Hansard: Appropriation Bill: Debate on Budget Vote No 10 - Public Enterprises

House: National Assembly

Date of Meeting: 14 Apr 2010

Summary

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Minutes

THURSDAY, 15 APRIL 2010

PROCEEDINGS OF EXTENDED PUBLIC COMMITTEE – COMMITTEE ROOM E249

____________________________

Members of the Extended Public Committee met in Committee Room E249 at 14:00.

House Chairperson Mr M B Skosana, as Chairperson, took the Chair and requested members to observe a moment of silence for prayers or meditation.

The MINISTER OF PUBLIC ENTERPRISES


START OF DAY

APPROPRIATION BILL

Debate on Budget Vote No 10 - Public Enterprises:

The MINISTER OF PUBLIC ENTERPRISES: Mr Chair, never before has the role of state-owned enterprises – SOEs - in our economy enjoyed so much attention and created such vociferous debate, and rightly so. We are all custodians of these entities and it is in our own interests that they are viable and efficient engines of economic growth and development.

It is in the midst of this debate that we present our Budget Vote to Parliament today. The tabling of the Budget Vote is always an opportune time for us to account to members, to reflect on what has been achieved and to indicate where it is that we are headed.

However, I would be the last person to say all is well with every state enterprise that reports to the Department of Public Enterprises. There is much that is yet to be achieved governance-wise, operationally and financially. And that is why it is timely that government has initiated a review of state-owned enterprises so that a cool and balanced assessment can be made of their contribution to the South African economy. I obviously do not want to anticipate the findings of that review. But it would be remiss of me if I were not to make some observations about the current tenor of the debate about the role of SOEs.

At the extreme end of the debate is a commentary that is richly peppered with opinions that all SOEs are collapsing, in a state of crisis and that it is the end of the road for them. A supposed symptom of that crisis is the alleged huge financial bailouts that the opposition claims that government is forced to make in order to breathe life back into these dead horses, as they say, thereby creating a massive and unnecessary drain on the fiscus. A glib solution is then proffered: privatise the whole lot of them and all our problems will be wondrously and miraculously solved. [Interjections.] Thank you. Okay, I'm glad you are not part of that. So we'll find out if they are.

Nowhere is this kind of crass discourse ... [Interjections.] Now listen very carefully, please. I think we are going to reach agreement at the end of today about how much government has funded SOEs, sir. Nowhere is this crass discourse better depicted than in the alternative budget of the DA, wherein it is claimed - I'm not sure that you are aware that this came into your alternative budget, but it is an actual quote – "Parastatals have received more than R243 billion in financial bailouts over the past four years." This is really quite a startling claim to make and, if it is true, it is really serious.

But we believe that this is wrong and misleading, partly because it includes the R176 billion-worth of guarantees that are destined for Eskom to underwrite its borrowings for its massive build programme. These are contingent liabilities. They are not cash payouts and they are not a drain on the fiscus. They also include other items such as investments government has made in infrastructure and in research and design capability. These items are clearly not bailouts in the classic sense.

The classic sense of a bailout is the act of giving capital to an entity in danger of failing in an attempt to save it from bankruptcy, insolvency or total liquidation and ruin. From time to time, all governments will be constrained to bail out companies in the public and private sectors. There can be no doubt about that. One only has to note the trillions of dollars and billions of pounds that countries such as the United States and the United Kingdom have had to fork out in recent months to rescue banks and other companies in one of the most spectacular, private-sector failures that this world has ever seen, in order to realise how deep a drain on government resources real bailouts can truly be. The truth of the matter is that the claim that the South African government has had to bail out SOEs to the tune of a massive R243 billion in the past four years has muddled things up completely.

For instance, when the state makes strategic investments in infrastructure, whether it be in energy or telecommunications - for example: Eskom and Infraco - then it is promptly called a bailout. When the state makes a strategic investment in high-end research and design capability, such as in the pebble bed modular reactor, it is immediately called a bailout. When the state makes land-claim reparations, as ordered by a court of law as in the case of Alexkor, it is called a bailout.

I submit that this bad habit of conveniently characterising every form of financial assistance and investment by the state in SOEs as a bailout detracts us from the fundamental debate that we ought to be having about the nature, scope, advantages and disadvantages of state investment in SOEs. It also serves to heighten false perceptions that most SOEs are in a state of chaos and are making huge and unnecessary demands on the fiscus. So the reasoned debates - and I do believe that we do have reasoned debates in this House - that we should be having, for instance on whether the state should be investing in telecommunications or not, or the kind of state support that should be given to the renewable or nuclear energy sectors - get completely waylaid in debates about bailouts.

This is not to deny that there are instances in the Department of Public Enterprises' portfolio and in other portfolios in which the state has indeed had to bail out certain SOEs in the form of recapitalisation. When Denel was found to have a severe liquidity problem in 2005, the state had to bail it out in the amount of R3,5 billion. Similarly, SAA, in its restructuring exercise, had to receive R744 million. These are instances which should not arise in the context of parastatals, but they do. This is what is requiring the serious attention of all of us in the House, and I believe we all are paying attention to that.

But the facts remain: of the R17 billion cash that was transferred to state-owned enterprises in the department over a seven-year period, approximately R6 billion of that was for classic bailout purposes. The remainder was for research and infrastructural investment purposes. The total cash transfers by government to SOEs from 2005 to 2008, other than those in the department's stable, amount to R26 billion. These amounts, large enough in themselves, nevertheless represent less than 1% of total government expenditure over that period and are a very, very far cry from the R240 billion that has been put forward as evidence of profligate financial bailouts by the state. Might I also add, just for the record, that neither Transnet nor Eskom received cash transfers from the state during this period. Now, I'm talking about cash transfers, not loans and not guarantees.

The recent financial assistance given to Eskom in the form of the R176 billion guarantee and the R60 billion loan agreement represent a conscious strategic investment by government in the energy infrastructure of this country that will have multiple counter-cyclical economic spin-offs such as job creation and economic growth, as well as secure our supply of energy for 20 years going forward in the future.

Had it not been for these financial support measures from government, the full financial burden of the Eskom build would have had to be carried by a much higher electricity tariff than the present 25% tariff hike. We regard these initiatives as essential to the wellbeing of consumers and for the economy. I therefore say: let us not talk so easily about bailouts, and let us really focus on those bailouts that really require the attention of this House.

In developing the strategic plan and Budget Vote of the department, we are extremely mindful of our responsibilities as shareholders, particularly in periods of economic downturns such as the one we have currently experienced. We have had to make some very painful decisions, one of which is virtually the cutting off of all cash injections to SOEs in the DPE portfolio. This is reflected in the small amount of transfers for SOEs under the DPE for this financial year, amounting to only R174 million.

The fact that the pebble bed modular reactor, the PBMR, has not yet been able to secure either an investor or a customer has meant that the programme had to effect a drastic staff reduction. The intention, however, is still to retain critical skills, capabilities and intellectual property. There is no uncertainty about the soundness of the technology; in fact, the PBMR has been nominated by the American government as a partner in its Next Generation Nuclear Programme. However, alternative funding mechanisms are being sought for this programme as government no longer has pockets deep enough to fund it on the scale and length of time required. An interministerial committee will be making proposals to Cabinet in this regard in the coming months. The PBMR has played an indispensable role in shoring up and expanding our nuclear research and design capabilities, which can only stand us in good stead as we decide on our energy options going forward.

Now, regarding two of the largest SOEs in our country and in our portfolio: Transnet and Eskom, it is obvious that their operational performance is essential to the underlying wellbeing of the economy. Both are undertaking massive build programmes to ensure the security of supply of energy going forward and to dramatically enhance our port and freight rail capacities. Both will give much-needed impetus to local manufacturing capacity in terms of our Competitive Supplier Development Programme. My colleague the hon Deputy Minister will speak later in depth about the considerable achievements within Transnet.

With regard to energy, the recent Nersa – the National Energy Regulator of SA - ruling on the 25% tariff hike in electricity has had profound implications for Eskom. Not only does the tariff hike not cover the full operating and interest costs of Eskom in the initial years going forward, but it also means that the Kusile build programme will be delayed owing to some serious funding gaps. This has the potential of endangering the security of supply of energy in the future if appropriate steps are not taken by government. The interministerial committee convened by Cabinet is engaged as never before on matters relating to energy. Some of the matters receiving attention are mitigation for the poor as a result of the tariff increase, and the funding model for Eskom's build programme with at least 46 options under consideration.

Conscious of the severe energy security supply constraints in the next few years, specific focus is being given to demand-side management and efficiency measures such as the aggressive roll-out of solar water geysers. Here we need to pause and thank business for coming to the table in a remarkable way and voluntarily offering to reduce their consumption of energy going forward. We call on all South African citizens to really look at ways in which they can save energy.

Both the tariff increase and the World Bank loan have engendered heated discussion and debate about energy in our country. After all the heat and dust have settled, we as South Africans must reach an informed consensus about all matters relating to energy. We do need to reach that consensus, because it affects each and every one of us in our daily lives.

For those concerned that government is not committed sufficiently to renewable energy, let me assure you that this is simply not the case. We voluntarily submitted ourselves to a low carbon trajectory in Copenhagen and we are absolutely determined to meet our commitment in that regard.

Eskom's renewable energy project, through the World Bank loan, will be the largest project on concentrated solar power and wind power that has ever been built in Africa, and this is just the start of our commitment to building renewable energy. It is also very encouraging that Eskom is quite advanced in renegotiating its special pricing agreements.

We need to have transparency about our tariffs and our pricing agreements. There is far more transparency than is actually recognised in the public domain. But, given that municipalities have also added their own surcharges, this creates great confusion for all of us in actually understanding the basis of what we are being charged.

A lot has been said about Chancellor House and its involvement in Hitachi. Let me say from the outset that the boiler project in the Medupi build programme, for which Hitachi have won the contract, is not being funded by the World Bank loan. Secondly, regarding the heat that is being generated on this matter, I think we need to take a little distance and look to see in what way these matters can best be resolved.

The ANC Polokwane resolution in 2007 called for legislation to regulate the manner in which political parties are funded. In terms of section 236 of the Constitution, there is a requirement that Parliament enact legislation to regulate the way parties are funded. However, the legislation that was, in fact, enacted only dealt with the election funding of political parties; it didn't deal with the general funding of political parties.

Now, in the Idasa application to the court that sought that all four political parties - the ANC, the IFP, the DA and the New NP - reveal their sources of funding, the ANC is on record in that court case that they would welcome such legislation. Let it be noted that in that court application, all four parties at that stage vociferously opposed making transparent their funding sources. That was all four parties, and there were reasons why that was done. I think that this is a sobering moment for us all to realise that we are all vulnerable in the absence of an appropriate regulatory model and legislation.

We might believe as a party that we are not contracting with high-level parastatals in terms of tenders, but have we thought what happens at local government level? Are we absolutely certain, as each party sitting here, that we can say that there is not a single company tendering for procurement at local government level that doesn't have a strong connection to a political party? We are all vulnerable, and that is why we require that legislation.

We therefore call upon Parliament to look expeditiously at bringing in mechanisms so that this legislation can be enacted. The ANC has endorsed this. In fact, I was just in discussions with the secretary-general yesterday on this matter, and he fully endorses this approach.

The vacancies at senior management level, especially the positions of CEOs at certain of our enterprises - the SAA, Eskom and Transnet in particular - have been a matter of grave concern for some time. Thankfully, the CEO position at SAA has now been resolved, and the board at Eskom will shortly make recommendations regarding their preferred candidate. Intractable as the Transnet problem has indeed become, and as equally regrettable, at least appointments can now be made in the immediate foreseeable future.

But we must all sit back and reflect on what corporate governance failures have led to such an undesirable situation. For as long as CEOs of parastatals see themselves as above - and even more powerful than the boards that they accountable to - then these problems will persist. For as long as CEOs resort to mounting the equivalent of public campaigns to secure their positions, then a company will suffer. For as long as the position of CEO becomes a hotly contested matter in the public domain, other candidates who are perfectly qualified and competent to do the job will simply not make themselves available for such positions.

From now on the message must go out very clearly that potential and incumbent CEOs cannot act as though they are above their boards. Just as a municipal manager is accountable to a council, so is a CEO accountable to a board. In equal measure, boards must exercise their prerogatives to hold CEOs accountable. If these two prescripts are adhered to, then we will be on the road to restoring good corporate governance in our parastatals. [Interjections.]

