Hansard: Appropriation Bill : Debate on Vote No 11- Public Enterprises
House: National Assembly
Date of Meeting: 31 May 2011
Summary
No summary available.
Minutes
UNREVISED HANSARD
EPC – COMMITTEE ROOM: E249
Wednesday, 1 June 2011 Take: 65
START OF DAY
WEDNESDAY, 1 JUNE 2011
PROCEEDINGS EXTENDED PUBLIC COMMITTEE – COMMITTEE ROOM E249
__________________
Members of the Extended Public Committee met in Committee Room E249 at 10:01.
House Chairperson, Mr C T Frolick, as Chairperson, took the Chair and requested members to observe a moment of silence for prayers or meditation.
The MINISTER OF PUBLIC ENTERPRISES
The Start of Day
APPROPRIATION BILL
Vote No 11-Public Enterprises:
The MINISTER OF PUBLIC ENTERPRISES: Hon Chairperson, Deputy Minister Dikobe Ben Martins, hon members, the leadership of our state-owned enterprises, ladies and gentlemen, today is 1 June, the International Children's Day, a day that serves as a reminder to all of us gathered in these hallowed chambers that our actions today must speak to the future. We owe it to our children, the guardians and guarantors of our future, to conduct ourselves in ways that secure them a prosperous and stable future.
We are also mindful of the fact that this is National Youth Month, and we are hence duty-bound to focus on how our actions and plans will bear on the aspirations of our youth. The youth of 1976 and the generations of youth, both before and after them, were correct to fight steadfastly for freedom in pursuit of a South Africa in which all would share in the country's wealth – a South Africa that belongs to all who live in it.
We are mindful of the fact that South Africa is facing significant economic challenges which are already captured most eloquently in the ministerial performance agreements, the new growth path, NGP, and the Industrial Policy Action Plan, Ipap; all of which provide a comprehensive strategic context for the development of the strategy of the Department of Public Enterprises. The budget presented before this House today is modest, but it provides the tools with which government, as a shareholder, ensures that the state-owned enterprises, SOEs, deliver to their public mandate.
In this context, I wish to provide some highlights of progress made in the last year, as well as my vision for the future role of state-owned enterprises, SOE, as instruments of the developmental state. Finally, I will provide a broad overview of strategic considerations relating to SOE in our portfolio.
To start with, I have delegated SA Forestry Company Ltd, Safcol, and Alexkor, the winding up of Aventura and the Pebble Bed Modular Reactor, PBMR, as well as our strategic interface with the provinces to Deputy Minister Martins. He will, in his presentation, expand on some of these themes.
During the previous financial year, the department used 98% of its R555,5 million budget, and SOEs made sterling progress in enhancing the state's developmental goals. We also took steps to enhance the performance of the department by, among others, appointing a director-general, and tasked him to address critical vacancies and the future capacity requirements for the department.
Government made the bold commitment to ensure the security of supply of electricity by approving a funding strategy for Eskom. Buoyed by this commitment, Eskom approached the international capital market to raise debt funding of $1,75 billion. It was encouraging that the transaction was oversubscribed and generated interest in excess of US$4 billion, demonstrating the confidence of international investors in both Eskom and our country.
We appointed the board of Transnet, the group chief executive, as well as the executive managers of the group, and, thereby, restored leadership stability in the organisation. We commenced with the fleet renewal plan at SA Airways, SAA. Between 2011 and 2015, we will acquire 25 additional aircrafts of varying ranges, which we will use for long-range as well as domestic and regional hauls, in order to enhance further SAA's fleet capacity. These new fuel efficient aircrafts will significantly improve the airline's service offering and will have a positive impact on the reputation of SAA as a leading airline on the continent.
Broadband Infraco invested in its national backbone fibre optic network which enabled the company to provide strategic international connectivity to operators in the Southern African Development Community, SADC, region and in the West Coast of Africa. During this financial year, we will continue to provide strategic leadership and vision to the department and our portfolio of SOEs, as well as address the organisational needs of the department in order to have the capacity to more effectively fulfil our shareholder management function.
The Department of Public Enterprises has the mandate to provide strategic shareholder oversight of a portfolio of key SOEs. The developmental state needs the ability to plan for long-term growth, drive investment in areas of the greatest impact, and form strategic economic partnerships to develop capabilities in targeted areas of the economy. Most importantly, the concept of the developmental state inspires us to be bold, to play an active and activist role in the management of the SOEs, and not shy away from making tough decisions.
We need to forge partnerships with the private sector and all stakeholders to mobilise skills and capital in pursuing our national objectives, without giving up strategic control of key national economic assets. As the NGP urges us, we need to align all our key stakeholders behind ambitious social compacts so that we move forward together as a united nation.
The NGP sets the target of five million new jobs by 2020. The SOEs can contribute in at least five ways: the expansion of their direct employment; the provision of infrastructure that can unlock jobs in the private sector and in rural areas; the expansion of procurement of locally manufactured components and consumer goods used by SOEs; the provision of skills to the wider economy; and the keeping of tariffs for services competitive and, thus, helping to reduce input costs in the economy. Accordingly, our new vision for the department is to drive investment, efficiencies and transformation in our portfolio of SOEs, their customers and their suppliers to unlock growth, create jobs and develop skills.
The department has historically put considerable effort into the development of a shareholder management model. Whilst this model undoubtedly lays a firm foundation for our management of the SOEs, it has its limitations. Initially, the evolution of our SOEs was premised purely on legalistic principles not cognisant of practical management of SOE activities.
The department is embarking on a paradigm shift to ensure proper alignment between SOE performance and executive or directors remuneration. This paradigm shift requires patience and careful consideration to ensure ultimate successful implementation. Remuneration of SOE executives and board members is an important and complex area for governance of SOEs, which requires careful consideration in consultation with Cabinet which the department is currently ceased with. I intend to take it forward with the necessary speed in order to support stability in the governance of SOEs.
The very rationale for SOEs is the developmental mandate they have, which relates to services provided in poorer parts of the country, skills development, industrial opportunities they create for local suppliers, and many more. There is a need for innovations in the governance of the SOEs if our new vision is to be achieved. These innovations will be focused on five key areas that relate to planning, funding, procurement, productivity improvement in the SOEs and integrating SOE developmental initiatives more effectively with overarching government programs.
The sharp decline in public investment in infrastructure in our country between 1976 and 2004 has created a significant backlog in infrastructure investment, which creates a significant constraint to investment and growth in key SOE customer sectors. As commercial enterprises, the SOE plans are based on the funds they can raise off their balance sheets. Clearly, there is a funding gap between the required investment to unlock growth in customers and these existing investment plans.
Secondly, a narrow approach by SOEs would ignore what economists refer to as positive externalities. For example, the societal benefits to the environment of moving more passengers and cargo from road to rail; the foreign exchange benefits of reducing the nation's fuel bill; and improvement to commuter safety.
Consequently, the department will continue to put considerable effort into the formulation of a new development-focused planning paradigm. No single institution, including the fiscus, is going to fill the funding gap. We need to start engaging creatively with key stakeholders in the private sector to see how we can qualitatively increase the rate of investment to fill the gap.
Our economy is characterised by very large mining, industrial and financial services companies that have the most to gain from an accelerated infrastructure programme, and with whom we need to forge social compacts to unlock their balance sheets and actively build funding partnerships to speed up the rate of investment in infrastructure and our strategic customer sectors. We need to begin this dialogue that aligns private sector players with our national economic objectives through concrete investment processes.
Another area of focus pertains to leveraging our capital and operational procurements to promote investment in relevant industrial capabilities. Consequently, we have implemented the Competitive Supplier Development Programme that requires the SOEs to integrate supplier development considerations into the heart of the procurement planning and execution processes.
This has been complemented by the fleet procurement approach that aims to provide a 10- to 15-year consistent demand platform for the building of advanced industrial capabilities in relevant supply chains. Both programmes have the objective of moving from a transactional relationship between the SOEs and their local and international suppliers to longer-term developmental partnerships based on the continuous building of national industrial capabilities.
It is critical that demand-side initiatives are co-ordinated with appropriate forms of supplier support. Consequently, Minister Davies and I will jointly provide direct ministerial oversight to the roll-out of the procurement leverage programme to ensure that it gets appropriate focus and support. I am also working with Minister Patel to ensure alignment between the procurement programme of SOEs and the Industrial Development Corporation, IDC's, new focus on building industrial capabilities in South Africa to identify opportunities for small businesses and enterprises in the social economy, and to integrate SOEs within the delivery mechanisms of the NGP.
We realise that the quality of service delivery of some SOEs is below acceptable levels in key areas. We need to ensure that SOE operational efficiency is continuously improving, even as we roll out our investment programmes. Improvements in productivity simply mean that we are using our assets more efficiently, producing more with less. Consequently, I am implementing a programme of bimonthly meetings with the chairpersons and CEOs of the SOEs in our portfolio. These meetings, the design and implementation of which will be closely monitored by the department, will systematically identify areas requiring productivity improvements and define interventions in these areas.
Turning to skills development, it is critical that we enhance the level of interdepartmental co-ordination. There are currently over 9 000 learners enrolled in training processes in the SOEs; the bulk of which training is related to scarce and critical skills: 2 242 engineering students, 1 064 technicians and 4 273 artisan students. A number of our SOEs have specialised and proven training infrastructure and associated capabilities that are being used to meet the SOEs' internal needs, but are not being used to their full capacity because of funding constraints.
I am, consequently, working closely with Minister Nzimande to enhance the output from these facilities to produce skills for the economy as a whole by accessing additional sources of funding from the National Skills Fund. Our plan is to increase the output of artisans from SOE training facilities by 60%, and that translates to 6 780 students for the coming year.
For example, we aim to increase output from Transnet from the present enrolment of 500 artisans to 1 500 artisans. In addition, Eskom intends providing apprenticeship to 10 000 young people in its pipeline, up from 4 500. Eskom also intends implementing a youth programme to support about 5 000 young people to find their way into employment - up from 200 – by 2015.
Furthermore, the SOEs will directly, and through partnerships with suppliers and commercial customers, provide support to Further Education and Training, FET, colleges and provide on-the-job training to graduates from these organisations. We will also be leveraging the SOEs in an integrated manner to advance youth development through our skills development, enterprise development and corporate social responsibility processes.
We will work with our colleagues to ensure that our country's SOEs play their role in the expansion of infrastructure on the continent as part of the vision of creating an African common market. We welcome the Presidential Review Commission on SOEs, and we are in a continuous dialogue with them around the department's experience in shareholder management. We look forward to their report.
SOEs in our portfolio will be investing over R105 billion during the 2011-12 financial year, comprised mostly of infrastructure. Eskom will be investing over R76 billion; Transnet R25,8 billion; and Broadband Infraco over half a billion rand in new broadband infrastructure. With the expansion of operations associated with this investment, the SOEs will target growth in their direct operations of at least 13 000 new jobs, and expect to help the growth in their South African supply chains by a further 40 414 jobs.
Eskom's core responsibility is to ensure the security of electricity supply, particularly as reserve margins get tight until new capacity is built. This will require close monitoring of the extent and effectiveness of Eskom's maintenance practices and the company's technical plan as a whole. Eskom's rolling capital investment program has climbed from R92 billion in 2005 to R549 billion to date.
We are working hard to ensure that the funding of the capital investment programme is in place, whilst ensuring that the roll-out of the programme takes place timeously and efficiently. Eskom is also working on their next generation supplier development plan to ensure that the impact of this expenditure on our industrial capabilities is optimised.
Eskom has launched the 49 Million Campaign to create a culture of energy efficiency and saving to mitigate the risks posed by our constrained power system and respond to the need to reduce our carbon footprint. We are also monitoring Eskom's role in future energy provision as per the Integrated Resource Plan, IRP, which may require us to find new and innovative sources of finance.
Through the Medium-Term Power Purchase Programme, MTPPP, Eskom signed contracts with five independent power producers since April 2010, totalling some 373 megawatts of capacity. They also signed up about 200 megawatts of municipal generation just for this winter. In order to address South Africa's commitment to carbon reduction and clean energy, and in line with the IRP, Eskom has incorporated renewable energy projects into its build programme.
Having received firm government support, work is ongoing to find sources of funding to further strengthen Eskom's balance sheet, without placing undue pressure on the fiscus. I am happy to inform this august sitting that the African Development Bank approved a US$ 365 million loan to Eskom for the 100 megawatts concentrated solar power plant and the 100 megawatts wind power plant. Eskom has submitted a US$ 250 million loan application to the World Bank for funding from the Clean Technology Fund, CTF, the final outcome of which is expected later this year.
Transnet's rolling five-year investment programme will be R110,6 billion. We are undertaking a comprehensive assessment of the level of investment required to unlock growth and to move goods from road to rail. In this regard, we intend to embark on a systematic process of engaging with both development and mainstream finance institutions and key customers to develop funding mechanisms for this programme.
I am confident that we will significantly enhance our export capacity in key logistics corridors over the next few years to ensure that we take advantage of global commodity boom. We are making considerable progress in building a firm foundation for our locomotive manufacturing cluster through comprehensive developmental programmes involving specialised skills development processes, production process redesign and a range of technology transfers.
In addition, direct investments are also being explored. As the next step of this process, we are designing a fleet procurement programme to renew the Transnet's locomotives fleet, provide capacity to support growth, and fundamentally localise the relevant supply chain. Given the scale of our national demand over the next 15 years, we will be a significant global market for locomotives. We will use this as an opportunity to ensure that South Africa becomes a global manufacturing hub for electrical and diesel locomotives, in partnership with leading original equipment manufacturers and their home countries.
We are also co-operating with the Department of Transport to explore how we can extract synergies from the Transnet and the planned Passenger Rail Agency of South Africa, Prasa, fleet renewal programme. In addition, we are engaging with the IDC to seek funding solutions for the procurement and to accelerate investment in the supply chain. In order to secure the supply of liquid fuels to the hinterland, the new multiproduct pipeline connecting Durban with Johannesburg will be commissioned in the third quarter of this financial year, and should be fully operational by the end of December 2013.
Arising out of concern for the time delays and cost escalations associated with this project, the department earlier this year commissioned a team of experts to analyse this, and we are presently reviewing their report. Furthermore, we are focussing on improving the efficiency and reliability of rail and port services. Decisive steps will be taken in this regard, including through investing in new equipment, especially in the port facilities.
Although Denel has made some progress since the company embarked on a turnaround strategy in 2005, its solvency position continues to pose serious challenges, with Denel Saab Aerostructures, DSA, being the major contributor to the entity's losses. A framework for the resolution of DSA has been developed and is underway. Whilst the trading losses in the other entities have been brought down, the majority of Denel's business entities remain loss-making.
Clearly, the business is not sustainable in its current model. A more robust turnaround plan that pursues financial recovery and stability through improvements in its operational and financial performance needs to be developed to secure the company's long-term viability. A structured mechanism is required in order to effect the necessary alignment of Denel's business plan with the requirements of the Department of Defence. Shrinking defence budgets have resulted in scaling back of certain procurement programmes with lower economies of scale and increasing unit costs. Going forward, there is a need to rethink Denel's strategic direction to ensure its financial sustainability.
With regard to aviation, the focus of SAA and SA Express, is on expansion in Africa, something which will contribute significantly to economic integration on the continent. SAA's primary focus on the African continent is to establish itself as a leading network carrier from OR Tambo International Airport to other primary airports across the continent. SAA plans to introduce additional routes and frequencies to broaden operations and improve its African footprints. This strategic focus is also fundamental to SAA's strategy to strengthen its balance sheet as the African market boasts good demand and better profit margins.
SAA has two long-term financial challenges. The first is to capitalise itself through the accumulation of strong retained earnings, and the second is to ensure that adequate cash is available to fund the Airbus transaction without government financial support. On the other hand, SA Express has a route network covering five African countries. It acts as a strategic feeder connecting secondary airports with each other and also with large hub airports. Most significantly, SAX plays an important role – that is SA Express; don't get excited. [Laughter.] SAX plays an important role in providing safe and reliable air services in African states where safety and reliability is challenging. [Interjections.]
In 2010 SAX launched Congo Express as a joint venture airline with Biz Afrika based at Lubumbashi in the Democratic Republic of Congo, DRC. However, other commercial risk factors have resulted in us withdrawing operations from this route. With commodity-led economic growth in Africa, SA Express is optimistic about its expansion plans in the continent, and has identified the underutilised cargo business as a core focus area. The new operating model for the cargo business will be finalised this year, which may include the conversion of current aircraft into dedicated freighters.
In the 2010-11 financial year, SAX embarked on a fleet renewal plan with the objective of meeting demand over the next 10 years. The plan is aimed at delivering improvements in reliability, introducing cleaner technology to reduce green house emissions and offering greater customer comfort while remaining cost efficient. The acquisition of new aircraft will commence in the first half of this year and result in the average capacity growth of 8,6% per annum over the next four years. We will continue to monitor the roll-out of the Infraco broadband network whilst working on a strategy to secure the long-term viability of the business.
In particular, we are exploring strategic synergies between Infraco and Sentech in order to optimise our capacity. The network having established 13,600 km of long-distance fibre and five open-access points of presence in key metropolitan areas, a further seven open-access points of presence are to follow. Work if continuing further to facilitate the roll-out of broadband access in remote rural areas and to facilities such as hospitals, clinics and schools.
Wholesale long-distance connectivity prices have come down by more than 75% over the past two years, further unlocking economic value by reducing the cost of connectivity. A deputy director-general from the department was seconded as acting CEO of Infraco, following the resignation of the then CEO of the organisation.
The delivery of this vision implicitly involves an expansion of the scope of the shareholder management process and the development of new capabilities in the department. Our SOE shareholder management teams in the department have the critical job of developing compacts, engaging with the policy formulation process and monitoring the sustainability and impact of the SOEs based on their corporate plans and quarterly reports. These teams will need to expand their capabilities to include growth planning and the monitoring of specific operational enhancement initiatives.
We will also have to significantly strengthen our capabilities in the areas of project design and finance and the development of co-investment arrangements and associated compacts. In addition, we will also be focusing on strengthening our capabilities in a range of specialised crosscutting areas such as economic impact modelling, procurement leverage, skills development, youth development, climate change and broad-based black economic empowerment, broad-based black economic empowerment.
We are in the process ...
The TEMPORARY CHAIRPERSON(Mr J Thibedi): Hon Minister, you have one minute left. Please try to wrap up.
The MINISTER OF PUBLIC ENTERPRISES: Thank you. We are in the process of reviewing the organogram to reflect our new vision.
Chairperson, at this stage I wish to thank Deputy Minister Ben Martins for excellent, critical but loyal support; the Director-General, Mr Matona, for his seasoned stewardship of our administration; the boards and chairpersons of SOEs and their CEOs; and the entire Department of Public Enterprises team for a great commitment to the goals of our nation as spelled out by our government. Profound gratitude is also due to the portfolio committee and, particularly, the chairperson, for the spirit of camaraderie in the discharge of their oversight responsibilities.
Finally, I want to thank my beautiful daughter, Qhakazile, even though she is absent today - for the first time - for her unfailing support, even when I neglect her in pursuit of national service, and for always smiling and giving me unqualified love. I accordingly request this house to support the Department of Public Enterprises Budget Vote of R230 000 000 million. Some of these figures are too big for me. Thank you. [Applause.]
Mr H P MALULEKA / GM// END OF TAKE
THE MINISTER OF PUBLIC ENTERPRISES
Mr H P MALULEKA: Chairperson, hon Minister, hon Deputy Minister, hon members, comrades and distinguished guests, today's debate on the Budget Vote on public enterprises must be conducted within the political and theoretical context of how we position state-owned enterprises within the context of the developmental state.
This theory of a developmental state must inform what we recommend and how we assess this Budget Vote. The central task of the ANC is to build a developmental state with the strategic, political, economic, admistrative and technical capacity in pursuit of the objectives of the National Democratic Revolution - that of building a national democratic society.
It is this task against which we must asses this budget and locates the state-owned enterprises, by recommendations that will qualitatively improve the functioning of the governance and of state-owned enterprises. Chairperson, the theory of national democratic revolution and its impact upon the transformation of the state and governance and in particular the assets of the state must inform the ongoing reorganisation of both the powers and functions of these state assets.
The ANC defines four key characteristics of a developmental state:
The first attribute is its strategic orientation and approach premised on people's centred, and people driven change, and sustained development based on high growth rates, restructuring of the economy and socioeconomic inclusion.
The second attribute is its capacity to lead in the definition of the common national agenda and in mobilising all of society to take part in its implementation and exercise leadership.
The third attribute is a state's organisational capacity in ensuring that its structure and systems facilitate realisation of a set agenda. These include macro-organisation of the state, policy, implementation organs, allocation of responsibilities, effective intergovernmental relations and stability of the management system.
The fourth attribute is its technical capacity, the ability to translate broad objectives into programmes and projects and to ensure their implementation. This depends among others on the proper training, orientation and on acquiring retaining skilled personnel.
Chairperson, it is within this context that we place the strategic objective of what state-owned enterprises should be doing in building the national democratic society. Further, we must assess this Budget Vote conscious of the fact that we have ANC policy that informs economic transformation and that Cabinet has adopted a New Economic Growth Path.
The central and most pressing challenges we face are unemployment, poverty and inequality. This means that we must simultaneously accelerate economic growth and transform the quality of that growth. Our most effective weapon in the campaign against poverty is the creation of decent work, and creating work requires faster economic growth. Moreover, the challenges of poverty and inequality require that accelerated growth take place in the context of an effective strategy of redistribution that builds a new and more equitable growth path.
Therefore, decisive action is required to thoroughly and urgently transform the economic patterns of the present in order to realise our vision for the future. Decent work is a foundation of the fight against poverty and inequality, and its promotion should be the cornerstone of all our efforts. Decent work embraces both the need for more jobs and for better quality jobs. The creation of decent work and sustainable livelihoods will be central to the ANC government's agenda. The creation of decent work opportunities and sustainable livelihoods must be the primary focus of our economic policies in building a more equitable and inclusive economy.
The ANC is therefore committed to addressing the problem of unemployment through practical measures in this year. Two thousand and eleven is the year of job creation through meaningful economic transformation. It is not enough to say that more or equitable sharing of economic growth will lead to a creation of jobs. We know that South Africa experience relatively strong economic growth during the 2000s, but we also know that this growth did not address the structural challenges in our economy.
Economic development is at the heart of driving the national project of job creation and our nation building project of job creation. For state-owned enterprises, job creation and skills development is a strategic objective and it is their performance against these critical indicators that we should measure whether they are contributing.
Practically this Budget Vote should therefore be able to reflect allocation of funds to state-owned enterprises that are aligned to the five key job drivers that are contained in the New Growth Path. State-owned enterprises must use the substantial public investment in them to create decent work and opportunities, target more labour absorbing activities, take advantage of new opportunities, take advantage of new opportunities in the knowledge and green economies, leverage social capital in the social economy and public services, foster rural development and regional economic integration.
The new growth path indicates that our goal of growing employment by 5 million new jobs over the coming decade is achievable. It cannot however, be achieved with only a single policy instrument. It needs a package of interventions that addresses a range of challenges in the economy and that balances competing policy concerns while mitigating unintended consequences.
The primary resolution of the ANC's 52nd National Conference states that the function of public enterprises:
Strengthening the role of stated-owned enterprise and ensuring that whilst remaining financially viable, SOE's, agencies and utilities, as well as companies in which the state has significant shareholding, respond to clearly defined public mandate, and act in terms of our overacting industrial policy and economic transformation objectives.
Chairperson turning to the vote funds to the public enterprises:
Any analysis of the vote and whether it is able to enhance the objectives of what the SOE's are meant to do is inform by the fact that the Budget Vote is a political and financial instrument for ANC policy objectives. Government's activities have been grouped into 12 functional areas or outcomes. Outcome four that is decent employment through inclusive economic growth speaks to job creation, and the primary focus for 2011.
While DPE has a definite role to play with regards to outcome four, it particularly contributes to outcome six that is an efficient, competitive and responsive economic infrastructure network. This outcome relates to the roll out, maintenance and refurbishment of economic infrastructure within an appropriate regulatory framework and ensuring that it is operationally effective and efficient.
The allocation of these resources has to be done in a manner that advances strategic policy objectives that include gender equity and poverty eradication. The ANC continues not only to fight for gender equity but to exemplify it through its internal processes. Section 9 of the South Africans Constitution entrenches equality such that unfair discrimination on the basis of gender is amongst the prohibitions it provides for. As a UN member state, we are signatories to the Millennium Development Goals, MDG's, of which MDG three enjoins all to promote gender equality and women empowerment.
DPE exceeds its human resources gender equity targets. As of March 2010 DPE had a staff establishment consisting of 56 males and 84 female staff members. However, the percentage budget allocation to procurement from women owned enterprises is not clear. Other than a commitment to conclude the Richtersveld Settlement Deed, there is very little in DPE programme that is explicitly pro-poor. DPE indirectly seeks to contribute to poverty reduction and job creation through ensuring that its SOE operate efficiently and effectively.
An element that could be linked to pro-poor agenda is the department's commitment to increase the number of access points to broadband in major cities, and under serviced areas, and to facilitate a reduction in wholesale broadband prices. This however is unlikely to be significantly realised given the very low budget allocation to broadband enterprises. A note of caution is DPE's position that infrastructure tariffs must be structured in a manner that allows for cost recovery and investment attraction. This could be positive, however the issue of cross-subsidisation is not raised, which poses a danger of the poor being excluded from access to key infrastructure such as electricity and broadband.
This may also skew infrastructure roll-out in a manner that benefits big capital only, and critical public responsibilities linked to the SOE mandate may be neglected. Such responsibilities may include the closure of key secondary rail networks due to unprofitability, therefore retarding rural economic development or closing unprofitable air route to smaller cities, which adversely affects their local economies. This test of this Budget Vote and what is contained in the Medium Term Expenditure Framework will be evaluated against whether it can address the economic framework that the 52nd National Conference of the ANC outlined in December 2007.
That is: the need to foster a thriving and integrated economy, which draws on the creativity and skills that South Africans can offer and build on South Africa's endowments to create decent work for all, as well as eliminate poverty; increasing social equality and a growing economy, which reinforce each other and constitute a positive circle of development and improves the quality of life of all our people.
Advancing to national prosperity through a mixed economy path...
The HOUSE CHAIRPERSON (Ms F Hajaig): Hon member, you have one minute left.
Mr H P MALULEKA: I believe also it would be amiss of us not to take up the energy saving campaign initiated by our Deputy President two months ago on behalf of Eskom. That all South Africans must join in the campaign to save energy; while Eskom's reserve energy has been steadily declining as result of increased demand, the utility is not planning any future outages but with high demand for energy in winter the risk might upset us. As the Presidency has correctly put it "lift a finger to switch off the plug." As the CEO of Eskom, Mr Brian Dames put it, "you turn me on and now it's your time to turn me off" Thank you. [Laughter.]
Dr S M VAN DYK / GG / END OF TAKE
Mr H P MALULEKA
Dr S M VAN DYK: Chairperson, the history of Eskom can be divided into the pre 1994 and the post 1994 periods as challenges and strategies were very different during these eras.
The first part was about Eskom providing energy for South Africa industrialisation. After 1994 the challenge for Eskom was to expand the supply of electricity to millions of homes in townships and informal settlements.
Four years later in 1998, The Energy Policy White Paper suggests that, that investment in generating capacity needed to be made by 1999, at the latest. Despite this, the ANC government decided in 2001 to prevent Eskom from building any additional power stations. As a result South Africa was plunged into darkness in the beginning of 2008 and in response former president Mbeki in his opening address to Parliament apologised to South Africa as he could not blame apartheid as the ANC frequently do when they are looking for excuses.
At that stage pressure on the government increased due to the escalating energy crisis.Nersa did not allow the price of electricity to rise in the early 2000, so Eskom could not invest any infrastructure. At the same time the private sector refused to invest as government proved to be incapable of contracting with private companies to build and run power stations.
The internal resources situation at Eskom was also neglected. In many cases Eskom appoint a personnel who are incapable to perform their duties and directors who are not familiar with managing a company. As a result poor maintenance and negligence triumphed at Eskom for almost two decades. These circumstances also led to the disastrous explosion at the Duvha power station earlier this year. Even the 2006 Koeberg disaster resulted due to badly maintained transmission lines that melted down. All of this was part of the less we spend on maintenance, the higher the profits and the higher the bonus approach that Eskom had adopted.
The internal capacity of personnel should be reviewed and seen as a matter of urgency. But this alone will not solve the energy crisis. Consumers should concentrate on electricity efficiency to improve savings on the demand side of energy consumption and government should also introduce tax relief measures to consumers in this regard.Unfortunately, even this approach cannot resolve the current situation.
There are certain areas where Eskom can play a major role to enhance sustainable energy supply in the short term and to lift the reserve margin of energy supply.
Just to mention a few, first improvement in management and control can assure that quality coal be delivered to the boilers by reliable suppliers, instead of the hundreds of small BEE contractors that failed to deliver properly. Eskom has already requested government to put more pressure on consumers in former disadvantaged areas, who fail to pay for electricity. According to Eskom Financial Director, Eskom carries R2, 4 billion debts from which 60%is Soweto's alone.
In July 2010 the Minister responded to a question in Parliament by saying that an amount of 625 million had been lost by Eskom due to illegal electricity connections. According to media reports of 21 August 2008 electricity theft in total is equal to the production of two power stations with a joint output of 7,200 mw.On 22 May 2011 Eskom announced that farmers steel more than half of electricity stolen from Eskom. The total loss of electricity stolen from Eskom is 7200 mw as mentioned. Half of this is 3600mw while agriculture only consumes 3%of electricity which equals 1200mw.So how can Eskom say that farmers steel more than 3600mw if agriculture as a whole consumes 1200 mw.That raises questions about Eskom's statistics.
Finally, when South Africa had a surplus of energy in the past, Eskom entered into contracts with smelters, that absorbed huge portions of electricity at a low cost.
Now circumstances have changed at the contracts have adverse effects on Eskom. Government as a shareholder should intervene and find a contractual basis to rescind them. The cancellation of the contracts will cost Eskom only R6 billion and in the process 2000 mw can be safe according to Eskom. To generate 2000 mw will cost almost R70 billion.Monthballing these smelters will significantly decrease the demand on the national grid and make up the bulk of the requisite 10% national energy saving.
What matters though chair is to look at the long term as well as to ensure sustainable electricity supply. In this regard I want concentrate on the planning process of energy supply and the availability of funds needed for infrastructure investment.
The way our government has dealt with the energy crisis is cause for great concern. It appears as if government waits until we are on the brink of blackouts before cabinets reacts.
Only after Eskom warned South Africa on 1 March 2010 that it will not be able to meet the demand for electricity from 2011 onwards and that blackouts might occur again in 2012, government started to provide guarantees to cover some of the costs. Later in March 2010, Eskom informed Parliament that it could only guarantee electricity supply for South Africa until 2017 in the absence of a clear policy from government combined with a funding solution.
At that stage Eskom was even on the brink of calling off the building of Kusile power station. Then all of sudden, government woke up and over and above the R60 billion from treasury, government submitted guarantees to Eskom to the amount of R350 billion for the building of Medupe and Kusile coal power stations as well as one pumped storage plant,Ingula,and the restart of the previous stations,Grootvlei and Komati. The commissioning of South Africa's new nuclear fleet in the 2012 to add 9600 mw to the grid between 2033 and 2030 is welcomed, although it is still unknown where the funding will come from.
The blackouts of 2008 resulted because of government's negligence since 1998, despite warnings from Eskom and others that blackout were on its way. Now four years later it does not seem that government has taken this problem seriously. According to Eskom, South Africa needs to build up to 50 000 mw new generation capacity by 2028, almost twice the current output.
At present South Africa 41000 mw and we want to increase production to 90 000 mw.The Budget for this exercise will be more than trillion rand.
Instead of proper planning to build more new coal and more than the already identified two new nuclear power stations, to which South Africa is accustomed to. Government decided to reduce coal's share of the electricity supply, from 85%of total generation, to only 15%for the next 20 years and renewable energy generation to increase 42%-something that we still have to experiment on.So, government foresees that the additional electricity will be made up only 6000 mw from coal, 9 600 from nuclear and 18000 renewable from so called green generation from gas, sun, wind water etc.
In March 2011, the Department of Energy again pushed for the implementation of renewable energy generation .It is hard to believe that sun, wind and gas which at present provides only 7% of electricity can add another 18000 mw to the grid. Time will not allow more experiments with wind, gas, sun and water. We need electricity power to enhance the economy.
Chairperson, the Integrated Resource Plan, IRP 1 declared in the Government Gazette on 31 December 2009, was 3 worthless pages of paper that did not say anything. In October 2010, IRP2 was tabled by the Department of Energy. Since then, contradictory views were raised by Eskom on IRP2, which calls into question the government' alleged concern with respect to energy generation.
As already mentioned IRP2 put emphasis on the renewable energy generation from sun, wind. gas and water. But on the contrary, on 9 November 2010, only 2 months later, Eskom executive Manager announced that coal and nuclear power generation is the way forward for South Africa, as South Africa does not posses enough gas, sun and water to meet our growing demand.
He also stated that the generation of renewable energy would cost almost four times more than coal power generation.
The Minister of Public Enterprise who is responsible for oversight on Eskom should provide Parliament with clarity on this confusion between different role players on what Eskom stands to do. There are even more bureaucratic role players, making it difficult for Eskom to move rapidly.
On 27 September 2010, the Minister of Public Enterprises responds to a question in Parliament saying that an Inter-Ministerial Committee on Energy was established. There is however, concern on the proper communication between all the role players who serves on this Ministerial Committee namely;
Firstly, Eskom as main supplier of electricity in South Africa, Secondly,The Department of Energy who appeared the IRP,Three The Department of Public Enterprises who provide effective shareholder management of Eskom,Four,Treasury who provides guarantees,Five,The Department of Trade and Industry who facilitates access to sustainable economic activity and employment,Six,The National Planning Commission in the Presidency who is responsible for developing a long term plan on reaching developmental goals,Seven,The Department for economic development whose aim is to promote economic development through participatory economic policy.
Eight, Nersa who determines energy prices for Eskom to recover costs and three other departments namely;
The Department of Science and Technology, Department of Environmental and Water affairs and the Department of Transport, who also serve on this Inter Ministerial Committee.
Eskom cannot afford to be delayed in the implementation of its building programme by possible bureaucratic procedures and red tape.
So, Minister if power supply fails to meet demand from now on, which of these 11 illustrated institutions will take responsibility?
The DA calls on a clear vision on electricity supply, agreed to by all stakeholders, as well as the private sector, since we are reaching a stage where we cannot rely on Eskom with government as sole shareholder to be the single source of energy for the country anymore.
Mr M A NHANHA / MMN / END OF TAKE
Dr S M VAN DYK
Mr M A NHANHA: Hon Chairperson, I'm being intimidated here. Initially the Minister offered me a membership form of the ANC. Hon Chairperson, Minister and Deputy Minister of the Department of Public Enterprise, DPE, colleagues of the fourth democratic Parliament, distinguished guests, ladies and gentlemen, may I preface my speech by extending my sincere and heartfelt condolences, on behalf of Cope, to the family, friends and comrades of Letsile Fani who served as a member of this House from 1994 to 1999.
Comrade Mdange, as he was affectionately known, passed away on 20 May 2011 and will be laid to rest at his home in Fort Beaufort, on 03 June 2011. May your soul rest in peace.
IsiXhosa:
Hamba kahle Mdange kaTshiwo, Thole leeNkunzi zasemaTshaweni.
English:
The Department of Public Enterprises may rightfully be called the problem child of the South African portfolio of departments. Not by its own making, but by the conduct of some state-owned enterprises, SOEs. A department with such a crucial role to play in the South African developmental story, but year on year some of its SOEs continue to fail and do not come to the party.
According to some reports SOEs have lost in the region of R2,5 billion in 2010 alone. For how long will we sit by idly and let these SOEs drain our economy? If you will allow me to quote from my own speech of last year's budget speech [Interjections.] There's nothing much to quote from:
It is such a shame that a developmental state we purport to be cannot learn from the past desperate situations and apply desperate measures as applied by the apartheid government during their isolation.
A few weeks ago I asked the Minister about the details of the new deal with Matsui of Japan to acquire new locomotives; I got evasive answers, Comrade Gigs. He said: "The total value of the transaction cannot be made public because it is commercially sensitive." What is even more disconcerting is the fact that no new tender was issued for the delivery of the new locomotives, this tender automatically went to Matsui. Surely a new transaction constitutes a new tender.
The department has disclosed that some local business people are partners in the deal with the Japanese, but we would like to know the details of the people or companies involved, in case it's Chancellor House once again.
As Members of Parliament we are here inter alia to make sure that government and its subdivisions can account for each and every cent appropriated to them. But, then we are stonewalled when trying to perform our tasks. So, Minister, once again, may I ask you to please enlighten me on the details of this transaction.
The once powerful Denel is now just a drain on the fiscus. Denel Saab Aerostructures and the Denel dynamics are pulling this struggling entity even further into the abyss. I welcome the announcement by the Minister in this regard. We are awaiting a final decision on the viability of the entity going into the future.
The department has been adamant that it is capable of turning this ship around. I just ask myself why Sub the Swedish manufacturer would decide to give up 20% of its stake if the contrary is untrue. A local firm, Aerosuite, is now in talks with Denel and we will be watching this space with keen interest, Denel.
The role of public enterprises is well-documented and in detail in the New Growth Path. The infrastructure development programmes have been identified as key job drivers of this document. Again minister I welcome your announcement that you are holding bi-monthly meetings with chairpersons and CEOs of these SOEs, however, it must not stop there Mr Minister. A harsher stance needs to be taken on underperforming entities and those responsible should be brought to book for underperformance. No performance bonuses for nonperformance, Mr Minister.
With winter in our midst, Eskom's ability to supply power readily will be tested severely. I still cannot figure out how it can be that one company called BHP Billiton Smelter can consume a total of bout 6% of our total generated electricity and yet Eskom, in its new renegotiated deal with this smelter, stands to lose about R4,7 billion. Government needs to ensue that we are not left in the dark in this regard.
In conclusion and on a more positive note, not suggesting that I'm taking up the offer from the Minister of joining the ANC, may I commend the Minister on his role in resolving the struggles experienced in Transnet and the sterling work that seems to be happening at South African Airways. May I also congratulate the Minister on addressing the problem of vacancies experienced within the SOE, especially with the appointment of the new chairman and the group CEO of Transnet. May this be a positive sign of things to come. Cope will support the Budget Vote. Thank you.
Dr M G ORIANI-AMBROSINI / N/b / END OF TAKE
Mr M A NHANHA
Dr M G ORIANI-AMBROSINI: Madam Chairman, through you Madam Chairman [Interjections.] No, its chairman in the English language, it's neutral and its manus of the Chair, I refer you to a proper dictionary. I apologise for my intermittent participation in this debate of the passage of the Bill.
What we have to say today reiterate what we said in the past two years and nothing has changed. So, we are forced to repeat things which we said before. The first aspect is our concern about the very nature of this department. Today, we will be debating about issues which are pertaining to energy policy, and the transport policy of the country. As we will deal with Denel, I'm sure somebody will dwell much on issues which are pertaining to the military policy of the country. If we want to deal with the great disaster of our diamond mine, we can also talk about mineral and energy.
This department is a mix and match and in order maintain its role has brought together very competent people; very capable people in the various field of each of the state-owned enterprises, SOE, who should rather be deployed within the line function of the department; and each SOE should become part and parcel of the line function of the department, as many of them already have. This has normally been carried on since the time of apartheid has not been addressed; it does not take a great deal of thinking on how it should be addressed; it's a simple way of transferring SOEs and personnel to each of the line function of the department so that these issues can be dealt with properly, competently and coherently.
They added value that the department brings to the table which is; undoubtedly there is no justified existence of the entire overhead with the Minister of State, Deputy Minister and the director-generals. This is the first concern; the other concerns you heard them before but they are continuing. We keep paying for Denel. We, the people, are the owner of our manufacturer which continues to manufacture at a loss with enormous problems in a seesaw of problems. Why do we need it? It must be privatised. We are competing with some of our manufactures in South Africa. The state is competing with its own citizens.
Why is Eskom taxing people progressively to build electrical plants? It should have been done through the Treasury but not by means of tariffs. A tariff is a nonbudgetary form to make the poor pay more for the same amount of benefits it receives. The Bill programmes should have been funded through a budgetary allocation. It is something that we find very difficult to stomach.
Aluminium smelters - we have been discussing this for three years. There is a problem, if we want to deal with it, let's do so and if we don't please let's stop talking about it; it's getting boring. It can be done at the departmental level. Contracts can be rescinded; we can do it legislatively. We have been discussing this in our committee two years ago about the possibility of passing legislation to deal with those contracts. The appropriation which is in the Constitution is broad enough; we can account to the conditions given in those contracts; and we can handle those factories which we are all paying. Every time when we turn on the electricity light bulb in our houses, we are paying for the cost of aluminium which we can't afford and that is the serious concern.
Lastly, I want to highlight the situation with the airlines. I've been an advocate of privatising the airlines as a matter of principles. I do acknowledge that they've been much better now than before. But the issue of privatisation of the airline lies straight in the way of expanding tourism in this country...[Laughter.]...lies straight on the road of heading a more successful tourism industry. Our airline, especially South African Airlines is becoming a stumbling block in expanding tourism industry internationally; and I don't need to stress the importance of tourism carries for trade and industry. This part of South African Airlines is ill conceived – I beg you pardon? Well its part of South African Airlines. Try to fly to London with Mango and see what it costs. [Laughter.]
Thank you very much.
Mr L W GREYLING
Dr M G ORIANI-AMBROSINI
Mr L W GREYLING: Minister, let me welcome you into this new Ministry and state that you really have your work cut out for you. You have come in at the time in which there has been an historical under investment in our fixed infrastructure with a backlog of R1,5 trillion having accrued since 1994.
The effects of this underinvestment have been felt across our economy from electricity blackouts to our failure to capitalise on the past commodities boom due to major bottlenecks in our transportation networks. It has also been felt in more indirect way such as our failure to retain our skills base in areas that we are going to need for all of our new build programmes.
So, while it is imperative for a major investment to take place in infrastructure, the burning question is whether we have both the financial and the human resource capacity to ensure that its goals can be achieved. It is therefore vital important that we obtain value for money from each of our investments in terms of both infrastructure stock as well as creating much needed jobs in our economy. We also need to build a more resource efficient economy with our infrastructure backbone helping to deliver far more sustainable outcomes.
In this respect, I welcome the South African Renewable Initiative which is admirably trying ways to achieve more ambitious targets for renewable energy that contained in the Integrated Resource Plan, IRP2. This initiative, however, needs to be institutionally bedded within government; and hopefully it can start to gain traction before the 17th Conference of the Parties of the United Nations Framework Convention on Climate Change, Cop 17, at the end of the year.
Eskom also need to actually start building the 100 megawatt concentrated solar power plant that has been on its planning horizon for the past decade. The ID is also concerned about the recent decision to scale down the rebates for solar water heaters as we are still far short of reaching the 1 million targets by 2014, and this will set the target back even further. Energy efficiency can not be just be about an advertising campaign but need to be back with real incentives and penalties if we are to ensure that the lights stay on in South Africa.
It also doesn't help when a 600 megawatt turbine is taken out by incompetence at the Duvha Power Station. I know that we are still waiting on the report, but even without it we can categorically state that this should never have happened at a supposedly world class power utility.
Finally, the ID is concerned about the funding model for Eskom and in particular that we still not have clarity over how the proposed R1 trillion nuclear build will be financed. We also need to avoid another chancellor house scandal and ensure that no political party financially benefit from any government contracts. The ID is therefore hoping that it will finally pass legislation outlawing such practices as recommended in the public protector's report. In the interest of both our democracy and good governance principles, this is an issue that the ID will not let you run away from. I thank you.
Mr A D MOKOENA / MS / END OF TAKE
Mr L W GREYLING
Mr A D MOKOENA: Chairperson...
Sesotho:
Dumelang.
English:
I rise here on behalf of the ANC to support the Budget of R230 million that has been appropriated by this Parliament in order to enable Public Enterprises to carry out its mission and vision during 2011 to 2012. This amount may be viewed by some as being rather jejune, especially considering the vast field that Public Enterprises has to cultivate in order to deliver a lucrative harvest, not only to this ANC-led government, but to the entire South African populace. However, we should all bear in mind that an efficient manner of managing state-owned enterprises, SOEs, is encouraged.
By the same token, I would like to take this opportunity to congratulate the Minister, the hon Malusi Gigaba, the Deputy Minister, the hon Ben Martins and the director-general, Mr Tshediso Matona, as the new top incumbents to steer the mighty ship of Public Enterprises and navigate it through turbulent seas. The portfolio committee will support you through thick and thin, because you are an accessible and accountable leadership that makes our parliamentary oversight role a pleasurable exercise. This complimentary recognition and challenge extend to other ministerial and departmental functionaries.
Sesotho:
Modulasetulo, ngangisanong ena, ke tla tsepamisa maikutlo a ka le tjhadimo ho Eskom, empa ke tla re qa! qa! dibakeng tse ding tse amanang le tshebediso ya Lefapha la Dikgwebo tsa Mmuso.
English:
Since 1994, Eskom has distinguished itself as an outstanding and effective power utility by supplying electricity to approximately 75% of all houses. This is indeed an impressive track record by any standard, especially taking into account the numerous challenges that it has had to face, inter alia, capitalisation shortfalls and unfortunate power outages. Notwithstanding these setbacks, Eskom did the country proud by not having blackouts during the 2010 Fifa Soccer World Cup, which we hosted with distinction.
Chairperson, Eskom employs 38 000 people. However, our President, hon Jacob Zuma, has pronounced that the ANC-led government has set itself a target of creating 5 million jobs over the next 10 years. As a portfolio committee, we urge Eskom to work out concrete strategies that will demonstrate meaningfully how this job target will be realised. The portfolio committee yesterday received a briefing on the disturbing industrial unrest at Kusile and Medupe Power Stations. [Interjections.] While recognising the right of workers to strike, we do not countenance the violent and wanton destruction of property. We welcome the intervention measures that have been taken by the management of Eskom. We also know that Eskom has played a significant role in respect skills development.
Sesotho:
Empa rona jwalekaha re le ditho tsa komiti ya palamente e disang le ho alosa tsela eo dikgwebo tsa mmuso di kgannwang ka yona, re batla ho ba le lenane la batho bao Eskom e ileng ya ba kwetlisa, ya ba neha tsebo ya ho sebetsa ka motlakase; haholoholo borakgwebo ba kobo di mahetleng. Ha re batle palo eo feela, empa sepheo sa rona ke ho tseba hore ke batho ba bakae bao Eskom e ba kwetlisitseng ba ntseng ba sebetsa kajeno kapa hona ho itshebetsa. Hona ho tla re thusa hore re bone hore na re tlatsa nkgo e dutlang kapa tjhe.
English:
The independent power producers are expected to play a significant role in energy supply. Hon Minister, we urge you and your colleague, the Minister of Energy, to firm up legislation on International Power Producers, IPPs, so that they can begin to operate and relieve Eskom of the burden of being the sole electricity supplier.
Hon Minister, the portfolio committee wishes to encourage government to be more aggressive in the area of renewable energy, as we all know that clean energy will rid us of the plague of climate change. We are looking forward to the Conference of the Parties, COP 17, which our country is hosting in Durban in October this year, to adopt concrete measures that will reduce the global carbon footprint.
Chairperson, as responsible politicians, we are appealing to our people out there to desist from the iniquitous practice of illegal electrical connections, as well as its twin evil of copper cable theft. These inyoka, ugly snakes, must be exposed and decapitated. [Laughter.]
Hon Minister, legislation to criminalise electricity theft must be drafted soon so that we can apprehend these ugly snakes. I hope I am expressing a collective desire of the portfolio committee that the lifespan of the Presidential Review Committee on SOEs be extended from the current 18 months to a reasonable tenure. We realised this after receiving an extremely impressive progress report at our strategy workshop which was held at Shelley Point a few months ago, presented by its fabulous and well-informed chairperson, Madam Riah Phiyega. I would like to urge this House, all of us, to speak with one voice to our people out there and support and buttress the campaign by Eskom to save energy by saying…
Afrikaans:
Ons moet die krag spaar. [We have to save energy.]
English:
We must save energy.
IsiZulu:
Masilondoloze ugezi.
Sesotho:
A re baballeng motlakase. [Ditsheho.] A re di beheng mohatla kgwiti. Kgomo tseo le manamane a tsona! [Mahofi.]
The DEPUTY MINISTER OF PUBLIC ENTERPRISES /Mohau//Mia / END OF TAKE
Mr A D MOKOENA
The DEPUTY MINISTER OF PUBLIC ENTERPRISES: Hon Chairperson, hon Minister of Public Enterprises, Mr Malusi Gigaba, Your Excellencies, Ministers and Deputy Ministers, hon members, the director-general and officials of the Department of Public Enterprises, the leadership of state-owned enterprises, esteemed guests ladies and gentlemen, the Budget Vote of the Department of Public Enterprises provides an opportunity for us to reflect critically on work under taken by the department.
I wish to focus on four state-owned enterprises delegated to me by the Minister of Public Enterprises. These are Alexkor; Aventura; the South African Forestry Company Limited, Safcol; and the Pebble Bed Modular Reactor, PBMH.
The department provides shareholder management of these entities. Our active involvement in monitoring key areas in each of these SOEs, which includes governance, performance and board appointments, ensures that we can identify potential problems early and can act swiftly to mitigate these.
We continue to improve our oversight management of these entities. It is the department's ongoing goal to ensure the implementation of proper governance systems within each entity, by using the applicable legal and regulatory instruments, including the Public Finance Management Act and the entity's founding legislation. A critical part of the governance process for state-owned enterprises is to create alignment by each entity to government's objectives and, in this context, to formulate the strategic intent for each entity in a manner that provides guidance to the board as to the mandate they should assume.
The role that state-owned enterprises play in the economy is an ongoing issue requiring engagement and assessment. We are confident that the research and outcomes of the Presidential Review Committee will ensure that the state has a more coherent view of the role that these enterprises should play in the South African economy.
Hon Chairperson, I should now like to give a very brief overview of the state of the enterprises delegated to me.
Alexkor's distinctive competencies are its quality of diamonds and its unique land and marine mineral resources. Alexkor remains focused on implementing the Richtersveld land restitution order imposed on it by the Land Claims Court. The court order obliges Alexkor to transfer land and mineral rights to the Richtersveld community, to establish Alexander Bay as a formal township, to undertake environmental rehabilitation, and to establish a pooling and sharing joint venture with the Richtersveld Mining Company for future mining activities.
To date, significant progress has been made in the implementation of the Deed of Settlement. All Alexkor, state and Northern Cape provincial land, including land mining rights, have been transferred, except the township erven.
Furthermore, there has been a redirection of Alexkor's strategy to ensure that it operates on a commercially viable basis and contributes towards the socioeconomic upliftment of the communities and regions in which it operates.
Alexkor has also been mandated to explore opportunities to procure new mining ventures in order to secure new revenue streams and ensure its future growth. This entails exploring opportunities for downstream beneficiation to contribute to the creation of new jobs, the development of requisite skills, investment in research and development, economic growth, sustainable development and cost-effective support for the broader policies of government. This new strategy will ensure the company's long term viability, whilst contributing to the socioeconomic upliftment and development of the Richtersveld region.
With reference to Aventura it is necessary to remember that, in 2001, the government decided to dispose of its noncore assets such as Aventura resorts. After years of protracted litigation by parties with vested interests in Aventura properties and land claims that were lodged, the department has made significant progress in transferring and registering most Aventura resorts in the names of their rightful purchasers. It is anticipated that the final winding up of Aventura resorts will be completed before the end of the current financial year.
Hon Chairperson, the South African Forestry Company Limited, Safcol, continues in its position of contributing to rural welfare and development. Safcol presently provides approximately 2 200 permanent jobs and 2 000 contract jobs, in rural areas characterised by high levels of unemployment, in Mpumalanga, Limpopo and KwaZulu-Natal.
The Department is currently exploring a range of different business models and institutional structures through which the developmental impact of Safcol's human and financial resources can be optimised. This will assist in providing certainty for the business and direction for the company's operations. Keen consultation with key stakeholders will also be required before taking the matter to Cabinet for final consideration.
Downstream economic activities in rural areas, from timber milling to furniture manufacture have also been very strongly encouraged. Furthermore, a process is underway with the Department of Rural Development and Land Reform to dispose of the remaining shareholding in four privatised forestry companies, to the communities surrounding Safcol's forestry operations.
Also, as approximately 61% of land under Safcol's operation is under land claims, the department is playing a proactive role in facilitating the resolution of these claims, through effective inter-departmental co-operation.
The past year has been a challenging one for Safcol. While not dependent on the fiscus, Safcol has been reliant on cash reserves and limited usage of debt finance. A key focus for the year ahead lies in ensuring improved financial and commercial sustainability.
Hon Chairperson, I now wish to turn to the Pebble Bed Modular Reactor, PBMR. Due to fiscal constraints and the PBMR's failure to secure an investor or partner, government decided to place the PBMR into care and maintenance to protect and preserve its intellectual property and preserve its assets. Good progress has thus far been made and it is envisaged that the preservation of intellectual property and the transition to care and maintenance will be complete within this financial year.
In conjunction with the Department of Science and Technology, the department has embarked on an intellectual properly audit of the PBMR, in order to ensure a sound strategy to protect its future value. A skills audit has also been conducted to ascertain how current expertise could best be utilised in future nuclear endeavours.
In conclusion, I should like to thank the Minister of Public Enterprises, Mr Malusi Gigaba, for his leadership and stewardship of the department. I should also like to thank the director-general, Mr Tshediso Matona, and the department's senior management and staff for their professionalism and unwavering dedication. I thank you.
Ms C C SEPTEMBER / nvs / END OF TAKE
The DEPUTY MINISTER OF PUBLIC ENTERPRISES
Ms C C SEPTEMBER: Hon Chairperson, hon Ministers and Deputy Ministers, hon members and comrades, leadership of the state-owned enterprises, SOEs, and the department, ladies and gentlemen, the primary resolutions of the ANC's Polokwane conference that relates to the Department of Public Enterprise is strengthening the role of state-owned enterprises, SOEs, and ensuring that, whilst remaining financially viable, SOEs, agencies and utilities, as well as companies in which the state has significance shareholding, respond to a clearly defined public mandate and act in terms of our overarching industrial policy and economic transformation objectives.
At the heart of a developmental state is a socioeconomic development and, thus, public enterprises should and can play a key role in a continuous emergence of a developmental state. The SA Forestry Company Ltd, Safcol, can play a catalytic role in promoting economic activities in rural areas, and Broadband Infraco should continue to counter the market failure in the provisions and pricing of the broadband communications capacity. As the ANC, we support the recognition that, given the Department of Public Enterprise strategic position, the department can play a critical role in both the customer and the supplier community in catalysing socioeconomic transformation in all communities – a case of shareholder activism.
As stated in our January 8 statement this year, the ANC called for the role of SOEs and development finance institutions, DFIs, to be crucial to achieve the new growth path goals that the institutions would need to operate differently and more effectively. The ANC, therefore, welcomes the department's commitment to increase the number of access points to broadband, especially in underserviced areas. This, however, is unlikely to be significantly realised given the very low budget allocation to broadband enterprises.
A note of caution is the Department of Public Enterprise's position that infrastructure tariffs must be structured in a manner that allows for cost recovery and investment attraction. This could be positive. However, the issue of cross-subsidisation is not raised, which poses a danger of the poor being excluded from access to key infrastructure such as electricity and broadband. This may also skew infrastructure roll-out in a manner that benefits big capital only, and critical public responsibilities linked to the SOEs' mandate might be neglected.
On 11 February this year, a report in Moneyweb stated that the Minister of Public Enterprises and the Minister of Communications held discussions on exploring potential synergies between Infraco and Sentech. The ANC welcomes this development and calls on Sentech to have the same approach to the development for the sake of ensuring long-distance national and international connectivity to previously underserviced areas. Infraco has to rise to the challenge to ensure that high-capacity communication technology is a major driver to grow our economy and ensure access to socioeconomic services such as our key priority areas of education and health, amongst others.
The budget allocation for transfers to SOEs has declined significantly, sadly. Most concerning is the budget allocation for energy and broadband enterprises contracts. This decrease is not in line with the government's need to address the critical shortage in communications infrastructure and electricity, and not in line with objectives of creating SOEs that must perform developmental functions.
The deficit is being supplemented by loans and private sector investments. In the long-term this may have adverse implications for tariffs. As a country in transition, public investment in economic network infrastructure is critical. It cannot be expected that SOEs champion the expansion required to address historical backlogs and to meet current and future demand purely from their balance sheets. Furthermore, the heavy reliance on loans will compromise the policy integrity of government in future and it should be cautioned against. Likewise, the burden cannot be transferred to citizens. Tariffs have to remain affordable.
Likewise, the bulk of the funding directed to Safcol is towards concluding land claim settlements, and the role of Safcol in providing wood-based products is not adequately explored. Safcol, through to beneficiation of wood, could serve as a catalyst to revive growth in the sector and create jobs for the local communities.
As the second national long-distance network provider in South Africa, Broadband Infraco aims to positively influence availability, access and market pricing for long-distance services, thereby contributing to lowering the costs of doing business in South Africa. In order to achieve this, Infraco deployed approximately 12 125km of high-speed fibre optic network across the country. This network channels internet traffic within the metropolitan domain and between the long-distance points of presence. The point of presence sites are facilities that contain the network termination equipment which is used to connect wholesale operations to those that are required by last-mile service providers like mobile operators, government entities, internet service providers and value added network operations.
The development of forestry in South Africa arose out of colonial development strategies. What is peculiar about South Africa's development history, however, is that economic development strategies were specifically designed to benefit one racial group exclusively from the rest of the country's population, particularly, between the 1950s and the 1990s. The present developmental strategies of Safcol under the present democratic government must, therefore, continue to specifically achieve equity.
The forest sector, through Safcol, can play a role in helping a developing country to progress towards its developmental path. It can do this by creating a platform for trade and manufacturing and, in this way, expand the economic base. Indeed, forestry has played this role for many countries that now have developed economies.
In countries like Canada and Sweden, forestry kick-started industrialisation and created a platform for diversification in other industries. As these countries moved up the developmental path, forestry's relative importance decreased. At the same time, the forestry sector tended to move up the value chain, supplying more processed forest products and fewer commodities.
Safcol is government's forestry company, conducting timber harvesting, timber processing and related activities, both domestically and internationally. It is undergoing a strategy review. We need clarity on the future of Safcol. Since 1996 the forestry sector has undergone restructuring. There has also been talk about leasing and handovers. Stability is required, and Safcol should not be disposed of.
The South Africa's forestry policy and the restructuring of the plantation sector were motivated by key policy objectives that time. These spoke about recognition that is more appropriate for the private sector to perform an essentially commercial function; recognition that the state's historical role distorted round wood prices through the long-term timber supply contracts; and many others. The above is an outdated view and should be replaced by my earlier views on the need for a developmental path for Safcol and forestry as a whole.
As the ANC, we welcome the view that the Department of Public Enterprises' strategic plan seeks to provide clarity on the future of Safcol. As the ANC, we look forward to a leadership in public enterprises that will be hands-on, bold, give decisive leadership and policy clarity in order to achieve a national democratic society.
Taking from the India Noble who said:
Government's commitment to create a people centred society of liberty binds us to the pursuit of the goals of freedom from want, hunger from deprivation. These freedoms are fundamental to the guarantee of human dignity, an integral part of a developmental state.
The ANC supports the Budget Vote, and I thank you for your attention. [Time expired.]
Mrs G M BORMAN ///NPM//GM (ed) / END OF TAKE
Ms C C SEPTEMBER
Mrs G M BORMAN: Hon Chairperson, hon Minister, and Deputy Minister, hon Members and guests, I sometimes find myself listening to people lamenting the state of affairs in the country. They say things like:
Nothing works; the politicians are all corrupt, there are no skilled people in our municipalities, Malema is pronouncing on things he knows nothing about, crime is out of control, poverty escalating, people have no jobs, the country is going to the dogs, Gloria tell us, is there any hope for this country or are we going the way of Zimbabwe?
I am then able with great confidence to tell them of the oversight visits that we make particularly to our state owned enterprises, SOEs, where we find excellence on the ground; in fact how much of what is happening on the ground is world class. There are challenges as there are in any other country but all is not gloom and doom. The ANC pays tribute today to the men and women who work very hard in our state owned enterprises, helping us to keep the lights on, move people and goods by air, rail, port and road, providing training and jobs, doing research and keeping us connected with all our modern technology, and often in difficult circumstances. Is the glass half empty or half full?
My focus today will be on our airlines: South African Airways, SAA, SA Express and Mango. In the SAA 2010 annual report, the CEO Siza Mzimela, wrote:
To generate the required returns, SAA will focus on achieving sustainable operational efficiencies and maximising the value of the network through improved route, fleet and revenue management. Achieving this will require SAA to continue with an inclusive approach to operating with its alliance partners and its subsidiary, Mango, to support better alignment of schedules, and to ensure that the network is serviced by matching aircraft gauge and operator, with route distance and demand.
She goes on to say:
SAA accounts for about 38% of international arrivals and about 49% of arrivals from elsewhere on the African continent... we have by far the largest presence in the continental freight market.
Parliament congratulates SAA Cargo who for the fourth consecutive year, have been named the best African Cargo Airline 2011, at the air Cargo News Awards Ceremony held in London in April this year. SAA Cargo transports over 130 000 tons of freight annually and is one of the most profitable divisions of SAA.
