Questions and Replies

Reply:

SOUTH AFRICAN EXPRESS AIRWAYS SOC LTD

(a) No

(b) (i) No, South African Express Services SOC Ltd has never engaged with Mr. Manyi.

(ii) South African Express Services SOC Ltd has never engaged with the Progressive Professionals Forum.

(aa) Not Applicable

(bb) Not Applicable

(cc) Not Applicable

(dd) Not Applicable

(ee) Not Applicable

ALEXKOR SOC LTD

1. No
2. (i) No

(ii) No. Alexkor is currently in a cost-saving drive and cannot commit to foreseeable, new services for the company. No services have been procured by Alexkor.

(aa) No services have been procured by Alexkor.

(bb) Not Applicable

(cc) Not Applicable

(dd) Not Applicable

(ee) Not Applicable

DENEL SOC LTD

1. No
2. (i) No
3. No

(aa) No services have been procured by Denel.

(bb) Not Applicable

(cc) Not Applicable

(dd) Not Applicable

(ee) Not Applicable

SAFCOL SOC LTD

1. No
2. (i) No
3. No

(aa) No services have been procured by SAFCOL.

(bb) Not Applicable

(cc) Not Applicable

(dd) Not Applicable

(ee) Not Applicable

ESKOM SOC LTD

Background

Eskom has not procured any services from Mr Mzwanele Manyi or the Progressive Professionals Forum. Eskom has paid R440 000 to the Progressive Professionals Forum consequent to a sponsorship decision, strictly considered against our sponsorship policy to ensure alignment with the objectives of the business.

a) (i) No, Eskom has not procured any services from Mr Mzwanele Manyi.

(ii) Eskom has not procured any services from the Progressive Professionals Forum.

The business has not raised a need that would require Commercial to procure services from this supplier. However, had there been a business requirement for services offered by this supplier; an open tender process would have been followed to satisfy such a need.

b) (i) No, Eskom has not made any payments to Mr Mzwanele Manyi.

   (ii) Yes, Eskom has paid R440 000 to the Progressive Professionals Forum consequent to a sponsorship decision, strictly considered against our sponsorship policy to ensure alignment with the objectives of the business.

(aa) Not applicable

(bb) Not applicable

(cc) Not applicable

(dd) Total payment is R440 000.

(ee)

Description	Amount
Two corporate tables at PPF Summit and Gala Dinner, Nov 2015	R40 000
Platinum sponsorship for PPF Summit and Gala Dinner, Nov 2016	R400 000

TRANSNET SOC LTD

a) No, Transnet has not procured any services.

(b) (i) Transnet has not made any payments to Mr Mzwandile Manyi.

(ii) Transnet has sponsored the Progressive Professional Forum.

(aa) Sponsored the Progressive Professional Forum conference entitled “Does Corruption undermine services delivery” as a platinum sponsor.

(bb) Total cost is R400 000.

(cc) Breakdown sponsorship:

• • • • Branding at the Summit and Gala
      • 2 seats at the main table with the keynote speaker
      • Opprtunity for a Senior Transnet Executive to deliver and address at the Gala dinner
      • 4 tables at the Gala dinner
      • 6m x 6m exhibition stand
      • Ticktes for 8 delegates to attend the Summit
      • Logo inclusion on all event collateral
      • Logo placement on the PPF website for the event

(dd) A single payment was made to the Progressive Professional Forum for the event.

(ee) R400 000. And no further payment has been made.

REMARKS REPPLY: APPROVE / NOT APPROVED

Mogokare Richard Seleke Lynne Brown, MP

Director-General Minister of Public Enterprises

Date: Date:

Reply:

(1) a) Bain and Company is the consultant appointed for the development of an optimal corporate structure to re-align the state owned airlines.

    b) The work to be conducted by Bain and Company South Africa entails the development of the said optimal corporate structure in line with Government’s objectives and in cognizance of the industry best practices.

   c) The total cost of the project is R12.1 million.

(2) I will not make a statement on the matter.

 

Reply:

1. The Transport Pension Fund (“TPF”) has 338 active contributing members and 5 628 pensioners, and the Transnet Second Defined Benefit Fund (“TSDBF”) has 54 026 pensioners as at 31 October 2016.

(2) The number of members of the specified pension funds who died are recorded below:

Entity	Referencing	Financial Year	Number of Deceased Members
Transport Pension Fund	a	2013/14	181
	b	2014/15	184
	c	2015/16	212
Transnet Second Defined Benefit Fund	a	2013/14	4255
	b	2014/15	4114
	c	2015/16	4142

(3) The causes of death of each member are unknown.

(4) As at 31 October 2016, for the Transport Pension Fund, 3 113 pension members are main members, with 2 290 spouses and 221 children. For the Transnet Second Defined Benefit Fund 17 681 pension members are main members, with 36 180 spouses and 165 children.

(5) The growth of the specified pension funds is detailed below:

 

Entity	Financial Year	Market Value	Surplus
Transport Pension Fund	2013/14	R8 373 million	R2 903 million
	2014/15	R9 053 million	R3 644 million
	2015/16	R9 366 million	R4 325 million
Transnet Second Defined Benefit Fund	2013/14	R17 218 million	R2 983 million
	2014/15	R16 757 million	R3 145 million
	2015/16	R15 630 million	R3 807 million

Reply:

(1)	(a)	Alexkor have conducted coffer dam mining since the early 1950’s (approximately 67 years) and the mine has been operational for approximately 89 years. Approval of the Environmental Management Programme Report (EMPR) was granted on 11 October 1995.
	(b)	Alexkor SOC LTD has 4 (FOUR) marine mining rights and the Richtersveld Mining Company (RMC) 1 (ONE) land mining right; all under the management of the PSJV:
		(i)	Marine Rights (Alexkor SOC LTD) MR 512_4a MR 513_4b MR 10025_1c MR 554
		(ii)	Land Right (Richtersveld Mining Company) MR550
(2)	Yes; approval of the Environmental Management Programme Report (EMPR) was granted on 11 October 1995.
	(a)	In terms of the Minerals Act of 1991. Alexkor was required to submit and obtain approval for an Environmental Management Programme Report (EMPR), Alexkor appointed CSIR to prepare the EMPR. The document was approved by department (1995-10-11). The approval included the construction of cofferdam mining.
	(b)	Background: A proposal entitled “Proposal for Alexkor 2004 EMPR update approach/structure/content” was compiled, dated 27 January 2004 and the approach set out therein was discussed with DME Kimberley at the time. Within such system the EMPR update was to be guided by the then pending Alexkor audit and performance assessments and the detail knowledge of the site acquired during their compilation given the complexity and extent of the mining operation. Such audits were completed in March/April 2004 and on the basis of those audits and understanding of the available literature and assessment of the existing 1994 EMPR, a set of rehabilitation specifications/methods to deal with existing disturbances entitled “Rehabilitation Liability Calculation; Specifications/Methods/Rates Used and notes on their calculation (Report #2446/SMR/Rev 1 [April 2005])” was formulated for submission to the DME to elicit their sanction/comment on the approach to the methods of dealing with existing disturbance as this posed the major undefined aspect of the new EMPR given that the 1994 EMPR paid relatively little attention to this element. Such specifications/methods were formally submitted to the DME during April 2005 and DME‟s initial comment was obtained in October 2005.Having achieved some level of co-ordination with DME on the historical rehabilitation, the process of EMPR update could be re-initiated. The approved EMPR states: “Historically coffer dam (sea wall) mining has been carried out at two sites, one in Block 60 in the north and the other at Geeldoring near the Rietfontein-North Plant.”
		(i)	Impacts resulting from coffer dam activities are as follows: Coffer dam mining requires a major relocation of sand from supratidal levels into the surf zone. This results in the removal of sand dunes and the destruction of their associated vegetation. Vegetation in the area not destroyed by dune excavation is damaged extensively by the heavy earth-moving equipment in use. The smothering of rocky shore and sandy beach destroys all biota, both intertidally and sub-tidally to the depth of the coffer dam wall. Coffer dam mining has been carried out using gravels, cobbles and boulders from tailings for the building of the wall. Although the dam wall has been breached by storm conditions, the redistribution of the material has resulted in a smothering of the original rock and the change from a rocky intertidal to a boulder beach environment.
		(ii)	Impact of the construction of the coffer dams with sand: Due to the fact that sand is not readily available in the vicinity further disturbances will be done to the already disturbed dunes along the coast, more manoeuvring of heavy machinery occurs, which in turn leads to increased environmental and economic impacts.
		Based on the above the PSJV has appointed a new independent environmental consultant to revise the approved EMPR. This document is currently out for public comment.
(3)	All documents can be made available to Mr S C Motau

Remarks:     Reply: Approved / Not Approved         Mr Mogokare Richard Seleke   Ms Lynne Brown, MP     Director-General     Minister of Public Enterprises Date:     Date:

Reply:

1. The table below details the surplus for the requested years, as well as the

utilisation:

ENTITY	REF	DATE	SURPLUS	UTILISATION
Transport Pension Fund		31 March 2010	R1605m	-
	aa	31 March 2011	R1739m	-
	bb	31 March 2012	R1548m	R120m as a Transnet 8.333% bonus
	cc	31 March 2013	R1453m	R62m as a Transnet 8.333% bonus, and extra 2.47% pension increase for SAA and PRASA respectively
	dd	31 March 2014	R2903m	R68m as two Transnet 8.333% bonuses, and extra 2.42% pension increase for SAA and PRASA respectively
	ee	31 March 2015	R3644m	R73m as two Transnet 8.333% bonuses, and extra 1.02% pension increase for SAA and PRASA respectively
		31 March 2016	R4325m	R72m as two Transnet 8.333% bonuses, an extra 2.42% pension increase, and 13th cheque bonus for SAA and PRASA respectively
		31 March 2017	-	R70m*
Transnet Second Defined Benefit Fund		31 March 2010	R2835m	-
	aa	31 March 2011	R2733m	R335m as two Transnet 8.5% and 8.333% bonuses
	bb	31 March 2012	2346m	R520m as a Transnet 10% and two 8.333% bonuses respectively
	cc	31 March 2013	R2167m	R155m as a Transnet 8.333% bonus
	dd	31 March 2014	R2983m	R305m as two Transnet 8.333% bonuses respectively
	ee	31 March 2015	R3145m	R300m as two Transnet 8.333% bonuses respectively
		31 March 2016	R3807m	R294m as two Transnet 8.333% bonuses respectively
		31 March 2017	-	R360m**

Notes:

* Uses after 31 March 2016 were two Transnet bonuses of 10% and 11% respectively, and an extra 2.07% pension increase and 13th cheque bonus for SAA and PRASA respectively

** Uses after 31 March 2016 were 10% and 11% bonuses respectively

(2)(a) The surpluses have been used to pay bonuses to beneficiaries of the Transnet Pension Fund and Transnet Second Defined Pension Fund.

(b) The expected future uses a mixture of bonuses and pension increases above 2%, should the Rules be amended to allow this.

 

Reply:

1. Based on the actuarial valuation results as at 31 March 2016, the amount required to pay a 10% bonus to all pensioners of the Transport Pension Fund (TPF), i.e. Transnet Sub-Fund, SAA Sub-Fund and PRASA Sub-Fund is R37.7m and for the Transnet Second Defined Benefit Fund (TSDBF) the amount is R172.4m. The Rules of the respective Funds contain a provision that authorises for the payment of ad hoc bonuses. These amounts are paid from the actuarial surplus of each of the Funds, amounting to R4.325 billion for the Transport Pension Fund and R3.807 billion for the TSDBF

2. There is currently no provision in the respective Fund Rules to utilise the surplus to increase the base of the pension.

3. The Shareholder Minister is unable to consider an increase in the base of all pensions as this is not provided for in the pension fund rules.

4. The pending class action court case has no impact on the matter. The rules of the funds guide action related to the pension funds.

 

Reply:

(a) There is no company in charge of investments of the Transport Pension Fund and Transnet Second Defined Benefit Fund. The Boards of Trustees of the respective Funds are in charge of their investment activities.

(b) No role is played by the said individuals as the Board of Trustees of the respective Funds are in charge of the investment activities.

(c) The specified person’s official positions and involvement in (i) Transnet is that of a Non-Executive Director and Chairperson of the Acquisitions and Disposals

(d) Committee. He is also Chairperson and Trustee of the Board of Trustees of the (ii) Transport Pension Fund and (iii) Transnet Second Defined Benefit Fund respectively.

(d) All non-Executive Directors are appointed to the Transnet Board of Directors by the Shareholder Minister.

(e) The specified person was appointed in the specified positions on the basis of his academic qualifications and technical expertise on the activities of the Board of Directors, and the respective Funds.

Reply:

Mr. Riaz Saloojee did not receive a severance package and did not resign. He was only paid up to the end of his contract.

Reply:

(a)

• The debt owed by ZESA to Eskom is R443 million as at 2 December 2016.
• The financial guarantee issued by ZESA in favour of Eskom amounts to R500 million.
• Consequently, there is no current financial exposure to Eskom.
• Eskom is currently looking at increasing the financial guarantee to cover future power purchases.

(b)

Additional arrangements are as follows:

• There is ongoing contact between Eskom and ZESA leadership to monitor the payments
• There is a guarantee in place to cover the amount owed.
• ZESA is putting in place mechanisms to address the foreign currency reserves challenge of the central bank so that they are able to meet their ongoing payment obligation.
• ZESA has recently made a number of substantial payments for example during November up to 1 December they have paid R198.2 million.

Reply:

(1) 

No amount was paid to Trillian Capital Partners for the Duvha power plant insurance claim. Eskom did not appoint Trillian Capital Partners to negotiate the settlement for the Duvha Power Plant insurance claim.

(2)

No, Eskom did not appoint Trillian Capital Partners to source a new supplier to replace the exploded boiler at the Duhva Power Plant. There was no need to appoint any external party to assist with sourcing.

(2)(a)

Not applicable

(2)(b)

No other additional relevant detail relating to the above is applicable.

(3)(a)

None

(3)(b)

Not applicable

Reply:

Herewith is the requested information:

WEEK START DATE	EAF (%)	Weekly System Peak Demand (MW) Including IOS	Weekly System Peak Demand (MW) Including IOS & IPP's	Weekly System Energy (MWh) Including IOS	Weekly System Energy (MWh) Including IOS & IPP's
2016/01/04 00:00	71.86	28531	30090	4 174 029	4 379 957
2016/01/11 00:00	71.72	29808	30551	4 366 433	4 536 181
2016/01/18 00:00	72.66	30408	31166	4 444 243	4 588 116
2016/01/25 00:00	72.36	29953	30851	4 373 779	4 575 471
2016/02/01 00:00	73.48	30534	31475	4 377 616	4 595 062
2016/02/08 00:00	73.83	30490	31466	4 447 442	4 642 052
2016/02/15 00:00	74.20	30254	31316	4 421 569	4 619 527
2016/02/22 00:00	76.54	30942	31876	4 439 988	4 632 660
2016/02/29 00:00	77.29	30607	31654	4 396 548	4 596 759
2016/03/07 00:00	72.98	30604	31699	4 367 156	4 577 630
2016/03/14 00:00	74.36	31022	31984	4 383 798	4 557 577
2016/03/21 00:00	73.49	29662	30705	4 048 077	4 242 914
2016/03/28 00:00	73.57	30431	31393	4 222 967	4 426 056
2016/04/04 00:00	74.84	32095	33194	4 325 270	4 527 750
2016/04/11 00:00	75.96	31401	32330	4 337 243	4 542 074
2016/04/18 00:00	76.41	32077	32752	4 357 402	4 544 637
2016/04/25 00:00	76.16	30495	31749	4 196 797	4 414 522
2016/05/02 00:00	77.13	31698	32645	4 255 040	4 460 191
WEEK STARTDATE	EAF (%)	Weekly System Peak Demand (MW) Including IOS	Weekly System Peak Demand (MW) Including IOS & IPP's	Weekly System System Energy (MWh) Including IOS	Weekly System System Energy (MWh) Including IOS & IPP's
2016/05/09 00:00	77.89	33126	33993	4 433 338	4 595 217
2016/05/16 00:00	79.07	33318	34172	4 426 802	4 624 752
2016/05/23 00:00	80.22	33742	34533	4 486 352	4 673 142
2016/05/30 00:00	80.76	34134	34913	4 518 664	4 683 653
2016/06/06 00:00	80.99	33738	34171	4 525 477	4 672 101
2016/06/13 00:00	80.14	33884	34679	4 510 004	4 669 556
2016/06/20 00:00	80.66	34075	34329	4 549 648	4 674 224
2016/06/27 00:00	81.91	33986	34415	4 534 536	4 694 288
2016/07/04 00:00	80.38	34470	34821	4 585 635	4 738 698
2016/07/11 00:00	79.91	34023	34523	4 542 159	4 703 847
2016/07/18 00:00	80.51	34215	34742	4 504 107	4 672 753
2016/07/25 00:00	81.95	34197	34886	4 592 703	4 757 914
2016/08/01 00:00	79.88	34239	34707	4 465 760	4 632 796
2016/08/08 00:00	78.95	33027	33455	4 348 841	4 520 367
2016/08/15 00:00	77.87	32324	32977	4 391 797	4 557 565
2016/08/22 00:00	76.24	33016	33694	4 312 300	4 513 400
2016/08/29 00:00	77.21	30950	31957	4 230 939	4 464 099
2016/09/05 00:00	75.59	31383	32293	4 338 801	4 570 880
2016/09/12 00:00	78.56	31915	32986	4 384 392	4 648 366
2016/09/19 00:00	76.29	32005	32914	4 366 970	4 621 655
2016/09/26 00:00	76.06	30589	32012	4 242 442	4 522 398
2016/10/03 00:00	72.84	30743	31692	4 296 692	4 561 854
2016/10/10 00:00	77.73	31253	32172	4 361 792	4 611 242
2016/10/17 00:00	75.45	31413	32471	4 417 529	4 644 664
2016/10/24 00:00	75.44	30296	31767	4 349 636	4 610 456
2016/10/31 00:00	74.83	30520	31909	4 349 349	4 610 022
2016/11/07 00:00	74.81	30404	31606	4 303 359	4 595 709
2016/11/14 00:00	75.20	30008	31419	4 283 228	4 560 171

Reply:

It must be noted internal or external forensic investigations within the State-Owned Companies that report to me mainly relate to operational matters and therefore where relevant, may fall within the ambit of the Board and/or Executives of the SOC.

In this regard, it is crucial to note that the Honourable Member’s request has to be considered against provisions of Promotion of Access to Information Act 2 of 2000 (PAIA). The Act has specific provisions that regulate disclosure of the nature of information requested hence the Honourable Member is implored to consider submitting specific PAIA application(s) with relevant authorities to access the information required.

With regard to my Department, I am aware of the following investigations that have been concluded:

No.	Details	Lodged with	Date reported	Status
1.	IT forensic investigation allegations of a possible fraudulent email	DDG: CM	29 August 2014	Investigation concluded in October 2014.
2.	Allegations of maladministration, fraud and corruption	Auditor General	12 Feb 2015	Investigation concluded in August 2015.
3.	Allegations of maladministration, fraud and corruption	Public Service Commission	23 Feb 2015	Investigation concluded in August 2015.
4.	Allegation related to recruitment processes: Junior Technician in IT Unit DD:IM ASD:SPME	DPE Whistle Blowing Box	23 Oct 2015	The investigation was concluded in November 2015.
5.	Allegations of possible irregular expenditure – Photo-copiers	Acting Director-General	March 2015	Investigation concluded in August 2015
6.	Allegations of irregularities with regards to bursary awards	Acting Director-General	March 2015	Investigation concluded in August 2015
7.	Allegations of possible irregular expenditure - Korwe	Acting Director-General	March 2015	Investigation concluded in August 2015
8.	Allegations of irregularities with regard to petty cash replenishment	Acting Director-General	March 2015	Investigation concluded in August 2015

 

Reply:

ALEXKOR SOC LTD

(a)	R NIL
(b)	(i)	R NIL
	(ii)	R NIL

DENEL SOC LTD

Rb’s

Local currency denominated debt	3 717
Foreign currency denominated debt	0
Total debt	3 717

(a)	R 3 717 000 000.00 (Three Billion Seven Hundred and Seventeen Million Rands).
(b)	(i)	R 3 717 000 000.00 (Three Billion Seven Hundred and Seventeen Million Rands).
	(ii)	R NIL

ESKOM SOC LTD

Rb’s

Local currency denominated debt	218
Foreign currency denominated debt	115
Total debt	333

(a)	R333 000 000 000.00 (Three Hundred and Thirty Three Billion Rands).
(b)	(i)	R 218 000 000 000. 00 (Two Hundred and Eighteen Billion Rands).
	(ii)	R 115 000 000 000.00 (One Hundred and Fifteen Billion Rands)

SAFCOL SOC LTD

Rm’s

Local currency denominated debt	73.138
Foreign currency denominated debt	0
Total debt	73.138

(a)	R 73 138 033.84 (Seventy Three Million One Hundred and Thirty Eight Thousands and Thirty Three Rands and Eighty Four cents).
(b)	(i)	R 73 138 033.84 (Seventy Three Million One Hundred and Thirty Eight Thousands and Thirty Three Rands and Eighty Four cents).
	(ii)	R NIL

SA EXPRESS SOC LTD

Rm’s

Local currency denominated debt	1077
Foreign currency denominated debt	147
Total debt	1224

(a)	R 1 224 000 000. 00 (One Billion Two Hundred and Twenty Four Million Rands).
(b)	(i)	R 1 077 000 000.00 (One Billion and Seventy Seven Million Rands).
	(ii)	R 147 000 000.00 (One Hundred and Forty Seven Million Rands).

TRANSNET SOC LTD

Rb’s

Local currency denominated debt	94.90
Foreign currency denominated debt	24.10
Total debt	119

(a)	R 119 000 000 000.00 (One Hundred and Nineteen Billion Rands).
(b)	(i)	R 94 900 000 000.00 (Ninety Four Billion Nine Hundred Million Rands).
	(ii)	R 24 100 000 000.00 (Twenty Four Billion One Hundred Million Rands).

Reply:

(1) (a) R2, 176 530 611.99 accrued as at August 2015.

(1)(b) This penalty has not been paid by Optimum to date.

(1) (c) No agreement has been reached.

(1) (d) The matter is still the subject of arbitration, no agreement has been reached.

(2) Yes.

(2)(a) Fines normally referred to as penalties have been levied in all instances where coal quality is at the bottom end of the expected range. A coal penalty regime is a standard condition of Eskom contracts.

(2)(b) For Eskom’s long-term coal suppliers, excluding Optimum Colliery which supplies Hendrina Power Station, a total of R90 million in penalties was levied for the period 01 April 2015 to 30 September 2016.

(2)(c) The price adjustments are effected in the month that payment for the respective coal supply was made and are reflected in both the invoice and in Eskom’s payment assessment.

(2)(d) The price adjustments are effected in the month that payment for the respective coal supply was made.

Reply:

The Department of Energy (DoE) takes the lead in the domestic IPP strategy including the sourcing and contracting component of these arrangements. This strategy is driven by the Integrated Resource Plan (IRP) which is the country’s plan for electricity. The IRP is currently in review and will provide appropriate guidance on technology, scale and timing of the electricity requirements for the country with the objective of meeting energy security and diversifying the energy mix.

The key assumptions in the IRP need to be updated to provide a robust plan. In the last month, Eskom presented its Interim Results which shows that year on year demand for electricity only grew 1.2%. In fact demand for electricity has been fairly flat for the last decade.

The current capacity being added on the grid is based on the IRP 2010 which projected higher demand for electricity based on the economy growing close to 6%. This means that we are currently adding on capacity to the grid at rate higher than what is required. The biggest risk with having too much capacity is what happens to the plants that will potentially become stranded. While Eskom can push for a more aggressive export strategy to mitigate this, it comes with its own limitations including Transmission capacity. The challenge then becomes that Eskom would still need to collect the same level of revenue to cover the incurred costs. This is particularly critical at a time where Eskom balance sheet is highly indebted due to the build cycle. So with low volumes, the price of electricity will have to rise to sustain the required level of revenue, meaning consumers will have to pay more for electricity. These Eskom assets belong to the South African public, I have a responsibility to safeguard these and ensure that South African derive maximum value. The current trajectory will potentially be detrimental to consumers and it is critical that the IRP is concluded so we can have plan that offers maximum protection for consumers

ADVISORY NOTE TO THE MINISTER:

DEAR Minister,

Eskom has written to yourself, ministers finance and energy as signatories to the Government Support Framework Agreement (GFSA). Even though some of the arguments raised can be seen as survivalist, there are some valid arguments raised that warrant the attention of the government as a shareholder and policy maker. Specifically the fact that there is no new demand for electricity in South Africa, and therefore the addition of new power is likely to result in the shutdown of Eskom plants to create space for renewables resulting in lower revenue. The challenge is that in the cycle of build where Eskom is, the balance sheet is highly indebted and Eskom requires the correct revenue to be able to pay its debt obligation and in the absence of demand prices will have to rise to sustain the revenue level resulting in negative impact on consumers. Alternatively Eskom could write off the assets and have the National Treasury honor its debt obligations linked to those assets (which, at 60% debt the fiscus can barely afford which means more taxes to raise the cash). So an evolutionary approach is required in the addition of new capacity to ensure maximum protection for consumers.

Reply:

(1)(a)(i) Trillian Asset Management was introduced to Transnet as a subcontractor to Regiments and as part of the latter’s supplier development obligations to Transnet. Trillian Asset Management was the lead manager on the ZAR Club Loan.

(ii) The extent of the appointment was to only lead the ZAR Club Loan.

(b) Mr. Stanley Shane was the Chairperson of the Acquisitions and Disposals Committee.

(c) Based on information supplied to us by Trillian, the Directors of Trillian Assets Management at that point in time were:

• Mr. Daniel Roy and
• Mr. Janfaure.

The Shareholders were:

• Mr. Daniel Roy 30%
• Mr. Jan Faure 20%, and
• Trillian Holdings 50% (which is wholy owned by Mr. Sallim Essa)

2(a) Mr Shane, a non-executive director of the Transnet Board of Directors since December 2014, and Chairperson of the Acquisition and Disposal Committee, declared all his interests in line with Transnet’s policies and procedures. According to these declarations there were no conflict of interests.

(b) Transnet assesses its need for specialised services on an ongoing basis and awards work to external parties based on these assessments, ensuring that there is no conflict of interest with Transnet employees.

The grounds for utilising external services providers may range from level of expertise/skills required, to capacity to execute etc. This is also enshrined within the Transnet procurement processes which also prescribe the appropriate delegations or appoval requirements for such engagements.

3. Refer to 2(b) above.

Reply:

1. Transnet has used The Oyster Box Hotel in Durban for accommodation and conferencing, in the past.

2. The services were sourced in line with Transnet’s normal and approved processs for conferencing and accommodation.

(3) (a)(i) There is no requirement for Transnet to determine directorships of each hotel they use in executing the duties. Transnet is a state owned company and it does not use specific hotels.

(b) Transnet is not in a position to provide commentary on the status of directors of any hotel.

(4) (a) The Oyster Box Hotel provides accomodation, restaurant and conference services. It would be paid by the travel agency.

    (b) The amount Transnet paid in the current financial year was R13 500 (thirteen thousand five hundred rand). Over the past 15 years Transnet has paid R351 335 (three hundred and fifty one thousand three hundred and thirty five rand) for services rendered to Transnet.

Reply:

1. ESKOM has not finalised its strategic plan for each of the next ten years. However, it is expected that its EBITDA margins will continue to improve, capital expenditure will decrease over the next ten years as the current built programme winds down, costs continue to be reduced and debt repayments become lower.
2. The measures mentioned in (1) will result in an increase in available free cash.

Reply:

1. SA Express has lease Agreements with multiple leasing companies. The preferred lease structure by the airline is Wet Lease Agreement on an ad hoc basis. One of the advantages for leasing aircraft on an ad hoc basis is that the relationship is determined by the airline’s schedule requirement at a specific time. This structure is more cost effective.

As mentioned above, there is more than one leasing company the airline has a relationship with and Star Air Cargo is one of them.

For a lease company to qualify to be in the pool of preferred vendors for aircraft to be leased to SA Express, the airline conducts internal safety audits to ensure compliance with all legislative requirements. Furthermore, the SACAA also conducts independent audits. This is done to ensure safety of the passengers is not compromised and this is in line with one of the Airline’s values.

(1)(a) South African Express has a Wet Lease Agreement on an ad hoc basis with Star Air Cargo which was signed in February 2015 and the contract expires in April 2017.

(1) (b) Star Air Cargo was engaged to mitigate the inherent challenges of an aging fleet and scheduled and unscheduled maintenance of aircraft.

(1)(c) Due to the nature of the Wet Lease Agreement, SA Express signs Non-Disclosure Agreement with respective lessors in order to protect each parties’ “Intellectual Property”.

2. Same as (1) (c) above

 

Reply:

(1) The purpose of the loan is to finance the Capital Expenditure Programme.

(a) The amount of the loan is US$500 million. The loan will be disbursed in US dollars in one single disbursement after the fulfilment of conditions precedent to the drawdown.

(b) The loan is a Three (3) year facility with the last repayment of capital on the 3rd October 2019 (3 years from the signing date of the credit agreement – 3rd October 2016). Repayments are quarterly starting from the 3rd January 2017.

(c) This information is confidential as it contains commercial terms between the parties and therefore it cannot be disclosed.

(d) This information is confidential as it contains commercial terms between the parties and therefore it cannot be disclosed.

(2) This facility is currently under negotiation between the parties. The details of the commercial terms and conditions of the loan will however remain confidential between the parties.

 

Reply:

(a) (i) The Chief Financial Officer post is currently vacant.

(ii) Acting Chief Financial Officer’s Qualifications:

• Bachelor of Arts in Political Science and Economics.

• Bachelor of Arts Honours in Economics (Monetary, International and Developmental).

• Diploma in Financial Marketing.

(b) (i) Director-General’s Qualifications:

• Bachelor of Science in Agricultural Economics Management.

• Bachelor of Science in Agricultural Economics Management.

• Post Graduate Diploma in Agricultural Economics Management.

(ii) Acting Director-General’s Qualifications: No acting appointment.

 

Reply:

1. The Director-General of the Department of Public Enterprises (DPE) has entered and signed a Performance Agreement for 2016/17 financial year with the Minister.

   (a) There is no HOD of the Department of Public Enterprises who has not signed or entered into a Performance Agreement;

   (b) Not applicable based on question 1 above

    (c) Not applicable based on question 1 above

    (d) This is not applicable to DPE case however Chapter 4, of SMS Handbook stipulate that SMS members including HOD must enter into a Performance Agreement within the first three months of appointment.

2.None

3. DPE HOD has been appointed on 01 December 2015.

    (a) Not applicable based on 3 above

    (b)Not applicable based on 3 above

Reply:

(a)

DPE	spend	period
(i) ANN7	Nil
(ii) SABC (aa) (bb) Ukhozi FM	Nil R174 676.50	(aaa) (bbb)
(iii) National commercial radio stations Ukhozi FM	R174 676.50	(bbb)
(iv) Community (aa) Cape TV B (bb) Radio Teemaneng Capricorn FM Nongoma FM Nkomazi FM Radio KC Radio NFM Barberton CR Radio Riverside	R91 200 R11 750 R120 270 R35 416.65 R22 500 R15 700 R28 462 R25 000 R34 200	(aaa) (aaa) (aaa) (aaa) (aaa) (aaa) (aaa) (aaa) (aaa)

(b)

SAX	Spend	Period
(i) ANN7	SA Express did not pay for advertising on the channel	(aaa) & (bbb
(ii) SABC (aa) (bb) Motsweding FM SAfm RSG	SA Express did not advertise on SABC television channels R208 980 R15 255 R92430	(aaa) Current financial year Current financial year
(iii) National commercial radio stations North West FM 702	R118 260 R124 814	(aaa) Current Financial year

Transnet	Spend	Period
(i) ANN7	Nil	(aaa) and (bbb)
(ii) SABC (aa) (bb)	Nil R384 082.42 R1 951 130	(aaa) and (bbb) (aaa) (bbb)
(iii) National commercial radio stations	Nil R469 440	(aaa) (bbb)
(iV0 Community (aa) (bb)	Nil R111 937.44 Nil	(aaa)-(bbb) (aaa) (bbb)

Eskom	Spend	Period
(i) ANN7	Nil
(ii) SABC (aa) (bb)	R16 million R8 million R2.4 million R5.5 million	(aaa) (bbb) (bbb) (aaa)
(iii) National commercial radio stations	R9.8 million R6.24 million	(aaa) (bbb)
(iv) Community (aa)	R3.5 million R1.1 million	(aaa) (bbb)

Alexkor	Spend	Period
ANN7	Nil
(aa) (bb)	Nil Nil
(i) National commercial radio stations	Nil
(ii) Community (aa) (bb)	Nil Nil Nil	(aaa) (bbb)

Denel	Spend	Period
(i) ANN7	Nil
(ii) Sabc (aa) (bb)	Nil R363 327.35
(iii) National commercial radio stations	R363 327.35
(iv) Community (aa) (bb)	Nil R140 520 R74 646.96	(aaa) (bbb)

Safcol	Spend	Period
(i) ANN7	Nil
(ii) Sabc (aa) (bb)	Nil Nil
(iii) National commercial radio stations	Nil
(iv) Community (aa) (bb)	Nil Nil	(aaa) (bbb)

Reply:

1. (a) (i) 2013-14 None

(ii) 2014-15 None

(iii) 2015-16 None

(b) The Department of Public Enterprises has never been approached by
any political party for any form of funding.

2. (a) (i) 2013-14: None

(ii) 2014-15: None

(iii) 2015-16: None

(b) The position of Department of Public Enterprises with regards to political
party funding is aligned to the National Treasury prescripts which
prohibits the funding of political parties from the fiscus.

 

Reply:

The duties of Ministers and Deputy Ministers are outlined in the Ministerial Handbook.

Reply:

	(a)	(i)	DPE	R 2 326 000.00
		(ii)	Alexkor	R 545 825.40
			Denel	R 1 660 410.65
			Eskom	R 54 016 282.81
			SAFCOL	R 172 873.00
			SAX	R 1 159 118.00
			Transnet	R 47 991 571.86
	(b)	(i)	DPE	R 2 379 000.00
		(ii)	Alexkor	R 115 000.00
			Denel	R 3 000 000.00
			Eskom	R 67 000 000.00
			SAFCOL	R 3 500 000.00
			SAX	R 4 800 00000
			Transnet	R 43 333 820.82

 

Reply:

(1). Mr Stanley David Shane was appointed to the Transnet Board on 14 December 2014 as a Non-Executive Director, on a three year term, subject to annual review. Mr Shane is not appointed as Chairperson of the Board, nor has he acted in the position to date. In terms of Board Committee membership, Mr Shane serves as member and Chairperson of the Board’s Acquisition and Disposal’s Committee, and member of the Remuneration, Social and Ethics Committee.

(a) Mr Shane possesses financial and economic competencies and business acumen.

(b) Mr Shane holds a B.Com degree (Finance) from the University of Witwatersrand obtained in 1993, completed the Regulatory Examinations at the Financial Services Board in 2012 and has been a Member of the South African Institute of Stockbrokers since 1996. He has extensive experience in Investment Banking, capital raising, insurance and structuring.

(c) The appointment of Board members is regulated by the Memorandum of Incorporation (MOI) of each State Owned Company and is the purview of the Shareholder Representative, after consultation with Cabinet. The Department is guided by a board appointment methodology which sets out the process of sourcing potential candidates for the appointment to Boards. Persons are found to be suitable by virtue of their qualifications, expertise, skills and experience.

(d) It is not known what connection Mr Shane has to the Gupta family, nor was this the reason for his appointment to the Transnet Board.

(2) Yes, he is a Trustee and the Chairperson of the Boards of Trustees of the Transnet Second Defined Benefit Fund and Transport Pension Fund.

(a) His academic qualifications and experience in economics and investment banking made him suitable for appointment.

(b) See 2(a) above.

(c) He was appointed by the Board of Transnet which is normal practice when Employer Trustees are appointed to these two Funds.

(d) The appointment is based on academic qualifications, experience and ability.

 

Reply:

(1)(a) 180 000 customers receive electricity from Eskom in Soweto, however, this translates into more residents which Eskom is not in a position to quantify (as more people reside in a given home). Eskom keeps customer data per customer category and network, and it would take a while for this to be provided per suburb.

(b) Of the 180 000 customers, our current payment levels are at 48% average for the current financial year to date, compared to an average of 40% in the previous financial year. Eskom has replaced 40 000 old meters of which 18 000 customers are on prepaid already and buying electricity and the balance is being converted to prepaid daily. The programme of installing the meters is continuing and plans are to convert all customers to prepaid within five years.

(2) Yes, Eskom has an incentive programme in place where customers converted to prepaid meters are monitored over a period of three years to establish if the behaviour of buying electricity becomes entrenched. Writing off the historical debt is considered if good behaviour is sustained during the monitoring period. Each customer is dealt with on an individual basis.

(3) No. There are no agreements in place for the City of JHB to take over Eskom Soweto supply areas. Eskom works very closely with the Municipality to address the issue of non-payment and the rolling out of the prepaid meters. Engagements with the community are conducted with the support of the leadership of the Municipality and alignment on issues such as dealing with the poor and debt issues are continuously discussed and agreed upon.

 

Reply:

SAA currently reports to National Treasury. The Honorable Member is advised to direct his question to the Minister Finance.

 

Reply:

	1. (a)(b) No merger or any kind of joint venture has been formed between Denel SOC Ltd, its subsidiaries or associated companies and the Military Industries Corporation (MIC) in relation to the new arms factory in the Kingdom of Saudi Arabia. However, Rheinmetall Denel Munition (Pty) Ltd, an associate of Denel, has designed and built the plant on a turnkey solution basis, as part of the supplier customer transaction arrangement. Therefore, there was no need to either inform or seek approval from Government or Parliament.
	2. (a)(b)(i)(ii) As indicated above in (1)(a) and (b), there was no requirement to notify or consult the SANDF.
	3 (a) Denel is not privy to the information.
	(b) No funds from South Africa were put into the project.
	(c) See (1) and (2) above.

Reply:

(1) (a) The contract of employment of the Chief Executive Officer was due to terminate on 31 January 2017. The Board decided to bring forward the termination date and pay out the balance of the contract. The decision was precipitated by the fact that the relationship between the Board and CEO was irreconcilable and had irretrievably broken down.

(b) None

(2) Yes, there was an investigation. I am not in a position to share the results of the investigation as there are disciplinary hearings involving other employees unfolding and at this stage there is a likelihood of further legal action.

Reply:

(a) Since my appointment to date as the Minister of Public Enterprises by the President, I have not officially tasked, directed or instructed directly or indirectly any of the officials in the Department of Public Enterprises to meet with any of the individuals mentioned in the question.

(b) The awarding of contracts between our State Owned Companies (SOCs) and different companies, the nature of these contracts, and the contractual relationships between SOCs and different companies are commercially sensitive.

 

Reply:

(1) The orders placed on VR Laser as of 29 April 2016 on the Badger vehicle programme amount to R236 646 034.

(2) I do not approve sub-contracts

 (a) Awarding of contracts is a business operational matter within the mandate of Management and the Board of Directors, depending on Delegations of Authority.

(b) Management awarded the contract in line with Denel’s procurement prescripts. The contract was awarded to VR Lazer as it presented the best value proposition to Denel for the services required.

 

Reply:

As the Honorable Member is aware, SAA currently reports to National Treasury. The Honorable Member is thus advised to redirect his question to the Minister Finance.

 

Reply:

1. Yes

2. Note that these numbers vary on a daily basis depending on contract mobilization or demobilization:

• Medupi: 6 995 employees
• Kusile: 12 951 employees

3. Medupi: 31 January 2017

Kusile: 30 September 2018

4. Medupi R221 046 709.94 excluding VAT (Contract concluded value)

R109 569 792.75 excluding VAT (Contract value spent to date)

Kusile R639 193 482.00 excluding VAT (Contract concluded value) R354 822 598.00 excluding VAT (Contract value spent to date)

 

Ms. Lynne Brown, MP

Minister of Public Enterprises

Date:

Reply:

(1)(a) Medupi power station units 1-5 are not yet in operation, therefore there is no cost of accumulated maintenance backlog. Unit 6 is in operation and there is no maintenance backlog.

(1)(b) Kusile power station is not yet in operation, therefore there is no cost of accumulated maintenance backlog.

(2)(a)(i) & (ii) Medupi Power Station Project cost make up is R 134.20 billion including capitalised interest. The key cost components are: Total Value of Packages, Owner’s Development Cost, Escalation, Cost of Cover, Contingencies and Rate of Exchange Adjustment as indicated below:

Cost to completion component	R’billion
Total value of construction packages	74.15
Owners Development Cost (ODC)	11.19
Escalation	12.69
Cost of Cover	3.97
Contingencies	3.00
Total project cost (excluding interest during construction)	105.00
Interest during construction	29.20
Total project cost (including interest during construction)	134.20

(2)(a)(iii) Medupi Construction cost escalations are currently going through the Eskom governance process.

(2)(b)(i) & (ii) Kusile Power Station Project cost make up is R 167.20 billion including capitalised interest. The key cost components are: Total Value of Packages, Owner’s Development Cost, Escalation, Cost of Cover, Contingencies and Rate of Exchange Adjustment as indicated below:

Cost to completion component	R’billion
Total value of construction packages	66.9
Owners Development Cost (ODC)	12.9
Escalation	22.7
Cost of Cover	5.6
Contingencies	10.4
Total project cost (excluding interest during construction)	118.5
Interest during construction	48.7
Total project cost (including interest during construction)	167.2

(2)(b)(iii) Kusile construction cost escalations are currently going through the Eskom governance process.

Reply:

1. (a) The Rules of the Transport Pension Fund and the Transnet Second Defined Benefit Fund provide that the majority of the Trustees be present to form a quorum.

(1) (b) There is no further requirement for the constitution of a quorum other than the majority of Trustees be present.

2. (a) No decision was taken not to pay a bonus in April. A proposal was prepared for approval by the Boards of Trustees, however, the pensioner trustees did not approve the resolution and queried the proposed bonus. This required additional calculations and reports to be prepared by the actuary, as well as a further resolution for approval, which delayed the submission of a proposed bonus for approval to the Transnet Board of Directors.

(b) As no such decision was taken, the question is not applicable.

(3) (a) As no such decision was taken, the question is not applicable.

(b) The ad hoc bonuses proposed by the Board of Trustees of the Transport Pension Fund: Transnet Sub Fund and the Transnet Second Defined Benefit Fund may be paid after the necessary governance process has concluded, with the final approval by the Transnet Board of Directors.

(4) (a) As no such decision was taken, the question is not applicable.

(b) As no such decision was taken, the question is not applicable.

(5) The Transport Pension Fund surplus per the latest actuarial valuation report as at 31 March 2015 was R3 644 million. The Transnet Second Defined Benefit Fund surplus per the latest actuarial valuation report as at 31 March 2015 was R3 145 million.

 

Reply:

(a) The matter is still in progress and engagements in respect of the proposed rule amendments are currently underway. The process will be finalised as soon as consultation between the relevant parties have been completed.

(b) Once the issues surrounding the proposed amendments have been resolved and the rule amendments are approved by me, with the concurrence of the Minister of Finance, they can be immediately implemented by the Transport Pension Fund: Transnet Sub Fund and the Transnet Second Defined Benefit Fund in line with their governance processes.

(c) In terms of the proposed amendment to the Special Rules of the Transport Pension Fund: Transnet Sub Fund and the Rules of the Transnet Second Defined Benefit Fund provision will be made for the granting of additional pension increases (over and above the statutory 2%) from time to time, subject to affordability, certification by the relevant Fund’s actuary and approval by the Employer.

 

Reply:

1. The companies that participated in the tender process were Regiments, Old Mutual and Colourfields.
2. The Board of Trustees appointed Regiments based on the outcome of the technical evaluation process during the tender process.
3. The company’s background and achievements were evaluated and scored during the tender process conducted by a technical task team consisting of the Chairperson of the Board of Trustees, Principal Officer, Trustee, Actuary, Investment Consultant and a Transnet Representative.
4. The appointment of the specified company was based, inter alia, on the fact that they are well established as a financial company managing this specific type of liability-driven mandate and the team executing the mandate are all experts in their field. In addition, during the due diligence process carried out by the technical team, their risk management structure and practices were found to be compliant with industry standards.

 

Reply:

(a)(b) (i)(aa)(bb)(cc)(ii)aa)(bb)(aaa)(bbb)(ccc) The duties of Ministers and Deputy Ministers are outlined in the Ministerial Handbook.

Reply:

1. (a)(b)(c)(d) The Member is referred to the Parliamentary process where Members annually declare their interests.
2. (a)(b)(c) (i)(ii)(iii)(iv) The lives of family members of the Executive are not regulated by the Ministerial Handbook or any act of Parliament.

Reply:

(1) (a) Transnet has formed a working group represented by Transnet National Ports Authority (“TNPA”), Transnet Port Terminals (“TPT”) and Transnet Freight Rail (“TFR”) in ensuring that any challenges that may ensue are addressed by all affected operating divisions to ensure an efficient, effective and consistent safe operation. The import programme is coordinated by Grain South Africa’s Logistics and Planning Committee (SACOTA) and comprises of representatives from all the ports, railways, traders, silo owners and millers.

(b) The total number will be driven by the commercial agreements between the shippping lines and the cargo owners. In terms of berth availability, vessels will be allocated berths according to vessels length, parcel size, draft, method of handling and safety considerations.

(c) The ports that have the capacity to handle grain are listed as follows :

• Port of Durban,
• Port of Cape Town,
• Port of East London, and
• Port of Port Elizabeth

(d) (i) Ships

PORTS	AVAILABLE BERTHS
East London	2 Berths (T & S berth)
Port Elizabeth	4 Berths (Berth 8,9,10,11)
Cape Town	3 Berths (Multi-Purpose Terminal)
	3 Berths (Fruit Purpose Terminal
Durban	3 Berths (Island View, Maydon Wharf, Maydon Wharf)

(ii) Grain

PORTS	CAPACITY (tons)
East London	1,344,000
Port Elizabeth	1,344,000
Cape Town	2,016,000
Durban (Agriport, SABT)	2,016,000
	3,360,000
	2,016,000

 

Reply:

I have not responded to question 855 on 13 April 2015 as no such question was not posed to me as it does not fall within the scope of the Department of Public Enterprises.

Reply:

(1) (a) Eskom purchased software from Microsoft through a contract which followed Eskom’s commercial process.

(b) Yes, all purchased software is licensed.

(b) (i) The purpose of purchasing Microsoft software was based on the following factors:

• To meet Eskom business requirements
• Mitigate desktop risk on Office and Operating Systems.
• To implement a best of suite strategy to lower the operational cost in terms of license expense
• Support resource cost across Desktop, Messaging, Security
• Ensure the Management and Windows Server Towers.

(b) (ii) Yes, the software is being used by the entire Organisation.

(b) (iii) A contract was entered into between Eskom and Microsoft in July 2010 prior to this Eskom purchased products including Microsoft software from third party suppliers.

(b) (iv) Yes, Eskom only maintains Microsoft Software that is in current use.

(b) (v) Eskom’s current contract with Microsoft is due to expire on 29 May 2016. A commercial process is currently underway for the renewal of the support and maintenance of the current contract. It must be noted that the bulk of this renewal is to maintain the current investment and ensure adequate maintenance and support.

(2) (a) Eskom’s commercial process which forms part of Eskom’s Procurement and Supply Chain Management Policy and Procedure was followed. The commercial process that was followed is in alignment with Eskom’s Procurement and Supply Chain Management Policy and Procedure and Public Finance Management Act.

(b) Yes, Eskom’s process followed regarding the Microsoft transaction satisfied all prescribed legal requirements. The details are that the commercial process which is provided for in Eskom’s supply chain policies is aligned to the Public Finance Management Act (PFMA) and the Preferential Procurement Policy Framework Act (PPPFA).

Reply:

1. The surplus is based on an actuarial valuation of a guaranteed statutory increase of 2% per annum, as the bonuses are not guaranteed.

While the actuary had indicated that a 10% bonus was affordable the actuarial surplus would reduce to a very insignificant amount or to nil should a CPI linked pension increase (in addition to the statutory increase of 2% per annum) be implemented in future together with a 13th cheque. To improve the affordability of implementing such an increase policy, the Board of Trustees resolved to pay a 13th cheque (8.33%) as per the practice of the Board of Trustees since 2010.

2. The Board of Trustees has not taken a resolution proposing payment of a further bonus in 2016.

3. (a) The firm was appointed by the Board of Trustees to implement a Liability

Driven Investment mandate with the objective to enhance investment returns;

(b) An amount of R 9 billion was allocated by the Board of Trustees; and

(c) The firm was appointed by the Board of Trustees based on the outcome of a

tender process.

 

Reply:

(1) There are no incentives provided to encourage the legal use of electricity. Eskom makes use of the Operation Khanyisa Campaign to inform and educate customers about how to better manage electricity usage.

(2)(a) We assume all non-technical energy loss to be attributed to theft. Non-technical losses in Eskom amounted to R4.7bn for 2014/15 FY.

(b) The amount stated in (2)(a) above represents the collective loss across all provinces. Eskom estimates non-technical losses at a national level, a breakdown per province therefore not available.

Reply:

(1)(a)(i) In terms of the Coal Supply Agreement, Optimum Coal Mine (Proprietary) Limited ("Optimum") was obliged to supply and deliver to the Hendrina power station coal which complies with, amongst others, the following quality specification:

• All coal must have an ash content which shall not exceed 28.8% in order to ensure that the calorific value of the coal is not less than 23.0MJ/kg (calculated on a moisture free basis);
• a monthly average size distribution of:
• not more than 55% of coal supplied will be smaller than 6mm;
• not more than 35% of coal supplied will be smaller than 2.38mm; and
• not more than 15% of coal supplied will be smaller than 0.81mm.
• The Second Addendum amended the quality parameters in respect of the Abrasiveness Index (pursuant to an arbitration with Optimum) to be <423 mgFe on a 7 day weighted rolling average basis.

(ii) The coal that was received by Eskom was within contractual specifications with regard to the Calorific Value but out of specification in respect of Abrasive Index and Sizing.

(iii) The coal currently being received by Eskom meets the contractual specifications with regard to the Calorific Value except for Abrasive Index.

(b) The price of coal paid by Eskom is R174.41/ton as at February 2016.

(2) The coal supplied by Optimum Coal prior to the imposition of the fine was outside the quality specification for Hendrina Power Station in terms of Abrasive Index and Sizing. For the 1 March 2012 to 31 May 2015, Optimum Coal, failed to supply and deliver to Eskom coal which meets the quality parameter as set out in the Coal Supply Agreement. The coal supplied and delivered to Eskom, amongst others, failed to comply with the sizing specification, in that 20% to 45% of the coal supplied and delivered to Eskom by Optimum on a monthly basis, during the period of supply was smaller than 0.81mm. Despite this failure by Optimum, Eskom has, without prejudice to its right in terms of clause 3.6 of the First Addendum, paid Optimum for such coal, without applying any adjustment or reduction to the payment, for Optimum's failure to comply with the quality parameters.

(3) The coal currently received by Hendrina Power Station is within the contractual specifications in respect of Calorific Value except for the Abrasive Index and the Sizing. Since Optimum is currently under business rescue, the parties have in terms of the interim agreement agreed to suspend the application of penalties until the business rescue process is finalised. Of critical importance to note is that Eskom has issued Summons against Optimum for failing to supply coal that meets the quality specification of the station. Optimum has since disputed the penalties. Once the business rescue process has been finalised, the legal proceedings will continue to run its course.

(4) High Abrasive Index causes high wear rate of the plant and sizing affects the material flow frequency causing hang-ups which results in load losses. The wear rate causes accelerated wear of parts. This negatively affects the energy output from the station thus the total energy capacity available for dispatch into the grid. In order to compensate Eskom for the capacity loss occasioned as a result of these quality parameters being out of specification, penalty provisions in terms of the contract apply.

(5) (a) Since Optimum is currently under business rescue, the parties have in terms of the interim agreement agreed to suspend the application of penalties until the business rescue process is finalized.

(b) No. Not applicable.

 

Reply:

(1)(a)(i)

• Calorific value (moisture free): 24,3 Mj/kg (base value) and between 23,3 and 25,4 Mj/kg
• Total moisture: 7,0 – 9,0% (range) and between 7,0 and 9,0%
• Ash content (moisture free): 23,0% (base value) and between 17,0 and 31,0%
• Volatile content (moisture free): 24,0% (base value) and between 21,0 and 29,0%
• Abrasiveness index: 375 mg Fe (base value) and between 325 and 425 mg Fe

(ii) The coal received by Eskom was within the contractual specifications range as per (i) above.

(b) The price of coal paid by Eskom at the expiry of the Agreement was R944.61/ton.

(c) The contract was not cancelled but expired on 31 December 2015.

(2)(a)(i) The coal contracted for Arnot Power Station is a better quality specification compared to the Arnot expired contract and is as follows:

Quality parameter	Unit	Quality Expected	Quality Specifications	Quality Rejection Limit	Measurement basis
Calorific Value	MJ/kg	24.0	≥22.5	<22.5	Air Dried
Total Moisture	%	8	≤9.0	>9.0	As Received
Inherent Moisture	%	4.1			As Received
Ash	%	20.2	≤24.3	>24.3	Air Dried
Abrasive Index (Eskom Mining House Method)	mgFe/4kg	<450	<450	>450	Air Dried
Sulphur	%	1.19	≤1.19	>1.19	Air Dried
Volatiles	%	21.7	≥19.5	<19.5	Air Dried
AFT (Initial deformation)	ºC	1380	>1380	<1380	N / A
Sizing: (cumulatve) %					N / A
	+60mm	0	0	>0
	+50mm -6.35mm	5 50	5 50	>5 >50
	-3.35mm	30	30	>30
	-1mm	15	15	>15

(ii) The coal received by Eskom is within the contractual specifications as per (i) above.

(b) The contractual price is R470/ton to Arnot Power Station.

(c) The coal is suitable for Arnot Power Station as it meets the quality specification for the station.

Reply:

 

	(1)	(a)	Denel SAAB Aerostructures (“DSA”) was a joint venture formed out of an equity partnership between SAAB and Denel Aerostructures (“DAe”) in January 2007. Prior to the formation of the partnership, DAe entered into two off-set contracts following the eight (8) A400m aircraft order by ARMSCOR. The offset packages with Airbus were to supply airframe structures namely, the Wing-to-Fuselage Fairing (“WFF”) and the Top Shells (“TS”) for the A400M military aircraft. As a result of the exposures with regard to these contracts, a condition precedent to the joint venture was that the Government indemnifies DSA in order to de risk the contracts. The indemnity is for a maximum amount of R1.6 billion (ONE POINT SIX BILLION RANDS) over a fifteen year period. The Indemnity Agreement was concluded on 21 May 2007.
		(b)	(aa)	As a program partner on the A400M, Denel has the obligation of the design, development, manufacture, and sole supply of the WFF and TS structures.
			(bb)	Denel has no obligation to ARMSCOR. DAe is directly contracted by Airbus to deliver the WFF and TS structures to their assembly lines.
			(cc)	As contracted through the Indemnity Agreement, Denel submits a claim to the Department on an annual basis, supported by an audited financial report, fully governed risk mitigation plan and a program report.
	(2)	(a)	From the R1.6 billion (ONE POINT SIX BILLION RANDS) indemnity cover, there is a balance of R359 million (THREE HUNDERED AND FIFTY NINE MILLION RANDS) remaining over the next 5 years.   Amount Capped Claim Value R 1,600,000,000 Claim YTD R 1,240,676,952 Balance R 359,323,048
		(b)	(i)	To date there has been 10 (TEN) claims submitted by Denel. Details of the claims are on the table below.
			(ii)	Amounts paid to Denel are shown on the table below.
		Claim Number Date Claim Submitted (DD/MM/YY) Period (MM/YY) Amount of Claim Amount Paid Balance of the Full Indemnity (over 15 years) R 1 600 000 000 Date of Payment (MM-YY) Status 1 31/07007 04/06 –06/07 R 222,290,420 R 220,980,584 R 1,379,019,416 Nov 07 Paid 2 22/08/08 07/07-07/08 R 259,516,131 R 257,639,637 R 1,121,379,779 Dec 08 Paid 3 20/05/09 08/08 – 03/09 R 191,865,684 R 191,865,684 R 929,514,095 Dec 09 Paid 4 28/10/09 04/09 –07/09 R 103,500,000 R 103,501,382 R 826,012,713 Dec 09 Paid 5 30/06/10 08/09 – 0310 R 96,000,000 R 78,155,111 R 747,857,602 Dec 10 Paid 6 13/06/11 04/10 – 03/11 R 116,634,725 R 116,254,986 R 631,602,616 Dec 11 Paid 7 28/05/12 04/11 – 03/12 R 118,782,844 R 118,782,844 R 512,819,772 Dec 12 Paid 8 18/05/13 04/12 – 03/13 R 57,249,797 R 57,249,797 R 455,569,975 Dec 13 Paid 9 29/05/14 04/13 – 03/14 R 63,140,844 R 63,140,844 R 392,429,131 Dec 14 Paid 10 25/05/15 04/14 – 03/15 R 33,106,083 R 33,106,083 R 359,323,048 Mar 16 Paid
	(3)	Yes oversight has taken place.
		(a)	(i)	As contracted in the Indemnity Agreement, Denel submits a claim to the Department on an annual basis, supported by an audited financial report, fully governed risk mitigation plan and a program report. When a claim is received, the Department appoints its own independent auditors to authenticate the claim as submitted by Denel.
			(ii)	The Department’s auditors physically go and verify relevant documentation and Enterprise Resource Planning (ERP) systems.
		(b)	The Department through its independent auditors. The Department conducts DAe plant visits at least twice a year to appraise itself of the A400M programme status.
		(c)	In instances where discrepencies were discovered, the claimed amounts were reduced accordingly, as indicated on the table above. The value of the annual claims over the past 10 years has reduced from R221 million (TWO HUNDRED AND TWENTY TWO MILLION RANDS) to R33.1 million (THIRTY THREE POINT ONE MILLION RANDS). Furthermore, for the past 4 (FOUR) years there has been no errors between the amount claimed by Denel and the audited amounts by the Department.
	(4)	The recent 2015 claim amounted to R33.1 million (THIRTY THREE POINT ONE MILLION RANDS). The R63.1 million (SIXTY THREE POINT ONE MILLION RANDS) was claimed and paid during 2014.   Earned Sales Cost Commitments Claim Serial Production and Ramp-up R184,943,445 R210,517,440 (R15,988,815) (R9,585,180) Jigs/Tooling RNIL R1,726,787 RNIL (R1,726,787) ILS & Freight R NIL R5,288,869 R NIL (R5,288,869) ENG & MODS R NIL R16,505,247 R NIL (R16,505,247) T O T A L (R33,106,083) ACRONYMS: ILS : Integrated Logistics Support ENG & MODS : Engineering and Modifications

 

Reply:

(1)(a) Eskom is in constant interaction with various suppliers for the required goods and services. This interaction includes Microsoft.

(b)(i) Eskom currently has an existing contract that is due to expire on 29 May 2016. A commercial process is currently underway for the renewal of the support and maintenance of the current contract. It must be noted that the bulk of this renewal is to maintain the current investment and ensure adequate maintenance and support of software.

(ii) The current contract with Microsoft expires on 29th May 2016. Please note that price is a confidential matter.

(aa) The current commercial process is to do the renewal of licences, subscription and maintenance.

(bb) The software is already in use as per the existing contract, except for the additional licenses. The additional licence is for functionality requirements from the business aligned to the digitisation strategy which will be deployed via approved projects once contract is approved.

(cc) Eskom’s commercial process which forms part of Eskom’s Procurement and Supply Chain Management Policy and Procedure was followed.

(dd) The commercial process that was followed is in alignment with Eskom’s Procurement and Supply Chain Management Policy and Procedure and Public Finance Management Act.

(2) Yes, Eskom’s process followed on the Microsoft transaction satisfied all prescribed legal requirements. The details are that the commercial process which is provided for in Eskom’s supply chain policies, is aligned to the Public Finance Management Act (PFMA) and the Preferential Procurement Policy Framework Act (PPPFA).

(3) There are currently no email capabilities with open source and a number of our critical systems are integrated to our email application (exchange), using open source therefore is not possible. Eskom’s applications are extremely critical, given the nature of our business, use of open source will cause vulnerabilities and security is a risk that cannot be tolerated. Furthermore, using open source will have too many incompatibility issues between different word processing applications. There is also a massive proliferation of excel macros across the organisation which will lead to different version that we will have to manage hence there will be an increase in costs (support and maintenance required).