ATC120903: Report of the Portfolio Committee on Public Enterprises on the oversight visit to state-owned companies, dated 7 August 2012

Public Enterprises

Oversight visit to South African Airways (SAA) and Airport Company of South Africa (ACSA)

Report of the Portfolio Committee on Public Enterprises on the oversight visit to state-owned companies, dated 7 August 2012

1. Introduction

The Portfolio Committee on Public Enterprises (the Committee) undertook an oversight visit to Transnet (Phelophepa Health Train, Transnet Rail Engineering, Port of Nqgura and Port of Richards Bay) and South African Airways from 18 to 22 June 2012. The main purpose of the visit was to assess the impact of Transnet’s infrastructure projects and the Phelophepa Health Train on communities in terms of job creation, skills development and the promotion of local businesses and localisation. Furthermore, the Committee wanted to interact with the staff and customers of South African Airways in order to understand their challenges and experiences and what improvements they were expecting.

1.1 Delegation

The Committee delegation included the following members: Mr Peter Maluleka (Chairperson of the Committee, ANC), Mr C Gololo (ANC), Dr GW Koornhof (ANC), Ms C September (ANC), Mr A Mokoena (ANC), Ms N Michael ( DA), Mr E Marais (DA) and Mr J Dikobo (Azapo). The delegation was accompanied by the following parliamentary officials: Mr D Mocumi (Committee Secretary), Ms N Magubane (Committee Assistant) and Mr E Boskati (Researcher).

2. Visit to Phelophepa Health Train (Douglas)

The Committee was welcomed by the Group Executive for Human Resources at Transnet, Ms Nkululeko Sishi, and the Project Manager for the Train, Dr Lynette Coetzee.

2.1 Overview of the Phelophepa Health Train

The Phelophepa Health Train (the train) is a mobile train that takes primary health care services to remote and rural areas around the country. The train started in January 1994 and has reached 18 million people since it was launched. It has 35 stops throughout the year and has a target of reaching 1 250 patients per week. Transnet pays R41 million a year towards the costs of the train, and a further R10 million is sponsored by private companies. The train operates from January to September, and October to December is used for training and to allow staff to rest. It has technologically advanced medical equipment. Every clinic has a cost centre budget and there are sound supply chain management and financial systems in place. The train has received a warm welcome from communities but has received resistance from private practitioners who claim that the train jeopardised their businesses.

2.2 Interaction with community/patients

Transnet communicates eight weeks in advance with the community to be visited, and uses community radio stations, local newspapers and public offices to publicise the train. The staff on the health train is guided by dignity and respect for the patients. The train has facilities for the physically impaired and also has pictographs to assist patients who are illiterate. At every station, Transnet invites the Department of Health to do voluntary counselling and testing and the Department of Home Affairs to register community members for identity documents.

2.2.1 Job creation and skills development

The train has 20 permanent staff members, 40 medical students and 45 local people are hired for the duration of the stay. Transnet will increase the staff component of the health train and will improve the conditions of service of workers in order to retain the medical staff. There is a working relationship with most universities to release medical students for two weeks to work on the health train. During interaction with the students, the students expressed their satisfaction with the conditions on the train in terms of accommodation, food, sanitary facilities, security and opportunities to study. Transnet has connected wi-fi to enable students to write exams on the health train.

2.2.2 Health services

The train offers primary health care (PHC) services to the communities for free, and patients are only expected to pay R30.00 for spectacles. There are different clinics headed by qualified medical practitioners, namely dentists, optometrists, radiographers, psychologists, pharmacists, and others.

2.3 Recommendations

The Committee recommended that Transnet should expedite the introduction of the second train in order to cover as many communities as possible. Transnet should consider contracting a security company for the health train.

3. Visit to Port of Ngqura

The Portfolio Committee was welcomed by the Chief Executive for Transnet Ports Authority, Mr Tau Morwe and the Port Manager, Mr Siyabulela Mhlaluka. The Port Manager made a presentation in which he gave an overview of the operations of the port. The Committee interacted with stakeholders such as organised labour and representatives of local businesses, and undertook a tour of the port.

3.1 Overview of the operations of the port

The construction of the port commenced on October 2002 and started operating in October 2009. The port covers 1 250 hectares of land and can accommodate 7 berths, namely 4 container berths, 2 break bulk berths and 1 bulk liquid berth. Seventy per cent of the containers handled at the port are destined for other destinations and include manganese, breakbulk and liquid bulk. The Port of Ngqura performed well in relation to other ports, but was still underutilised and required more business in order to create more jobs.

There were plans in place to improve security surveillance and the effectiveness and efficiency of the port traffic control. The NPA and CSIR were investigating possibilities of getting a 5-day forecast of the sea level, as it had a bearing on the offloading of the ships.

3.1.1 Challenges

The challenge identified by the management of the port was the fact that, according to existing legislation, the operations of the port will be managed by the private sector. The white paper on transport separated the regulator from the operator, and prohibited the National Ports Authority (NPA) from operating the ports. This would compromise the efficiency of the port, investment, growth and the contributions towards the advancement of the developmental goals of the state such as job creation and the support for local industries. The NPA requested the Committee to consider amending legislation in order to stop the privatisation of operations in ports. All stakeholders made a plea to the Committee to assist in ensuring that the NPA received a licence to operate the port.