SAA has made good progress, and its financial performance is positive, showing a 2010, group pre-tax profit of R596 million, despite a weak balance sheet. However, much ground has been lost in the quality of service of SAA. The public vote with their feet, there is little loyalty to brands. The ANC has confidence in the new leadership. Parliament will carefully monitor the envisaged turnaround in quality of service delivery.
South African Express continues to achieve sustainable growth and has implemented the first phase of its African strategy which is to establish a joint venture airline Congo Express mentioned here by the Minister. It is good to see the new look rebranding which distinguishes it from SAA. Over the last 24 months it has embarked on its own exclusive cadet pilot programme which has produced 8 pilots and is already flying for the airline. The intention is to identify 10 candidates each year.
Mango is South African Airline, SAA's, low-cost airline and has performed exceptionally well providing excellent service at an affordable price. The Chief Executive Officer, CEO, says in her 2010, report:
Despite the strong competition, the Mango team has increased market share for the second year running. It will continue making air travel accessible to more South Africans. Mango achieved a pre-tax profit of R18, 5 million, a 9% improvement on the previous year.
Mango provides air travel services to an average of 140 000 passengers per month and since its inception at the end of 2006, over 6 million South Africans had made use of the service. The CEO recognises that the airline's importance as a fundamental platform from business, trade and tourism cannot be underestimated. This has huge potential for job creation and skills development which is a top priority for all our state owned enterprises. SOEs will not be getting any further funding from the fiscal, the question to the Minister must be, and, will SOEs benefit from the R9 billion job funds as well as the R5 billion youth subsidy set aside by government for job creation? If not, Parliament could run the risk of only overseeing the filling of vacancies and not creating new jobs.
South Africa has joined the Brazil, Russia, India and China, BRIC, group of emerging countries. It means we are increasingly recognized as the most significant country in Africa where highly industrialised countries seek to do trade on our continent. This means that SAA is uniquely positioned to serve the rest of Africa. It is world acknowledged airline brand which trade delegations and business entrepreneurs will use to access the mineral-rich countries elsewhere on the continent. If we dither, other airlines will climb in. The CEO of SAA has had the wisdom to seize the initiative and we await progress.
SAA made a significant contribution to the successful hosting of the World Cup. Cheryl Carolus, Chairperson of the board of SAA, said in the 2010 annual report:
Beyond the World Cup, SAA looks forward to continuing its collaboration with other key role players in promoting South Africa as a business and tourism destination. I am sure that our family of 8034 SAA staff will take to the skies to meet the challenge ahead and, by extension, raise South Africa's flag proudly on the global stage. The ANC certainly supports that. Thank you very much.
Mr P VAN DALEN /NN / END OF TAKE
Mrs G M BORMAN
Mr P VAN DALEN: Chairperson, I want to complement hon Maluleka, chairperson of the committee, for his ability to run a meeting and that he has stabilised the portfolio committee and that we can now have updated agendas and presentations in advance. I see him as a fair person and I want to thank him for that. Thank you, very much. [Applause.] Chairperson, I also want to tell the Hon Minister Gigaba through you, that we as a party have given him six months to settle in. The honeymoon is over and I want to warn him that he must fasten his seatbelt as the ride is going to be rough.
From the start, with the Minister allowing the reappointment of Siyabonga Gama as the chief executive officer, CEO, of Transnet fright and rail after he had been found guilty of not adhering to instructions of his board and had given a tender for 50 as new locomotives to a different company that the board had approved and where the procurement policy was not followed. As if this was not enough grounds he gives his friend and cadre Mr Siphiwe Nyanda a security contract of over R25 million yet, he was only authorised to award contract of less than R10 million.
We as a department, through the entity reporting to us have embarked on a build program that is of monumental importance and that this is a huge backlog in infrastructure we have build up over the last 17 years. For this, I commend the department. What is however worrying to me is the huge escalations in the cost from the original prices. We are not talking about building your normal house and I can understand escalations as there must be unforeseen costs.
The trend is however that some costs double the original cost and everything is either R5 billion or R10 billion or R100 billion. There is no half measures like R1,25 billion. Why is this and I come to the same conclusion as Anthony Butler in the Business Day of 18 March, that it is "Parastatals budgets for dummies."
This is why entities like Chancellor House and Makotulo Investments are in on the act. What is R5 billion extra anyway? Who would notice it? I will tell you, it is R5000 million and if you give the money to 5000 people tomorrow, they would all be millionaires or you could build 100 000 Reconstruction and Development Programme, RDP, houses for the poor with it. That is how much money Chancellor House is estimated to get out of is once off deal with Eskom and Hitachi according to Paul Hoffman in the Business Day on 26 May.
What other deals does it have with any other parastatals where the ruling party have deployed its cadres for this purpose? I have been informed that Chancellor House and therefore the ANC has a net value of about R60 billion. Now if the ruling party was so set on eradicating poverty I can tell you if you ask hon Sexwale this would almost be enough to eradicate the housing backlog in the whole of South Africa. Chancellor House, is like a cockroach in the soup and will spoil it for everybody.
I also want to ask you Minister, to speak to your counterpart in the government, as to why the Second Hand Goods Bill that was signed by the President and gazetted in 2009 has not come into effect yet. There seems to be no political will to do this. The Bill will go a long way in curbing cable theft and it would give the law enforcement agency the teeth they are lacking. The imposing of an export duty on the export of scrap copper, copper alloy and aluminium would most certainly immediately stop this scourge.
The money that is raised in this way can be pooled in a separate account where the entities and municipalities could claim back their losses. It would not help to lobby to have copper proclaimed a precious metal as this would only drive up the price.
The issue of baggage theft and pilferage should also be deserving of some of your attention. This scourge is also not only an embarrassment to this country but a sure indication that the management of the state owned enterprises are failing us. Everybody is passing the buck on whose responsibility it is to do something and I want to submit that we should give the political guidance and make it Airports Companies of South Africa, ACSA's responsibility.
We should put it in their shareholder compact and refuse to pay any bonuses until this out of control criminality at our airports is rooted out. Workers and contractors should be vetted and undergo lie detector tests. Criminals should apprehend and charges of sabotage should be laid against transgressors as this is a national key point and there is legislation governing that. In the interim ACSA should wrap all luggages.
In conclusion, we must relook at the viability of the parastatals and decide if there strategic intent of pre 1994 and the apartheid regime are still in effect. Thank you. [Applause.]
Dr G W KOORNHOOF / AZM MNGUNI/ END OF TAKE
Mr L W GREYLING
Dr G W KOORNHOF: Chairperson, Minister, Deputy Minister, Director-General of the department, leadership representing the state-owned entities, SOEs, officials, ...
Afrikaans:
Die TYDELIKE VOORSITTER (Mnr A Mlangeni): Ons kan jou nie hoor nie.
English:
Dr G W KOORNHOF: ... guests and hon members, no one has done so in this debate, so may I, firstly, congratulate Kaiser Chiefs; sorry, Orlando Pirates ... [Laughter.] ... for winning their third piece of silverware this season. Well done Pirates! [Interjections.] Your neighbours and brothers in sport, the Blue Bulls, are proud of you.
Congratulations also to the Blitzbokke! This weekend they won with the biggest comeback in the sevens rugby world history by beating Australia in the cup final. The winning try scored by S'bu Sithole was absolutely brilliant! Such sporting achievements make us proud to be South Africans.
While I am mentioning exceptional achievements, allow me to also congratulate the Department of Public Enterprise for having just received the seventh consecutive unqualified audit report since 2003. [Applause.] It is good performance and we hope that you will maintain the high standard in future. I also congratulate the Minister and Deputy Minister of Public Enterprises for their first Budget Vote in Parliament [Applause.]
Before reacting to some statements made by members, I want to address three issues very briefly, namely the role of SOEs in a developmental state; the challenges confronting one of the business units of Denel, namely Denel Saab Aerostructures, DSA; and some thoughts on corporate governance of SOEs.
The chairperson has already referred to the primary resolution of the ANC's Polokwane conference. That is the policy of the ANC; that's a starting point. State-owned enterprises should have a long-term national interest perspective, looking ahead to the next 20 years and beyond. A focus should be on infrastructure investment.
One of the highlights of the 2011 budget is that the total public sector infrastructure investment will amount to R808 billion over the next three years. Capital investment expenditure by the public sector will average 8,5% of gross domestic product, GDP, over this period. It is brilliant achievement. We should be confident of the role that SOEs will play in this regard.
In a recent publication by the Department of Economic Development, entitled The New Growth Path Framework, the following is stated on the developmental state:
A developmental state is not simply hostage to market forces and vested interests. Through careful alliances, clear purpose and by leveraging its resource and regulatory capacity, it can align market outcomes with developmental needs.
A key challenge will be to improve the state's efficiency, effectiveness and responsiveness in the face of opportunities and risks. Our new outcomes–based performance monitoring and evaluation system provides, however, a base from where to address such challenges.
The new growth path, therefore, requires a reorientation from all state-owned agencies, including the SOE's. In essence, it will be a new partnership between the state, business, organised labour and civil society actors. For a SOE to play a role in the developmental state, a paradigm shift is required towards addressing infrastructure backlogs and bold future investment programmes.
It will require a new thinking with regard to planning, funding, procuring, productivity, job creation and skills development, only to mention a few key initiatives. I am glad that the Minister in his introduction also referred to this new paradigm shift that we need.
One of the important job drivers identified to grow employment by 5 million jobs in 2020, while, at the same time, stimulating the GDP growth closer to 7%, include infrastructure investment. This includes a near doubling of electricity capacity by 2030, including new generation coming from renewable sources and from nuclear power.
Also included in this infrastructure investment will be the expansion of rail transport with more railway tracks and rolling stock for both commuters and freight transport. Another important job driver will be to improve our port efficiencies and costs. This includes key ports on the continent and an integrated road and rail system across the continent.
Given the above-mentioned scenarios and policy positions, calls for privatisation of SOEs ignore recent history and are blind for the consequences of the global recession which started nearly three years ago. In the period between 1994 and 2004, when government policy then focused on privatisation of SOEs, investment in infrastructure was very low, less than 5% of GDP. There was no investment in either infrastructure refurbishment or rolling out of new and modern infrastructure.
It was only when the ANC government stated that it would retain ownership of SOEs that Eskom and Transnet announced their massive investment programmes. It is through government ownership that the momentum of these investment programmes can be sustained and matters of national interest prioritised.
