Public Enterprise’s Programme of Action: Briefing by Minister

Meeting report

PUBLIC ENTERPRISES PORTFOLIO COMMITTEE; LABOUR & PUBLIC ENTERPRISES SELECT COMMITTEE: JOINT MEETING
6 March 2001
PUBLIC ENTERPRISE’S PROGRAMME OF ACTION: BRIEFING BY MINISTER

Chairperson: Mr SBelot

Documents handed out:
Department of Public Enterprises’ Programme for 2001/2: Presentation by the Minister Jeff Radebe  (also attached as a text appendix)
Other relevant DPE documents

Department website: www.dpe.gov.za

SUMMARY
The Minister said his Department’s vision is to make State Owned Enterprises globally competitive and mentioned that the major programmes this year are the Restructuring of State Owned Enterprises and Performance Monitoring and Benchmarking. Key initiatives are the Initial Public Offering for Telkom, preparations for South African Airways, Airport Company of South Africa, and Arivia.kom IPOs and the finalisation of Sectoral Policies. Another challenge was the interaction his Department would have with organized labour.

MINUTES
Accompanying Minister Jeff Radebe were:
Dr Sivi Gounden – Director General
Mr Leslie Maasdorp – Head of Restructuring Unit
Dr Ian Phillips – Special Advisor
Mr Mac Gantsho – Chief Director: Performance Monitoring and Benchmarking
Mr Andile Nkuhlu – Chief Director: Restructuring Unit
Mr Fani Zulu – Director: Communications

The Minister Radebe gave a presentation on his Department’s strategies for 2001/2. He referred to the Department’s vision of making State Owned Enterprises (SOE) globally competitive. He then touched on the Department’s programmes and objectives. (See Appendix for his presentation)

Discussion
Ms. Taljaard asked the Minister the following questions:
- What areas had caused a deficit of R2.2 billion of revenue budget for the Department last year.
- What mechanisms are in place to ensure that the IPO for Telkom is finalised.
- What guarantees are there that the BAE System will not entail offset deals.

The Minister’s response to the first question was that the SairGroup and the M-Cell deal contributed to the deficit and that this year they are not only going to reach their target but they are going to go beyond it.

On the issue of the Telkom IPO, the Minister said he chairs a Ministerial Committee that deals with this matter. He is very confident that the Telkom policy is going to be in place.

The Minister said the BAE System was always a separate issue. On the side of the Government and its advisors they will ensure taking care of the interests of the shareholder which is the people of South Africa.

Ms Taljaard asked if the Committee could be involved in the process of the oversight role of the Shareholder Compacts with Eskom, Transnet and Denel.

The Minister replied that “his door is not only open but that they can go right through it” so that on finalisation, the Shareholder Compact is something which the Portfolio and Select Committees are happy. The Minister added that they want to standardize the Shareholder Compact across all the SOEs.

Mr Msomi (IFP) asked the Minister to comment on Cosatu’s role in the restructuring process.

The Minister replied that they have a National Framework Agreement within Government and organized labour. At broad policy level they have what they call “six a side” where six cabinet members meet with six members of organized labour and discuss in broad outline the restructuring in South Africa. Underneath that they have Sectoral Committees (for example Telkom, transport etc) where specific issues relating to that sector are discussed. Below this they have Restructuring Committees at an enterprise level where management and organized labour meet on continuous basis.

The Minister commented that this is a very challenging task which will not be without problems. Overall, he believes that the process is manageable.     

Appendix:
Department of Public Enterprises' Programme for 2001/2
Presentation by Minister Jeff Radebe   6/3/2001

Background and Context
- SOE restructuring critical in this phase of economic restructuring (emphasis on growth and universal access to affordable and reliable services)
- SOE restructuring aimed at integrating public, private and social capital and expertise, to ensure that our developmental objectives are achieved
- Restructuring objectives include macroeconomic, microeconomic and social objectives

DPE Vision
Restructured SOEs in a globally competitive environment, promoting economic growth and a better life for all

DPE Mission
To direct and manage the accelerated restructuring of SOEs to maximise shareholder value

Programme 2a: Restructuring Unit
Key initiatives
· Energy (Eskom)
· Telecommunications and Information technology (Telecoms Consolidation, M-Cell, Arivia.kom)
· Transport (Transnet - Spoornet, Portnet, SAA, Petronet, Transnet end-state), ACSA
· Defence (Denel)
· Other - Safcol, Alexkor

Eskom
· Finalisation of a restructuring plan for Eskom Generation (March 2001)
· Finalise Transmission Model (March 2001)
· Finalise EDI blue print and phase 2 of study (March 2001) - DME
· Develop regulatory framework for competition (Sept 2001) - NER
· Amendment of Eskom Act to give effect to competitive model & establishment of holding company (March 2001)
· Determination of Eskom asset values (May 2001)
· Establishment of subsidiary companies dependant on finalising of restructuring model

