increase in transfer payments to the SOE. Under programme 5 (transport enterprises), the expenditure for the year amounted to R752.1 million compared to R3.5 million in 2006 / 2007. The increase was due to a transfer payment of R744.4 million to SAA. Under programme 6 (joint project facility), the expenditure for the year amounted to R15.5 million compared to R11.4 million in 2006 / 2007. That was due to an increase in existing projects as well as the sourcing of specialist and technical expertise. She set out how the revenue was comprised.

The Chairperson wanted to know what was the commission on insurance.

Ms Hutchings provided an example and said that if the Department allowed Old Mutual to debit accounts directly, they would pay a percentage to the Department. Page 83 of the Annual Report gave a breakdown of the major expenditure items, and page 85 contained a listing of  compensation of employees.

Ms Molefe then detailed the emerging risks that had to be managed. They included Institutional continuity, since DPE was constrained in its ability to attract experienced specialist skills which were also in great demand in the private sector. The perception of uncertainty regarding DPE’s future further exacerbated the problems of skills attraction. The funding of SOE capital investments was a big problem. The revenue generation capacity of SOEs was increasingly begging answers to the availability, nature and extent of appropriate shareholder support, at a time of planned and critical economic growth.

Discussion
Mr C Wang, ANC, wanted to know how  Infraco and CSDP  were working together, given the economic global recession that was expected, and how was the project affected.

Ms Molefe noted that the West Coast Cable undersea cable deadline was 2010. Given the financial crisis, progress in terms of funding options needed to be looked at.

Mr Wang enquired about the environmental standards around exporting technology in the future, how successful exporting would be, and who would buy from South Africa.

Mr Forlee said that in terms of international environmental standards approval, plenty of work had been done with the USA and that the regulator would be visiting or they had been already.

Ms Molefe added that there was a co - operation agreement. She said that licencing was not only a problem in South Africa and that the US regulator would work with their regulator.

Mr Wang asked whether the DPE was intending to absorb many of the intern candidates.

Ms Crosson said that DPE would love to take on all the interns and that it tried to absorb as many as possible, taking into account how many staff were needed. This was a continuous programme, as every year new interns were brought into the programme. Interns that moved into the job market received more than just an entry level job in other departments.  She added that the interns received optimal training.

Mr Wang enquired what other departments could learn from DPE.

Ms Crosson suggested that how other departments could learn from the DPE needed to be discussed so as to compare best practices.

The Chairperson wanted a one page report on the Public Enterprises Employment Skills Development Agency.

The Chairperson asked, in regard to vacancies, whether the Department actually screened people before they were employed, and whether this was done during the term of employment as well. She stated that the DPE had a high turnover when compared to other departments, and it was an area that should be watched.

Ms Crosson responded that screening candidates was done at the short listing stage, and that every five years a re-screening was done. All employees had to sign confidentiality agreements.


The Chairperson commented that the Aventura presentation this morning and what was contained on page 34 of the Annual Report were capable of being read completely differently, and cautioned that it was necessary to report in a way that did not promote any misunderstanding. She also said that each member should receive a copy of the PAIA manual.

Ms Molefe said that each member would be given a copy of the PAIA manual. With regard to Aventura, the objective was to conclude the transaction but the addendum was not done with the original transaction. In essence the addendum was now done, but the Department was still awaiting finalisation on transaction. She said that what the Department had procured for Infraco was the optical part of the network. She added that if there was a competitive supplier in South Africa then they would procure from that supplier. However they utilised local contractors. She added that Infraco did not have a CSDP. 

Mr Nogumla commented on the capital injection into SAA, noting that it was a guarantee, and that the commitment down the line needed to be questioned.

The Chairperson said that the Committee had received a briefing on the turnaround strategy for SAA, and noted that SAA had reported losses of R883 million in the previous year, but would report a break-even situation in the current year. She added that SAA wanted to recapitalise, but she wanted to know what exactly was being recapitalised, and whether the amount was intended to purchase aircrafts, since there were aircrafts that were grounded. Furthermore, she said that a guarantee did not lower the borrowing rate. The Chairperson also suggested considering amalgamating SAX and SAA into a SOE.  She stated that she was very interested in a strategic overview of State empowerment of airlines and said that there was a need to start valuing the cost to the economy without SAA, and prepare a document on that.

The Chairperson had noted that the key performance indicators (KPIs) were finalised, but she had no sense of what formed them. These were drafted quite broadly. She asked if the Committee could receive them prior to the end of the year, so as to develop further insight around particular targets.

Ms Molefe said that with regard to the shareholders compact, she was awaiting response from the DDGs to see which ones were done for the current year. The clause in the contract setting out the target was often an indicator of what the company was doing operationally, and it was for that reason that the DPE was not able to give the KPIs.  She added that a workshop with the Committee would be useful to show one of the dimensions of the compact, and even if the numbers were not available, the previous year’s numbers could be used. That would indicate the type of measures taken and why they were taken. A one day workshop with the Committee prior to the SOE annual report should be held to discuss all of the compacts and the indicators.

The Chairperson said that it was nonsensical just to go through the motions. She added that those sessions would be extremely important going forward.

Ms Molefe said that one area of adjustment in the government shareholders’ management model was the negotiations of the shareholders compact, and that there was great contention between DPE and the companies.  Ideally, the shareholders compact should be done at the beginning of the year. She added that there was a requirement for companies to submit their corporate plans, but that DPE did not have the powers to approve the corporate plans. This was one of the changes it would like to see, as if the power to approve was given, then DPE would be able to take those targets from the corporate plan and sort out administrative issues.

With regards to the area on Significant and Materiality Framework, Ms Molefe said that the remuneration framework only covered two executives, the CEO and the CFO. She added that the incentive programme was developed by the Board and management, and approved by the Board. She said that the CEOs running the companies were excellent and that they were dealing with a competitive environment. She reiterated that a confidentiality agreement was required of employees, and a new agreement was required for every project undertaken.

Ms Molefe then spoke further of SAA and SAX, expounding upon what had been raised by the Chairperson. Both SAA and SAX came from Transnet. The reason they were taken out of Transnet was because Transnet was in a volatile market. Their removal had provided Transnet with a much more stable portfolio for the future developments. SAX had been able to turn itself around but was still undercapitalised. The long term strategy was to have an aviation holding company. In the meantime, it was not desirable to put both companies at risk. She stated that IATA was not appointed to advise the DPE but that database had been purchased from IATA. She said that the issue was not how many people entered the country, but how much revenue would be retained without a national airline. The recapitalisation for SAA was not much for the acquisition of new aircrafts but for the pre-delivery payments and for the replacement of the guarantee. The guarantee also came with its costs, as it had fees attached to it. She added that the leases and operational costs for 747s were very expensive and therefore they were grounded, since it was cheaper to do so than to fly them. Four of these 747 aircraft had been leased four to other companies.

The Chairperson confirmed that the capital injection required was actually for leases that needed to be paid and pre-delivery payments for Airbuses, and hopefully that would be cheaper to run.

Ms Molefe said that the Airbuses were cheaper to run than the 747, and that they were more suited for the market, as they were smaller. They had effectively replaced the 747. She noted that R1.56 billion was just for the guarantee. 

The Chairperson wanted to know how long the payments would continue for the planes that were grounded.

Ms Molefe said that it would be for the duration of the lease.

Mr Nogumla wanted to know whether depreciation did not affect the 747.

Ms Molefe replied that it did not affect SAA, as the planes were leased.

The Chairperson said that she would really like a cost analysis of the current financial problems experienced by SAA, and a costing on the value of SAA strategically to the country, over and above what it cost to run the company.

She noted some of the challenges of DPE and reiterated the Committee’s availability to support the DPE’s initiatives.

The meeting was adjourned