Similarly, there are instances in manufacturing where state ownership is critical for national sovereignty, such as in the defence industry. It is, therefore, crucial that SOEs play an important part in driving investment, creating jobs and developing scarce skills, and thereby assisting in accelerating economic growth in our country. For this to happen, we need a national partnership and compact to drive such investment and job creation in the economy. The SOEs should be key drivers of this process, in partnership with private stakeholders.
Let me turn briefly to Denel. I am not going to refer to Denel's mandate and aims. Denel Saab Aerostructures, DSA, is currently the only loss-making entity in Denel. It is important that attention be given to the following. Firstly, we need to await the report of the Presidential Review Committee on SOEs, which will most likely make a recommendation on the future and position of DSA.
Secondly, strategic partnerships for DSA should be considered for a turnaround strategy and to give access to international markets. Thirdly, the Department of Defence and Military Veterans should express itself on what defence capabilities are needed, and what their strategic requirements are. The updated defence review is eagerly awaited because, once that is known, it can be aligned to what Denel and DSA can offer. There is an urgent need to define the future role of Denel in the economy to ensure the strengthening of advanced manufacturing technologies in support of our government's industrial policy objectives, as contained in Industrial Policy Action Plan 2, Ipap2.
I want to make a concluding remark on the governance of SOEs. I am not going to read what I have put down here, save to say that it is interesting to read what the Organisation for Economic Development and Co-operation has said about the state acting as an owner of the SOEs.
I want to say it seems that best international practice for the state acting as an owner of SOEs shows that the function of policy and regulation can indeed be separated from the function of operations. It is better not to be player and referee at the same time. Let us hope that the Presidential Review Committee on SOEs will investigate and report on this matter of the state acting as owner of SOEs.
Let me turn to the fun part and react to some of the comments that were made. The DA started out with the criticism on Eskom. We have a totally different view. Eskom is a national asset. Eskom has - if you look at the leadership and listen to the presentation recently at the portfolio committee – excellent top-quality leadership. Eskom keeps the lights on. Eskom has embarked on a massive infrastructure role-out programme that this country has never seen in its history. [Applause.]
Yesterday, Eskom told the committee about the status of the system. They said that there will be no load shedding despite the risks, and they spelled out the risks. I sometimes get the impression that some parties and some people want the load shedding only to say: I told you so! [Laughter.]
The DA also calls for a new vision in electricity supply, not to rely on Eskom, and not to have the government as the only shareholder. I have copies here; I will give them to you free of charge: the new growth path, the Ipap2, the strategic plan of the Department of Public Enterprises and the annual report of Eskom. They all address these issues of the new vision for electricity. So I really don't know where this new vision will come from.
Mr Nhanha - I think he has left to sort out the huismoles [domestic strife] in his own party because he is not here - talked about the Department of Public Enterprises as a problem child. My goodness! Maybe he is talking from experience about the problems in his own party and then comes here and says: "Listen, you have a problem child within your own midst."
I think Mr Ambrosini has left to address another Extended Public Committee because the IFP is thin on the ground. [Laughter.] He talks about privatising arms manufacturing. I want to ask hon Ambrosini to give me examples of countries that have privatised all their arms manufacturers. You know, he reminds me of a quote about government that says: If it moves tax it. If it still moves regulate it. If it stops moving subsidise it. [Laughter.] And I think that is probably what the IFP will do when they get into government. [Interjections.]
Mr Greyling you talked about Duvha. I fully agree with you; that was an unfortunate incident. I think the best logical way to handle this will be to wait for the investigation report - yesterday, the department said it will make the report available - and then engage the report to see what exactly happened.
Mr Van Dalen, you made so many points and I couldn't hear any positive input. But, maybe I should leave it and spare the 30 seconds for the Minister to wrap up and make it clear to you. I thank you. [Applause.]
The DEPUTY MINISTER OF PUBLIC ENTERPRISES ///NPM// GM (ed) / END OF TAKE
Dr G W KOORNHOF
The MINISTER OF PUBLIC ENTERPRISES: Chairperson, I want to thank hon members for what was a good debate. I want to start from where the hon Borman started. Much of what is happening on the ground in the state-owned enterprises, SOEs, is world class. We often pay tribute to the kings and queens, the leaders and forget that the people who do the work on the ground are the ones that actually withstand many difficulties.
I want to pay tribute to all our staff in all our SOEs, whoever they are, wherever they may be, whatever they may be doing, for the incredible work that they do for all our SOEs, be they at Transnet, Eskom, SA Airways, SAA, SA Express, Denel, broadbending Fraco, Saudi Arabian Fertiliser Company, Safco, Alexkor or Pebble Bed Modular Reactor, PBMR. We pay tribute to all of them and we hope that their leadership present here today, will convey our heartfelt gratitude to all of them for the work they do on behalf of our country. [Applause.]
The hon chairperson of the committee emphasises the important need for broadband access by the poor. That is why we are discussing with Centech to find synergy so that we are able to leverage on mutual capacities and resources and do more because sometimes duplications are not so very useful. We have put this quite clearly and this is one of the reasons we have established these bi-monthly meetings with the chairs and chief executive officers, CEOs, to focus on the agenda for the poor, the number of jobs and skills and to raise the strategic issues that the President and the ruling party, the ANC, want us to deal with. That is going to emerge clearly because it is at the top of our agenda.
The hon Van Dyk raised important challenges about the history of the electricity challenges that we are faced. It is important for us to say that government does have long-term plans for electricity generation and we are looking at funding models in order to address these plans that we have, to avoid exactly the problems that we have had to face in the recent past. But, what I find interesting, hon Van Dyk, is an almost silent criticism of the role played before 1994 to deny the majority of our people electricity. You focus singularly... [Applause.] ...on what happened post 1994, which is a sad excuse for Verwoerdian policies. Sir, I listen to you very carefully and I even tried to listen to the underlying message that is being communicated. I don't worry about the superficial things that people say.
With regard to BHP Billiton contracts, Eskom has already re-negotiated the contracts and moved to coast reflectivity but the Department of Public Enterprise wants them to move further to be closer to standard tariffs and has requested engagement over the next two to three months. With regard to electricity theft, the amount of electricity stolen is far below the figure that you, hon member, have presented here. For one reason or the other, which might be unparliamentary, I will not say what it was, but it is far below what you have presented here.
We are discussing with the Ministers of Mineral Resources and Energy about copper and electricity theft, and the interventions which are required in that regard. We should be able to do something to address those challenges. We've addressed your concerns about funding issues and we need to say quite explicitly and unequivocally that we cannot avoid renewables. The fact that some of the technology might not be experimented with or tested doesn't mean that we should run away from renewables. We need to go in that direction for reasons of climate change and to ensure that our country plays its leading role in regard to addressing climate change concerns.
The purpose of the International Marketing Council, IMC, which is often chaired by the Deputy President, is to harness our interventions and to bring together all the Ministers so that you don't have all of us moving parallel when the agenda is the same. So, the concerns you are raising in regard to the IMC are properly addressed. I will ignore what Mr Nhanha has said and will address it when he re-joins the ANC because he will have better ideas once he has done that.
The hon Ambrosini raises issues which have no relevance to this debate. He says that we are debating transport energy and defence policies and we were not. Defence policies are debated by the Budget Vote of the Department of Defence and Military Veterans, transport policy by the Budget Vote of the Department of Transport and energy policy by the Budget Vote of Department of Energy. What we were dealing with here is the policy impact on SOEs of exactly those policies. What we were debating here are the operations by the SOEs to address the policies and implement those that have been taken by different departments. We were not even debating the review of SOEs, which is seemed to be trampled on.
It is important to say that we are engaging with the various Ministers of policy departments to align our work because it doesn't help for them move in one direction and for us to move in another direction. There is rigorous work in that regard and I'm quite happy with what we are doing. Those meetings and engagements have already produced positive results for Transnet and Eskom, and we hope that they will produce positive results for the Chamber of Mines, the mining industry and other sectors that rely on our SOEs.
We sometimes say that an argument often repeated becomes the truth and that's not true. It becomes stale. So, to repeat the same issues as they have been raised over the last two years about the privatisation of SOEs doesn't make these things to become true. They have become stale and Mr Ambrosini needs to find new issues to bring to the Budget Vote next time he has the courtesy to moonlight on our Budget Vote. The concerns that he raises will not be achieved by privatisation. There is already considerable progress within the SOE environment to address many of these concerns. That is why we are happy to see many of our SOEs on a better footing.
Before I address the funding issues for the SOEs, let me respond to hon Greyling. I reported that the African Development Bank approved a US $365 loan for a solar power plant and we are going to begin to move more concretely in regard to that. We are further discussing with the World Bank about funding from the Clean Technology Fund and we hope that that will also allow us to make further progress.
The decline in the Budget transfers to SOEs must be understood. Government say that SOEs are commercial enterprises. They've got to be on a positive balance sheet footing so that they are able to fund their capex programmes. But there is more that we are talking about. That is why in our presentation we raised the issue of development-focussed planning paradigm, the engagement with key stakeholders in the private sector such mining, industrial and financial services, and the development finance institutions in order to leverage funding for our capex programmes. We are further looking at leveraging our capital and operational procurements to ensure that we do have additional funding.
We are introducing innovation in this cooperation with other departments such as with Minister Nzimande of Higher Education and Training so that we are able to fund our skills commitments and make progress in regard to the issues that need additional funding, which might not be covered in the budgets of our SOEs.
Mr Van Dalen, unfortunately did not comment on any of the strategic issues that we were discussing here today and I think he weakened the debate which had been at a high level. Let me start by saying that with regard to the Markov Modulated Poisson Process, MMPP, we took the initiative to analyse the cost escalations and are addressing that.
With regard to Mr Gama, that was the decision of the board which had hopefully been thoroughly considered. However, I don't want to get started on this case because if I were to, I would end up saying way too many things. But, I support the board of Transnet for taking the decision to reinstate Mr Gama.
When hon Van Dalen talks about in closing, I actually wondered whether he had commenced at all. I was still waiting. But, sir, I had no honeymoon. When we came here there were urgent challenges which we had to address. We were told clearly by the President that we have no honeymoon. We've not had any honeymoon. We will fasten our seat belts but fasten yours too. Thank you. [Applause.]
Ms F HAJAIG: Members are reminded that the Extended Public Committee, EPC, on Arts and Culture will meet in the Good Hope Chamber at 14:00 and the EPC on Mineral Resources will meet in Committee Room E249, also at 14:00.
The Committee rose at 12:19
A N N / END OF TAKE
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