Telkom
· Finalisation of Telecoms Policy post Telkom exclusivity (April 2001) - DoC
· Gazette final regulations (July 2001) - ICASA
· Telecommunications Amendment Act - enacted (July 2001) - DoC
· Intergrated license/s conditions (July 2001) - DoC, ICASA
· Integration of SOE Telecoms capability dependent on Telecoms Policy? (July 2001)

M-Cell
· M-Cell competitive bidding process for remainder of Transnet shares (to end May 2001)

Transnet
Spoornet:
· Finalisation of Spoornet Restructuring model (April 2001)
· Establishment of Rail Safety Regulator including legislation (June 2001 - interim, Sept 2001 - permanent) - DoT
· Establishment of economic regulator including legislation (Sept 2001) - DoT
Incorporation of Spoornet (August 2001)

Portnet
· Ports policy completion (March 2001) followed by legislation - DoT
· Incorporation of Port Development Agency and Port Operations (August 2001)
· Establishment of regulator (March 2001) followed by legislation - DoT
· Multiple Tariff reform finalisation (December 2001)
· Commence outsourcing of some port operations (January 2002)
 
Petronet
· Implementation of policy framework for regulation of liquid fuel pipelines (June 2001) - DME
· Legislation for regulator (July 2001?) - DME
· Establish liquid fuel pipelines regulator (September 2001?) - DME
· Completion of technical analysis on restructuring model for Petronet (May 2001)
 
SAA
Finalise negotiations with SairGroup on 10% call option (December 2001)

ACSA
Finalising restructuring model for Airports Company (June 2001)

Denel
· Finalise negotiations with BAE Systems for minority shareholding in Denel Aerospace (July 2001)
· Complete negotiations with Snecma-Turbomeca for disposal of controlling shareholding in Denel Airmotive (May 2001)
· Complete negotiations with Pains-Wessex for disposal of shareholding in Swartklip (July 2001)
· Finalise restructuring model for Denel Ordnance including international partnerships (July 2001)

Safcol
·  Finalise disposal of KZN package by July 2001
·  Disposal of Northern Forests package - September 2001
·  Develop and finalise strategy for remaining Safcol packages (July 2001)

Alexkor
-  Amendment of current Alexkor Act (Urgent -first sitting 2001)
-  Commence process to identify a SEP for Alexkor (March 2001)

Programme 2b: IPO Unit
Key initiatives
·  Initial Public Offering for Telkom (4th Quarter)
· Commence preparation for SAA IPO scheduled for 2002 (September 2001)
· Commence preparation for ACSA IPO and Arivia.kom IPO scheduled for late 2002-2003, subject to Cabinet approval (December 2001)

Programme 3b: Strategic Analysis
· Study on employment impact of SOE restructuring (August 2001)
· Macroeconomic analysis of impact of restructuring (Jan 2002)
· Sector specific analysis (by request of Restructuring Unit or IPO Office)
· Restructuring policy annual analysis (Sept 2001)

Program 4: Alternative Service Delivery
· SOE procurement policy finalisation and implementation
· Employee share ownership plans - policy finalisation and guidelines (Nov 2001)
· Development of models for the formation of Co-operatives and community trusts (September 2001)
· Monitoring of SOE procurement outcomes and ASD strategies (Ongoing)

Program 3a: Performance Monitoring and Benchmarking
· Development of a post restructuring model for Government to manage its shareholder interests phase 1 (September 2001)
· Models / systems for holistic performance monitoring and evaluation of SOEs (August / September 2001)
· Audit report on corporate governance status and compliance by SOEs (May 2001)
· Signing off of Shareholder Compacts with Eskom, Transnet and Denel (April 2001)
· Development of relevant SOE Database (September 2001, ongoing)

Financial:
· Establish SOE financial performance and evaluation regime (June 2001)
· Evaluation of borrowing programmes (annually)
· Tabling of financial statements, report on financial position and performance of SOEs (annually)
· PFMA compliance (ongoing)
· Financial performance monitoring and reporting (ongoing)

Corporate Governance:
· SOE Board selection/appointment policy and management of conflict of interest policies (May 2001)
· Board Remuneration policy (May 2001)
· Assessment of corporate governance Protocol (July/August 2001)
· Best practice probity and ethics policy (July 2001)
· Shareholder compacts monitoring (ongoing)
· Implementation of monitoring systems (Sept. 2001)

Process and Management:
Electronic platform/interface between DPE and SOEs (November 2001)
Summary reports to Govt on SOE performance (ongoing)
Management and co-ordination of shareholding relations with internal programmes, SOEs and other departments (ongoing)

Key Challenges
· Finalisation of Sectoral Policies
· Timeous finalisation of critical legislation
· Interaction with organised Labour on restructuring initiatives
· Careful review of current shareholder agreements and development of future shareholder agreements

Conclusion
· 2001/02 represents an acceleration in the implementation of SOE restructuring
· Need for the alignment of Portfolio Committee programme with Departmental programme to ensure constructive engagement prior to implementation
· Commitment to avail Ministry and Departmental resources to support Portfolio Committee programme