Question NW3295 to the Minister of Public Enterprises

Reply:

1. Strategies to improve the performance and accountability of State-Owned Enterprises (SOEs) have not failed.
2. It is worth noting that SOEs face structural, operational and financial issues.
3. There has been progress although there have been some setbacks. The following are some of the examples denoting progress registered to date:

Eskom

Restructuring proceeding: Eskom’s vertically integrated structure is no longer suitable to meet the country’s energy needs and has made the utility susceptible to the kinds of problems it has recently experienced including state capture and dependency on fiscal allocations. Therefore, Eskom is currently being restructured into three subsidiaries i.e. generation, transmission and distribution as per the 2019 Roadmap For Eskom in a Reformed Electricity Supply Industry.

Currently the Eskom Transmission Division is undergoing a process of legal separation to form the National Transmission Company of South Africa (NTCSA). The NTCSA was incorporated into a wholly owned subsidiary of Eskom Holdings in December 2021. The National Energy Regulator of South Africa (NERSA) approved the licence for NTCSA to operate the electricity transmission system as well as trading and import/export licences. Eskom’s plan is to commence trading by April 2024, but this is dependent on obtaining lenders consent which is currently being sought. The application for the designation of the NTCSA as a buyer has been supported by the Department of Mineral Resources and Energy (DMRE) and is being finalised by NERSA. The appointment of the NTCSA Board of Directors is underway. It is expected that NTCSA will be operationalised in April 2024.

Similarly, the Eskom Distribution Division is undergoing legal separation to form the National Electricity Distribution Company of South Africa (NEDCSA). The functional separation for Distribution was completed in March 2021. A new company, the National Electricity Distribution Company of South Africa SOC Ltd (NEDCSA), has been registered. The Minister of Finance and Minister of Public Enterprises has granted approval of the PFMA application in terms of section 54(2)(a) and 54(2)(d) for the transfer of the distribution business assets to the NEDCSA. It is expected that NEDCSA will be operationalised and trading by 2025. Functional separation for the Eskom generation business was completed in March 2021.

Generation improvement: To end loadshedding, Eskom has implemented a Standard Offer Program to purchase excess power from private generators and from neighbouring countries. The Standard Offer Programme is fully subscribed for the 1000 MW. Consideration is being given to extending the capacity and duration of the programme to take advantage of additional opportunities. Furthermore, An Eskom Emergency Generation Programme has been implemented, to procure emergency power when the grid is under significant strain. To date 60 MW has been signed on to the programme and is available to the grid. A further 150 MW is expected to be on-line from the Risk Mitigation Independent Power Producer programme by December 2023. Between 2028-2023 approximately 2411 MW of new capacity was brought online via the Department of Mineral Resources and Energy’s (DMRE) Renewable Energy Independent Power Producer Programme (REIPPP).

Eskom is currently in a process of extending the life of KNPP by an additional 20 years. Key to the life extension programme is the replacement of three life limiting components, namely, refuelling water storage tanks (RWST), reactor pressure vessel heads (RPVHs) and steam generators (SGs). Despite some setbacks, Eskom has replaced two of the three life limiting components i.e. RWST and RPVH. On 28 July 2023 Eskom replaced Unit 1’s stream generators and Unit 2 is undergoing similar replacement so to ensure energy security.

But unless new megawatts are added to the entire system, minimal loadshedding will continue in short term.

SAA

SAA is on its way to financial and operational sustainability. SAA’s 2021/2022 financial statements, indicate that the airline emerged from business rescue as a company that was liquid and solvent. After exiting the business rescue process its assets of R8.9-billion exceeded its liabilities of R5.8-billion, resulting in positive equity of R3.1-billion. SAA is now a going concern. During the period ended 31 March 2022, SAA operated on average five narrow-body (i.e., 3 x A319s and 2 x A320s) and two wide-body (i.e., 1 x A330 and 1 x A340) aircraft. The narrow-body fleet peaked at seven in December 2022 when SAA received two A320 deliveries to replace the A319s. The A319s exited the airline fleet in March 2023, leaving the airline with five A320s.

Despite fleet acquisition challenges, the airline will end fiscal year 2024 operating 17 routes, including Sao Paulo, and Perth, Australia and seasonal domestic routes which are George and Port Elizabeth

Transnet

There has been progress registered despite the structural setbacks experienced by Transnet relating to maintenance, equipment and crime. These will be addressed through the turnaround plan as well as the initiatives of the National Logistics Crisis Committee (NLCC).

In October 2023 Transnet developed a recovery plan (Turnaround Plan) outlining various measures planned and implemented across the operating division to improve operating performance, enhance effectiveness, and attain improved financial sustainability. The recovery plans include amongst other are reforms proposed by the NLCC in the Freight Logistics Roadmap such as vertical separation of Transnet Freight Rail into rail infrastructure manager and operation collaboration with private sector in ports and rail to resolve operating and financial challenges experienced.

• New top management will be put in place in Eskom and Transnet.
• The focus is now on creating financial and operational efficiency.

Remarks: Reply: Approved / Not Approved

Jacky Molisane P J Gordhan, MP

Acting Director-General Minister

Date: Date: