Question NW3516 to the Minister of Public Enterprises

Reply:

I have directed the boards of several SOCs in my portfolio to formulate and implement turnaround plans. These plans aim to enhance operational efficiency and significantly improve the overall performance of the respective companies.

Eskom

Eskom is making strides towards ensuring energy stability and sustainability. The Generation Recovery plan has already recovered 1,535 MW between April and September 2023 contributing to Eskom’s goal of achieving an Energy Availability Factor (EAF) of 65% by March 2024. This progress is poised to reduce the intensity and frequency of load shedding while increasing grid capacity. Furthermore, Eskom has significantly improved generation at its coal-fired stations through accelerated maintenance. In addition, the bringing online of three units at Kusile Power Station earlier than scheduled has reduced the amount of load shedding. Eskom’s partnership with independent power producers (IPPs) will add 9,421 MW of renewable energy to the grid. This underscores Eskom’s and the countries commitment to cleaner energy solutions. Eskom is also undergoing restructuring process that will result in the company having ion and Distribution. This is to promote efficiency, accountability, and the adoption of new technologies. The recent debt relief package from the government, along with efforts to strengthen the transmission grid and combat corruption, further solidifies Eskom's position on the path to a sustainable and reliable energy future for South Africa.

In addition to these advances, Eskom has made significant progress in addressing financial challenges and enhancing its corporate structure. The debt relief package of R254 billion from the government and measures to write off municipal arrear debt demonstrate Eskom's commitment to financial sustainability. Their focus on strengthening the transmission grid, with a special emphasis on the first 1,000 km of power lines, underscores their readiness to accommodate power from independent producers. Importantly, Eskom's anti-corruption efforts have led to a number of arrests, the recovery of assets, and the pursuit of criminal cases, affirming their resolve to protect the integrity of the company and public funds. These combined efforts paint a promising picture of Eskom's commitment to a more stable, sustainable, and accountable energy future, ultimately benefiting the people of South Africa.

Transnet

On 1 September 2023, I directed the Transnet Board to urgently address and report to the shareholder on its decisions and recommendations within the next few weeks in respect of, inter alia the following:

1. Operational transformation: Develop or enhance a turnaround plan to radically transform the operational performance of each of the business areas, including the restructuring of the entity to deliver on its mandate more effectively and efficiently.
2. Root causes: Identify the root causes of the inability of management and staff to meet the performance targets and a plan to deal with the deficiencies.
3. Stringent / rigorous accountability Oversight: Transnet to develop, with the DPE and National Logistics Crisis Committee (NLCC), a new framework for transparency and accountability through detailed reporting on the successful execution of the turnaround strategy.
4. Digitisation of systems: Mechanisms to speed up the automation and digitisation of performance reporting systems to prevent deliberate and wrongful manipulation of data.
5. Rigorous system of controls: Implement urgently the controls identified by the Auditor General reports.
6. Private sector participation: Transnet is in the process of getting private sector involved in various capital projects. For example, a reputable international private sector partner has already been identified for the development and operation of the Pier 2 container terminal at the port of Durban.

As a result, the Board and Interim leadership have formulated an impressive “Recovery Plan” that is being rigorously implemented. In particular, the operational inadequacies are being systematically overcome – the assistance of the private sector through the establishment of “Centre of Excellence” will result in better operational outcomes in due course. Similarly, extraordinary efforts are being made to acquire additional equipment to improve port performance. Already a difficult operational approach at the ports introduced by management, is reducing the time spent by ships at anchorage.

 

Alexkor

Alexkor is solvent and does not have any interest-bearing debt. Alexkor’s financial position has limited financial risk as the largest liability will be settled by ring-fenced funds.

In January 2022, I appointed an interim board to restore governance amid years of instability. The appointment process for a permanent CEO and CFO is underway.

In 2019, we initiated a forensic investigation into allegations of maladministration and corruption. This led to significant findings, prompting President Cyril Ramaphosa to authorize the Special Investigating Unit (SIU) to delve into corruption and maladministration in Alexkor and joint venture diamond operations on December 10, 2021. We remain resolute in our commitment to transparency, justice, and ethical governance as we pave the way for a brighter future.

South African Airways

There have been notable strides in the SAA Strategic Equity Partner (SEP) transaction. The approval of the transaction in July 2023 by the Competition Tribunal offers the potential for a significant turnaround. It provides the opportunity for SAA to comprehensively address and overcome its longstanding financial difficulties, with the added benefit of mitigating the compounding effects of the COVID-19 crisis. By securing a strategic equity partner and fostering collaboration, SAA may embark on a path towards financial stability and long-term viability, marking a pivotal moment in its recovery journey. Currently, it has expanded its route network to 11 destinations and increased a number of aircraft by 9 with further expansion expected over the short and medium term. It also plans to commence international routes with the first flight to Brazil expected shortly.

SAFCOL

SAFCOL's unqualified audit and INFLOMA's clean audit underscore SAFCOL’s financial responsibility and transparency. With a notable R285 million profit, SAFCOL is not only stable but also positioned for growth, especially as it pursues projects like Combined Heat and Power (CHP – generating heat and power from wood chips) to mitigate load shedding risks. SAFCOL’s initiatives further highlight its commitment to social responsibility. SAFCOL is a thriving, responsible organization, ready to embrace future opportunities and challenges.

Denel

 

In the past three years, Denel was faced with significant viability challenges. The malfeasance linked to State Capture and poor management decisions resulted in a steep decline in revenues and profitability since 2017/18, reversing a 7-year trend of good governance, growth, and profitability. This culminated into in a weak balance sheet, declining order book, poor operational performance, unpaid salaries, and suppliers which resulted in an erosion of key defence industrial capabilities and loss of critical skills.

Government has made significant interventions to stabilize the SOC. In the past five financial years, the State has injected into Denel approximately R9 billion, including settling guaranteed debt which was keeping Denel in a debt trap due to high interest payments. The intervention has resulted in an appreciable improvement in the market sentiments (employees, clients, partners, financial institutions, and suppliers) regarding the clarity of Government’s strategic intent with respect to Denel.

The focus in the near term, the Department is encouraging Denel to optimise on short term revenue opportunities to ensure that the SOC can fund its operational requirements and deliver on existing contracts.

Despite the challenges of the prior years, the interest by both local and international entities as well as government to collaborate with Denel on various defence technologies remains high.

Remarks: Reply: Approved / Not Approved

Jacky Molisane P J Gordhan, MP

Acting Director-General Minister

Date: Date: