Report: Strategic Planning Workshop, dated 12 June 2012
Public Enterprises
REPORT OF THE
PORTFOLIO COMMITTEE ON PULIC ENTERPRISES ON ITS STRATEGIC PLANNING WORKSHOP,
DATED 12 JUNE 2012
1.
Background
The President of the
2.
Introduction
The Portfolio Committee on Public Enterprises, as the
legislative arm of the state entrusted with the oversight responsibility over
the executive, convened its strategic planning workshop from the 23 24
February 2012 at Villa Via,
3.
Presentation
by Department of Public Enterprises
In
the presentation, the Director-General gave a brief overview of the vision,
performance of the Department, challenges, priorities and how the Portfolio
Committee could assist the Department in achieving its goals.
3.1 Vision of the
Department
The vision of the Department has been changed to align it
with national economic strategy which is t
o drive investment, productivity and transformation in its portfolio of
State Owned Companies (SOC), their customers and their suppliers to unlock
growth, drive industrialisation, create jobs and develop skills.
3.2
Outcome
six:
An Efficient, Competitive and
Responsive Economic Infrastructure Network
The Department is focused on achieving the outputs and
sub-outputs linked to outcome six and those contained in the Ministers Service
Delivery Agreement.
These are:
3.2.1
Improving the delivery and maintenance of infrastructure and
monitoring the rollout of Transnets and Eskoms build programmes;
3.2.2
Achieving policy and regulatory clarity in sectors in which the
state-owned
companies operate;
3.2.3
Improving the operational efficiencies of the state-owned
enterprises, particularly in relation to the reliable delivery of rail and port
services and the reliable generation, distribution and transmission of
electricity; and
3.2.4
Developing operational indicators for each of the required
sub-outputs identified as part of the delivery agreement. Where necessary,
these will be included in the Shareholder Compacts concluded between the Boards
of the SOCs and the Minister.
3.3
Performance of Department in relation to outcome six
This
is how the Department has performed in relation to outcome six:
3.3.1
Improving competition and regulation
-
Work on the Rail Policy
and Rail Act has progressed to the finalisation of a draft green paper,
now under industry stakeholder consultation.
-
A Private Sector
Participation (PSP) framework has been developed to address private sector
participation in rail.
3.3.2
Generation, distribution and
transmission of energy
-
Legislation for the
creation of an Independent Electricity System and Market Operator (ISMO)
was introduced in Parliament by the Department of Energy and it is
expected to be promulgated during 2012.
-
Following the
Ministers directive, Eskom has ring-fenced the System and Market Operator
(SMO) unit. The implementation plan to establish the SMO as a subsidiary
is being finalised.
-
Approximately 248 000
households were electrified during the period from November 2010 to
November 2011, and 3 655 homes were connected to off-grid solar systems.
Eskom build programme (as end of 2011)
Medupi
is 35% complete, with 56.9% of the budget having being spent.
Kusile
is 17% complete, with 30% of the budget having being spent.
Ingula
is 41% complete, with 54.3% of the budget having being spent.
The
Return to Service programme is 93.5% complete, with 89% of the budget having being
spent.
Transmission
projects are more than 70% complete, with 70.4% of the budget having being
spent.
Regarding
the development and implementation of
3.3.3
Logistics: road, rail and ports
With regard to increasing the market share of total freight from a 177
mtpa baseline to rail to an annualised 250 mtpa by 2014, 178 mt was achieved in
2010/11. Up to December 2011, 148mt was recorded and Transnet is on track to achieve
206mt by the end of the 2011/12 financial year.
§
With regard to productivity improvements at the
§
Transnets build projects are generally on track. Two container berths at
the Ngqura port have been completed and an additional two will be completed by March
2012. A total of 875 000 containers have been handled at Ngqura since it opened
in October 2009, and the additional two berths will improve capacity to 800 000
containers per annum.
§
The National Multi Products Pipeline (NMPP) 24 inch trunk line for
petroleum products from
§
Three rail branchline opportunities for private sector concession in
2012/13 have been identified and there has been consultation with
Free State provinces
in this regard.
3.3.4
Information and communication technology
§
F
ollowing the
establishment of Broadband Infraco, wholesale broadband prices have dropped by
about 73%.
§
As part of its mandate to increase access to broadband services,
Broadband Infraco has access to 18 Points of Presence (POPs), of which 5 are
open access sites in the main centres
.
§
Sentech
and Broadband Infraco have also commenced with the Broadband Plan for the
3.4
Key challenges facing the Department
The challenges included the following:
3.4.1
The current prioritisation of
infrastructure expansion for growth and employment creation and the role of the
Departments SOCs, especially the infrastructure SOCs (Eskom, Transnet and
Broadband Infraco), will challenge and shape the future trajectory of the
Department.
3.4.2
The Department has the capacity challenge
to oversee the investment programmes and its intended impacts, i.e.
industrialisation, job creation, skills development, etc both from a shareholder
perspective as well as from an SOC performance perspective.
3.4.3
Legislative framework supportive of the
Departments specific shareholder mandate/role requires clarification.
3.4.4
Challenges
with skills attraction and retention.
3.4.5
Budgetary
constraints.
3.4.6
Interdepartmental co-ordination and
alignment of mandates of SOC require strengthening.
3.4.7
Evolution of the Department will be
informed by the President Review Committee on State Owned Companies (PRC).
3.5
Priorities
of the Department
The priorities of the Department are informed by the State of
the Nation Address which pronounced on the infrastructure development programme
and its impact on
job
creation, skills development, localisation,
Broad-Based Black Economic Empowerment, industrialisation and regional integration.
Furthermore, the Department will focus on the electricity price path, electricity
conservation and the green economy.
3.6
Assistance
from Portfolio Committee
The Department requested
the Portfolio Committee to assist to deliver its mandate by:
3.6.1
Adequate notice for
presentations and briefings in order to assist with proper planning and
execution of functions and duties. This will assist the Department with
efficient use of resources, given current constraints.
3.6.2
Clear and specific requirements for
reporting will result in improved preparation and a common understanding of
expectations.
3.6.3
Assist the Department to
secure additional funding for its operations.
3.6.4
Participation and
engagement in the Departments annual Parliamentary Learning
Programme
to provide insight into the sector and key issues of relevance to the
Committee.
3.6.5
Engaging counterpart committees
and departments that are critical to the NCOP.
3.6.6
Securing
a conducive policy and regulatory environment for SOCs.
3.6.7
Regular engagement on issues of mutual
interest affecting the SOC.
4.
Review
of the Portfolio Committees performance
In planning for the
remainder of the term, the Portfolio Committee undertook a review of how it has
executed its oversight and accountability mandate, and whether it was efficient
and effective. Most importantly, it assessed whether it implemented resolutions
taken, and whether proper follow up was done to ensure their positive
conclusion. The Committee made the following observations:
4.1
Shortcomings
of the Committee
4.1.1
The Committee identified time as a
constraint to follow through the implementation of
resolutions and the lack of a resolution-tracking
mechanism.
4.1.2
Over-concentration on the major entities
and neglect of the smaller entities.
4.1.3
Lack of timeous notification on changes and
developments in state-owned companies.
4.1.4
Inadequate robust oversight visits to
state-owned companies and the Department.
4.2
Priorities
for the Committee
In line with the strategic
focus of the state with regard to the economic development, the Committee
identified key priorities that SOCs will have to report on in the remainder of
the 4th Parliament. These include job creation, skills development, rural development,
beneficiation, promotion of local manufacturing and small businesses and the impact
of SOCs on the communities.
4.3
Focus
areas for each SOC
In addition, the Committee identified
all the outstanding challenges facing state-owned companies, and would
intervene and monitor to ensure their positive conclusion.
The areas identified for each entity are as follows
:
4.3.1
South
African Airways
The
Committee will monitor the financial position of the entity, route expansion
programme, the R1.6 billion guarantee, the Airbus deal and investigate high
airport taxes, the performance bonus system and the hedging practice.
4.3.2
South
African Express Airways
The
Committee will monitor the f
orensic investigation,
ensure action against external auditors, investigate the relationship between SA
Airlink and SAA, monitor the performance of the board, and ensure external
auditors and audit committees are effective and accountable.
4.3.3
Transnet
The Committee will ensure
that Transnet improves financial management systems to eradicate fruitless,
wasteful and irregular expenditure, follow up on the R8.5 billion irregular
expenditure, monitor the implementation of the TSDBF resolution, monitor the
infrastructure development programme (including PE tank farms and storage
facitilities), and ensure that the entity has the capacity to deliver and that
the development contributes to the priorities of the state.
4.3.4
Safcol
The Committee will ensure that a decision is taken on future role of
Safcol, it will advocate for the funding shortfall for training of staff,
follow up on oversight resolutions and that they are implemented, ensure that
land claims are resolved speedily, and that the entity expands its social
responsibility by ensuring beneficiation and improving the lives of the
adjacent communities.
4.3.5
Eskom
The Committee will monitor and await the outcome of
the SIU investigation, monitor the high electricity tariffs, ensure compliance
of subcontractors, monitor the introduction of IPPs and renewable energy,
monitor the negotiated contracts with smelters, ensure that Eskom has the
capacity to deliver, monitor security of supply, and that Eskom projects
promote localisation, beneficiation, jobs and skills development.
4.3.6
Alexkor
The
Committee will monitor f
inancial management systems
in Alexkor, Alexkor Development Foundation and Namda, ensure sound corporate
governance practices, and monitor mining production at sea for the productivity
of the entity.
4.3.7
PBMR
The Committee will monitor
and ensure that the registration of intellectual property is with the state,
and will ensure that the
Department
reports on progress of care and maintenance of the entity.
4.3.8
Infraco
The Committee will ensure that there c
larity
on the public mandate of the entity, address the concern on the structure of
points of presence, monitor progress on the turnaround strategy, look at the
relations between Infraco with Sentech and follow up with the issuing of ECS licence
to the entity.
4.3.9
Denel
The
Committee will m
onitor the recapitalisation
of Denel Aerostructures, seek clarity from the Department of Defence and
Military Veterans (DoDMV) on what is sovereign and strategic for defence, and
the streamlining of procurement between DoDMV and Denel.
4.3.10
Department of Public Enterprises
The
Committee will seek clarity on the future role of the Department
, look at legislation impacting on the mandate of the Department and
SOCs, monitor the oversight function of the Department, monitor the
departmental premises (suitability), await the remunerations report with
recommendations, and look at the capacity constraints and skills shortage in
the Department.
5.
Oversight and accountability mechanisms
The Portfolio Committee will use the following mechanisms to improve its
oversight and accountability functions:
5.1
Entities will send quarterly reports on progress regarding
turnaround strategies, financial and performance reports and reports on any
other matter of interest to the Committee.
5.2
The Committee will
ensure regular interaction with communities and stakeholders such
as unions and interest groups on matters
of interest to the public.
5.3
The Committee will
undertake robust oversight visits to state-owned companies to
ensure that they deliver on their mandates and
improve the lives of communities.
5.4
The Committee will use
the legislative processes in Parliament to improve its oversight
and ensure compliance with relevant
legislative frameworks across all SOCs (BRRR,
budget
vote and strategic plans, annual reports, section 32 reports).
6.
Conclusion
The Committee acknowledged that the outcomes of the Presidential Review
Committee on SOCs will have an impact on the role, structure and alignment of state-owned
companies and will give clarity to policy and legislative challenges facing
state-owned companies. However it would ensure that SOCs deliver on their
public mandate and contribute towards the developmental objectives of
government.
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