Hansard: Debate on Vote 11: Public Enterprises
House: National Assembly
Date of Meeting: 14 May 2013
Summary
No summary available.
Minutes
UNREVISED HANSARD
EPC – COMMITTEE ROOM E249
Tuesday, 14 May 2013 Take: 501
START OF DAY
TUESDAY, 14 MAY 2013
PROCEEDINGS OF EXTENDED PUBLIC COMMITTEE – COMMITTEE ROOM E249
__________________
Members of the Extended Public Committee met in Committee Room E249 at 10:04.
House Chairperson Mr C T Frolick took the Chair and requested members to observe a moment of silence for prayers or meditation.
FIRST ORDER
UNREVISED HANSARD
EPC – COMMITTEE ROOM E249
Tuesday, 14 May 2013 Take: 501
START OF DAY
APPROPRIATION BILL
Debate on Vote No 11 - Public Enterprises:
The MINISTER OF PUBLIC ENTERPRISES: Hon Chairperson, Ministers, Deputy Ministers, members, distinguished guests, ladies and gentlemen, we are honoured to present to this extended public committee today our Budget Vote for the 2013-14 financial year.
Our portfolio of state-owned companies, SOCs, has been aggressively accelerating investment to maintain aggregate demand precisely when there is a downturn globally and the private sector is too apprehensive to invest. Three years ago, our portfolio of SOCs invested R53 billion, but in the next financial year we will be investing over R113 billion.
I wish to state unequivocally that in relation to industrialisation and transformation, we have an unyielding political will. In October 2012, we convened a transformation dialogue as the first step in the development of a transformation framework and guidelines for SOCs to be launched during the course of the 2013-14 financial year.
Having awarded the single largest audit appointment of a South African black-owned auditing practice, Sizwe Ntsaluba Gobodo, Transnet went further to award a R1,3 billion internal audit contract to a group of three audit firms led by Sekela Xabiso, involving Nkonki and KPMG.
Furthermore, Eskom's total procurement spend for 2012-13 financial year was about R120 billion and the total spend on black economic empowerment compliant companies is R103,4 billion, which is 86,3%, against the target of 70%.
As at February 2013, the BEE spend at Transnet stood at R58 billion, or 87% of total procurement spend. The procurement of the 1 064 Transnet locomotives we spoke about last year is now far advanced and shall be concluded in due course. This historic procurement will result in the development of qualitatively new industrial capabilities and the comprehensive transformation of the locomotive supply chain.
Pursuant to the last Budget Vote's commitment, the Department of Public Enterprises held the Supplier Development Summit. It was attended by the suppliers, customers and other key stakeholders of our state-owned companies. At the summit, the SOCs communicated their next-generation supplier development, localisation and transformation plans and further explored how they and large companies in strategic sectors can collaborate around supplier development to create a truly national effort around achieving our objectives. I am confident that within the next six months we will have some exciting announcements to make in this regard.
Over the coming year, we will be mobilising our entire portfolio of SOCs, along with their customers and suppliers, to give added momentum to a comprehensive industrialisation and transformation agenda in our economy. As part of this, we will be exploring set-asides and other mechanisms to accelerate radically the promotion of black industrialists and the entrance into the mainstream economy of businesses owned by the youth and women.
We will be reaching out to our large private-sector customers and suppliers in the resource extraction and processing sectors to partner with us in our developmental programmes. We will also be drawing on our influence over SOC-related pension funds to provide additional leverage to this process. The details of this programme will be unveiled at a later stage.
I will now provide you with an overview of how we are directing our SOCs to achieve their developmental mandates while ensuring that they remain financially sustainable. Eskom continues to increase its investment, with R58 billion spent over the last year. Over the last financial year, 260 MW of generating capacity has been added to the system through returning to service previously mothballed plants and a further 787 km of high-voltage transmission lines were installed. This year, Eskom will be spending about R65 billion - and R337 billion over the next five years - to complete Medupi, Kusile and Ingula. Eskom has committed to ensuring that the first unit of Medupi starts delivering power by the end of this year.
The commercial operation of the Sere wind power plant, which will save an estimated 252 603 tons of carbon emissions per annum, is scheduled for 30 December 2014 at a total cost of R2,4 billion, of which R104 million has been spent to date. The draft procurement strategy for the concentrating solar power plant in the Northern Cape, estimated to cost around R9 billion, has been completed and will be finalised after it has gone through Eskom's internal governance processes.
Eskom's funding plan for the currently committed build programme has been finalised and about 82% of the funding has been secured. We note the decision of the National Energy Regulator of South Africa, Nersa, of an 8% average increase annually over the next five years and we are analysing its full implications for Eskom. As a shareholder, we are committed to ensuring that Eskom remains sustainable and is able to deliver on its build commitments.
The electricity supply system continues to experience constraints, but we have put comprehensive plans in place to manage this. Evidence from a survey commissioned by Eskom suggests that our efforts at mobilising the population around the energy-saving campaign are bearing fruit and the level of awareness of the 49M campaign is as high as 73%. As we approach the winter season, and in order to intensify communication and make South Africans participate in monitoring their own personal impact, Eskom and the SABC have collaborated to create an exciting initiative to educate and inform consumers about the country's electricity status. This will be launched tomorrow,
Over five years, Eskom is projected to spend over R200 billion on the supply of coal. In light of this, I had an engagement with established miners, the Chamber of Mines, SA Mining Development Association, SAMDA, and emerging miners in the coal and limestone value chain during which I also launched the Black Emerging Miners Strategy. The essence of this initiative is to increase black participation and ownership in the coal mining sector. A key element of this strategy is to establish a mine development fund to provide finance for the development of mines, mainly at the early exploration stage. We intend to ensure that by 2018 Eskom will procure more than 50% of its coal from emerging black coal miners, which would be a significant act of transformation. To date, significant work has been done to establish the fund, which will go into operation by the end of the 2013-14 financial year.
I am pleased to report that the implementation of Transnet's market demand strategy is on track. Over the last year, we have seen a 5% growth in rail volumes, a 4,8% overall improvement in operational efficiencies and a 30% increase in capital invested in the build programme to just below R30 billion. This strong performance has enabled the company to adopt a countercyclical investment strategy with a plan to invest R37 billion this coming financial year and about R307 billion over the next seven years.
Transnet has risen to the challenge of driving industrialisation in our economy through the way it is pricing its services to relevant customers, through the internal development of industrial capabilities and through the way that it procures from suppliers. An amount of R700 million was disbursed in the 2012-13 financial year from the R1 billion ports rebate to the exporters of manufactured goods announced last year. The remaining R300 million will be disbursed this year.
Transnet has put proposals to the Ports Regulator for a ports pricing strategy that reverses the historical legacy which favoured bulk commodities at the expense of containerised manufactured goods. We have also established a task team involving the department, the Department of Trade and Industry and the Transnet National Ports Authority to develop joint strategies to promote investment in port-dependent sectors that are prioritised in our Industrial Policy Action Plan.
We saw progress in 2012 in positioning Transnet Engineering as a rail and ports manufacturing centre for Africa. Transnet Engineering invested R1,3 billion in new technology, equipment and plant upgrading in the year 2012-13 and plans to invest a further R954 million over this financial year. At present Transnet Engineering has an order book of over R1 billion for locomotives, wagons and coaches for six countries in Africa.
Our objective in owning Transnet Engineering is to develop strategic industrial capabilities relating to Transnet's business while supporting the growth of a broader private sector rail and ports supplier cluster. We have made significant progress over the past year in defining the role of Transnet Engineering in relation to the private sector and will continuously engage with the private sector around our approach.
Building intermediate and advanced industrial capabilities will require enormous effort by all stakeholders in the South African economy. Over the coming year, we will be exploring how we can more coherently leverage the capabilities in Denel, Transnet Engineering and Rotek to support the localisation of strategic and complex industrial components.
Broadband Infraco, BBI, has been stabilised over the last financial year with all key management positions having been filled. The company invested R140 million over the last year and has plans this financial year to spend over R700 million to upgrade technology and improve network performance and reach. This should enhance the company's competitiveness and value proposition to both public and private customers.
Building on this enhanced position, and with the department's support, the company will over the coming year focus on ensuring that government becomes an anchor tenant at national, provincial and municipal levels. In this regard, I am pleased to announce that the Department of Science and Technology has taken up 70% of the capacity associated with the Black Business Initiative's investment in West Africa Cable System, WACS, in support of the Square Kilometre Array project. The department continues to work with the company on a detailed funding plan to ensure that the infrastructure roll-out takes place and that the company is placed on a stable footing.
Given the acceleration of our investment programme and the key role played by our SOCs in the Strategic Integrated Projects, SIPs, a number of initiatives has been undertaken to enhance our ability to design, fund, manage and oversee megaprojects: Eskom has codified the lessons it has learnt in implementing the build programme into a comprehensive toolkit and has established an Institute for Project Management Excellence to provide training based on this toolkit. We are exploring how to make this a resource that all our SOCs and broader government can draw on to enhance their ability to manage complex megaprojects.
The boards of Eskom and Transnet have established subcommittees that will have the specific responsibility of monitoring progress on the build programmes.
The department has established a project oversight unit that will focus on intelligently monitoring and adding value to the SOCs infrastructure roll-out programme as well as to those SIPs, where the executing authority or SOCs in the Department of Public Enterprises portfolio play a leading role.
We have also established a funding capability within the department to work with our SOCs to see how we can draw on new sources of equity finance for the build programme. A task team has already been established with Transnet and the Chamber of Mines to explore the funding of specific projects.
It is no secret that SA Airways has had a turbulent year in terms of its leadership and governance. I hope that the appointment of the new CEO, Mr Monwabisi Kalawe, and the finalisation of the long-term turnaround strategy will provide SAA with the stability, leadership and direction it requires to turn around decisively. I am cognisant of the fact that SAA has produced a number of turnaround plans over the past 10 years, yet none has put the airline on a sustainable footing.
Consequently, the Department of Public Enterprises, in collaboration with the SAA board, will be designing a special governance arrangement to ensure that we are able to rigorously monitor progress on the implementation of this new strategy. I am happy to report that SAA has already begun to implement its turnaround strategy and achieved its cost-compression target of R1,3 billion for the year ending March 2013. Over the next year we will focus on ensuring that SAA's cash position is stabilised, the cost-compression programme is accelerated, the international network is reviewed and the long-term fleet plan is finalised.
During the next quarter, SAA will start taking delivery of a fleet of 20 Airbus A320 aircraft, valued in the order of R10 billion. This forms part of a broader fleet replacement plan that aims to address the fuel inefficiency of SAA's current long-haul fleet. As reported last year, we have been working with the board of South African Express to address internal control challenges in the airline. To this end, the 2010-11 financial statements were tabled to Parliament on 25 April 2013. The board of South African Express plans to have all outstanding audits finalised by the end of July.
As with SAA, the department and the board of South African Express are working to develop a comprehensive turnaround strategy for the company. It is pleasing to note that South African Express cut R129 million in costs in the last financial year. Over the coming year, South African Express will continue to focus on enhancing efficiencies and cutting costs, improving customer service and enhancing internal controls.
Denel returned an unaudited profit of R60 million in the 2012-13 financial year, breaking a long stretch of losses. This turnaround is a result of implementing a strategy of global alliances to supplement the domestic revenues. Last year, Denel signed R3,7 billion in new, predominantly export orders. Denel received a R1,85 billion government guarantee and a R700 million capital injection in order to position the company to access these international orders.
In the coming year, the company will continue with its three-year plan to consolidate its structure and cost base. We will be focusing on ensuring the success of the Hoefyster infantry combat vehicle production programme and further positioning the business for collaborative product development opportunities, with a focus on Latin America, Africa, Asia and the Middle East.
The department will be also working with SAA to ensure that the supplier development obligations associated with the SAA fleet renewal contribute to the expansion of Denel's aero structures, engineering and maintenance capabilities. In addition, the department will rigorously interrogate how synergies between SAA Technical, South African Express Technical and Denel Aviation in the maintenance, repair and overhaul space can be captured to create an organisation with the credibility to capture the growing air-traffic through South Africa.
SOCs continue to play a leading role in skills development and will be investing over R2,8 billion in training over the coming year. Over the last year, more than 16 000 learners were trained in various scarce and critical skills learning programmes within the SOCs in the Department of Public Enterprises portfolio. Eskom also facilitated the training of 5 248 young learners through their key suppliers.
Eskom has secured an amount of R175 million from the Department of Higher Education and Training to train an additional 1 000 learners, who will be recruited across the provinces over the coming year. This will increase artisan learners at Transnet training facilities to 3 000. In the coming year, we will be focusing on further optimising the use of existing SOC training facilities to increase the number of artisan and technician trainees beyond the portfolio's requirements.
In July 2012, we launched the SOCs climate change response framework and all our SOCs committed to the United Nations global sustainability compact. We have given the SOCs 18 months to design and implement their climate change strategies before they will be integrated into the shareholder compacts.
In this regard, Transnet has aligned energy efficiency objectives with management incentives. Eskom has a collaborative initiative with SA Forestry Company Limited, Safcol, around the establishment of a charcoal manufacturing plant in Mpumalanga to lower Eskom's carbon emissions while promoting rural development; and SAA, under the leadership of the department, has established an aviation biofuels project in response to the threat of internationally imposed bio-fuel requirements.
The governance programme in the department is focused on undertaking targeted initiatives to operationally enhance the shareholder management model. Five deputy directors-general have now been appointed. The outstanding two have been recruited and their appointment is awaiting final Cabinet approval. When this is done, I am proud to say that five out of seven of our deputy directors-general will be female. [Applause.]
The Deputy Minister will give further detail on some of our achievements and plans in the areas delegated to him.
In conclusion, I hope that I have demonstrated to you that our SOCs are a unique instrument of our developmental state and are systematically driving investment, industrialisation and transformation among their customers and suppliers, as well as in the broader economy. The benefits of this should be felt in the medium and long-term by the ordinary people of or country. I believe that we are getting an extraordinary return on the capital that we have invested in them and they are worthy of our continued unflinching support.
I would like to thank Deputy Minister Magwanishe, the director-general, all the deputy directors-general and staff of the department for their relentless support and tireless work. I also wish to thank the Chairperson of the Portfolio Committee, the hon Peter Maluleke, the hon members of the portfolio committee and my Cabinet colleagues for their support and regular wise counsel. I hope that this EPC will join me in conveying our sincerest condolences to our Chairperson, the hon Mr Maluleke and his entire family at the sad loss of his brother.
I further wish to thank the chairpersons, chief executive officers and, in particular, all the staff of our SOCs for their commitment to fulfilling the difficult goals and targets we set them, especially in this difficult economic climate. I humbly request the EPC to support this budget of R236 889 000 for our department, which has achieved nine consecutive clean audits. Thank you. [Applause.]
Mr G W KOORNHOF
UNREVISED HANSARD
EPC – COMMITTEE ROOM E249
Tuesday, 14 May 2013 Take: 502
The MINISTER OF PUBLIC ENTERPRISE$S
The HOUSE CHAIRPERSON (Mr C T Frolick): Thank you, hon Minister. Hon members and members of the public in the gallery, I wish to remind you that you are not allowed to make recordings or take photographs of the session that is currently under way. The next speaker will be the hon G W Koornhof.
Afrikaans:
Dr G W KOORNHOF: Agb Voorsitter en agb lede, soos die Minister genoem het, dink ek dat u met my sal saamstem dat ons namens hierdie uitgebreide komitee en spesifiek die partye wat in die portefeuljekomitee verteenwoordig is, ons innige meegevoel betuig teenoor agb Peter Maluleka en sy gesin, oor sy groot verlies. Ons innige simpatie aan die Maluleka-familie.
English:
I am proud to represent the ANC in this debate for three reasons. Firstly, we have a Minister in charge who takes the responsibility to lead, who gets his hand dirty, who seeks solutions to problems and who leads from the front with visible leadership. He is not shaky - the state solves problems in state-owned companies.
Secondly, as you have just heard, the Department of Public Enterprises has again received a clean audit report from the Auditor-General - for the ninth consecutive year. It is a relatively small department with a small budget, compared to other departments, but it succeeds in successfully overseeing some of the largest SOCs in South Africa. We acknowledge the sterling work done by its director-general, Mr Tshediso Matona, and all our officials in this department in continually strengthening their oversight functions.
Thirdly, we have SOCs that continuously ensure that they remain sustainable and are able to support government's objectives. Our SOCs in this department directly employ in excess of 100 000 workers, who are loyal and hardworking citizens. They are proudly South African SOCs. [Applause.] If you take indirect job creation into consideration, the number of people being employed by these SOCs is probably closer to half a million. [Applause.] They have good, solid leadership and we are proud of them, both management and the boards. This year, Eskom celebrates its 90th birthday and South African Airways celebrates its 80th birthday.
When we analyse gross-fixed capital formation in South Africa, it is clear that capital expenditure by SOCs is key in sustaining overall investment growth. Fixed capital investment by public corporations has been on an upward trend since 2004 and has grown over this period by 300%.
Of equal importance, which the Minister alluded to, is that the high levels of growth experienced between 2008 and 2012 during the downward phase of the business cycle have been maintained in support of government's countercyclical approach. This reflects the commitment by the ANC government to the build programme.
Quarterly growth in investments indicates that investments by the state in the economy continues to accelerate in 2012. Although the state investment expenditure is not on par with that of the private business enterprises, the rate of investment expenditure growth by the state outstrips that of the private sector.
I briefly want to address some governance issues and related oversight responsibilities. Given the complexity of the multiplicity of legislations and policy frameworks of different departments at different spheres of government and their entities, the difficulties of implementing an overarching strategy are acknowledged in the context of decentralised and multiple policy frameworks, legislations and oversight approaches.
The task of the ANC government is to embed a uniform strategy for state-owned commercial entities in South Africa that effectively responds to the developmental state agenda and creates an enabling environment, which, among other goals, seeks to create a universal policy framework and legislation, and develops state capacity to effectively monitor and evaluate state-owned commercial entities - in all spheres of government. The absence of this will lead to conflicts of governance and a lack of clarity within boards.
Implementing this strategic perspective is what the ANC requires of this department. However, this cannot be assumed to happen automatically and the portfolio committee will have to ensure that in its responsibility of oversight, key principles of governance and management of SOCs are met. These would include, firstly, an investment planning framework that is linked to the long-term strategic, economic priorities of the country. These cannot only be determined by balance sheet constraints.
Secondly, there must be expansion and diversification of sources of funding for the investment plan beyond the balance sheet, and the fiscus must include development finance institutions and the private sector.
Thirdly, there must be a focus on localisation in the procurement programmes in order to support local suppliers and hence promote investment in national industrial capabilities. This must be done through entering into longer-term sustainable contracts to reduce any dependency on imports for intermediate goods and build stable relationships.
Fourthly, there must be enhanced co-ordination between SOC programmes and all levels of government to ensure that SOC capabilities are fully leveraged, that implementation is accelerated and the impact of the programmes is optimised. This will mean that all provincial governments will have to be involved in the facilitation of this process.
We should partner with the private sector, not unbundle state assets and resources. The theorists who repeatedly call for the unbundling of state assets are locked in a time warp; a failed project of neo-liberal restructuring in order to meet the narrow needs of capital accumulation, while selling off state assets to the highest bidder without any developmental appreciation for the country. Such theorists will probably be rolled out by the opposition in this debate. The solution lies in the following models - they work and can be summarised as follows:
Firstly, there should be partnering between the private and public sectors and the focus should be on collaboration and the alignment of government entities in capital infrastructure programmes. This model has proven to be very successful in developing countries such as China, India and Brazil.
Secondly, the state-owned enterprises of South Africa, which is part of the family of Brics countries, should lead and forge strategic commercial partnerships with experienced state-owned entities to lead in the infrastructure development opportunities on the continent.
Thirdly, SOCs should be required to collaborate through public-private partnerships that plan and implement the strategic programmes of the developmental state. These joint efforts should first serve to satisfy the absolute need to increase long-term planning to guide the co-ordination, project selection and effective execution of investment programmes.
Fourthly, strategic programmes and projects developed for roll-out by SOEs should reserve a role for the relevant development finance institutions to act as a financial lead arranger to arrange the financing of such programmes.
We should consider debating further the recommendations of the African Summit of the World Economic Forum, which ended in Cape Town last Friday, with specific reference to the role that public institutions must play. The question is whether we should talk about competition or whether we should rather talk about how we complement one another.
In terms of ANC policy, the two pillars driving our economic growth and the development of our economy are the infrastructure and industrialisation programmes. The infrastructure programme, which is within the National Development Plan's vision, is based around strategic integrated projects that will have a catalytic impact on job creation, unlocking resources, developing the poorest regions of our country, overcoming spatial inequalities and developing the region. I am referring to the Mangaung resolutions of the ANC. [Applause.]
The industrialisation process should seek to construct a new comparative advantage based on our natural resources ... [Interjections.] ... in the context of stronger regional integration. [Interjections.]
The HOUSE CHAIRPERSON (Mr C T Frolick): Order, hon members!
Dr G W KOORNHOF: You should still have a conference! [Interjections.]
The HOUSE CHAIRPERSON (Mr C T Frolick): Order, hon members!
Dr G W KOORNHOF: You still need a conference. [Laughter.] This requires us to ensure the competitive pricing of key resource inputs to our downstream beneficiation activities, including measures to address import parity pricing.
Industrialisation is rooted in investment in the productive sectors of the economy. Here, the New Growth Path and the Industrial Policy Action Plan provide important building blocks to achieve the objectives of the National Development Plan, the NDP. Within this policy framework, achieving industrialisation and shifting to the employment-creating growth trajectory is critical for achieving the vision of the NDP. The department has already spelt out how they are going to implement the vision of the NDP.
We are pleased that the Department of Public Enterprises is playing a central role in supporting these two pillars of infrastructure and industrialisation programmes. There are practical examples and demonstrations of this work to be found in the work of Transnet, which is one of the best managed SOCs in South Africa. The Minister referred to this and I will shortly do the same.
Transnet is the main repository of the specialised skills and expertise necessary to execute this mammoth infrastructure programme. The negotiations with the National Skills Fund to source additional funding to increase the number of learners in SOEs has led to R175 million being approved for Transnet to expand the level of artisan training over the next three years. So I can cite to this House the localisation and procurement initiatives critical for job creation that Transnet has embarked upon.
The extensive localisation drives of Transnet in the acquisition and construction of locomotives and train coaches has meant the revival of our train manufacturing capabilities and a direct contribution towards industrialisation in the country.
I need to talk briefly about SAA. Air transport to, from and within South Africa creates three distinct types of economic benefit. The first is its contribution to the gross domestic product; the second is jobs and the third is tax revenues generated by the sector and its supply chain.
The connections created between cities and markets represent an important infrastructure asset that generates benefits through enabling foreign direct investment, business clusters, specialisation and other spill-over impacts on an economy's productive capacity.
It is common cause that the working capital of the airline was depleted, presenting the immediate risk of the company not being able to meet its obligations. The deterioration of the debt equity position of the company required the intervention of the shareholder, the Minister, to stabilise the company. The turnaround strategy was submitted in April 2013 and is being evaluated. What is spoken about much less is that the airline has performed satisfactorily in the regional and domestic markets. Not once during this period has SAA been grounded. [Applause.]
The national carrier plays a critical role in that it is responsible for a significant share of international and regional arrivals to South Africa. That is why it must remain a national carrier and will do so. [Applause.] In addition to this, it plays a significant role in the current airlift of Southern Africa and plays a critical connectivity role in the global economy.
South African Express airline experienced its first major challenge in 2011-12. As the portfolio committee we have been dealing with South African Express for many years and this was the first time that they experienced such trouble. The ANC acknowledges that there were challenges when the misstated financial statements for 2010-11 were withdrawn. They were with us two weeks ago and we will recall them in the third quarter for the next set of financial statements, which will also be a disclaimer. We will again work with them to see how we can assist in turning it around.
The economic downturn affected the airline's planned fleet replacement programme. In terms of achievements, South African Express commenced a cost-cutting exercise towards the end of the 2011-12 financial year to reverse the losses. The airline achieved savings of R129 million by the end of March 2013 from the cost-containment exercise. At least they are doing something. [Interjections.]
Over the medium term, focus will be placed ... [Interjections.] ... on establishing Durban as a regional hub. [Interjections.]
I want to conclude. The role of SOCs is to underpin the role of the state in directing national economic development through the mobilisation of domestic and foreign capital and other social capital formations or partnerships to achieve stated economic and developmental goals. SOCs are powerful instruments for economic transformation and should remain firmly in the hands and control of the state in order to respond effectively to the developmental goals of the ANC government. [Applause.]
ANC policy on SOCs seeks to advance the key objectives of economic transformation and the ANC programme of the NGP. The overall objective and mandate of SOCs is therefore to advance the socioeconomic and political agenda of a developmental state, to promote social cohesion, the creation of decent jobs and the development of skills and training. In this regard the vision of the National Development Plan plays a central role. The ANC proudly supports the Budget Vote on Public Enterprises. [Applause.]
Ms M W A MICHAEL
UNREVISED HANSARD
EPC – COMMITTEE ROOM E249
Tuesday, 14 May 2013 Take: 503
Dr G W KOORNHOF
Mrs N W A MICHAEL: Hon Chairperson, Minister and Deputy Minister of Public Enterprises, members, ladies and gentlemen, please allow the DA to also extend its deepest sympathy to the Maluleka family.
South Africa's state-owned entities, SOEs, are protected from failure. Insolvency is not a concern as government bail-outs are the financial rescue plan in most instances. The threat or option of a takeover bid, which would be viable for a private company, is simply out of the question for our SOEs, which results in possible slumps of management efficiency and the fall into complacency of many board members.
The power of the boards of SOEs is often usurped by the government. Government sets and drives the strategy of our state-owned entities; appoints and dismisses chief executive officers and approves financial and major capital expenditures of our state-owned entities. This creates a complex situation in which various factors contribute to confuse the board as to its powers and their execution.
Research indicates that problems in governance can be attributed to the poor operational and financial performance of state-owned entities in general. An effective government-shareholder management model that addresses the key challenges of state-owned entities governance will improve the performance of state-owned entities and better protect the assets of government. Even modest improvements in the efficiency of state-owned entities in a country could free up financial resources equivalent to 1 to 5% of its gross domestic product, GDP.
No doubt at the front and centre of most South African's minds right now is the worry of our very precarious electricity supply. It is not the DA alone who has raised concerns regarding the electricity situation in our country. The president of Cape Chamber of Commerce and Industry, Michael Bagraim, said that the business world is worried about the likelihood of Eskom's planned power outages. Bagraim's concerns come after Eskom's CEO, Brian Dames, warned that power cuts could be on the cards this winter. I quote Dames:
We have said and said it consistently: Alone, Eskom cannot give the assurance that the country will not go through load shedding this winter.
Allow me to quote Bagraim's response to Eskom's situation:
I am very worried and the business community is shaking, because the reality is that every time there is a power cut, there is an enormous loss of money.
We cannot expect to grow our economy, create jobs and better the lives of South Africans if we cannot ensure a secure supply of electricity. We are fumbling in the dark when it comes to the building of our power stations. Both the Medupi and Kusile power stations are way behind schedule. Virtually continuous labour disputes at both sites have set the projects dangerously behind schedule.
The DA has called for the appointment of permanent mediators at both sites to ensure that future disputes are resolved before crisis levels are reached. We urgently need to boost capacity, for example by allowing independent power producers to enter the market and ease the burden on the state entity.
We must now be realistic. Load shedding will be a fact of life unless we, the public of South Africa, pull together like never before and save energy wherever we possibly can. We as South Africans have been forced into a situation where we have no option but to look to ourselves to dig this country out of this crisis. Should we manage to avert the crisis this winter, it would be thanks to the South African public and the public alone.
Another one of our public entities that flitted from scandal to scandal and crisis to crisis is South African Airways. If it wasn't the clandestine resignation of a board, then it was the allegations of security services spying on board members, not to mention allegations of tampering with legal opinions regarding the suspension of the then acting CEO, Mr Kona.
The DA has called for Minister Gigaba to appoint a task team to urgently investigate all alleged irregularities at SAA and any related matter that is impeding the airline's functioning and report back to Parliament on its findings.
I think it is more than fair to say that the airline's survival has for far too long depended on billions of rands of government bail-out. The national carrier has been shrouded in a veil of secrecy for too long now. South Africans have a right to know what is going on with the national carrier. After all, it is their money that is being used to keep the airline afloat.
Another huge concern remains the issue of the Transnet pensioners. This is an issue that simply cannot be politicised. This is an issue that affects thousands of South Africans who dedicated their lives to bettering the country and are now suffering. The amount of money that these pensioners are expected to survive on is unacceptable.
The situation has reached crisis levels that could have been avoided had the necessary action been taken by the Department of Public Enterprises and Transnet. A parliamentary directive was directly ignored with regard to increases for the pensioners. Excuse after excuse was given for the situation. The DA approached the Public Protector last year in June and requested a full-scale investigation into both pension schemes. I am pleased to inform Parliament that on 25 July 2012, we received confirmation that the Public Protector would investigate the issue. The investigation is ongoing and I look forward to the outcome.
The comments by the Minister of Public Enterprises, Malusi Gigaba, on cadre deployment at the Cape Town Press Club will hamper the government's efforts to professionalise our public service. Minister Gigaba said, and I quote:
I wouldn't apologise for deploying a cadre to a board [...] There will be some rotations on boards, based on people whose time has lapsed.
[Interjections.] We cannot allow our public enterprises to become a revolving door for ANC cadres. We need professional and capable people to make sure that trains run on time, that lights are kept on and that the national carrier does not continue to run at a loss.
Minister Gigaba's comments are also a blatant contradiction of the National Development Plan and will undermine South Africa's fight against corruption. The NDP is clear that the government needs to take steps – and I quote – "to professionalise the Public Service, strengthen accountability, improve coordination and prosecute corruption".
Furthermore, the NDP criticises political appointments by saying, and I quote:
In South Africa the current approach to appointments blurs the lines of accountability. The requirement for Cabinet to approve the appointments of heads of departments makes it unclear whether they are accountable to their Minister, to the Cabinet or to the ruling party.
[Interjections.] The reality is that cadre deployment has undermined the ability of the government to deliver quality services to all South Africans and has effectively been used as a smoke screen behind which wholesale corruption has been allowed.
South Africa needs an efficient and professional Public Service, not a Luthuli House-appointed bureaucracy. [Interjections.] In contrast to the King I and King II reports, the King III report applies to all entities, both private and public, regardless of the manner and form of their incorporation or establishment. By adhering to King III report's key principles, any entity will practise good governance.
Some principles from the King III report that the DA would like to see implemented in our state-owned entities are: The need for an annual integrated report that focuses on the impact of the organisation in the economic, environment and social context; a statement by the audit committee to the board and shareholders on the effectiveness of the internal financial controls to be included in the integrated report; a consideration of the strategic role of information technology and its importance from a governance perspective; the positioning of an internal audit and strategic function that conducts a risk-based internal audit and the provision of such written assessment of the organisational system of an internal control, including internal financial controls; the governance of risk through the formal risk management process and the need to follow rescue procedures should it become evident that the entity is distressed. Minister, that would apply to SAA.
Allow me to conclude with a quote by Theodore Sorensen, which, I believe, sums up the importance of the country's need for transparency and realistic expectations for our country's public enterprises:
If we can but tear the blindfold of self-deception from our eyes and loosen the gag of self-denial from our voices, we can restore our country to greatness.
I thank you. [Applause.]
Mr M A NHANHA
Mrs N W A MICHAEL
UNREVISED HANSARD
EPC – COMMITTEE ROOM E249
Tuesday, 14 May 2013 Take: 504
Mrs N W A MICHAEL
Mr M A NHANHA: Chairperson, I guess today you will be a bit generous with time because the Kings played very well over the past weekend. [Interjections.]
IsiXhosa:
Ndivumele Sihlalo ndijoyine amaLunga ePalamente avakalisa amazwi ovelwano kusapho lwakaMaluleka ngokusweleka nokushiywa ngumtakwabo. Siyi-Cope sithi mabalale ngenxeba. [Uwelewele.]
English:
Mr M A NHANHA: Some four years ago, when Cope was elected into Parliament, we undertook to be a patriotic opposition. We chose to be critical of the ruling party and government when they faltered, as they would from time to time. However, in the same breath, as a responsible party we also chose to give credit as and when it is due and to offer ideas and advice.
I am rising to commend Mr Tshediso Matona, the Director-General of the Department of Public Enterprises on the sterling job he has done and continues to do. [Applause.] The applause is quite strange, isn't it? [Interjections.] This humble gentleman has always inspired confidence in us and a sense of optimism in a sea of pessimism. He continues to be a shining example and an embodiment of how a true public servant should conduct himself or herself. [Applause.] Sir, keep up the good work. Our country needs more men like you. [Interjections.]
However, Minister, I am sure you will agree with me that efforts such as those of Mr Matona are set to go down the annals of history as a nonevent if the state-owned enterprises around him do not get their act together. If I were to be asked, Minister, where to start fixing the mess, I would advise you to start by elevating the status of the department from a privatisation desk to an essential component of our economic development. [Interjections.] Give them sweeping powers to interfere and intervene whenever they deem fit. Secondly, you should lobby in Cabinet for them to get a decent budget. The budget that the director-general presented to us the other day simply does not talk to the mammoth task that his department is facing.
We welcome the department's commitment in implementing the remuneration standards for the boards and executives of state-owned entities. This will not only bring uniformity to salary packages of board members and senior executives but will also help trim the exorbitant salaries and bonuses that are paid to executives and board members. It continues to boggle my mind that some of the CEOs earn far more than the President and the poor Members of Parliament who are gathered here today. [Interjections.] [Laughter.]
During our interactions with the department, we discovered ... [Interjections.] [Laughter.] ... that some of our SOE board members serve in over 20 other boards elsewhere in the country. It does not require a rocket scientist to figure out that the affected people cannot possibly be in a position to perform their duties optimally. In this regard, we welcome the review of the current board performance framework, which, among other steps, will regulate the number of boards on which an individual can serve. A lot still needs to be done, though. The continued inability to adhere to clean governance and fiscal discipline will remain a challenge.
There are reports that between Telkom, Eskom and Transnet about R27 million has been spent on sponsoring the New Age/Morning Live Breakfast Show. In our view, there is nothing wrong with any business asking for sponsorship from an SOE. If Transnet and SAA - rightly so, Mr Group Chief Executive Officer of Transnet - this year decided not to participate in the Cape Town Jazz Festival for financial reasons and the realisation that you do not get value for your money, then it stands to reason that the same determination has to be made regarding whether we get value for the millions paid to the New Age newspaper.
An HON MEMBER: And to the Guptas!
Mr M N NHANHA: I don't want to say that.
With winter in our midst, once again, in as many years, Eskom's ability to supply power readily is already in question. The delays at Medupi and Kusile are not helpful either – I'm glad that the Minister has touched on that. I remember vividly standing here two years ago, asking a question: How can it be that one company's smelters, namely BHP Billiton, consumes roughly about 6% of our national grid at a very, very, very, very, very low price?
IsiXhosa:
Vukani, zemka iinkomo magwalandini.
English:
What really intrigues us is that some of these smelters are not even in our country. Electricity is being transported from South Africa to BHP Billiton smelters in Mozambique, for instance, while our people are suffering here because there is not enough power.
In conclusion, many would like to enter the market for electricity generation, so we need to cut down the red tape and bring to an end the bureaucracy that is preventing independent power producers from entering the market. These IPPs will significantly reduce pressure on an already stressed system and create jobs in the future. Thanks for your indulgence. [Applause.]
Mr K P SITHOLE
UNREVISED HANSARD
EPC – COMMITTEE ROOM E249
Tuesday, 14 May 2013 Take: 505
Mr M A NHANHA
IsiZulu:
Mnu K P SITHOLE: Sihlalo, Ngqongqoshe nePhini likaNgqongqoshe, siyiNkatha yeNkululeko sijoyina ezinye ezinhlangano ngokukhalela umndeni wakwaMaluleka ngokushonelwa ngumfuwabo kanye nakuKhongolose njengeqembu lakhe.
English:
As the IFP we wish to use this opportunity for the debate to highlight how damaging the existence of the Department of Public Enterprises is to our fiscus, state and republic. Somehow, there has long been the realisation that the very existence of this department is problematic and there have been projects, programmes, commissions, workshops and endless deliberations aimed at possibly doing away with it. All these are utterly unacceptable.
It is self-evident that the department makes no sense whatsoever. It is a huge waste of money and leads to the mismanagement of each of the relevant state-owned enterprises and is retrograde to public enterprises and common sense alike. One should have the political will to abolish it without further procrastination.
Each of the state-owned enterprises must be moved to the line-function department with the relevant expertise, rather than having a department that must replicate expertise in transport, energy, mining, defence and all the other areas in which this department needs to have expertise.
It was reported recently that the government could be planning to bring the state-owned oil company Petro SA and the SA Broadcasting Corporation into the public enterprise fold. This is tantamount to moving from the sublime to the ridiculous. The IFP strongly opposes these movements, should they occur, and we reiterate our call for state-owned enterprise to be moved or, in these two cases, remain in their line-function department.
This department is staffed with quality and competent experts who could enrich the relevant line-function department, some of which already have responsibility over state-owned enterprises that apartheid did not see fit to lump together into this absurd department.
The persistent state ownership of Denel and SA Airways should end and they must be privatised, because they have become great enemies of the public, the taxpayer and the Republic. SAA is singlehandedly destroying and undermining one of our most important industries, our tourism industry, while Denel has become a 20-year drag on our scarce resources, with no real social or public benefit.
Eskom too must be broken up into two complementing companies to reduce the massacre that the electricity monopoly is perpetrating on a daily basis, affecting our industries and families alike. Eskom has failed us and we are bearing the brunt of their failure, not only with the intermittent electricity supply but also the crippling electricity price increases to somewhere in the region of 6% per annum over the next five years. Thank you. [Applause.]
Mr C L GOLOLO
UNREVISED HANSARD
EPC – COMMITTEE ROOM E249
Tuesday, 14 May 2013 Take: 506
Mr K P SITHOLE
Mr C L GOLOLO: Hon Chair, Minister Gigaba, Deputy Minister Magwanishe, Members of Parliament, ladies and gentlemen, I greet you all. Let me start by supporting Budget Vote 11 for the Department of Public Enterprises. This year's Budget Vote has the advantage that it draws on the wisdom of ANC policy discussions and resolutions emerging from its successful policy conference in June 2012 and the 53rd National Conference in December 2012. The two areas of focus that I have been assigned to speak on, the SA Forestry Company, Safcol, and Alexkor, need to be contextualised in the light of both conferences.
May I take a minute of your time to remind us all of where we come from as this great nation? The majority of South Africans under the humiliating apartheid regime never enjoyed the benefits they do under the current government, led by the most trusted leadership of President Jacob Zuma. [Interjections.] The apartheid legacy still shows its ugly features, for example in the co-existence of dual economies, which is characterised by world-class development in one area and the lack of development in another. These are often in cities such as Cape Town, where there is a world-class infrastructure in suburbs and a lack of services for people in townships such as Langa, Nyanga and Khayelitsha. [Applause.] [Interjections.]
Apartheid has defined and classified people in terms of their race and often stripped them of their human rights. What remains of its devastating impact is the triple challenge of inequality, poverty and unemployment faced by a majority of South Africans. The ever present lessons that apartheid taught us are that we can never sacrifice the majority of our people only to cater for the minority. The system was simply incorrect and dehumanising to society.
The Department of Public Enterprises has demonstrated leadership and expertise in discharging a broad mandate for economic development, economic growth, infrastructure development and, most importantly, community and people development. Under the capable and most innovative leadership of Minister Malusi Gigaba, we have seen the transformation of state-owned companies such as Alexkor and Safcol.
The deed of settlement for Alexkor has been completed, with all mining activities being performed in the Pooling and Sharing Joint Venture, PSJV. This was formerly named the Alexkor Richtersveld Mining Company, which was established on 7 April 2011 after the successful transfer and cession of the land mining rights to the Richtersveld Mining Company, RMC, on 6 April 2011. All the mining operations will still be performed by mining contractors in the foreseeable future. Alexkor and RMC hold a 51% and 49% interest respectively in the PSJV.
The commencement of the Alexkor-RMC operations on 7 April presented management with a new and challenging situation, requiring the continuous adaptation of the operations. These challenges included the formation of the joint venture with the Richtersveld Mining Company; the change in management; the addition of more production units and the change in the contractual relationship with various contractors; the nonperformance of certain contractors; and lastly, the continuous demands forced on operations by changes in environmental conditions.
There are also achievements coupled with those challenges. Alexkor has continued to contribute towards job creation and employment. The head count on 31 March 2012 was 104 employees, 66 term contractor employees and a total of 611 outsourced contractors involved in diamond production. Salaries paid to employees in the previous financial year amounted to R20,6 million. Payments to outsourced contractors amounted to R110 million. This contributes directly towards the fight against poverty, unemployment and inequality.
Alexkor continues to contribute to human resources development and a total of 168 employees and contractors received training in the previous year. Of these, 98,8% were historically disadvantaged South Africans and, of course, 1,2% were women. Another achievement is the upgrade of the town of Alexander Bay. As at 31 March 2012, an estimated amount of about R106 million had been expended in projects to upgrade the town of Alexander Bay.
The next achievement is the hostel revamping. As at 31 March 2012, more than R700 000 had been expended on the purchasing of material to upgrade single-quarters facilities to family units. This marks an important step and visible example of how state-owned companies can contribute towards developmental objectives of government by building sustainable human settlements.
Safcol's major assets are biological assets, which are plantations and forests. The biological asset has grown from R2 billion since 2007 to R3 billion in 2012. Safcol has reported an operating profit against the R14 million losses reported during the 2011-12 financial year. Safcol has a staff complement of 1 787 employees, while its Mozambican subsidiary, Industrias Florestais de Manica, Ifloma, has 624 employees.
In the 2012-13 financial year, it was part of Safcol's turnaround plan to implement a business process re-engineering project focusing on aligning business processes to be more efficient and productive. Despite a very challenging period of restructuring, Safcol and Komatiland Forest managed to retain a level 2 broad-based black economic empowerment grading.
During 2011-12, employees and external individuals benefited from the bursaries offered by the company. Safcol awarded 22 bursaries for the 2012-13 financial year, a number that we feel can be increased significantly in line with the policy intentions of government, such as the New Growth Path, Industrial Policy Action Plan and the National Development Plan.
The fields of study in which Safcol offers bursaries include finance, human resources, planning, environmental studies, corporate services, marketing, information and communication technology, engineering/artisans, processing, forestry and research.
Adult Basic Education and Training, Abet, is continuing at business units and new learners have registered. Some 240 employed learners are enrolled in this system. Safcol's community Abet programme, known as Thuto Adult Centre, caters for 85 learners and runs a programme at the Nelshoogte, Belfast and Ngome plantations. The company continues to make significant contributions to socio-economic and enterprise development initiatives in areas where the company conducts its business initiatives and operations. A budget of R8,1 million was spent in this regard since 2006, when 41 infrastructural projects were completed and handed over to the communities.
Siswati:
Umklamo lomuhle kakhulu ngumklamo lapho lenkampani yakhe khona lihholo lelikhulu kanye nelidladla, nome likhishi, Ekucathuzeni Primary School eBarberton. Ngulapho ngivela khona-ke mine, eMpumalanga. Ngulapho-ke lapho Indvuna Malusi Gigaba ivule khona, ngalokusemtsetfweni sikhungo lesikhulu lesiletse injabulu kubantfwana balowo mango, indzawo lekahle yekudla nekudlala.
English:
I want to commend Safcol for the good work they do in ensuring that our people in rural areas are well catered for. Viva Safcol!
In conclusion, as state-owned companies Alexkor and Safcol continue to contribute positively to policy objectives of government, such as rural development, economic development, employment creation and human resources development. These state-owned companies demonstrate that through state intervention, the lives of ordinary South Africans can be changed for the better. Poverty and inequality will be a thing of the past. This can only be achieved under the resolute leadership of the government of the ANC. The ANC supports the Budget Vote.
The DEPUTY MINISTER OF THE PUBLIC ENTERPRISES
UNREVISED HANSARD
EPC – COMMITTEE ROOM E249
Tuesday, 14 May 2013 Take: 507
Mr Mr C L GOLOLO
The DEPUTY MINISTER OF PUBLIC ENTERPRISES: Chairperson, hon Ministers, Deputy Ministers, members, chairpersons and board members of our state-owned companies, Director-General of the Department of Public Enterprises, chief executive officer and senior managers of our SOCs, all my colleagues from the Department of Public Enterprises present, distinguished guests, ladies and gentlemen, I would like to wish Eskom a happy birthday. [Applause.]
The sight or vision of trees says to us that we are alive. We water them daily and with passion to build their strength. Throughout our lives, we are committed to nurturing the trees and we enjoy watching them grow. The Department of Public Enterprises adopted such a vision in 2011 to drive investment, productivity and transformation in the department's portfolio of SOCs, their customers and suppliers in order to unlock growth, drive industrialisation, create jobs and develop skills. This vision gave birth to provincial engagements with the objective of aligning planning between provinces and SOCs. At the strategic level, this involves ensuring that the investment plans of SOCs and the economic development of provinces are aligned. Furthermore, it ensures that the implementation of this plan is co-ordinated so that the impact is optimised.
In 2012, four provinces, North West, KwaZulu-Natal, Eastern Cape and the Free State, were visited. This was in response to the commitment the Minister made in 2011. Our SOCs provided updates on issues raised by each province. Recently, we agreed that these sessions should also address issues of actual employment and business opportunities within our SOCs. We are currently finalising the establishment of an institutional support mechanism to process issues raised in the provinces. We are working on our vision of trees.
The provincial engagement also served as a vehicle for our Youth Economic Participation programme. We are alive to the fact that young people constitute the majority of our society and those who are unemployed. As such, youth engagement sessions are part of all the provincial engagements. This is being done to ensure that community stakeholders, and the youth in particular, receive the required information. This refers to information relating to skills, jobs, business opportunities and corporate social investment programmes. In collaboration with our SOCs, a plan on priorities for the 2013-14 financial year has been developed. Our Youth Economic Participation programme, together with our SOCs, has been successful in engaging young people in the above-mentioned provinces.
This programme has spread its presence to local communities, attracting more than 5 000 young people through career expos conducted by our SOCs. Grade 10 to 12 learners and the unemployed youth of Khayelitsha benefited from the expos. Learners in Mpumalanga and young people in Kwazakhele in Port Elizabeth benefited from those expos. In the month of June 2013, Youth Economic Participation will be hosting, jointly with Ekurhuleni Metropolitan Municipality, a three-day youth career expo, focusing on aviation as a career of choice. It is expected to draw 5 000 young learners, young entrepreneurs and young people in general.
In response to a plea made during our visit to the Free State province in December 2012, the Department of Public Enterprises and the SOCs Denel, Transnet, Eskom and SA Express, working with the Free State department of economic development and the Free State department of education, will be hosting a youth camp for Grade 10 and 11 learners, including those with disabilities. [Applause.] Learners will be drawn from schools in and around the province, with a special focus on rural learners. The learners will visit all the operations of our SOCs. They will fly for the first time in their lives, thanks to SA Express. [Applause.] They will travel by train for the first time in their lives, thanks to our collaboration with the Passenger Rail Agency of SA, Prasa. [Applause.]
Following our provincial engagement in KwaZulu-Natal, our Youth Economic Participation programme is planning an SOC supplier forum in KwaZulu-Natal. In June, we will be launching a state-owed company youth forum. From 1 June, we will be starting a year-long programme of distributing maths dictionaries, developed by Denel, to schools that performed dismally in maths and science. These will be donated to their libraries, as a start.
From July, we plan to replicate competitive supplier development summits to all the provinces. Before the end of October, we will host a summit with our SOC foundations and our supplier companies. We want to address the question on how to use corporate social investment programmes to fund youth employment and development in general.
We will continue to support Eskom's initiative to support further education and training colleges by building electrical and mechanical workshops to the tune of R1,9 million each. [Applause.] The following provinces have benefited from the programme: Gauteng, Limpopo, KwaZulu-Natal and the Western Cape. We have established a forum, consisting of chief executive officers, heads of corporate social investment and departments of our SOC foundations, to foster collaboration and to learn best practice from one another. We will be working with the SA Maritime Safety Authority, Samsa, and Transnet to expose our young people to maritime opportunities.
Our focus for the month of August will be on young women in engineering. Our young women engineers at Denel, Broadband Infraco, Eskom and Transnet will be dispatched to schools to help popularise engineering to young women as a career of choice. [Applause.] The SOCs will submit plans on how older engineers will be mentoring young women engineers during this month and how the plan is sustained going forward.
In September, we will be working with Transnet through the National Science Foundation, recruiting 1 000 learners to be trained as artisans. We are collaborating with the Department of Human Settlements to ensure that young people who are in construction are assisted to get the required Construction Industry Development Board certification. [Applause.]
We are working with the Department for Co-operative Governance and Traditional Affairs, Department of Energy and Middle East South Africa Energy, Mesa, to develop a joint programme on electrical infrastructure refurbishment, using our engineers as part of their employee volunteer schemes. We are nurturing the tree and the young to watch them grow. [Applause.]
With regard to the SA Forestry Company, I want to report the progress made since the last Budget Vote and the good work done by the former Deputy Minister, Ben Martins. Since our last Budget Vote, Safcol has appointed a permanent chief executive officer. She is the first and only black female CEO in the forestry industry in the whole of South Africa. [Applause.] Her name is Ms Nomkhita Mona. Since her appointment, the new CEO has initiated a project that has already created employment for approximately 134 individuals in the community of Sabie. This is in addition to the 1 681 permanent employees and 2 500 contract workers employed by Safcol.
Safcol has also built an array of infrastructure using timber frame. This includes classrooms, administration blocks, kitchens, houses, and computer centres. This is in line with our government's Rural Development Strategy. I can safely say that in Mpumalanga, Safcol is the mother to the motherless, father to the fatherless and friend of the community. [Applause.]
Safcol has been awarded 70 hectares in Sofala province in Mozambique. Through its development, the company is destined to positively contribute to government's drive for regional development. The Department of Public Enterprises, Safcol and the Department of Rural Development and Land Reform are in the process of finalising the land claim settlement model relating to the disputed land on which Safcol is operating. The model is not just to ensure that sustainable benefits are transferred, but also to ensure continuity of forestry production with the assistance of Safcol.
With regard to the progress made in turning around the company Alexkor since the last Budget Vote, the shareholder appointed a new board of directors, led by Mr Bagus, with the mandate of appointing a CEO within three months. This has been done. Mr Percy Khoza is our new CEO. The board is finalising the appointment of a chief financial officer. A turnaround strategy for the Pooling and Sharing Joint Venture is ready to be presented to the shareholders. The board has improved relations with communities.
The new board has taken the decision to be firmer in dealing with contractors that perform poorly while rewarding the better performers with more opportunities. As the shareholder, we are behind the board in this regard. This will be underpinned by the monitoring of sea days versus production, a stone size distribution analysis, security upgrade, the introduction of middle water mining and the implementation of the deep-sea mining agreement with the IMDSA.
Alexkor has successfully completed all the necessary upgrades for the township infrastructure that will support the handover to the Richtersveld Municipality. The company is currently attending to the rehabilitation backlog and is employing over 20 people in this regard. An amount of R200 million has been given to Alexkor for this project. The company has to enter an era where it becomes a driver of prosperity in the Richtersveld and Namaqualand regions of our country. The Master of the High Court has appointed an investigator to investigate the affairs of the trust.
As the Department of Public Enterprises, we led a delegation of the Deputy Ministers of Rural Development and Land Reform and of Mineral Resources to meet the four communities of the Richtersveld. As a result of the visit, the following interventions are under way: Regarding the farm recap, Grow-Agri has been appointed as a strategic partner to revive the farms. A person has already been deployed to turn around the farms. Sixty young people have been captured in their system for the national service corps. Spatial development plans have been approved by Department for Co-operative Governance and Traditional Affairs. One hundred and fifty-nine kilometres of road is to be improved. The Alexkor board has been given a mandate to look for mining opportunities beyond diamonds, in line with the relevant enabling legislation.
In 2010, government decided to place the pebble bed modular reactor into care and maintenance mode until 31 March 2013. This was done to protect and preserve its intellectual property and assets. The packaging of the intellectual property to be preserved has been completed. The department is in the process of facilitating a consolidated government view on which PBMR assets will be preserved, donated or disposed off for cash. This process should be completed in this coming year.
I am happy to announce that Aventura is finally going to be liquidated.
I would like to thank the Minister for his leadership, warmth, guidance and wise counsel. I would also like to thank colleagues from the Department of Public Enterprises for their assistance and support. Let me further take this opportunity to thank the Portfolio Committee on Public Enterprises and the study group of ANC for their guidance. All the people who graced this occasion, I thank you. [Applause.]
Mr P J GROENEWALD
UNREVISED HANSARD
EPC – COMMITTEE ROOM E249
Tuesday, 14 May 2013 Take: 508
THE DEPUTY MINISTER OF PUBLIC ENTERPRISES
Mr P J GROENEWALD: Chairperson, I would like to begin by saying this to the hon Minister: It is quite clear that you are transforming public enterprises into black elite enrichment enterprises. [Interjections.] It fits with your remark of cadre deployment, for which you will not apologise. It is quite clear. You call it BEE, black economic empowerment. I call it black elite enrichment, because that is what it is.
Afrikaans:
Ek het na die agb Minister geluister. As die agb Minister oor geld en die begroting praat, dan staan hy hier groot en hy vertel van die miljarde rande wat gespandeer word. Dit is baie selde dat jy van net 'n miljoen rand hoor. Dit het, in 'n mate, 'n grootheidswaan begin skep van: as dit kom by openbare ondernemings, dan praat ons net in miljarde. Dit lei tot arrogansie.
Ek sê nie die agb Minister is arrogant nie, maar ek wil vir die agb Minister sê, kom ek vat Transnet. Transnet het 'n opdrag gekry van 'n komitee van hierdie Parlement. Hulle het 'n arrogante uitgangspunt van "ons sal ons nie daaraan steur nie". [Tussenwerpsels.] Hulle moes by 'n pensioenfonds van die werkers inbetaal het, en die werklikheid is dat hulle hulle nie daaraan gesteur het nie. Dit is hoekom die VF Plus se Anton Alberts die land vol gereis het, met die pensioentrekkers gepraat het, en dat daar nou 'n hofsaak aan die kom is.
Die arrogansie is dat dit nie Transnet se geld is nie. Dit is die belastingbetalers se geld, maar as jy gaan kyk na die hoof uitvoerende beampte van Transnet se salaris verlede jaar was dit amper R17 miljoen. Weet die agb lede wat is R17 miljoen? [Tussenwerpsels.] Dit beteken in 'n maand verdien die hoof uitvoerende beampte meer as wat u in 'n jaar verdien. In 'n maand verdien hulle meer – met die belastingbetaler se geld. Dit is 'n arrogante houding van ... [Onhoorbaar.] ... en ons sal doen wat ons wil.
In my beperkte tyd wil ek sê ons bespeur dit ook by Eskom. Eskom word bedryf met die belastingbetaler se geld. Daar word kort-kort gekla en gesê dat daar nie genoeg geld is nie. Minister, ek sê vir u dit is 'n skande as daar beurtkrag moet kom hierdie winter, want dit beteken dit is swak beplanning deur die bestuur. Dit is swak in terme van die uitvoer van pligte en dit is 'n miskenning van die verbruiker wat vir daardie dienste betaal, want hulle – bestuur - kan dit nie behoorlik bestuur nie. [Tyd verstreke.]
The TEMPORARY CHAIRPERSON (Prof L B G NDABANDABA)
UNREVISED HANSARD
EPC – COMMITTEE ROOM E249
Tuesday, 14 May 2013 Take: 508
Mr P J GROENEWALD
The TEMPORARY CHAIRPERSON (Prof L B G Ndabandaba): I now call on the hon Dudley.
An HON MEMBER: Beautiful! [Interjections.] [Laughter.]
The TEMPORARY CHAIRPERSON (Prof L B G Ndabandaba): Hon members, I do not think "beautiful" is something we need to see in Hansard even though it may not be unparliamentary. [Interjections.]
Mrs C DUDLEY: Thank you, Chair. To say that Public Enterprises is fraught with challenges is an understatement, I know. We just have to look at SAA, Alexkor and Denel, all singled out by Treasury for poor performance. Hon Minister, will court challenges and accusations that government bailouts for SAA to the tune of R11 million plus a further R5 billion guarantee – which are anticompetitive and have resulted in a number of commercial airlines shutting their doors – cause any drastic change in policy? Statements by Treasury that parastatals facing persistent financial difficulty will be urgently reviewed to establish sustainability would be reassuring, only no one believes that any tough decisions will actually be taken.
State-owned entities are set to spend R397 billion over the next three years on infrastructure – 43% of the money sourced from debt markets and the remainder generated internally. Now, the ACDP recognises that so much is riding on the success of our infrastructure development as South Africa attempts to aggressively create and take hold of opportunities for economic growth - and now we must.
Eskom and Transnet, the largest contributors to the borrowing requirement, account for 87% of capital expenditure by parastatals. The ongoing building of power-generation plants and new transmission lines, investment in rail, ports and pipelines, large new water transfer schemes and airport upgrades account for some of the spending. We are seeing some bold moves that carry huge risk, but we also understand that we simply must pull it off. Sentech and the SABC are also in line for large amounts to help pay for digital terrestrial television migration, some of this being preparation for the 2014 African Nations Championship.
The ACDP congratulates Safcol on the 22% improvement in sales, an operating profit of R51 million and plans to expand operations beyond South Africa and Mozambique – a great recovery from the previous year's R32 million loss. Safcol's world-class forestry stewardship and management skills, which can be shared with other African countries, also offer opportunities for entry into the forestry industry in these countries.
Eskom, we understand, is reviewing the implications of the National Energy Regulator of South Africa, Nersa, decision to grant it a lower-than-requested electricity tariff hike. The 16% increase asked for would have more than doubled the current price, and the ACDP commends Nersa, who opted for an 8% increase, a decision which went some way to softening the immediate impact on users.
We note government's resolve in pursuing nuclear options, seen as a critical driver of much-needed industrialisation. This controversial energy source will, however, take time and a lot of money as safety and technology challenges rear their heads. [Time expired.]
Mr I S MFUNDISI
UNREVISED HANSARD
EPC – COMMITTEE ROOM E249
Tuesday, 14 May 2013 Take: 508
Mrs C DUDLEY
Mr I S MFUNDISI: Chairperson and hon members, we in the UCDP wish to align ourselves with the hon Minister by expressing our condolences to the hon Mr Maluleka and his family in respect of his late brother.
It would seem that there is never a dull day in the Minister's working life and there is always a fire to be put out in one or other of the state-owned enterprises. The most interesting in the public's eye should be the Medupi project. This is not only for the controversy it attracts, but also because we should not have to live with the collective anxiety that, one of these days, we may have to live with load-shedding, as we had to a few years ago.
It has become public knowledge that the Minister declared that he would not accept any further delays in the project. He repeated this morning that the deadline will be the end of the year, even though the initial deadline was April last year. It is doubtful that the project will produce power at the scheduled time.
We are interested in how Eskom decided to draw Alstom's performance bond when Alstom and Hitachi Power Africa were reportedly both performing badly and with unacceptable complacency. Earlier we heard reports that Eskom relied on Hitachi to carry out work but that welding faults were concealed. How did Hitachi get away with what appears to be a big, fraudulent misrepresentation? Could it be that Hitachi is pardoned and its faults tolerated because of the 25% stake that Chancellor House has in it? [Interjections.] Is it because of the undisputed reports that the ANC stands to benefit R2 billion from it?
Of course, there is a need to have diplomatic trade relations with the rest of the African continent. We appreciate the fact that the Minister appears to hold that view. We just hope that such relations do not bear catastrophic results, as suggested by our military presence in the Central African Republic, as we had in the past.
While we appreciate the extent to which SAA brings the world to Africa and takes Africa to the world, and while SA Express traverses Southern Africa, it is disconcerting that the North West province is the only province without flights – which they had before. We hope this matter will be addressed sooner rather than later. [Applause.] [Time expired.]
MR A D MOKOENA/Robyn
UNREVISED HANSARD
EPC – COMMITTEE ROOM E249
Tuesday, 14 May 2013 Take: 509
Mr I S MFUNDISI
Sesotho:
Mong A D MOKOENA: Modulasetulo wa ngangisano ena, ke a o dumedisa. Ke dumedise hape le Letona la Lefapha la Dikgwebo tsa Setjhaba, mohlomphehi Malusi Gigaba, ya kgothetseng, ya sebetsang ka bokgabane, hammoho le letsoho la hae, mohlompehi Bulelani Magwanishe, mmoho le molaodi-kakaretso wa lefapha lena, e leng Tshidiso Matona, ya kgothetseng ka tsela e makatsang. Le utlwile ka moo mohlompehi, Leloko la Palamente Nana, a ileng a mo rorisa ka teng. Ke leboha hape le Maloko a Palamente kaofela a tlileng mona, le Matona a mang, hammoho le baeti ba tlileng ho tla mamela ditaba tse monate tsena tsa Lefapha la Dikgwebo tsa Setjhaba.
Ke ema mona ke tshehetsa Tekanyetso ya Tjhelete e kana ka dimilione tse R236, e abetsweng lefapha lena hore le kgone ho etsa mosebetsi wa lona. Ke tlile ho tsepamisa maikutlo a ka haholoholo ho Denel, eo e leng ya bohlokwa ka hobane e le khampani e laolang le ho alosa dikgwebo tsa mmuso motjheng ona wa dibetsa.
E re ke qale ka ho totobatsa hore re a leboha ha Kabinete e ile ya fana ka thuso ya tjhelete e kana ka dimilione tse R700 hore e thuse Denel kopong ya yona ya ho tlatselletswa hore e kgone ho phethisa mosebetsi wa yona. Leha ho le jwalo, re kgesa tsela e lesisitheho le ho ba monyebe eo tjhelete ena e ileng ya tla ka yona. Hona ho ile ha sitisa Denel hore e phethahatse merero ya yona kaofela.
A nke ke hlomphe hape Boto ya Taolo ya Denel, eo e leng ka tlasa bolaodi ba Modulasetulo Zolo Kunene, hammoho le Molaodimoholo wa yona ya kgabane, e leng Riaz Saloojee. Jwale ka ha re le komiti ena, re thabile haholo ke tshebedisanommoho e ntle eo re e fumaneng ho bona hobane ba na le boikarabelo bo makatsang. Ba a tla ha re ba bitsa, ba hlalose, mme ebile ba a tsepahala. Ha ba etse manyofonyofo le ho ipata jwaloka bane ba pele ba neng ba etsa ntho eo bana ba banyenyane ba e bitsang 'black maipatile'! [Ditsheho.]
Ntho ena e ne e tsa hore Denel e se ke ya bonahala e sebetsa hantle. Re motlotlo ka lona mme re mona ho le tshehetsa. Ha le sa etse dintho tse ntle re tla le kgesa, empa ha le etsa dintho tse ntle re tla le kgothatsa.
English:
As I have indicated, my focus area is Denel. I want to make a few quick points: What is the mandate of Denel? Denel's mandate is that of a primary strategic supplier of defence material and equipment to the National Defence Force. That is its mandate and it is incorporated in the Companies Act. When was Denel established? Denel was established in 1992, but its precursor was the SA Royal Mint, which underwent transformation and became Pretoria Metal Pressings, which is now part of Denel.
What are Denel's capabilities? Denel has astounding technological abilities, especially in cutting-edge technology. It has high-profile programmes such as the Hoefyster and the Rooivalk, to mention a few. Denel has positioned itself as a contractor for overseas companies to handle their testing, trials, design, innovation and training as well.
As a portfolio committee we have been privileged to visit Denel several times. We were intrigued by the enormous capacity for technology and high science that we saw. However, because of the fact that it was badly run in the past, the South African public could not appreciate this big asset that we have. The past! Your past! [Laughter.] [Applause.]
Denel furthermore ... [Interjections.]
Afrikaans:
Mnr P J GROENEWALD: Voorsitter, is die agbare lid bereid om 'n vraag te beantwoord?
English:
Mr A D MOKOENA: Not at the moment, sir!
Mnr P J GROENEWALD: Are you prepared to take a question from my past?
Mr A D MOKOENA: No, no!
Mnr P J GROENEWALD: Oh, you are afraid of my past!
Mr A D MOKOENA: No, no, no! Take it easy, hon Groenewald, take it easy! Let us come to another point: The personnel complement of Denel. How many people are manning Denel? Denel has got a core group of 4 000 people. These people are spread across different categories. There are labourers, artisans, prentices, interns, engineers and scientists of note! [Applause.]
Apart from that, Denel works with many companies whose staff complement is close to 30 000 in its value chain - all these people dip into the expertise of Denel. I know there is the view, held by the opposition, that because Denel and other state-owned companies were battling at one stage, government should have sold them and got rid of them. [Interjections.] If we had succumbed to that pressure, we would not be standing here with pride as a member of Brics. [Interjections.]
Recently, in March, the SA government hosted a high-profile meeting of six heads of state from Bric countries who came to Durban. Among them, we have a memorandum of understanding, which was signed by Russia, for Denel to upgrade and run what is called a centre for the maintenance, repair and overhaul of 1 000 Russian helicopters. These helicopters will be flying all over Africa to assist. [Applause.] That is the point!
We know that the Russians were seen as enemies in the past. Today, they have come out to extend a hand of friendship and say, "South Africa, because you are a democratic and open society and you have come up with a miracle, we are going to hold your hand and incorporate you in Brics." So, South Africa has been elevated. This is a direct contract; one that is deliverable. Denel managed to get it and is the envy of the world. By contrast, other manufacturers all over the world have collapsed in the area of weaponry and artillery, but not Denel.
That is because the ANC-led government is progressive and is leading a developmental state. [Applause.] It adopted a policy of countercyclical fiscal budgeting. This means that when the economy is down, the government must come forward to pick it up! [Applause.]
However, when the economy is performing well, the government can hydraulically pull back. [Interjections.] The government was able to do that by injecting money into Denel so that Denel would not be closed.
The Russian MOU is a very significant milestone. Not only that: Denel is also training a lot of young engineers and they are playing a meaningful role. This is because, when it comes to transformation, not only Denel but many other companies are unfortunately faced with ageing expertise. These are white males - very good guys with excellent brains but they happen to be stereotyped as whites –but they are male and they are ageing! [Laughter.] As they age and atrophy, nature does not allow a vacuum. There must be replenishment. [Interjections.] I, for one, do not want to suggest that all the people who work for Denel are members of the ANC. I am not going to suggest that. However, I must say that the programmes they are running there are so progressive and you can see that the spirit of the ANC is ruling in them. [Applause.] [Interjections.] You can see the heart of the Freedom Charter when they train these young people. It is reminiscent of the Freedom Charter, which says, "The doors of culture and learning must be open to all."
We are not discriminating, saying "whites" and "blacks" because South Africa is a country that belongs to everybody. However, the reality is that as much as we appreciate the expertise of these white males, and very few white women, for that matter, we are unapologetically saying that black people must come to the fore. We agree with you, hon Minister, that BEE is not a mistake.
There is no party that should understand BEE better than Mr Groenewald's party. You are the people who understood affirmative action better but what the ANC did in its magnanimity ... [Interjections.] Hold on! The ANC did not want to be vindictive. It didn't want to stereotype and be vindictive. Mandela was very magnanimous. He said we must never have those dark days of apartheid coming back. Never again will racism prevail in this country! [Time expired]
Sesotho:
Ke a e tshehetsa Tekanyetso ena ya Ditjhelete, Modulasetulo. Ke a leboha. [Mahofi.]
Mr K J DIKOBO
UNREVISED HANSARD
EPC – COMMITTEE ROOM E249
Tuesday, 14 May 2013 Take: 510
MR A D MOKOENA
English:
Mr K J DIKOBO: Hon House Chair, hon members, distinguished guests, let me start by declaring that Azapo supports Budget Vote 11. [Applause.] However, we want to raise a few concerns. We agree with the Minister that there is a need for Eskom to be sustainable but our concern is that this has to be balanced with the need to be affordable for poor, ordinary people.
Azapo appreciates the role that the National Energy Regulator of South Africa has played in keeping the cost of electricity as low and affordable as possible. In fact, we have serious reservations with Eskom's pricing model. Up to now, Eskom seems to have behaved like trade unions who demand 20% when they know full well that the real need is 10%.
Hon Minister, you are possibly aware of the challenge of skills development in our country and how further education and training colleges are struggling to rise to the challenge. We appreciate the input of state-owned companies in skills development. The number of learners who are trained every year is commendable. Azapo urges the Minister and the department to consider designing a training programme for FET college lecturers. We believe that this would have a multiplying effect and we are not saying that state-owned companies should not train learners. In fact, we are aware that this is not the Minister's responsibility. However, we are saying this because we have seen the quality of training that is done in state-owned enterprises ... [Applause.] ... and we compare it to the difficulties that we see in our FET colleges.
Minister, the portfolio committee was left with an egg on the face when, having given SA Express a clean bill of health, it turned out that the financials had been cooked. It is now public knowledge that the financials were withdrawn. They were not withdrawn because somebody in the department had picked up or noticed any statement, but because of a whistle-blower. In Azapo's book, the existence of a whistle-blower suggests wilful wrongdoing by somebody. What the department needs to ascertain is whether there were persons who benefited from this misrepresentation.
Like all other parties, Azapo conveys its condolences to the Maluleke family, Van'wanati [Maluleke]. Thank you. [Applause.]
Mrs G M BORMAN
UNREVISED HANSARD
EPC – COMMITTEE ROOM E249
Tuesday, 14 May 2013 Take: 510
Mr K J DIKOBO
Mrs G M BORMAN: Hon Chairperson, hon Ministers, Deputy Ministers, hon members and distinguished guests, President Zuma concluded his state of the nation address in February this year with these words:
As South Africans, we should continue to have one primary goal - to make our country a truly great and prosperous nation.
The ANC believes that state-owned companies have a significant contribution to make towards achieving this goal. In the aftermath of the 2008-09 economic crisis, we saw an increased role for the state in the economy in major parts of the world. In South Africa, where private-sector activities have continued to be subdued, state-owned companies have assumed major strategic importance regarding investment, job creation and economic growth.
Broadband Infraco, which is what I am going to be speaking about today, is one of the state-owned companies with an important role to play in the roll-out of the information communications technology needed to grow the economy. Again, I quote from the President's speech:
To prepare for the advanced economy we need to develop, we will expand the broadband network. Last year the private and public sector laid about 7 000 km of new fibre-optic cable. The plan is to achieve 100% broadband internet penetration by 2020.
The rationale for the establishment of Broadband Infraco by the government of South Africa was to create an environment in the ICT sector in which business and ordinary citizens are able to access large streams of high bandwidth capacity at affordable rates and with ease of access to places where they live and work. This intervention has had a significant impact on the pricing strategies of different operators, resulting in the reduction of business-to-business prices by up to 70% between certain cities. This helped boost the growth of ICT-driven industries such as business process services - our call centres.
Broadband Infraco acts as a basic platform to stimulate private and public sector development and innovation. Up to R1,8 billion has been invested and has resulted in the construction of almost 13 000 km of fibre and access to 151 open points of presence. A point of presence is a node from where government and other private operators can plug their networks into Broadband Infraco's network for onward usage. This means more capacity available for the South African public to use.
Broadband Infraco has served as the backbone of the second network operator. It carries high capacity for all three major network mobile operators: Cell C, MTN and Vodacom. It further provides connectivity to operators that carry traffic to neighbouring countries, like Liquid Telecommunications Operations SA and Seacom.
Broadband Infraco assumed a major investor status in the West African Cable System, WACS, which is a 14 500 km-long submarine fibre-optic cable linking Southern Africa, West Africa and Europe. The benefits to South Africa and Africa at large will be: lowering the cost of international bandwidth to a level comparable with international benchmarks; creating a sustainable and efficient international bandwidth market in South Africa; positioning South Africa for future growth by connecting her to key global knowledge economies, i.e. Europe, North America, South America and India; providing cost-effective access to international bandwidth for key projects such as the Square Kilometre Array.
The Square Kilometre Array Telescope will be the world's biggest telescope and one of the biggest scientific projects ever. [Applause.] It will use enough optical fibre to wrap around the earth twice. The data collected by it in a 24-hour period would take nearly 2 million years to play back on an iPod. It will generate enough raw data every day to fill 15 million 64 gigabyte iPods. The central computer will have the processing power of about 100 million PCs. The mind boggles! Crisis? Hey, we've got some fantastic people working out there in this country! [Applause.]
The most important spin-off will be the generation of knowledge and knowledge workers - young scientists and engineers with cutting-edge skills and expertise in a wide range of scarce and innovative fields. South Africa has areas that are not deemed financially viable for ICT infrastructure roll-out. Through our Broadband Infraco, government has committed to ensuring backbone coverage in underserviced rural areas in terms of its licence obligations - these cover 57 points of presence.
As I said earlier, the plan is to provide a 100% broadband coverage to all households by 2020, establishing more points of presence in district municipalities, extending new fibre networks across provinces and at local level, and taking the network into deep rural areas, with affordable access. While the private sector will invest in ICT infrastructure for urban and corporate networks, government will co-invest in township and rural access as well as e-government, school and health connectivity. One part of digital access to all South Africans is TV migration nationally from analogue to digital broadcasting.
According to section 4(1) of the Broadband Infraco Act 33 of 2007:
The main objectives of Infraco are to expand the availability and affordability of access to electronic communications, including but not limited to underdeveloped and underserviced areas [...] through the provision of: (a) electronic communications network services, and (b) electronic communications services.
The Act stipulates that Broadband Infraco will be able to fulfil its objectives once it obtains the two licences. To date only the ECNS licence has been granted.
Chairperson, may I address the Minister through you? Hon Minister, Broadband Infraco is making a significant contribution to economic development. As Parliament, we are concerned that the ECS licence has not been granted. This is having a negative effect on delivery of ICT into the rural areas and this really concerns the ANC. We urge both you and the Minister of Communications to bring resolve to this impasse urgently.
In his 2012 report, the acting CEO, Dr Andrew Shaw, stated the following:
The organisational structure was adjusted in October 2011. This was necessary to meet the newly defined market needs, improve accountability, enhance capital project roll-out and address a number of governance-related shortcomings in the previous structure.
He further said:
By the end of calendar year 2011, the presence of the newly appointed executive management was felt in earnest.
We note the improved financial performance of Infraco, recording a net loss of R95,2 million for 2011-12 as opposed to a loss of R207 million in the previous year. This is a huge improvement. Vacancies have been filled with suitably qualified persons. The ANC welcomes the new chief executive officer, Ms Puleng Sejanamane, and Ms Ramasela Magoele as the chief financial officer. [Applause.]
We want to thank the director-general and his department for the significant role they have played in steering this ship through stormy waters. The ANC believes that Broadband Infraco is ready to play a significant role in contributing towards growing the economy and making our country a truly great and prosperous nation, as expressed by our President in his state of the nation address. [Applause.]
Mrs D A SCHÄFER: Mr Chair, I rise on a point of order.
The HOUSE CHAIRPERSON (Mr C T Frolick): Yes, hon member.
Mrs D A SCHÄFER: Chairperson, I believe one of the members on the other side called our member, the hon Mubu, a Zimbabwean. Can they withdraw that statement, please?
The HOUSE CHAIRPERSON (Mr C T Frolick): Order, hon members! Hon member, is there somebody who – no, hon member, I am the one chairing this session - referred to another member in that way?
Mrs N W A MICHAEL: Yes, Chair.
The HOUSE CHAIRPERSON (Mr C T Frolick): Order! We will continue with the debate and then we will check the recording. If necessary, we will get back to the House.
Mr E J MARAIS
UNREVISED HANSARD
EPC – COMMITTEE ROOM E249
Tuesday, 14 May 2013 Take: 511
The HOUSE CHAIRPERSON (Mr C T Frolick)
Mr E J MARAIS: Chairperson, Minister, Deputy Minister and members, budgetary work is one of the most important oversight functions of Parliament. The budget reflects the choices that government has to make and it is the tool government uses to achieve its economic and development goals. However, budget work also has a larger purpose, which is to contribute through ensuring openness, transparency and accountability for public resources. The DA sees the principle of accountability as very important in the budget process.
The Department of Public Enterprises has been allocated R1,2 billion for the 2013-14 financial year. A total amount of R1,05 billion of this budget are transfers, meant for Denel and Alexkor. Denel will receive R700 million for the recapitalisation of Denel Aerostructures, while Alexkor has been allocated R350 million, which was meant to settle any outstanding unfunded obligations under the Alexkor-Richtersveld community deed of settlement, including the tax obligation of R69,9 million.
In his state of the nation address, the President did reflect on infrastructure investment as a key priority of both the National Development Plan and the New Growth Path. South Africa's economy could be stimulated by implementing a long-term, government-led infrastructure investment programme. As government we should lay the foundation for growth.
This is where state-owned enterprises play a major role. State-owned enterprises invested over R105 billion, mostly in infrastructure, during 2011-2012. The National Growth Plan sets the target of 5 million new jobs by 2020. In July 2011, Cabinet announced that President Jacob Zuma was heading the Infrastructure Commission, which was set up to improve the visibility and co-ordination of South Africa's R860 billion public investment drives. It includes all spheres of government, various national departments and state-owned enterprises.
To achieve this, the Department of Public Enterprises plays the key role in contributing to the objectives of the National Development Plan, which include growing the economy, reducing poverty and increasing employment. [Applause.] The DA supports these objectives. The department plans to contribute to these objectives through Eskom's build programme and Transnet's capital expenditure programme in order to improve industrial capabilities and the productive capacity of the economy. The department will also focus on the development of the business plans of the strategic integrated projects to meet these objectives. State-owned companies provide apprenticeships and learnerships and play a major role to support the youth to qualify themselves for the formal workplace.
Some changes were identified as requirements to the shareholder oversight process. I want to highlight just two of them. New sources of funding for the expanded investment plans need to be mobilised. The Department of Public Enterprises needs to provide the Minister with relevant support for bimonthly meetings with the top management of the state-owned companies to monitor progress in the implementation of key efficiency-enhancing initiatives.
State-owned companies are insulated from failure. They are not allowed to go insolvent because government generally bails them out. Furthermore, if they fail, the option of a takeover bid, which may be viable for private companies, is also out of the question. This means the boards and management may slump into complacency. The power of the boards of state-owned companies is often usurped by government. Government sets and drives the strategy of state-owned companies, appoints and dismisses the chief executive officer and approves financial and major capital expenditures of the state-owned companies. This creates a complex situation in which various factors contribute to confuse the board regarding its powers and their execution.
Referring to Broadband Infraco, today about 17% of South Africa's population is able to access the Internet – a number that is rising by about 20% a year. The use of digital communications has changed society in ways that are not yet fully understood. It is clear, however, that young people have embraced the new media and this represents a potentially powerful means of fostering social inclusion. To prepare for the advanced economy, we need to develop and expand the broadband network. In 2012, the private and public sector laid about 7 000 km of new fibre-optic cable. The DA supports this critical infrastructure project as a basic foundation for economic competiveness. The DA also supports establishing national, regional and municipal fibre-optic networks to provide the backbone for broadband access. This will create more opportunities for all South Africans in an open-opportunity society for all.
As far as Eskom is concerned, municipalities use a mark-up on Eskom's tariff to supplement their income stream. What is further of major concern is the wide percentage range of the mark-up between the various municipalities. Selling of electricity has become the main income source for municipalities, not property tax, and the consumer is placed under increasing financial pressure to survive. Outstanding payments for municipal accounts are increasing and the negative spiral of bad debt is becoming worse. It is of the utmost importance going forward to find a balance to support or finance the capital infrastructure plan of Eskom and annual increases.
The impact on small and medium businesses cannot be overemphasised. Forced closures because of running costs that are too high will lead to more people becoming jobless and consumer bad debt climbing. The Medupi and Kusile power stations are not on track and any further labour disputes would be disastrous for our power supply. A 20-month schedule overrun - at an additional R60 billion - in the construction of the boilers for Medupi and Kusile, and R20,9 million in fruitless and wasteful expenditure is a great concern.
Despite these inefficiencies, Eskom executives have seen generous pay increases. In the 2011-12 financial year, Eskom paid executive members 109% more than they were paid in the previous year. In recent years, executive pay has risen from R8,8 million in 2010-11 to R18,5 million in 2011-12 to the latest projected figure of R34 million. That the Eskom chairman earns R113 500 for each and every board meeting he presides over while the average annual household income for a black African household amounts to only R69 632 is irreconcilable.
Afrikaans:
Ek sluit graag af met die kwessie rondom die benadeling van Transnet-pensioentrekkers. Die pensioenfondse is ondergefinansier en die situasie is ernstig vererger deur die vervreemding van die fondse van hul belangrikste bate, naamlik inkomstegenererende Transnet-effekte. Die effekte ter waarde van R10,394 miljard het 'n koeponkoers van 16% gedra. Dit het aan die pensioenfondse 'n inkomste van R1,6 miljard per jaar gegee vanaf 1990, toe die fonds gestig is, tot Januarie 2001, toe effekte ter waarde van R7,7 miljard geskrap en "geruil" is vir M-Cell-aandele, later MTN-aandele. Transnet het daarmee R1,2 miljard per jaar aan rente gespaar en R7,3 miljard aan terugbetalings.
Die trustees het in 2001 besluit om die jaarlikse verhogings van pensioene tot 2% te beperk, strydig met vorige besluite dat verhogings minstens 70% van die inflasiekoers moet dek. [Tyd verstreke.] [Applous.]
Ms C C SEPTEMBER
UNREVISED HANSARD
EPC – COMMITTEE ROOM E249
Tuesday, 14 May 2013 Take: 512
Mr E J MARAIS
Ms C C SEPTEMBER: Hon Chairperson, Minister, Deputy Minister, hon members, guests, ladies and gentlemen, let me also express my condolences to the chairperson of the committee, hon Peter Maluleka, who has had three bereavements consecutively. It has been a sad time for him.
I rise on behalf of the ANC in support of the budget for the Department of Public Enterprises. We noticed that the economic crisis resulted in an increased role for the state in the economy in major parts of the world, particularly in driving investment. In South Africa, where the private sector's activities have continued to be subdued, state-owned companies have assumed major strategic importance regarding investment, job creation and economic growth, hence the ANC-led government's decision to make major investments in infrastructure.
State-owned companies are not created to maximise profits or incur losses, but rather to drive the developmental agenda. It is therefore correct for the state to intervene when the invisible hand of the market fails and provide a guarantee to SA Airways, in this instance. It cannot be construed as a moral hazard. It is common cause that the working capital of the airline was depleted, presenting the immediate risk of the company not being able to meet its obligations. The deterioration of the debt equity position of the company required the intervention of the shareholder to stabilise the company.
We want to congratulate SAA for making sure that every Member of Parliament who flies SAA has never, ever been late for Parliament. [Applause.] This is in line with what government is doing with the South African Airways Act, as amended in 2007. Let me quote what it stated when we amended it:
Since the Republic's rapidly developing economy requires reliable and extensive air transport capacity; and since the state desires to promote air links with the Republic's main business, trading and tourism markets within the African continent and internationally; and since the state has a developmental orientation and regard the South African Airways as a national carrier and strategic asset that would enable the state to preserve its ability to contribute to key domestic, intra-regional and international air linkages, the state intends to retain it as a national carrier.
When I checked the Hansard, I saw that the DA supported that Bill.
Investment by the state corporations has played a fundamental role in moving the economy out of the recession and has crowded in private sector investment. The policy strategy is to use the strength of the state-owned enterprises and to direct private sector investments in the productive sector of the economy to stimulate the manufacturing and promotion of entrepreneurship development programmes that will enhance the deracialisation of the economy. The strategy is also to create new firms and industries and to focus on the productive economy as opposed to tender-dependence in economic transformation.
As members have said previously, the ANC welcomes the constant search to use information and communications technologies to improve service delivery to citizens. As was said earlier, this extends to all areas, stretching from the health sector, making sure that we can transfer files and/or medicines of patients to remote areas, to having links with various schools, and so on. It also involves connecting very many different centres through high-speed bandwidth. Broadband Infraco's overhauled network is available as a core platform to deliver such citizens' service. Broadband Infraco has become an important part of almost every aspect of the knowledge economy, especially so in activities that rely on the provision of data and information, particularly in service sectors.
The ANC-led government, through Broadband Infraco, assumed the status of a major investor in the West African Cable System, Wacs, which is a submarine fibre-optic cable of about 14 5000 km long that links Southern Africa, West Africa and Europe. In South Africa and Africa, we are at last starting to experience lower international bandwidth costs to create sustainable and efficient international bandwidth in South Africa. Very importantly, it will also ensure cost-effective access for the Square Kilometre Array, the SKA, as we heard earlier on. We want to congratulate Infraco. You are often not spoken about because you are a small entity, but you are doing big things. [Applause.]
Comrade Minister, the ANC wants Infraco to continue aligning the entity with the objectives of the National Development Plan; the SA Regulatory Framework to be changed to ensure that Internet broadband capacity improves; and prices to fall significantly so that access improves.
Today, we heard many different members in the opposition on various aspects of the Transnet pensions issue. This is just absolutely pure politics that is being dished up for every one here. [Interjections.] The trustees have implemented most of what we as Parliament brought to them. They have put it very clearly to us where it was impossible and not affordable for them to comply. They are currently even considering changing some of the rules! More than that, the trustees are coming to Parliament quarterly to report to us on what is happening regarding the pensions issue. We will meet you on the hill. [Interjections.]
Afrikaans:
'n AGB LID: Luister dan baie mooi. [Tussenwerpsels.]
English:
Ms C C SEPTEMBER: The imbalance between supply and demand in so far as Eskom is concerned, has triggered Eskom to embark on the biggest build programme in South Africa, despite all the gloomy, dark stories here today. [Interjections.] While the supply constraints remain, significant progress has been made by the ANC with regard to the implementation of the "return to service" programme and the expansion of transmission capacity.
In efforts to stimulate the local economy, Eskom has placed an average of 76,9% of local content in new-build contracts, which is greater than the target that was set at 52% over the three-year period. Well done, Eskom! [Applause.]
Eskom had a total learner complement of 11 953 learners, of which 5 715 are engineering, technical and artisan learners and 5 159 are in the youth programme in 2011 and 2012. This provides critically important work experience to unemployed youth. The ANC is driving the skills programme in these directions in support of our youth instead of just fighting about the youth wage subsidy. [Interjections.]
Working with the department, the ANC congratulates Eskom for successfully managing the national supply and demand constraints over the last three years. This resulted in no rotational load-shedding since 2008, including keeping the lights on during the Fifa World Cup 2010 and the Africa Cup of Nations hosted in 2013. [Interjections.] The lights went out in Cape Town the other day, rather.
In the state of the nation address, President Jacob Zuma said that we should put South Africa first. All of us have a patriotic duty and responsibility to build and promote our country. He further said to all of us that the National Development Plan provided a perfect vehicle for a united action precisely because it has the support of South Africans across the political and cultural spectrum. Leaders in every avenue should be ready to rise above sectional interests and, with great maturity, pull together to take this country forward.
The National Development Plan reminds us that South Africa has missed a great opportunity when it missed a generation of capital investments in roads, rail, ports, electricity, water and sanitation, public transport and housing. So, too, does the Reconstruction and Development programme of the ANC state that attacking poverty and deprivation must be the first priority of a democratic government, and this includes the SOEs too. The ANC requests the Minister and Deputy Minister to align the department and entities with the objectives of the National Development Plan.
What we heard here today is very strange. We heard in this Parliament that all the political parties supported the National Development Plan, but when it came to the state-owned entities, you heard something different. I thought I should just say what the National Development Plan says ... [Interjections.] ... because they are selective in their support when they do so.
Concerning electricity, the NDP says that given these realities, a more pragmatic solution would be to invest in human and physical capital in the 12 largest distribution areas. How can we then oppose what Eskom is saying? It says that Eskom, together with the metropolitans and the cities, could, on a voluntary basis, take over the distribution to smaller, poor-performing entities. How can you oppose the NDP in this instance? [Interjections.]
The NDP also says: Revise the National Electrification Master Plan and ensure 90% coverage by 2020 and 95% coverage by 2030, with the balance met through off-grid technologies.
Cosatu has an absolute right to protect the interest of workers where this is not met in the NDP.
The NDP says the state-owned enterprises have a vital role to play in advancing key national objectives, particularly through providing economic and social infrastructure. It says if this is done in an equitable and cost-effective way, state-owned enterprises can contribute to both economic growth and overcoming spatial inequalities.
Minister, you cannot listen to people who are telling you to sell these entities when we are absolutely clear of the direction they will take. Nowhere in here does it say that you cannot assist the SAA, Transnet, Eskom and all the other entities. It says that SOEs need a stable and straightforward governance structure that allows them to focus on their long-term objectives. They have been given very clear mandates and they must deal with capacity constraints, which include the question of what to do with the financing of these entities.
So, it is extremely strange that we hear so many different viewpoints. When we are on the public platform, we support the NDP, but when it comes to the content of the NDP, we hear a different story.
You were told here today, Minister, that there is confusion when it comes to the governance aspect of these entities. It says here that the governance structure of the SOEs arises from the need to treat these enterprises differently from executive government departments or privately owned commercial enterprises. It says that they exist to serve the public interest, but they are also expected to generate at least some of their own revenue through their business activities. The governance structure needs to reconcile the commercial objectives with the public-interest objectives. That is what we have to follow, Minister, and not that there are "confusions" if you intervene when there are problems in a board. This division of responsibilities can help to create a healthy tension that ensures that adequate attention is paid to both the services provided by the SOEs and its financial sustainability.
It does tell us that what we need to do is to make sure that we have a range of skills – in administration, policy-making and management. We would urge that we must continue to improve in these different areas. It also says that, alongside the reviewing and clarifying of the mandate of individual SOEs, it is essential that there is a skills audit and an assessment of whether the current approaches are adequate for developing the necessary skills and that where there are gaps, we need to attend to them.
I want to say to the hon Eric, well done with what you did here today - providing the country and Parliament with the thoughts you expressed. Thank you that you opposed what your own colleague said in parts of her speech. Hon Natasha ... [Interjections.] ... Michael, thank you, Michaels - no, just Michael. As the portfolio committee, we don't believe all the things you said here today. You are an absolute builder in the committee; you are very co-operative. We understand that when you come here, you have to grandstand. But we don't believe all the things you said because you are not that the type of person. [Interjections.] You are extremely sweet when you are in the committee, but when you come here it is a completely different story that you have to put to all of us. So, we don't believe any of the things you said. Minister, in fact, we urge you not to listen to any of it. [Interjections.]
It is a pity that the hon member from the IFP had to repeat the same speech that the hon member Ambrosini had developed on this podium last year. [Applause.]
As I conclude, the National Development Plan says to all of us that we must ensure accountable governance. This requires leadership. And for institutions to be transformative and capable, they must be well-led at all levels. [Interjections.] [Applause.]
The MINISTER OF PUBLIC ENTERPRISES
UNREVISED HANSARD
EPC – COMMITTEE ROOM E249
Tuesday, 14 May 2013 Take: 513
Ms C C SEPTEMBER
The MINISTER OF PUBLIC ENTERPRISES: Chairperson, I would like to thank the hon members for what was a very constructive discussion. The Budget Vote we presented today was an industrialisation and transformation budget. What we sought to demonstrate was that the state-owned companies continue to invest aggressively against a global and domestic economic slump. What we also sought to demonstrate was that our department is enhancing its capability to co-ordinate state-owned companies for collaborative effort to support this industrialisation and transformation agenda, as well as to co-ordinate the partnerships between the state-owned companies and the private sector to support the development of critical industrial sectors in our economy.
The state-owned companies are driving an aggressive transformation agenda and the racists will be angry at that. [Interjections.] The racists will explode in anger because they cannot tolerate the reconfiguration of property relations through the interventions that our state-owned companies are doing. [Applause.] [Interjections.] [Laughter.] They will not contain their anger and we cannot help it. So, we will continue with implementing our transformative policies regardless of what the racists hope for or expect us to do because our agendas are not the same. [Interjections.]
Regarding the governance of state-owned companies, we reject the insinuation being made about our boards. Our boards are composed of extremely competent, suitable and qualified individuals ... [Applause.] ... who have massive credibility and integrity in their own fields of work. They didn't need to do this. They didn't ask for it and they didn't apply – we approached them to come and do this. [Applause.] [Interjections.]
Hon Michael, you have quoted my statements on cadre deployment selectively and you are misleading the House. [Interjections.] You are misleading the House! You are also selectively quoting the National Development Plan in the same regard. Cadre deployment is like affirmative action. We have always maintained that there is nothing that says that affirmative action must of necessity be devoid of merit. So, the insinuation that cadre deployment is of necessity devoid of merit is in itself a false assertion ... [Interjections.] ... because there are many cadres who possess sufficient merit to occupy any position in South Africa. [Applause.]
In the past, we were told that affirmative action was devoid of merit and that merit was white. [Interjections.] But when the hon Premier Zille does the same thing in the Western Cape, then it is not cadre deployment or it is cadre deployment that is "acceptable". [Interjections.] It is okay when you generalise, but it is wrong when somebody else does it. You apply this selective morality to everything and that is the problem. [Interjections.]
The HOUSE CHAIRPERSON (Mr C T Frolick): Order, hon members!
The MINISTER OF PUBLIC ENTERPRISES: The hon Michael selectively quotes the statement I made last week and I am sure she is feeling very proud of herself right now. But, you know, she is naughty. [Laughter.] She stole the hon Groenewald's speech about the Transnet Pension Fund. Hon Groenewald had nothing to say on this podium today. [Interjections.] It's wrong, man! [Laughter.]
The hon Sithole delivered a speech written by the hon Ambrosini on his sick bed. [Laughter.] It doesn't warrant a response because I'm not sure if the hon Ambrosini was in a healthy state of mind ... [Applause.] ... or whether he is listening because he repeats the same speech every year.
We have made the point clearly that we expect no delays in delivery of first power at Medupi. But South Africans must not regard it a burden to partner Eskom and government in saving power. This is where we differ fundamentally from our opposition. Where we regard the masses as their own liberators, they believe that the masses are mere spectators and must be passive recipients of the processes of change. [Applause.] Where we believe that the masses must become partners in the national effort to transform our society and its economy, they believe that the masses must sit despondently at home, lamenting and joining them in whining, expecting that the market will level the playing field and redistribute resources. What you heard here today is a fundamental ideological difference between us and our neo-liberal opponents who believe in the failed system that the market is the great distributor of resources and that it is a great leveller. [Interjections.]
You have listened to an interesting debate today, hon members, where the negative focus on the challenges facing some of our state-owned companies was drawn up and used to try to eclipse the achievements of these companies. I think that effort failed dismally. [Interjections.]
When we bailed out SAA, we did so not by privatising it but by ensuring that we stayed on course in implementing the turnaround strategy to which we had agreed. Even as it experienced the challenges that it did, SAA remained operationally sound and was even able to make cost-savings by the end of March 2012-13. [Interjections.] The fact is: While the dogs are barking, the car keeps moving and picking up speed. [Applause.]
Finally, let me quote from a message I received from a concerned South African:
The opposition reminds me of listed company equity analysts: They have so much to say about what should be done and yet have no clue what it takes to do it. To me, this is no different from shouting instructions at my beloved Kaizer Chiefs on TV when I've never kicked a ball in professional life. It's actually pretty childish, bra'.
[Laughter.] Enough said. Thank you. [Applause.]
The HOUSE CHAIRPERSON (Mr C T Frolick): Thank you, hon Minister. Order, hon members! Earlier in the debate a point of order was raised by the hon member Schäfer. She has unfortunately left the EPC but I just want to deal with the issue. I have requested the assistance of the table staff. It is not clear at whom the interjection was directed: at the hon Borman, who was the speaker at the podium at the time, or another member of the House. May I just say that while we do allow interjections, it is important that we always maintain the decorum of the House and be respectful of one another.
Debate concluded.
The Committee rose at 12:50.
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