The HOUSE CHAIRPERSON (Mr M B Skosana): Order! Order!

The MINISTER OF PUBLIC ENTERPRISES: Executive remuneration has been another concern regarding parastatals. We have set up a panel to review all executive remuneration and we look forward to hearing the results of their considerations.

I'm not going to speak in turn to each and every one of the SOEs. Their chairpersons and CEOs are sitting in our midst. I want to thank them for the incredible, loyal, hard and dedicated way in which they have done their work in sometimes extremely trying times. They are essential to the very good functioning of our economy. I would also like to thank our staff in the Department of Public Enterprises. I would like to thank the acting deputy director-general, our deputy directors-general and every single staff member of the department for their incredible commitment, their long nights of hard work and their absolute professionalism. They are a great team.

Finally, I must thank Members of Parliament. We might get irritated. We might say, "Oh gosh, now we have to go to Parliament", "Now there is this problem"; "Now there is that problem." But Parliament has a duty to hold us to account. I have always been a Member of Parliament. I will always agree that Parliament must hold us to account. [Applause.] But could I now just make one plea, hon Chair? Could you cut us some slack, just a little bit of the time? We are doing our best. We are absolutely going to make sure that we are meeting our mandates, and we look forward to a constructive engagement in the future.

Lastly, let me thank Deputy Minister Enoch Godongwana, who has been an absolute pillar of strength, an intellectual giant and an extraordinarily subtle and principled commentator on the role of parastatals. With this team in place, I have no doubt that we are going to make a great difference to the role of parastatals in our country. Thank you very much. [Applause.]

END OF TAKE

Ms M P MENTOR


THE MINISTER OF PUBLIC ENTERPRISES

The HOUSE CHAIRPERSON (Mr M B Skosana): Thank you, hon Minister. I did cut you some slack: you took some of your time from your response time, unless some members of the ANC leave you extra time for your response.

Ms M P MENTOR: Hon Chairperson, hon Minister and hon Deputy Minister, hon members, the leadership of the state-owned enterprises and all guests, all protocol being observed - I must say this also in Parliament.

The ANC and Parliament welcome the department's budget for this financial year. The ANC, in particular, supports the budget of the department for this financial year, which indicates a huge decrease compared to previous years.

In the last two financial years the department was allocated R3,2 billion and R3,9 billion respectively. This year the department has been allocated only R350 million, a decrease of 91,7%. This decrease is not only a result of the government's realignment of priorities, but also resonates with the infrastructure programme that the President announced earlier in which a huge amount of money, amounting to R868 billion, will be spent in the next three years.

Although the department's budget has been significantly reduced, quite a lot of money will be spent on the infrastructure build of some of the SOEs in the next three years.

State-owned enterprises have a huge role to play in a developing country's industrial base. They need to interrogate the sectors in which they operate and to fit into the country's industrial framework. We will recommend largely to SOEs that they interrogate and participate in the New Industrial Policy Action – Ipap2 - to identify their role and where they will fit in, and to prepare themselves for meaningful participation in economic growth.

I would like to speak about oversight from a constitutional perspective. Although we accept this budget, we want to declare from the portfolio committee's side that we will be upping the game in terms of oversight, in so far as the department, its political heads, which is the Minister and the Deputy Minister, as well as the SOEs themselves are concerned. We find this mandate of the committee in section 55 of the Constitution, which gives Parliament the right to ensure that all executive organs of the state in the national sphere of government are accountable to Parliament. Section 55(2)(b) also says that we need to maintain oversight of the national executive authority as well as any organ of state. I want to declare that all SOEs are organs of state. On the basis of this constitutional principle, we will be intensifying oversight in the current financial year.

The President has made a call for an activist Parliament. We will do so from the oversight side to ensure that the objective of remodelling Parliament into an activist one is realised. In fact, Parliament has embraced this call by the President.

The other section of the Constitution I would like to refer to as outlining the kind of oversight we intend to play, is section 92 of the Constitution, which calls upon Parliament to hold the Cabinet collectively as well as individually accountable in so far as the performance of their duties, functions and powers are concerned.

I think that sometimes when we cry foul, or have problems with SOEs, we tend to put a lot of pressure on the Minister, which is correct to do so, but we often forget that Cabinet also has the role of strengthening the Minister's hand in ensuring that SOEs fulfil their functions and their mandates. To this extent, we intend to do what the Constitution expects us to do: to hold Cabinet members individually, in the form of the Ministers and the Deputy Ministers, and collectively to account in so far as the SOEs are concerned.

The President was cognisant of this role when he called for an overview of the SOEs. I think he was leading as the head of Cabinet in saying that we need to pause as South Africa and review the mandates of SOEs and align them with the objectives of a developmental state.

The ANC's resolutions actually go further and mention three specific things, which I would like to say will be the clarion call from our side in this financial year. We will be monitoring the impact of each SOE in participating in economic growth. We will do so with sister committees of the Department of Trade and Industry and of Economic Development and others. We will also ensure that skills development and skills retention, especially of skills that are very special and scarce, are generated within these SOEs and also that black skills are also retained in the SOEs. For this reason, we will keep an eye on the transformation agenda and the extent to which the SOEs help us to fulfil it.

In so far as Eskom and the energy regime are concerned, we do welcome the World Bank loan to Eskom, as the Minister said. If this loan was not forthcoming, we were going to have very serious tight margins of supply of electricity as early as 2011, and especially from 2012. We welcome this and hope that all South Africans will understand that it was absolutely necessary for government to act in this way and that government has acted very responsibly.

We do intend also, however, as Parliament to play an oversight role of the conditions that will be granted in so far as this loan is concerned. We expect to have a conversation with our own Minister and the Minister of Finance when time allows. So we keenly await for government to indicate to us the right moment to discuss this issue and to put the fears of South Africans at ease. We know that the government has acted very responsibly in securing this loan; and we know that, in fact, we will pay very little or low interest on this loan. Thank you very much.

We welcome the Minister's review of remuneration packages. We want to remind members that there is a need to review SOEs, because the SOEs are straddling the space of public sector and private sector by way of their being companies. They cannot pay or remunerate only in a manner that is in line with the market, because their sole function is to enhance the government in its objectives of economic growth and fulfilling its duties as a developmental state.

Therefore, we hope that in the next six months, both the Minister and the panel will come to Parliament to report to us about the findings and the recommendations of the panel on remuneration packages. We hope that we will cease to see exorbitant packages that are paid to management and the boards that are not comparable to the actual conditions of South Africans in the country.

In so far as deployment is concerned, a football that has been played against us often, I want to submit that approximately 11 million people voted for the ANC in the last election. Now, it is very, very silly to expect none of the 11 million people to find space in the economic sector of the country, including on the boards or as part of the management of SOEs. It would be very silly to say that once you associate yourself with the ruling party, you forfeit your constitutional rights to participate in the economy of the country.

ANC members, like any other South Africans, do have a right to sit on the boards of SOEs and to be part of the management of SOEs. However, there should be conditions for them to be there. Firstly, they should be competent and have the capability to sit on those boards and be part of management. Secondly, once they sit there, they must perform. They must perform according to the outlined mandates of those SOEs, and they must perform and perform and perform. Therefore, it is silly to say once you are a card-carrying ANC member, or if you support or vote for the ANC, that you have no right or have no place in the public sector or in the various corners of the economy. [Applause.]

In terms of the infrastructure build programme announced by the President, there is an amount of R846 billion over three years. I would submit that we would be failing very badly as a developing country if we did not reorganise the regulatory framework, including the procurement regulations, to ensure that we use that infrastructure build to deracialise the economy: share the cake amongst those who were previously disadvantaged in order to make sure that we use the infrastructure build to attract skills, transfer skills and apportion those skills to those that historically did not have those skills.

In terms of the marginalised, we must make sure it will not be the giant multinationals, as has been the case in the past 16 years, that bid for and receive tenders for these builds, with the crumbs going to the BEE – black economic empowerment - companies. I think we need to review the space and the regulatory framework urgently to make sure that we draw lessons from the BEE efforts of the past 16 years in that, yes, they were not broad based enough. But in any life of any country this size, if one compares the size of the build to the size of the GDP, it would occur only in the next 100 years that we would be able to have that kind of giant build.

For that reason, we should move that build with regulations and all that we have into the hands of competent people who are largely black and African, who are historically poor and who have historically not benefitted from being part of the economic mainstream of the country. I thank you. [Applause.]

Nb/

END OF TAKE

Dr S M VAN DYK


Ms M P MENTOR

Afrikaans:

Dr S M VAN DYK: Voorsitter, met die opening van die Parlement vanjaar het president Zuma nie na die Eskom-krisis verwys nie. Die Minister van Finansies het ook nie met die nasionale begrotingstoespraak na die Eskom-krisis verwys nie. Gelukkig spreek die portefeuljekomitee se verslag sy kommer uit oor die swak finansiële toestand en die onderbenutting van infrastruktuur van sekere openbare entiteite wat die afgelope vier jaar R240 miljard uit die belastingbetaler ontvang het. Minister, of dit nou gekry is of dit nou geborg is, ons kan dit nie met mooi woorde wegwens nie. Dit word ook waardeer dat u, Minister, vanjaar aangekondig het dat daar oor openbare ondernemings se bestaan herbesin moet word. Ons is bly dat u nou uiteindelik luister wat die DA al sedert 2004 gevra het en dat u nou uiteindelik DA-beleid verkondig.

Maar Minister, waaroor u tot en met vandag nog nooit gepraat het nie, is die hoë vergoedingspakkette van die direksie en bestuurslede van openbare ondernemings, waarna u vandag verwys het. Kom ons kyk byvoorbeeld na die omstrede SAL. Mnr Khaya Nqula, voormalige hoof uitvoerende beampte van SAL het met R8 miljoen geloop. Mnr Coleman Andrews, voormalige hoof uitvoerende beampte is met R232 miljoen weg.[Tussenwerpsels.]

Voorsitter, in Transnet se geval het net vier direksielede alleen R68 miljoen huis toe geneem. 'n Groot deel daarvan was bonusse wat gebaseer was op die verbetering van Transnet se balansstaat. Om dit reg te kry, het Transnet onder andere sy finansiële verpligting teenoor sy pensionarisse van die tweede vastevoordeelpensioenfonds verminder. Hierdie 80 000 pensioenfondslede kry slegs 'n verhoging van 2% per jaar in pensioen en 'n mediese bydrae van slegs R213 per maand. Hierdie pensioenfondslede – swart, bruin en wit wat Transnet se infrastruktuur oor jare opgebou het, veg nou vir oorlewing, terwyl Transnet se direksielede in weelde leef. Voorsitter, dit is die moeder van alle skandes! Wat Eskom betref, ontvang die topbestuur nou R56 miljoen se bonusaandele, terwyl Eskom Suid-Afrika se ramp van die eeu is en die Regering se Gear-strategie en die Asgisa-groeiprogram van die tafel afgevee het.

Eskom het allerlei verskonings aangebied vir sy verval. Byvoorbeeld, in Januarie 2008 het Eskom die hoë vlak van energieverbruik as die probleem van die die kragonderbrekings uitgelig. In November 2009 het Eskom die skuld op 'n bestuursprobleem gepak toe hulle van mnr. Maroga ontslae geraak het. In Januarie 2010 het Eskom aan die Parlement vertel dat laekwaliteit steenkool die problem is. Tog het steenkoolmyne op dieselfde vergadering in die Parlement daarop gewys dat Eskom die Parlement mislei het. Nou sê Eskom dat die privaatsektor traag is om die elektrisiteitsmark te betree, maar dit is Eskom wat sloer om kontrakte aan die maatskappye te voorsien. Verder het Eskom ook valse redes aangevoer vir sy dilemma, soos byvoorbeeld dat die krisis as gevolg van nat weer met nat steenkool ontstaan het, maar waar is Eskom se risikobestuur van opberging dan? Eskom sê ook dat Nersa nie tariefverhogings in 2000 wou toestaan nie, maar hoekom het Eskom tot met 2008 nie daarop aangedring nie? Verder beweer Eskom dat die ekonomie vinniger gegroei het as wat hulle gedink het, maar tog erken Eskom dat hy sedert 2000 geweet het dat kragonderbrekings in 2008 sal voorkom. Nou sê Eskom dat lae kragpryse vanaf 2000 die oorsaak is, maar Eskom het sedert 2000 en die begin van die eeu stewige winste getoon wat hy in investering kon terugploeg het.

Voorsitter, die werklike rede vir Eskom se verval is die volgende: Eerstens, die ANC-regering se monopolistiese beleid tot 2009 het Eskom, as die alleenkoper en verspreider van krag, die privaatsektor uit die mark gehou. Gelukkig het president Zuma net soos minister Hogan ook weer na die DA-beleid geluister om daarvan af te sien en het president Zuma aangekondig dat Eskom voortaan nie meer die koper van krag deur private produsente sal wees nie. Tweedens, die regering se Witskrif oor Energie het in 1998 teen die uitbreiding van Eskom besluit. President Mbeki het ons voorheen om verskoning gevra daarvoor. Derdens, Nersa was sedert 2000 'n slapende organisasie. Nersa is veronderstel om die energiebronne te moniteer en te reguleer maar waar was Nersa die afgelope sewe jaar? Vierdens, die regering is 'n onbevoegde eienaar van staatsondernemings. Daar was geen beplanning deur die Kabinet vir die instandhouding van Eskom nie en in 2001 het die Kabinet Eskom amptelik verbied om meer kragsentrales te bou. Voorsitter, wat 'n ironie. In daardie tyd het die ANC-regering nie vir Eskom geld gegee nie en noudat Eskom in die internasionale Wêreldbank 'n lening bekom het, nou moet ons hoor dat die ANC deur Chancellor House Eskom se geld gaan vat. Vyfdens, daar is tot nou toe 'n tekort aan kapasiteit by die staat as die alleen aandeelhouer om met die privaatsektor te kontrakteer. Sesdens, sien ons onbevoedgde leierskap by die raad van Eskom wat nie sy aandeelhouer, naamlik die staat se belange beskerm nie. Daar word ook nie voldoende geskoolde arbeid aangestel nie en vir nege jaar lank is daar swak gekommunikeer met die verbruikers oor die nood om nuwe kragsentrales te bou.

Voorsitter, Eskom se finansiële bestuur is net so power. Eskom is besig om drie nuwe kragsentrales te bou: Medupi in Limpopo, Kusile in Mpumalanga en Ngula in die Drakensberg. Twee jaar gelede was Kusile se kostebeplanning R80 miljard. Nou is dit skielik R142 miljard, terwyl die internasionale boukoste norm vir die opwekkingsvermoë van steenkoolkragsentrales 1 600 dollar per kilowatt beloop. Kusile behoort dus net R58 miljard te kos. Minister, waar gaan al die ander miljarde rande heen? Is hier grootskaalse korrupsie aan die gang? Hoekom ken Eskom kontrakte vir Kusile toe sonder om tenders te vra soos wat voor Nersa getuig is? Dit sal daartoe lei dat Eskom kan vergeet om 'n beplande 50% van Kusile aan die privaatsektor te verkoop. Daar sal nie belangstelling in korrupsie wees nie. Eskom kan nie met openbare geld vertrou word nie en daarom het die DA alreeds lankal gevra dat 'n forensiese ondersoek na Eskom se geldsake gedoen word.

Wat die potensiaal van Eskom betref, tans lewer die 22 operasionele kragsentrales 31 000 MW met 'n 6 000 MW reserwe. Eskom voorspel dat die winter en die sokkertoernooi die verbruik tot 37 000 MW sal verhoog. Die vraag is of daar nog steeds reserwe gaan wees? Verder verkondig die Departement van Kommunikasie in sy dokument, Vuk'uzenzele van Januarie 2010, dat Medupi wat 4 800 MW sal produseer binne twee jaar voltooi sal wees. Minister, dit sal nie gebeur nie. Ek was op 12 Maart vanjaar by die Medupi-perseel in Lephalale en het daar met kontrakteurs gepraat. Ek het ook foto's geneem en ek gee graag, Minister, vir u 'n afskrif van hierdie foto's. Al wat ek daar gesien het, was 'n klomp hyskrane en 'n paar pilare wat gebou is. Volgens die kontrakteurs sal slegs een van die stoomketels moontlik oor twee jaar in werking kom, terwyl die Medupi-kragsentrale nog baie langer as vyf jaar sal neem om gefinaliseer te word. Die rede daarvoor is omdat fondasies eers verkeerd gegooi was en dat daar nou voortdurende stakings van werkers is. Minister, is u daarvan bewus dat werkers byna elke tweede of derde dag tot twaalfuur in die middag staak? En dat werkers dan nie verder werk nie omdat die wette van die regering van hierdie land waarvan u deel is, Minister, bepaal dat daar 'n vier uur afkoelperiode moet verloop. So, teen vieruur die middag het hulle nog nie gewerk nie en dan is die werksdag verby. Minister, dit is tyd dat u in u parlementêre motor klim en Medupi gaan besoek en met kontrakteurs praat. En u moet dit nie doen met afsprake nie, u moet ook nie 'n afspraak met Eskom maak nie, want dan word matte vir u uitgerol en gaan u ge-'sweet-talk' word.

Voorsitter, die DA sê dat Eskom 'n beleidsraamwerk vir die bepaling van tariefverhogings moet saamstel. Eskom se bestaande aannames vir tariefverhogings is bloot op spekulasies van alternatiewe energiebronne en privaatsektor belangstelling gebaseer. Eskom moet ook 'n finansieringsmodel kry om groei in Eskom te stimuleer. Prysstygings kan nie uitgawes voortdurend finansier nie. Eskom moet ook 'n tenderbeleid instel om te voorkom dat kontrakte sonder tenders toegestaan word en dat ongeveer 67 van sy kontrakte aan klein onvemoeënde kontrakteurs toegestaan word wat nie oor kapasiteit beskik nie. Verder sê die DA ook dat elektrisiteitsprysverhogings onvermydelik is. Dis 'n gegewe. Ons moet dit aanvaar. Eerstens is dit nodig om die privaatsektor te lok en tweedens om Eskom in 'n finansiële onafhanklike bedryfbare posisie te plaas teenoor die huidige 2% opbrengs in verhouding tot die waarde van Eskom se bates. Die DA maan egter dat prysverhogings nie buitensporig inflasionisties moet wees nie.

Voorsitter, Eskom benodig R460 miljard oor vyf jaar vir sy investeringsprogram. Die DA sê dat die staat as aandeelhouer verantwoordelikheid moet aanvaar om stygende kragtariewe te subsidieer. Dit kan gedoen word deur langtermyn internasionale lenings as teenvoeter van te hoë kragprysstygings te waarborg, binne die staat se fiskale vermoë natuurlik. Tweedens kan die staat belastingaansporings aan verbruikers toestaan vir die verbruik van alternatiewe energiebronne en vir die gebruik van arbeidsintensiewe in plaas van kapitaal-elektrisiteitsintensiewe produksieprosesse. Derdens is ons ook van mening dat verbruikers se aankoop en aanbringkoste van alternatiewe energiebronne teen belasting afgeskryf behoort te word om besparing van Eskom-krag te bevorder.

Mnr Tito Mboweni, voormalige president van die Reserwebank het 'n eenmalige belastingverhoging voorgestel om geld vir Eskom te bekom. Die DA kan nie daarmee saamstem nie omdat die las sou neerkom op onder andere net 8% individuele belastingbetalers wat die oorgrote individuele belasting betaal. Korporatiewe belastingverhoging sal ook buitelandse beleggings ontmoedig en hul produksie inkort en werkloosheid verhoog.

Tans is daar te min betalers van elektrisiteit en te veel parasiete wat help om krag te verbruik. Voorsitter, hier praat ons van mense wat krag deur middle van onwettige konneksies steel. Steel is steel: amptenare wat Eskom se geld steel deur wanadministrasie van voorafbetaalde kragstelsels en sekere sektore in die mynbou wat krag tot nou toe teen 'n baie lae tarief bekom het. Kragdiefstal en ondoeltreffende kragverbruik is tans gelyk aan die uitset van twee kragsentrales van 7 200 MW. Mnr Maboe Mphaka, senior bestuurder by Eskom sê dat Eskom in sy sentrale verspreidingsarea tot 30% krag as gevolg van residensiële kragdiefstal verloor. Eskom sê ook dat tot 40% van residensiële krag in Soweto gesteelde krag is. Volgens munisipaliteite gebruik tot 43 000 informele nedersettings per metropool onwettige kragkonneksies. Verder het Suid-Afrika ook 8 miljoen onwettige immigrante wat op een of ander wyse verbruikers van elektrisiteit is. Al hierdie onwettige verbruikers betaal nie vir Eskom-krag nie en hulle betaal ook nie vir 'n verhoging in Eskom-krag nie. As die DA aan bewind kom, sal ons sorg dat hierdie onwettige kragverbruik gestaak word en dat dit gemoniteer word sodat almal wat krag verbruik ook 'n bydrae maak om dit te genereer. Eskom kan ook geld bekom deur sy agterstallige munisipale skuld van R174 miljoen by die munisipaliteite in te vorder. Eskom moet ook sy kontrakte met die groot smelters en maatskappye hersien wat elektrisiteit tans teen 'n laer prys bekom as die koste daarvan om dit op te wek.

Voorsitter, die strategiese en administratiewe posisie van Eskom laat ook veel te wense oor. Tans moet Eskom met sy onbevoegde bestuur binne die operasionele raamwerk van ANC-kaderontplooiing funksioneer en dan binne die beleidsraamwerk van die Departement van Minerale Energie aan die Departement van Openbare Ondernemings verslag doen en verder dividende binne die prysraamwerk van Nersa aan die Tesourie betaal, soos deur die ANC se Chancellor House voorgeskryf word. Eskom is dus vasgevang in 'n 'entangled red-tape struggle'. En om dit nog verder te vererger, dikteer die staat as aandeelhouer strategie aan Eskom. Die staat stel ook direkteure en die voorsitter aan wat nie noodwendig die insig het om 'n industriële onderneming te bestuur nie. Verder beperk die staat ook Eskom se raad tot slegs operasionele bestuur sonder om hul vryheid van besluitneming en implementering te gee. Daaar is 'n moontlikheid dat die Wêreldbank benewens die lening van R28 miljard ook 'n tweede lening van R19 miljard aan Eskom kan toestaan. Dit sal beteken dat die ANC se Chancellor House dan R1,6 miljard met sy aandele in Hitachi sal bekom. U ontken dit vandag, mev die Minister, maar hoekom openbaar Eskom nie sy kontrakte nie? [Tussenwerpsels.] Hulle wil dit nie eers in die Parlement openbaar nie. Net soos wat mnr Julius Malema vir president Zuma en adjunkpresident Motlanthe voorskryf en vir hulle sê net wat hy wil, net so regeer Chancellor House se Mamatho Netsianda vir mnr Matthew Phosa. [Tussenwerpsels.] Mnr Matthew Phosa sê dat dat die ANC hom uit Hitachi gaan ontrrek, maar Netsianda sê dat die ANC dit nie gaan doen nie. Minister, die ANC moet vir ons sê wat hulle van plan is om te doen. Maar die DA sal daarop aandring dat Eskom, wat 'n openbare onderneming is, sy inligting oor sy steenkoolkontrakte en ander kontrakte met Hitachi, asook ooreenkomste met die Wêreldbank op sy webwerf openbaar. Ons sal in die Parlement daarop aandring dat hierdie inligting aan die publiek beskikbaar gestel word, want dit is van openbare belang.

Voorsitter, die feit dat die Departement van Openbare Ondernemings nie daarin slaag om die prestasies van openbare ondernemings te moniteer en te verbeter nie, laat die vraag ontataan of die departement nie eerder moet ontbind nie. Eskom kan dan by die Departement van Minerale en Energie inskakel en Transnet, by die Departement van Vervoer om sodoende konflik van beleid uit te skakel. [Tussenwerpsels.] Die res van die sewe oorblywende openbare ondernemings wat nie ekonomies funksioneer nie kan, in plaas daarvan om bakhand te staan, uitgefaseer en/of gelikwideer word, en die ander wat wel ekonomies onafhanklik funksioneer, kan dan geprivatiseer word.

Ter afsluiting vra die DA, deur die Parlement, weer eens vir die aanwysing van 'n multidissiplinêre taakspan bestaande uit lede van politieke partye, die staat, Eskom en die privaatsektor om die oorsake van Suid-Afrika se kragkrisis te evalueer en om dan met voorstelle na minister Manuel se beplanningskomitee te gaan om sodoende 'n bydrae te lewer om die elektrisiteitskrisis te verlig. Ek dank u. [Applous.]

END OF TAKE

Mr M A NHANHA


Dr S M VAN DYK

Mr M A NHANHA: Hon Chairperson, members of the executive present here today, hon members of the fourth democratic Parliament, distinguished guests, ladies and gentleman, good afternoon. I send warm greetings to my family in the Eastern Cape, who I know are watching and I make special mention of my wife Vathiswa, my mother Nonzaliseko, and my two lovely daughters Mkrancolo and Lunga. [Interjections.]

Chairperson and hon members, as you know by now I represent a party of noble principles, Cope. [Interjections.] Also, as you know by now that Cope took a decision that in this House we shall be a patriotic opposition. [Interjections.] We reiterate our position and we shall give credit where and when it's due. However, we shall neither think twice nor hesitate to speak out loud when this government falters, even if that means calling for a vote of no confidence against a sitting head of state. [Interjections.]

At the height of the liberation struggle, one of the pillars of the struggle was total isolation of the apartheid regime. During those days, the regime and its few friends found themselves against the international community. Such a desperate situation required the regime to employ desperate measures. One of those desperate measures was for the regime to ensure that state-owned enterprises were totally self-sufficient for the regime and that there was little dependence on others.

If a country, for one reason or another, can lose approximately one million jobs in a period of 18 months - if that is anything to go by - surely our country needs desperate measures because we are facing desperate situations? It is such a shame that the developmental state we purport to advance cannot learn from the past's desperate situations and apply desperate measures. Instead, competent, self-serving and corrupt officials with connections to the elite in the ruling party continue to line their pockets ... [Interjections.]

The TEMPORARY HOUSE CHAIRPERSON (Mr M R Mdakane): Order! Order! Please, order.

Mr M A NHANHA: ... and those of their friends with tenders worth millions and millions of rand. Transnet and Denel are cases in point.

The TEMPORARY HOUSE CHAIRPERSON (Mr M R Mdakane): Order! Order! Order! Hon members, I'm not going to allow this. Even if you disagree with the speaker, please give him a hearing. Continue, hon member.

Mr M A NHANHA: Thank you, Chairperson. It is unfortunate that this government is hellbent on ensuring that it dismantles all that is working and fixes all that is not broken. It also intimidates Ministries that are performing. The Ministry of Public Enterprises is a case in point in this regard. Talks about dismantling this department are at an advanced stage.

Your sin, amongst other things, Madam, is speaking on principle against the Chancellor House-Hitachi relationship and the Transnet-Siyabonga Gama one, with the latter having close ties with some bigwigs within the ruling party. Those bigwigs are on record as saying that they would do everything in their power to protect them. I am afraid that the bigwigs are now getting back at you for sticking to your principles. Cope is not surprised by the recent announcement by the President that SOEs were to be assessed and that a looming Cabinet reshuffle after the World Cup was looming.

It has been said on countless occasions that as a country we have a chronic shortage of skills, particularly in specialised disciplines. In the past 10 years, R8,7 billion has been invested in the pebble bed modular reactor, the PBMR. As at March 2009, the PBMR had 851 employees, of which 70% were engineers, scientists or technologists. This is a nuclear skills base at the country's disposal and, unsurprisingly and as usual, lack of leadership from government regarding the future of the PBMR has led to uncertainty and poaching of personnel by countries that can put them to good use. Such expertise may be lost to us forever.

In June last year, Freddy Enslin from Springs in Gauteng wrote to me asking what Cope would do to protect the poor from the Eskom tariff increase. [Interjections.] To you, Freddy, and millions of South Africans out there, Cope and other parties have fought the tariff increase, but we were bound to fail because the ruling party is set to benefit over R1 billion from the deal through its investment arm, Chancellor House.

It is worth noting that the ruling party has joined the list of tenderpreneurs, following in the footsteps of many in their ranks. As Karima Brown of Business Day put it, the arrangement between Chancellor House and Hitachi patently constitutes a deep conflict, "a strong body of opinion within the leadership is holding out for the money". [Interjections.] If the ruling party is a centre of power, well, in my opinion, the opposite is true: the centre is not holding.

IsiXhosa:

Ndivumeleni ke – phulaphula! phulaphula! - ndivumeleni ke ndinibulele ngokundiboleka kwenu iindlebe. [Uwele-wele.] Lo mthendevu wasemaMpondomiseni, uJola, ithole leenkunzi zaMakrancolo, ooMbema, ooMsiza, ooMbuyeni, uyanibulela. Maz' enethole! [Uwele-wele.]

Mr M G ORIANI-AMBROSINI


Mr M A NHANHA

Mr M G ORIANI-AMBROSINI: Mr Chairman, let me start, if I may, with the statement of the Minister relating to contingent liabilities. In any organisation, contingent liabilities are approved by the same entity which approves the budget, whether it's the board of directors or anything else. We, in this Parliament, have no say in contingent liabilities. We are responsible for authorising R100 worth of expenditure, but we have no say over R40-billion worth of contingent liabilities.

If one looks at the history of these contingent liabilities, more often than not they are paid by the state for the very simple reason that they are raised because the balance sheet of the SOE doesn't enable it to raise the cash on a commercial basis.

We were told by Minister Pravin Gordhan and other Ministers that the tariff increase was required by Eskom in order to have a balance sheet that would enable it to borrow. Instead, we the state are borrowing and we the state are going to be paying for it. That is the very aspect.

The second aspect, Minister, through you, Mr Chairman, is: let us respect the intelligence of the people of this House and the people of South Africa. One cannot separate from the funding stream what goes to the boiler and what goes to the chimney, and what goes to Hitachi and what goes to the other companies. This is one project in which the money is spread around.

The IFP has made a call on the ANC to do the dignified thing, which is that of divesting itself of the investment at acquisition cost, because the value of those shares today already reflects the discounted value of profits to come. How did this happen and how does it affect Parliament?

We have made a call for the Portfolio Committee on Public Enterprises to have a bite at this cherry. We have had no input, no serious discussion on the Eskom funding model despite many requests. The chairman did not allow them. [Interjections.]

Mr M R SONTO: Stop lying.

Mr M G ORIANI-AMBROSINI: I'm sorry, Mr Chairman, I think it's terribly unparliamentary for a Member of Parliament to accuse me of lying. [Laughter.] I request through you, Mr Chairman, that the Member of Parliament withdraw that statement. So I'm raising a point of order on my own behalf. [Laughter.] No, it's not a laughing matter!

The TEMPORARY HOUSE CHAIRPERSON (Mr M R Mdakane): Please go ahead, Mr Oriani-Ambrosini. There is no point of order.

Mr M G ORIANI-AMBROSINI: I just raised it, Mr Chairman.

The TEMPORARY HOUSE CHAIRPERSON (Mr M R Mdakane): ... unless you want to raise a point of order against yourself -

Mr M G ORIANI-AMBROSINI: I don't accept the Member of Parliament calling me a liar.

The TEMPORARY HOUSE CHAIRPERSON (Mr M R Mdakane): No, I did not recognise that. Please proceed.

An HON MEMBER: Proceed.

Mr M G ORIANI-AMBROSINI: Yes, I am proceeding. We need to have a serious discussion on the ...

Mnr P J GROENEWALD: Agb Voorsitter ...

The TEMPORARY HOUSE CHAIRPERSON (Mr M R Mdakane): Order, please! Order!

Mnr P J GROENEWALD: Agb Voorsitter, 'n punt van orde ...

Mr M G ORIANI-AMBROSINI: It is a way for the portfolio committee and this Parliament to be ceased with the matter of the ... [Inaudible.]

Afrikaans:

Mnr P J GROENEWALD: Voorsitter, op 'n punt van orde: Ek wil weet of dit parlementêr is dat 'n lid van daardie kant vir die agb lid sê dat hy 'n leuenaar is? Ek dink dat dit onparlementêr is. Kan u asseblief 'n reëling maak daaromtrent?

The TEMPORARY HOUSE CHAIRPERSON (Mr M R Mdakane): Ek het nie my oorfone aangehad nie. Kan jy dit asseblief in Engels herhaal?

Mr P J GROENEWALD: Chairperson, I want to know whether it's parliamentary for an hon member from that side of the House to tell this hon member that he is telling a lie. It is unparliamentary to say that the hon member is telling a lie. [Interjections.]

The Temporary House Chairperson (Mr M R Mdakane): Could the hon member who said the hon member was telling a lie identify himself. I didn't see him. [Interjections.] Order! Order, please! Order! I'm not going to allow this. Please!

Mr M R SONTO: Chairperson, I was saying that the member was very economical with the truth.

Mr M G ORIANI-AMBROSINI: That's not what he said.

The TEMPORARY HOUSE CHAIRPERSON (Mr M R Mdakane): I don't think that's a point of order. It's correct to say somebody is economical ... [Laughter.] I don't think ...

Mr M G ORIANI-AMBROSINI: Mr Chairman, that is not what he said. It is his right to correct what he said.

The TEMPORARY HOUSE CHAIRPERSON (Mr M R Mdakane): Order! Order, please! Order! It's a polite way of saying: I don't believe what you are saying. [Interjections.] I haven't recognised you, Chief Whip. I will recognise you just now. Just sit down, please. Sit down. I will recognise you just now. I was saying that I believe it's a polite way of saying: I do not believe what you are saying. What's your point of order?

The CHIEF WHIP OF THE OPPOSITION: Chairperson, my point of order is that economical with the truth was not the way he stated it in this House. He called the member a liar. I heard it distinctly.

The TEMPORARY HOUSE CHAIRPERSON (Mr M R Mdakane): He has denied ... Hang on, please. Hang on. He denied that he said the member was telling a lie. I don't know whether you want us to check the Hansard and, perhaps, give a ruling thereafter. Help me, help me, help me. What do you want me to do? Check the Hansard?

Hon members, I'm advised that I should ask once more that the person who accused Mr Oriani-Ambrosini of telling a lie – if he did do so – to politely withdraw. We don't want to have to check the Hansard, etc, etc.

Mr M R SONTO: Chairperson, without putting this House at pains to do so, I must withdraw. Very economical. [Laughter.] [Applause.]

The TEMPORARY HOUSE CHAIRPERSON (Mr M R Mdakane): Thank you very much. Carry on, Mr Oriani-Ambrosini.

Mr M G ORIANI-AMBROSINI: Thank you very much. We need to have the courage to look differently at the entire funding of Eskom. We need to establish an Eskom 2. This is an opportunity of creating a competing company which will bring about efficiency and address the type of problem Dr van Dyk identified with Eskom. We need to have an international tender. Let us open the doors for funding from abroad.

I stand with the hon Nhanha. There is still an apartheid mindset here: a survivalist mindset which will not allow foreigners to invest in what has been determined to be a strategic interest of the country. This is one of the few opportunities we have to attract fixed long-term investment.

Lastly, this is a good department. It's a department staffed with good, intelligent, and hard-working people. I stand with the Minister in that respect. Yet, the President is establishing a committee of outsiders to determine what this department should be doing. [Interjections.] It should be the responsibility of this department to take at hard look at why we own some of these SOEs. [Interjections.]

The reason for us having to pay for the land restitution claim of Alexkor is because we own it. But why do we own it? The answer is missing. Why do we own Denel? There is another R2 billion of contingent liabilities, which we have not approved and are not part of this debate. Yet, these are part of our liabilities and the liabilities we are enforcing on the South African people. Why do we own Denel? [Interjections.] You have spoken. You said very little when you did, so allow me to speak. [Interjections.] [Laughter.]

The TEMPORARY HOUSE CHAIRPERSON (Mr M R Mdakane): Hon Mentor, I'm afraid I have to mention your name. Please!

Mr M G ORIANI-AMBROSINI: Why do we need to continue to finance a manufacturer of weapons which cannot make a profit? Those questions need to be asked. And I stand with the hon Nhanha - it is a dramatic situation which calls for dramatic action. We need to look at public enterprises becoming the incubator of industries of the future. They should be places where funding becomes available for biotechnology, for nanotechnology, for an industrial plant which today takes us into the future for the next 100 years, and for an industrial plant developed during the apartheid era by the National Party regime under those circumstances.

By having the Department of Public Enterprises focusing on things like Denel, SA Airways, Alexkor, Safcol, etc., we are missing out on an opportunity of focusing on ... [Inaudible.]

The TEMPORARY HOUSE CHAIRPERSON (Mr M R Mdakane): Mr Oriani-Ambrosini, I regret your time has expired.

Mr M G ORIANI-AMBROSINI: Thank you very much, Mr Chairman. [Applause.]

GM//

END OF TAKE

Mr C L GOLOGO


Mr M G ORIANI-AMBROSINI

Mr C L GOLOLO: Chairperson, I want to propose that next time we get a translator for people like Mr Oriani-Ambrosini because we do not understand what they are saying. What an honour for me to address this House today. I want my speech to focus on Denel, one of the strategic state-owned entities that have to play a significant role in the economic growth of our country. I will also touch a little bit on Eskom thereafter.

The change in the arms manufacturing global market had a huge impact on Denel's financial sustainability, forcing the company in 2006 to embark on a turnaround strategy. The strategy included the disposal of non-core assets as well as joint ventures in the form of equity partnerships with private-sector players in the hopes that it would bring in fresh capital, greater market access, modern technologies and business processes. Despite numerous challenges, progress has been made and Denel boasts about four such partnerships. They are the German-based Rheinmetall Denel Munitions, Carl Zeiss Optronics, the French-based Turbomeca Africa, and the Swedish-based SAAB.

I want to share with you hon members that despite the continued losses made by certain business entities within Denel, the group has contributed positively to the economic environment. Denel is a valuable earner of foreign currency revenue earned exports which amounted to about R1,2 billion in 2008. This is the net export sales in respect of the ammunition business which was sold to the Rheinmetall Denel Munitions group in September 2008. Denel has sustained its global footprint through foreign equity partnerships.

Notwithstanding the above successes, Denel still faces a number of challenges. We all know that. Denel is faced with a critical shortage of skilled technicians and engineers, similar to what faces many industries in South Africa. The group is a skills-intensive environment in which it is still a challenge to train and retain suitable employees. Given the current economic recession and limited funding for defence products and related support services, market conditions are challenging.

The above challenges are shared with Denel's primary customers, notably the Department of Defence and branches of the SA National Defence force, as well as the shareholders in terms of the Department of Public Enterprise. The state-owned enterprises group, align their skills development initiatives with those of other state-owned enterprises and government entities. The SA Air Force is also working closely with the group to address the acute shortage of aviation technical employees.

In terms of the bailout or, if I may put it this way, the guarantees, I want to reiterate the point the Minister mentioned earlier on in her speech - that government's total guarantees to Denel in 2007 were about R2 billion respectively.

In terms of Denel's restructuring, the company has established several independent new companies in which it will hold equity on behalf of the South African government. The process to incorporate the new companies is still under way, although the businesses are already being managed as such. SAAB of Sweden, which is popularly known as "Saab", has a 20% holding in Denel's aerostructures business, and the German firm Carl Zeiss Optronics, which makes lenses that are also used for cameras, has acquired a majority holding in Denel Optronics.

I want to comment about defence expenditure in that it should not be seen as just a protective measure against unexpected risk, but as a centre for employment, skills and technology development. The challenges faced by Denel will, however, not be sorted out by guarantees of the company becoming a profitable business enterprise. This includes Denel's Denel Aerostructures division which continues to incur losses. We are told that a formal audit of business continuity of this division has been contracted to implement specific interventions which. we believe, in turn, will turn the business around. Parliament, in its oversight responsibilities, will closely monitor the progress of this division.

I promised earlier that I would touch on Eskom. It is responding to the growing electricity demand and needs to establish new-generation capacity in South Africa over the next few years. Generation capacity today can be met by harnessing different energy sources and applying different technologies. These technologies, hon Nhanha, will differ markedly in their generation costs, performance and utilisation characteristics, and will do so suitably for the South African environment and the state of commercial development. The choice of generation technology is multifaceted and complicated and has to be conducted within the context of the South African policy framework and legal and regulatory framework.

An important component of the Eskom capacity-generation programme is, among other things, the introduction of independent power producers who will diversify the revenue sources for the build programme and help ensure security of electricity supply. Nuclear power, the most viable alternative to coal as a base-load source of electricity, is also expected to make a larger contribution to the energy mix. This will be done through conventional nuclear technology and the new fourth-generation high-temperature reactors offered by the pebble bed modular reactor, the PBMR.

The PBMR is a major development project that requires considerable initial investment by the project partners. This project is important for the retention of skilled professionals within the South African industry. The success of the project will have a positive impact in the country's manufacturing sector and provide leading technology in the reduction of green-house gas emissions.

In terms of the World Bank loan to Eskom, these funds are going towards the construction of the 4 800-Megawatt Medupi power plant, which is set to be the world's fourth largest coal-fired power plant. The project is part of a five-year $50-billion plan by Eskom to increase generation capacity in South Africa.

It is very unfortunate that countries such as the United States of America and the United Kingdom were totally against this loan. The reason they cited was that the new coal plant would deepen South Africa's climate of debt for the poor. It is also regrettable that even the DA's Hellen Zille was totally against this loan, which is very, very unfortunate.

The TEMPORARY HOUSE CHAIRPERSON (Mr M R Mdakane): Hon member, please wrap up.

Mr C L GOLOLO: Let me conclude by saying that we support this Budget Vote. Thank you. [Applause.]

NS/

END OF TAKE

Mr L W GREYLING


Mr C L GOLOLO

Mr L W GREYLING: Thank you, Chair. Hon Minister, you have inherited one of the most difficult ministries with major problems existing throughout many of our public enterprises. Despite all of these problems, though, as a social democratic party the ID still believes in the importance of certain key strategic public enterprises. It is important, however, that fundamental changes are put in place to ensure that these enterprises are well positioned to capitalise on the opportunities of this new century.

Unfortunately, the current diverse collection of public enterprises in many ways reflects the strategic priorities of the old government, rather than what our new democracy should be focusing on. The ID firmly believes, for instance, that the state should no longer be in the weapons industry and that those skills must be redirected towards building up our country's competitive advantage in emerging global industries.

If one of the focus areas of our new industrial policy is green industries, then why don't we ensure that some of our public enterprises make this a core focus area of their work? We need to be bold in our thinking. Public enterprises are perfectly positioned to get out in front of the technological curve of these new industries, rather than simply continuing tie us to the old economic growth path.

To build public enterprises of the 21st century, though, we also need to deal with good governance principles. Public enterprises cannot in any way be used as a vehicle for the enrichment of a politically connected elite or, for that matter, the ruling party itself.

It seems paradoxical to the ID that everyone, except for Gwede Mantashe, recognises the major conflict of interest that exists in Chancellor House's shareholding of Hitachi Power Africa, but no one wants to take on the responsibility for doing anything about it. Even the World Bank tactically recognised the conflict of interest while trying to neatly evade it through claiming that their loan won't be used for the Hitachi component of the deal.

Minister, I agree with the sentiment in your written response to my question on the conduct of business between state-owned enterprises and political parties - that this issue should be dealt with in a broader piece of legislation. However, it is your party that has dragged its heels in formulating this legislation. In the very court case that you mentioned, the ANC didn't say that it would welcome legislation. It said it would bring it to this House shortly, and that was five years ago. We are still waiting.

Until this happens, Minister, it is your responsibility to ensure that public enterprises are not compromised through these blatant conflicts of interest, either legally or ethically. You therefore have a duty to pass regulations preventing these controversies from occurring in the future. But, based on your speech today, I trust that the ANC will now finally support my motion to set up an ad hoc committee on party funding. The next Joint Rules Committee will reveal whether we can finally start trusting the word of the ANC again. I thank you. [Applause.]

Mnr P J GROENEWALD


Mr L W GREYLING

Afrikaans:

Mnr P J GROENEWALD: Agb Voorsitter, die VF Plus verwelkom die feit dat die agb Minister sê daar sal 'n paneel aangestel word wat 'n evaluering sal doen van hoof uitvoerende beamptes van openbare ondernemings, maar ek wil vir die agb Minister sê dis eintlik 'n bietjie te laat. Hulle moes al gister hul werk en hul verslag na vore gebring het.

As ons gaan kyk na hoof uitvoerende beamptes wil ek ook vir u sê daar behoort 'n bepaling te wees dat geen hoof uitvoerende beampte van 'n openbare onderneming 'n salaris groter as R1 miljoen per jaar moet kry nie. Daarna kan dit op streng, goeie kriteria van prestasie gebaseer word. Dan sal ons verseker dat daar behoorlike prestasie is met die belastingbetaler se geld. Dis nie 'n argument om te sê ons kompeteer met die privaatsektor, ons gebruik die belastingbetaler se geld, en daarom moet ons salarisse van tussen R3 miljoen en R10 miljoen per jaar vir hoof uitvoerende beamptes betaal nie. Dis onaanvaarbaar!

Agb Minister, ek wil ook vir u sê weens die feit dat ek 'n voormalige werknemer van 'n filiaal van Denel vir omtrent tien jaar was, is Denel vir my 'n besondere teer punt as dit kom by tegnologie en werknemers. Suid-Afrika sit met 'n bron van hoogs kundige mense binne-in die Denel-groep, maar agb Minister, ek het vir u 'n vraag gevra oor hoeveel van die besighede verkoop is en u het my geantwoord. Sedert 2006 is daar 15 besighede van die Denel-groep verkoop, maar slegs vier van daardie 15 het op 'n verlies gewerk. Hoekom moet ons dan die ander 11 – en ek weet ...

English:

... you will say it's a non-core business and all those sorts of things -

Afrikaans:

maar die feit van die saak is 11 van daardie besighede het wel 'n wins gemaak. Hoekom het ons dan van hulle ontslae geraak? Oor die ander aspek, in terme van besighede waar daar aandele verkoop is, agb Minister, het u nie vir my in u antwoord die bedrag gegee waarvoor daardie aandele verkoop is nie. Van daardie 15 besighede wat verkoop is, het ons ongeveer R845 miljoen gekry. Dan wil ek graag weet: wat is die situasie met die aandele?

Ons neem byvoorbeeld Rheinmetall Denel Munition (RDM) waar ons net 49% aandele het. Dis 'n minderheidsaandeel. In die geval van Carl Zeiss Optometrics het ons ook maar net 'n 30% aandeel. Dis 'n veel kleiner aandeel. Dit is basies net in die geval van een filiaal, die Saab Aerostructures maatskappy, waar ons nog 'n 70% aandeelhouding het.

Agb Minister, ek is bewus daarvan dat veral in die krygstuigindustrie die kompetisie wêreldwyd geweldig sterk is. Ons moet ons kundige mense daar behou. Ons kan eerder ons hoof uitvoerende beamptes en hoof bestuurders se salarisse verminder en sorg dat die geld by die werknemers uitkom - by die mense wat die produksie lewer – in belang van Suid-Afrika. Dan sal daar vordering wees.

Die VF Plus verwelkom ook die feit dat die agb Minister sê daar moet gekyk word na die befondsing van politieke partye. Dan moet ons darem ook eerlik vir mekaar sê dat die ander partye soos die DA, IVP en dies meer nie hier hoog heilig moet kom staan en vertel hoe erg hulle daaroor voel nie, want hulle het saamgestem met die grondwetlike hof destyds dat dit maar eers daar gelaat moet word. Het hulle dan ook iets om weg te steek? Ons sê: as ons moet wys, moet almal wys! Daar moenie net party wys nie. Ons moet sê: wat kry ons ook van die buiteland af? Ek dank u. [Applous.]

'n AGB LID: Mooi gesê!

END OF TAKE

SN

The DEPUTY MINISTER OF PUBLIC ENTERPRISES


Mr P J GROENEWALD

The DEPUTY MINISTER OF PUBLIC ENTERPRISES: Hon Chairperson, hon Minister Hogan, hon members of this House, the leadership of the Department of Public Enterprises and the leaders of state-owned enterprises, I've decided to be cool today and start my speech with The Lion and the Statue, one of Aesop's fables.

This is the story of an argument between a man and a lion over which species is stronger. Clarifying this point, the man takes the lion to the public gardens and points to a statue of Hercules strangling a lion. "This proves," the man explains, "that humans are the stronger species". "No", the lion replies, "It proves nothing, since a man made the statue. If lions could make statues, Hercules would be lying under the lion's paw."

I raise this particular point because in the debate around public enterprises people have been erecting statues in public gardens. Minister Hogan, in her address, has alluded to those statues that some have erected in public gardens. We have not been able to erect our own statues, but now it is time for the hammer and the chisel to be given to the lions.

Having said that, the overriding challenge facing South Africa's network industries, particularly in transportation and power generation, is the implementation of large infrastructure investment programmes that are required to enable the country to achieve its ambitious growth and development objectives and global competitiveness.

Just by way of indication, of the R846 billion referred to by the Minister of Finance, about 60% of that is within our portfolio. The following points are current constraints in that regard. For most of our developmental needs, the demand for energy far exceeds available capacity. At 14% of GDP, the cost of logistics is higher than the average of around 10% that is found in developed countries. Transport costs account for more than 50% of total logistics costs, which compares poorly against the international average of 39%. And there is a significant imbalance in the freight transport system between road and rail. Road transport comprises 90% of transport costs, with the fuel price being the single biggest cost driver for road freight.

The net effect is that any changes in the fuel price have a significant impact on total commodity costs, highlighting our vulnerability to an external uncontrollable variable. Additional challenges include the significant infrastructure backlog across all areas of the freight system and the high cost of container shipping in the region. In addition, owing to the forecasted freight demand increase in the economy over the next two decades, there will be a need for sustained high levels of investment over an extended period.

Transnet, an SOE entrusted to be the custodian of critical port, rail and pipeline network infrastructure and operations, plays a leading role in addressing this critical freight challenge. Members of the House, this is why we need fully functional and effectively run public enterprises, because they play a catalystic role in the development and growth of our economy.

Despite the recession, our SOEs have managed to strive to achieve their mandates and objectives. The following are some examples. Over the past financial year, Transnet was able to improve its profits from operations by 12,8%, year on year, in spite of the negative impact of the global economic crisis. Over the same period, Transnet invested R18,3 billion, bringing total investment over the past five years to R72 billion. This has made a significant contribution towards the eradication of the infrastructure backlog in the port, rail and pipeline network. Major projects completed in 2009-10 include the widening and deepening of the entrance channel at the Port of Durban, and the expansion in capacity of the iron ore channel from 32 million tons to 47 million tons.

In addition, Transnet plans to invest about R93 billion over the next five years. A recent study conducted by our department found that Transnet's 2009/2010 plan to invest R80 billion in infrastructure over five years will contribute R113 billion to the GDP.

Eskom has committed to a 100-megawatt solar concentrating plant. I am told that this is one of the biggest projects of its kind, given that another project in Spain produces 20 megawatts and that the first phase of a planned project in China produces 30 megawatts, although it is intended that to produce more.

Eskom plans to double its generation capacity to about 80 000 megawatts by 2028. Currently, 90% of electricity is generated by coal. However, it is envisaged that by 2025 only 70% of generation will be coal based. The renewable and nuclear energy sources will be critical to filling in that space, consistent with our low carbon energy trajectory.

The global aviation sector experienced huge losses in the past two years. However, our domestic aviation industry, particularly the SOEs, have remained profitable both in the domestic and international lines. For instance, the largest airline in the Middle East reported a fall in profits of 72% for the 2008-09 fiscal year, yet in the same period SAA and SA Express recorded significant profits.

Our SOEs are playing a critical role in the broad-based black economic empowerment space as well. For example, Transnet has rapidly scaled up its BBBEE procurement spending from 37% of total procurement spending in 2007, to 65% in the past financial year. This translates into an absolute figure of R13,5 billion spent on BBBEE-accredited organisations during 2009-10.

Of this amount, R2,7 billion is spent on qualifying small enterprises, with turnover between R5 million and R35 million. An amount of R1,9 billion is spent on exempted micro enterprises, EME, with turnover below R5 million, and R837 million was spent on black-owned companies.
Eskom's procurement process for the New Build Programme aligns government's industry development objectives with empowerment. Over 50% local content has been sought for the supply of turbines, water treatment and electrical works. We have entered into supplier agreements which specify targets for SMMEs and women empowerment.

South Africa is emerging from an extremely limited investment period in fixed infrastructure particularly between 1984 and 2004. Supplier industries to infrastructure, in particular the manufacturing sector, were negatively affected by this lack of investment. This created a reliance on imports, which is not sustainable given South Africa's balance-of-payments constraint. It has also created a security of supply threat, particularly when global markets are overheating.

Together with our department, our SOEs launched the Competitive Supplier Development Programme which has the objective of leveraging SOE procurement to promote investment in plant, skills and technologies in the SOE supplier base. This is achieved through providing medium to long-term procurement plans in order to give the supplier community visibility of SOE requirements so that they can be positioned to meet them.

Global and national suppliers partner to make the best propositions to SOEs around the development of the relevant supply chain to meet SOE requirements. This is in line with the Department of Trade and Industry's Industrial Policy Action Plan 2 objectives and has the impact of increasing employment, increasing the value delivered by national industries and increasing the skill's profile of the supplier base. It also increases the security of supply and the competitiveness of the national supplier community to meet the needs of the SOEs.

At this stage, I would like to turn to some of the critiques that were raised by our colleagues. When we talk about remuneration we should be careful – we must look at each sector. We must make sure that we attract and retain skills and compare industry to industry. It may well be that if SAA does not pay pilots in line with industrial needs that the pilots will go to other airlines. So, when we look at the remuneration package in the industry, we have to take into account the interests of the various sectors as well.

Reference has been made to Eskom blocking IPPs, Independent Power Producers. I think we must make the point clear that policy has been developed in relation to IPPs. Once the development of that policy has been done, the Department of Energy will then make necessary announcements next week in relation to the International Organisation for Standardisation, the ISO.

With reference to Medupi not being effective until 2012, I think we have to talk the same language. The intention is that by 2012 the first unit – not the whole of Medupi – will be commissioned, Unit No 1. I think we are on track in relation to commissioning that unit.

Another issue which is quite critical is that we should not trivialise the funding model. It is an important debate in which all of us should participate in a constructive manner. I know Mr Oriani-Ambrosini referred to an Eskom Two. In this regard, we have listened to Mr Oriani-Ambrosini for years. He has said that we must bring in the private sector. We asked Mr Oriani-Ambrosini a couple of months ago what he means by this, and where these private-sector companies are that want to invest in this capacity. He has referred to a company whose name I can't remember.

However, we are having a national debate about the capacity of the country. It is quite important that we distinguish between our interests as political parties and the interests of the country. What we are talking about is the generation capacity of the country. It has been pointed out that between now and 2028 we need to double the capacity that we have. As to what generation mix that should include will depend on the IRP – Integrated Resource Planning - which is being developed now, in line with the commitments that were made in Copenhagen. So, it is going to be quite important that this debate we are having must be in terms of national interests and sectoral interests. We would, therefore, make the appeal that as we conduct this debate that those interests be the standards.

The second set of issues is that part of what we do is what we read in the newspapers. And Members of Parliament have to make sure that people respect what they say. If you are a Member of Parliament, everything you say must be based on fact because communities take what we say as the truth. We, therefore, appeal to Members of Parliament to take that into account.

In relation to what is referred to as privatisation, the ANC has no intention of privatising any institution at the moment. That must be clear. As far as IPPs are concerned, we are asking what the capacity is that we need over the next 20 years. Can Eskom on its own deliver that capacity? The answer to that question is no. Therefore we have to get extra capacity form other private operators. That is the strategy we have adopted. We would advise hon members, as part of this debate, to be quite cautious about how we translate this, because at the core of this is not the ANC, is not the DA, but national interests. That is central to this debate.

Hence, my warning is the following: A writer said that Members of Parliament have to analyse and be sober, and understand the interests of the country and not rely on what we call experts – and not rely on newspaper cuttings. We have been warned that experts frequently do not know what they are talking about and scholarly opinion, more often than not, is nothing but uninformed gossip. General acceptance does not decide a case, arguments do. Thank you. [Applause.]

MS

END OF TAKE

Mrs G M BORMAN


The DEPUTY MINISTER OF PUBLIC ENTERPRISES

Mrs G M BORMAN: Hon Chairperson, hon Minister and Deputy Minister, hon members and our guests, at a function on 31 March to mark the completion of the Durban harbour entrance widening and deepening project, Theunis Steenkamp, the Project Director of the Natal Corridor, Natcor, made a presentation in which his first slide began with the words: "The saying goes, 'The job is not over until the fat lady sings.'" The next slide showed the Queen Mary II, the world's biggest passenger liner, in all her graciousness entering the harbour with the caption: "The fat lady arrived on 23 March. The fat lady has sung."

This R3 billion project is one of Transnet's key projects in its rolling five-year R93 billion capital investment plan. Transnet's acting chief executive officer, Mr Chris Wells, says:

This port is key to Transnet's growth strategy and our objective to improve customer service, safety and environmental compliance, contain operating costs as well as to take advantage of revenue and volume growth opportunities.

He goes on to say:

Operationally, it will help us meet the stringent targets we have set ourselves on improving efficiency in our ports through reducing shipping delays and improving terminal operations.

This project started in May 2007 and was completed at the end of February 2010 – a month ahead of schedule – with some 6,5 million hours worked demolishing, dredging and constructing, providing work for thousands of people, whether unskilled, semi-skilled, skilled, or specialist skilled, all benefiting from the project.

Colleen Dardagan in The Mercury dated 1 April 2010 writes that while the global downturn had resulted in a 20% drop in container handling over the past year, Moira Moses, group executive in charge of Transnet projects, said that growth over the next 30 years was expected to more than double. She also said, "We have to increase capacity to compete with the best in the world. Shipping trends are changing. We are seeing much larger vessels carrying greater capacity."

So often the picture painted is that we are Third World, backward, and incompetent, when in fact we are out there competing with the best in the world. [Applause.]

The portfolio committee visited the new port of Coega in the Eastern Cape. Owing to the sensitivity of the environment in which the port is constructed and operates, Transnet implemented a poison-free system of monitoring and controlling rodents inside the port. The release of endemic birds of prey, owls and rock kestrels back into the port area has decreased the previously overpopulated rodent areas to their natural state.

Renee de Klerk, a Mott MacDonald employee, is the project environmental manager of the Transnet Capital Projects at the port. After winning the Mott MacDonald Sapling Environmentalist of the Year Award in 2008, she went on to win the Oak Award in Bristol, in the United Kingdom, for her work on the port of Coega's urban raptor project and for her continuing professional excellence in improving the environmental and sustainable performance of the port. Congratulations to Renee. [Applause.]

The 52nd annual conference of the ANC emphasised the importance of pursuing a rigorous programme of economic transformation. One of these focus areas is the creation of decent work opportunities, and this was captured in the ANC's 2009 election manifesto, namely "the creation of decent work and sustainable livelihoods". Decent work is the foundation of the fight against poverty and inequality. The creation of decent work and sustainable livelihoods is central to the ANC-led government's agenda, which has been supported in the budget.

To this end, the President announced in his state of the nation address that government is planning to spend R846 billion on infrastructure programmes in the next four years. Transnet will play a major role in this spend, which will need to create more jobs to reduce the country's high unemployment rate. As part of our responsibility to Parliament, the portfolio committee will need to play a vigorous oversight role to ensure that this happens.

This will include Transnet's capacity expansion programme. According to Mr Wells, Transnet has spent about R74 billion of its R93 billion set aside for this programme. The money has been invested in the port of Coega in Port Elizabeth, the Durban port entrance channel, a new mulitproduct pipeline from Durban to Johannesburg, as well as in 300 new refurbished locomotives and hundreds of wagons for coal and iron-ore export lines.

According to an unpublished study, Transnet's infrastructure programme will enable more than 550 000 jobs to be created in the economy over the next five years. However, we need to ask the question: Which people in the unemployment queue will benefit? The biggest demand for employment will be people who are unskilled or semi-skilled. As Parliament, we will engage with Transnet regarding these 550 000 jobs – how many direct and what will be indirect – which will make a substantial difference to the lives of the families who will benefit.

We note Transnet's commitment to skills development. In the 2009 annual report, Mr Wells writes:

One of the key drivers of organisational success is to harness and apply a high level of skills among the workforce. Transnet remains committed to having employees, at all levels, equipped with the requisite skills sets. This is demonstrated through the company's investment in excess of R420 million on skills development.

During our oversight visit of Transnet's rail engineering, we visited the School of Engineering, where 269 learners were being trained in different trades. The committee would like to see these training programmes rolled out to other enterprises and entities. It was encouraging to see female electricians doing electrical work on those massive locomotives.

During the year under review, the company assisted or sponsored the following students: 315 engineering bursars, 290 technical bursars, 11 learners in the Training Outside Public Practice programme, 30 bursars on the Thuthuka programme, and 40 graduates in training.

It is critical that we get the right people in the right jobs, people with a commitment to what they are doing. Transnet engaged with their employees, and together they defined a winning culture for Transnet, and in 2008 they unveiled the culture charter to close on 30 000 employees.

The launches were a huge success, with employees and the labour union partners spontaneously embracing the "Masihambe" [Let's move together] song. The charter process, arguably one of the largest ever undertaken in the country, has attracted the world's attention. The US-based Wharton School of Business is considering writing this up as a case study for a global best practice.

I must point out that Transnet is self-funding, and since 2005 has not received a single government guarantee to back any of its borrowings. All borrowings are made on the strength of its balance sheet.

The ANC would like to congratulate the Transnet team on a job well done and would like to thank everybody, including all the workers, who have worked tirelessly with great commitment to making a great success of this state-owned enterprise. The ANC supports the budget for the department. [Applause.]

GG//Mia

END OF TAKE

Mr S N SWART


Mrs G M BORMAN

Mr S N SWART: Chairperson, the ACDP shares the view that most of our state-owned enterprises are facing serious corporate governance issues resulting in weak decision-making, operational confusion, financial uncertainty and a failure to deliver.

Minister, we welcome your unequivocal comments of chief executive officers who consider themselves above or beyond the boards. These and other corperate governance issues must be addressed. We support the appointment of that panel to look into these issues.

The SOEs have become a considerable drain on the fiscus, even if one speaks of R26 billion - or the amount of R240 billion the DA spoke about – the amounts that have been spent to bail them out. The question arises then: When does one decide to stop the funding of these SOEs? Does one then decide to sell them off or parts of them, as has been done? Even if they were sold off at bargain-basement prices, would this step not, in any event, result in a saving for National Treasury or, on the other hand, the loss of strategic enterprises?

In mitigation on behalf of the SOEs - as a good lawyer one must argue in mitigation - they have had to operate against a backdrop of investment backlogs. We have to admit that there has been political interference and, of course, let us not forget about the global economic crisis.

I am sure you are aware of the recent Financial Mail article that stated that:

The business models for public enterprises are fatally flawed ... They encourage political interference and reward wrong behaviour.

The article also points out that whilst some private sector financial measures are obviously useful for SOEs, the danger is that executives are awarded for getting priorities wrong. And the issue of executive remuneration is, of course, being addressed. An example of this is that in January 2008, the power crisis was triggered by coal shortages, with managers running down inventory, which is a financial measure, rather than maintaining a stockpile, which is operational – and, clearly, getting priorities wrong there. We've heard of other instances of this this afternoon.

Minister, as far as the World Bank loan is concerned and this has been repeated continually, we as the ACDP were one of the first parties that said that party funding must be transparent and open. We supported that legislation. So we are concerned that five years after the Idasa court case we still have not seen that legislation. One doesn't want to say that it has been deliberate because of the World Bank loan, but we would have liked to have seen that legislation. It is clearly not your fault, but that legislation should have been in place a long time ago.

In conclusion, the ACDP agrees that Parliament will have to monitor cost-cutting measures closely to reduce the costs for SOEs. We need to know what savings will be affected and within what timeframes, and SOEs must no longer – in the words of the Minister of Finance - be allowed to "ratchet up salaries, spend on frills, travel in luxury and spend more on marketing the agency than in fixing the service".

However, we would like to express our gratitude to the chief executive officers, the board members and officials who are hard-working and honest and who are trying to make a success of the SOEs, notwithstanding the challenges they face. We will try to cut you some slack. Thank you, Minister. [Applause.]

Mrs F HAJAIG


Mr S N SWART

Mrs F HAJAIG: Chairperson, hon Minister, hon members, officials from the various SOEs and distinguished guests, I rise in support of this Budget Vote. I would like to address in some measure the present and the future role of SOEs. From the outset, I would like to quote one of our Polowane resolutions:

A developmental state should maintain a strategic role in shaping the key sectors of the economy, including the mineral and energy complex and the national transport and logistics systems.

This includes strengthening the role of state-owned enterprises and ensuring that, whilst remaining viable, agencies and utilities as well as companies in which the state has a significant shareholding, respond to a clearly defined public mandate and act in terms of overarching industrial policy and economic transformation objectives.

Some major transformation objectives are the creation of decent jobs, as many of my colleagues have said. Other objectives are to close the large gap between the rich and the poor, and to develop skills training, skills training and more skills training.

In our oversight work, at the various SOEs, I am quite convinced that institutions or enterprises or entities - or whatever you call them - such as Transnet, Eskom, Denel and SAA have the capacity to train at the highest level.

The first step would be for society to be led by the government especially SOEs, the private sector, labour and civil society in close support to agree on a vision of doubling the size of the economy within a generation. State-owned enterprises constitute one of the many instruments available to government in carrying forward the state's development agenda.

Some of the reasons why it is important for SOEs to remain in government control include, one, reducing dependence on other nations or multinational co-operations; two, building a strong position from which to secure management and technological expertise; three, developing and promoting local industries, which is very important; four, making investments where the private sector is either unwilling or unable to invest; five, forging a strong tool for national development; and, finally, establishing a more effective economic and political basis for dealing with other countries.

There are currently nine SOEs, as you all know, under the auspices of the Department of Public Enterprises. All nine are listed on Schedule 2 of the Public Finance Management Act. They range from aviation, transport, energy, mining, arms manufacturing, ports, forestry to information communication and technology.

The distinguishing factor about these entities is that they have borrowing powers whenever market conditions suit their credit-worthiness. That means the fiscus doesn't have to be milked all the time. The Department of Public Enterprises' revised mission and strategic focus for SOEs revolves around actively engaging stakeholders within and outside government, so that the role of each SOE is aligned with broader economic policies and strategies, and to ensure that industry-specific policies and regulations support this alignment. Furthermore, the department's immediate focus is to align SOE planning and performance with the outcome defined by the national Medium-Term Strategic Framework.

In line with these objectives, the department has developed a state shareholder management model to bring coherence and consistency to the management of all SOEs. This model will allow the government to systematically leverage SOE capacity to achieve strategic national objectives without compromising their financial sustainability. I repeat: "... leverage SOE capacity to achieve strategic national objectives without compromising their financial sustainability".

A key focus will be to gain greater recognition for SOEs as strategic instruments of industrial policy. In this regard, the following applies: define a clear medium-term strategic intent for each of the SOEs; ensure the ongoing commercial viability of the SOE through a constant process of monitoring and risk management and, where required, intervention; ensure the competent management of each of the SOEs and that boards fulfil their fiduciary duties; align the activities of the SOE with the relevant sector policies; facilitate co-ordination between SOE programmes and relevant government departments; and, lastly, ensure that the SOEs are adequately capitalised to respond to changing market conditions.

The infrastructure build programme provides SOEs with a great opportunity to help South Africa's economy in a big way. For example, in the procurement of large capital goods, government needs to ensure that a significant proportion is produced in South Africa. This requires a strategic change in the supply of equipment, while also addressing South Africa's weakness in the economy by developing the local means of production and creating conditions to supply these means of production, not only to the SADC region, but also to the rest of Africa, thereby boosting infrastructure development.

In line with the country's new industrial policy, those SOEs in the manufacturing business, like Denel and the SA Forestry Company Ltd, will need to put greater emphasis on manufacturing finished products - and not only on components parts - in order to boost exports. Innovation and reasearch should also form part of SOEs' strategic objectives as it does, but now to a greater extent. The SOEs' procurement policies need to also take into account the role played by the small, medium and micro enterprises in the economy, especially in terms of job creation.

Now, this question of SMMEs has been a sore point for a long, long time. I think that it is about time that we really work out a system in terms of which SMMEs can get started, be mentored and be productive. I think we have failed the SMME sector in our country. [Applause.]

There is no doubt that large a section of civil society view SOEs as having a huge role to play in the county's economic development. I think that a large majority of us do believe that. Some of the SOEs have not fully realised their potential - that is something we also need to recognise. The important thing, however, is that government has now taken up the issue of SOEs, outlining what role these SOEs are expected to play in the country's development agenda.

Nevertheless, the government's main task, as a developmental state, is to reorient SOEs towards the twin goal of attaining our socioeconomic developmental goals and maximising operational efficiency and financial sustainability.

In conclusion, SOEs can play a significant role if all stakeholders – private, public, civil society – hold hands in building a development agenda for a strong economy, resulting in a bedrock for social justice. I thank you. [Applause.]

VM/

END OF TAKE

Mr M A MANGENA


Mrs F HAJAIG

Mr M A MANGENA: Chairperson, hon members, I would like to start by commending the ordinary men and women at Eskom who have managed to tough it out under trying conditions. They have done us proud in a difficult environment that includes a dithering shareholder for many years; a shareholder unable to inject sufficient capital into the business due to pressing and competing needs; a need to expand the business under an international economic meltdown; a large percentage of its clientele being unable to pay adequately for electricity due to poverty and unemployment; bitter complaints when the lights go out; environmental groups screaming at the company not to do this or that; climate change considerations that impact on options to expand the capacity of the company to provide sufficient power; and the demand by society and the shareholder to provide electricity for those still outside the grid.

Yet, wherever you go to Eskom sites, you will find men and women who are doing their best to keep the lights on. I think these men and women in their thousands deserve our support and appreciation. [Applause.]

Azapo supports a funding regime for the Eskom build programme: that is, a combination of capital injection by the state, borrowing from financial markets, and a once-off tax. Although it would be preferable if loans were raised internally, the loan of about R29 billion to Eskom from the World Bank is, nevertheless, welcome. Although some of us are not friends of the World Bank, under the circumstances, we think we should grit our teeth. The loan will go some way towards cushioning the hard-pressed consumers against steep tariff increases.

The remarks we make about the good men and women at Eskom apply, with the necessary modifications, to the ordinary good men and women at SA Airways, SA Express, Denel, Transnet, Alexkor, Broadband Infraco, Safcol and the pebble bed modular reactor. Owing to limited time, we are unable to detail the circumstances at each one of them, but we know, in general, the conditions are the same.

In a country like ours, with formidable problems relating to poverty, skills deficits and general underdevelopment, state-owned enterprises are correctly understood to be tools in the hands of the state to spearhead development. They are to align their operations in a way that would assist projects and programmes run by the relevant government departments and generally support government developmental policies. They are supposed to support research and development, and act as catalysts in economic development. But state-owned enterprises, SOEs, can only play this role if they are appropriately funded and competently managed. State-owned enterprises in perpetual crisis cannot play this role. Instead, they become a drain on the fiscus, and an arena for destructive battles.

Generally speaking, most of our SOEs are not in good shape. Some of the reasons for this state of affairs derive from inadequate funding by the state, frequent changes of instructions with the frequent changes of ministers, and a high turnover of senior leaders or managers. These rapid changes in instructions and personnel rob the SOEs of institutional memory, stability and sustained efforts to implement plans to fruition.

Being the most unequal society in the world, it seems we have no choice but to strive for strong SOEs so that they may play a pivotal role in creating jobs, supporting economic growth, and improving the delivery of service to our citizens. But for that to happen we must be prepared to fund them adequately and manage them properly. We are not talking about SOEs that just get by, but about SOEs with strong balance sheets so that they can play a vigorous role in the economy and in the development of our people. Thank you. [Applause.]

Mr G W KOORNHOF


Mr M A MANGENA

Dr G W KOORNHOF: Mr Chairperson, Minister, Deputy Minister, officials of the department, the senior management of the state-owned enterprises, SOEs, comrades and colleagues, the Roman philosopher Seneca once said, "It is not because things are difficult that we do not dare, it is because we do not dare that they are difficult."

During the last 18 months we have witnessed the worst global economic and financial crisis in decades. In most countries the effects were devastating. In South Africa we did not escape this crisis, but due to solid political leadership and a stable political environment, backed by a sound economic system and good financial and monetary policies, we are managing this crisis better than most other countries. We are still experiencing difficult times with major challenges, but if we do not dare, things will stay difficult and will become even more so. As leaders, we have to dare in a responsible manner and in such a way that it will benefit the majority of our people.

The stakeholders in public enterprises, including the department, all nine state-owned entities and our portfolio committee, must now dare to make things easier, not more difficult. One such area is good corporate governance of state-owned entities, and this is the first issue I want to address in the time allocated to me.

There are a number of excellent Acts and documents linked to corporate governance in South Africa which are also applicable to public enterprises. The three most important are the Public Finance Management Act, PFMA, of 1999, the Companies Act of 2008, which will come into effect later this year, and the corporate governance standards of the King III Report. In the consideration of governance arrangements and the state-owned enterprises, it may be worth considering the relationship between the provisions of the PFMA, the Companies Act and the King III Report. Questions will need to be asked, for example: how are SOEs going to be affected by these Acts and corporate governance principles; and are these Acts and the King III Report compliant with one another with reference to SOEs?

We must ask ourselves whether the time has not arrived to develop a set of consolidated guidelines on the corporate governance of South African state-owned enterprises based on best practice and practical experience. Such guidelines were produced by the Organisation for Economic Co-operation and Development, OECD, and published in 2005, and these will assist the government in improving the performance of SOEs. The decision to apply the guidelines to the governance of a particular SOE should be made on a pragmatic basis, allowing for the differences in size, structure and mandate.

Challenges will be to structure a complex web of accountability in order to ensure efficient decisions and good corporate governance, and to clarify what role SOEs will play within the context of a developmental state. The hon Hajaig has already referred to that. SOE infrastructure projects, for instance, are critical if economic growth is to be sustained.

It is not because things are difficult that we do not dare, it is because we do not dare that they are difficult!

A second aspect that I want to address is that of certain choices that have to be made in challenging times. During turbulent times of financial and economic difficulties, entities operating in both the private and public sectors experience the opportunity to reconsider what is a "nice to have" and what is a "need to have". For state-owned enterprises, this choice also arises. Tough questions need to be asked, for instance, the retching up of salaries and bonuses, the spending on frills, the travel in luxury and the spending of more on marketing the enterprise than on fixing the enterprise, to quote from the Budget Speech for 2010-11 by the Minister of Finance:

In this regard, we have to work together to eliminate ineffective programmes and to improve value for money.

Boards of SOEs and CEOs of state-owned enterprises have a particularly important task to fulfil in this regard, and they need to set an example. As the Portfolio Committee on Public Enterprises, we should monitor the SOEs for the progress they make in this regard.

Lastly, I want to welcome the appointment of the inter-ministerial committee headed by Ministers Hogan and Gordhan, as well as the independent panel of experts appointed by the President, to look into various important aspects relating to SOEs. We are looking forward to their recommendations once the timelines and their reports have been finalised.

I am not going to finish my speech, because I want to respond to some of the comments made by members in this House.

Afrikaans:

Kom ons praat sommer plat Afrikaans. Eerstens, agb Mnr Van Dyk, jy het baie skerp en ongelukking miskien ongegronde woorde vandag in hierdie Huis gebruik teenoor 'n organisasie soos Eskom. Ek gaan daardie woorde nie herhaal nie, want ek dink ons moet kyk na die woorde wat Mnr Mangena gebruik het, en ek wil met hom saamstem. Dit is eerder 'n tyd om mense te komplimenteer wat baie harde werk doen in belang van Suid-Afrika, as om hierdie woorde te gebruik het wat die agb lid van die DA vanmiddag gebruik het teenoor Eskom.

Hoekom word daar nie hieroor gepraat wanneer hierdie mense voor ons in 'n komitee sit nie? Ons kyk mekaar dan in die oë, praat daar man teenoor man met mekaar oor wat die fout is. Eerder dit, as om dit hier in die openbaar te kom ophaal.

Toe ons by Madupe was, het hulle aan ons verduidelik dat die eerste module in 2012 gaan staan. Dit is duidelik gewees. Om nou na die tyd te kom en sê, nee, dis 'n vertraging en dis nie waar nie, is besig om die publiek te mislei. En ons kan nie bekostig dat ons openbare uitsprake maak wat nie gegrond is op feite nie.

English:

Then, I want to address Mr Nhanha. Mr Nhanha, I have news for you. I think you are flogging a dead horse in your party. You are using the words "corrupt officials in Transnet and Denel" here. You talk about bigwigs. It is good to greet your family on television! [Laughter.]

Do not come and bash officials that are hard-working and who are trying their very best to do that. You talk about bigwigs? I think you should look at the bigwigs fighting for position in your own party at your conference that is coming up. Then we will see who is corrupt and who the bigwigs are! So, let us not use words and make sweeping statements about hard-working officials who are trying their best to do some development for South Africa. I agree with you about PBMR, the core of the expertise needs to be kept in South Africa. We cannot afford to lose them.

Mr Ambrosini, it is not an internal committee appointed by the President, it is an independent panel of experts. Perhaps you know the names of this panel of experts. I have not seen the list. But let us not talk about the internal committee appointed by the President – it is not based on facts. The President said it is an international panel of experts from all over the world, so let us not make a judgement before they have started their work.

Mr M G ORIANI-AMBROSINI: Who appoints them?

Dr G W KOORNHOF: Mr Gololo has already answered you as far as Denel is concerned. You talk about needing drastic intervention. If you call for drastic intervention, you must still keep a cool head. Let us keep cool heads when we make statements, and say, let us review the situation. The President has just made that announcement.

Mr Greyling, I agree with you on good governance. That is what I am trying to say in my speech as well. We need that. As for the legislation for party-funding, let us bring it to Parliament, and let us see who comes to the table.

Afrikaans:

Mnr Groenewald het verskoning gemaak. Hy moes ongelukkig uitgegaan het. Hier is 'n boekie, Renumeration Guidelines for State-owned Entities. Hy is alreeds gepubliseer deur die departement. Daarin is die voorstel wat hy maak; dit is reeds in die boekie vervat. Nou het die Minister nog verder gegaan en gesê sy het nou 'n paneel aangestel om vergoeding te ondersoek. Dit is nie die VF Plus of iemand anders wat die inisiatief geneem het nie, dis die ANC-regering wat die inisiatief geneem het! Ons het gesien daar is fout, kom ons hersien dit, kom ons sit dit op die tafel, kom ons bespreek dit.

So, ons moet nie nou hier kom en "hijacking" op 'n groot skaal doen, en sê, nee, maar dit is ons idée nie. Dit is al lankal die ANC se idee wat hierso ter tafel gelê is.

Dan wil ek net ten slotte vir Mnr Mangena sê dat ek dink hy praat die waarheid. Ek dink ons moet nou saamwerk om te doen wat in die beste belang van Suid-Afrika is.

Wat is die rol van hierdie staatsondernemings wat onder hierdie departement val? Ons moet hulle kan saamkry om die ontwikkelingsrol wat die staat in hierdie land moet speel te ondersteun. En as ons op daardie pad gaan, en ons werk almal saam as politieke partye, Voorsitter, dan gaan ons vordering maak.

English:

Then we will "dare to make things better". Thank you. [Applause.]

Robyn – (NP–ed)

END OF TAKE

Mr S B FARROW: Chair ... [Inaudible.] ... I do not know if you were in the Chair in the beginning, but the Minister now has only three minutes, according to the calculations. [Interjections.] But wait, I have not finished. Just relax! But she has the right of reply and if she is very nice to us, the hon Van Dyk actually had a minute spare. The ANC did not give you anything, Minister, not one second, according to my calculations. [Interjections.] You are welcome to talk for an extra minute, Minister. Thank you. [Interjections.]

The TEMPORARY HOUSE CHAIRPERSON (Mr M R Mdakane): Thank you. Order! Order! Minister, you have five minutes to reply. The ANC gave you two minutes, and the hon member here gave you one minute. That comes to six minutes.

The MINISTER OF PUBLIC ENTERPRISES
Mr S B FARROW

The MINISTER OF PUBLIC ENTERPRISES: Hon Chair, can you assure me that this is not an attempt by the DA to bribe me? [Laughter.] You see, it is not only in certain quarters that we have bribery and corruption. It comes from the most unexpected ... [Inaudible.]

The HOUSE CHAIRPERSON (Mr M B Skosana): Then what do we say with the two minutes from the ANC?

The MINISTER OF PUBLIC ENTERPRISES: What do we say? [Laughter.] Chair, I do not want to keep you here much longer. I want to thank every member here for the incredibly robust debate and for some of the very, very pertinent points that people have made. Some of it has been touched with a remarkable passion about the future of our country. To listen to someone like the hon Mangena is to listen to the soft rain falling and the blessing of a man who understands and has the wisdom to understand what is required for this country to go forward. I want to thank you, hon Mangena, for that wisdom that you have shared with us. [Applause.]

I think it is time, and I said this earlier on, that this country engage in a debate about energy. As I listened to some of this debate, I do believe it is necessary for this portfolio committee to really get to grips with what Eskom is really and truly about. The unfortunate context in which we are operating at the moment is that Eskom has become the person, the institution that everybody loves to bash.

If there is a problem, it is Eskom's fault. If this is happening, it is Eskom. If you had listened to the hon Van Dyk, nothing Eskom could do was right. The Madupe power station build is regarded as one of the biggest builds in the southern hemisphere. It is regarded as one of the most ambitious projects. The concentrated solar power project and the wind power project that Eskom is going to embark on are, as we have heard, the most ambitious projects yet in the world around concentrated solar power.

And yet, we can sit here and just bash, bash, bash, and make sweeping generalisations and great, great inferences that are not based in reality: the board is incompetent, the management cannot do work, and the workers are on strike half the time. Surely, that is not the way that we engage in oversight. Oversight requires that we exercise accountability with measure, with insight, with honesty and with good wisdom.

I think Dr Koornhof was absolutely correct - we need to talk eye-to-eye here. We cannot afford to simply trash an institution that is so critical to the economy and to the future of this country as is done in certain quarters of this country. We have to recognise what it is actually achieving.

Yes, there was a glitch in 2008. Yes, it was government who actually stopped, government had to apologise, because Eskom warned government that there were going to be power shortages. It was not Eskom's fault, it was government's fault. Government has accepted that.

To continue to bash Eskom because it did not engage in that build is really playing games in terms of accountability. Since 2008, has anyone bothered to actually monitor, for instance, the coal reserves that Eskom is maintaining? The chairman says we did.

Eskom has not failed us. The lights are on, industry is blooming, households are cooking. Why is there such a problem? Why are we told that Eskom is such a disaster? I would like us, as this committee, to really engage on this issue. I do not want us to be coming here with this committee with just flippant, often very prejudiced, remarks.

I have just come from a board meeting, a board breakaway with Eskom. It was chaired by the extremely capable Mr Mpho Mokwana, who I think is still here in this room. Chairperson, can I tell you that I have never been in a board meeting where there was so much energy, so much focus, and so much direction. All senior managers were there. Things are happening like clockwork. In the interministerial committees that government has set up confronting energy – those nine or 10 streams – Eskom is a participant in virtually every one. The CFO is driving an extraordinary process to look at the funding models, and is really taking us places, including National Treasury, where we have never been before.

Have we gone to those many power stations? Have we actually really acquainted ourselves with the scale and the enormity of the Eskom project? No, we have not. Do we know, for instance, that the institution in the Drakensberg goes 50 storeys below ground?

The HOUSE CHAIRPERSON (Mr M B Skosana): Hon Minister, I've run out ... [Inaudible.] Give us now ... [Inaudible.]

The MINISTER OF PUBLIC ENTERPRISES: Okay, I will give you some slack. [Laughter.] Thank you, Chairperson, and thank you to all the members. And I do appeal that we actually engage on the matters relating to all state-owned enterprises, but please, let us try to get a balanced understanding of where Eskom stands in our parastatals. Thank you. [Applause.]

The HOUSE CHAIRPERSON (Mr M B Skosana): Thank you, hon Minister. Hon members, you are reminded that the EPC on Environmental Affairs will meet in Committee Room E249 at 10:00 tomorrow, and that the EPC on Women, Children and People with Disabilities will meet in the Old Assembly Chamber also at 10:00.

That concludes the debate and the business of this Extended Public ... Hon members, please! Could you sit down. Could you sit down, hon members. I don't know but perhaps some members were not here yesterday when I appealed to members that it had been brought to the Speaker's attention that the way we conclude the business of the Houses or the Committees is not the correct way.

When the Chair says "The Committee will now rise," then the Committee rises, but before then members must remain seated. But now there is a tendency in that we see members, before the Chair says anything, going through the door. That is not the way we should be doing it.

So, here I go again: That concludes the debate and the business of this Extended Public Committee. The Committee will now rise. [Laughter.]

Debate concluded.

The Committee rose at 16:31.

Robyn

END OF TAKE


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