There is a shortage of pilots and maritime specialists in the port and management has plans to recruit young people from rural areas as part of the skills development programme.

3.2 Interaction with stakeholders

The Committee met with representatives of organised labour and representatives of business. All stakeholders were given an opportunity to explain the relationship with the management of the port. These were some of the findings of the Committee:

3.2.1 Job creation and skills development

The port has 220 funded posts, of which 133 have been filled and 97 are vacant. Only 26% of the staff is women but the management has training opportunities for women to study and be appointed in the male-dominated fields, like crane drivers. There are no women represented at top and senior management levels. There are programmes to visit rural communities in order to educate school learners about career opportunities in the port and to market the bursary opportunities. For 2012, there are 21 grade 10 learners who are enrolled in Simonstown, 12 students from the Eastern Cape placed at Durban University of Technology and 17 students currently placed at Cape Peninsula University of Technology.

The NPA will turn all non-core employees, such as security officers, into permanent employees of Transnet. There is a healthy working relationship with organised labour, and a delegation representing both parties, that will go on a study tour to learn best practices of port management. The Committee interacted with a number of employees who have been trained and developed and who have subsequently been promoted to higher positions in the organisation. One employee, Ms Nosipho Kale, started as a tea girl at the port, then she studied logistics management through Transnet bursaries, and was promoted as a planning technician.

3.2.2 Promotion of local small and medium businesses

The NPA was developing a pricing strategy that is in line with the Industrial Policy Action Plan (IPAP). The aim is to promote local manufacturing by charging less for processed goods. It will also support the surrounding industrial development zones and job creation. It has spent 35% of the budget on BBBEE companies. The port has the potential of assisting small and medium enterprises and supporting local business if it was utilised to its full potential.

3.2.3 Community involvement and development

The NPA has a corporate social investment plan, and it continuously monitored the impact on the communities. The port has adopted Newell High School , and has invested in infrastructure rehabilitation, which included the installation of a security system, upgrading of ablution facilities, roof repairs, tiling of classrooms, installation of fire extinguishers, and upgrading a home economics facility and a library. Furthermore, there are Saturday classes to tutor 99 maths and physics students from around the Port Elizabeth area.

3.3 Recommendations

The Committee recommended that Transnet should consider improving the representation of women in senior management positions, and should make an extra effort to recruit people with disabilities to work at the port. It furthermore requested Transnet to forward details of the legislative challenges facing the port and recommendations on how Parliament needed to intervene. The Committee recommended that all employees who are beneficiaries of Transnet bursaries should visit their high schools to educate pupils about their professions and the available career opportunities at the port.

4. Visit to Port of Richards Bay

The Committee was welcomed by the Chief Executive for Transnet National Ports Authority, Mr Tau Morwe, and the Port Manager, Mr Victor Mkhize. The Port Manager made a presentation in which he gave an overview of the operations of the port. The Committee interacted with stakeholders such as organised labour and representatives of local businesses, and undertook a tour of the port.

4.1 Overview of operations of the port

The port was established in 1976 as a bulk port to export 26 millions tonnes of coal per annum for the first 10 years. It is the largest port in South Africa in terms of hectares, and has a large portion of undeveloped land for future development. It has six cargo handling terminals, and commodities handled include coal, granite, sulphur, aluminium ingots, alumina, woodchips, ferrochrome, bulk liquids and forestry products. The port will spend R5.4 billion over the next 7 years on infrastructure development.

4.2 Challenges

The port has a shortage of tug drivers in the port and the port is generally underutilised. The port has an old and dilapidated fleet of machinery, some of which was beyond repair or continuously broken. This had a negative impact on the productivity of the port. For example, out of 117 haulers and tractors, only 64 were available for use (55% availability). However, there were plans in place to replace ageing equipment in order to improve capacity and productivity.

4.3 Interaction with stakeholders

The Committee met with representatives of organised labour and interacted with workers. These were some of the findings of the Committee:

4.3.1 Job creation and skills development

The port is characterised by a high turnover rate and is struggling to recruit and retain professionals, especially women. There are no women represented in the top management of the port and there was an under-representation of women and people with disabilities across the structure. Only two women were trained per year, which was not sufficient, and none of the trained women have been promoted in the organisation. The other challenge was that Black women of Transnet in the port were being head-hunted by big corporate companies in order to address employment equity targets.

The NPA has trained employees through the Seta, and they are still awaiting certificates of competence from the Manufacturing, Engineering and Related Services Sector Education and Training Authority ( merseta). They requested the Committee to address the matter with the Department of Higher Education and Training.

4.3.2 Relationship with union (Satawu)

The union raised serious concerns about the lack of consultation and involvement in decision making at the port. The union further highlighted the following issues:

- There was a need to recruit and develop young people from Richards Bay .

- There was no career development plan and an over-reliance on one individual, hence the low morale of employees.

- There was a high vacancy rate and the process of filling vacancies was too slow.

- Subcontractors did not comply with the Basic Conditions of Employment Act.

- Transnet National Ports Authority paid better than the Transnet Port Terminals, promoting salary disparities among divisions of the same company.

4.3.3 Promotion of local small and medium businesses

There is an alleged complaint from emerging mining companies, as they are unable to access the Richards Bay Coal Terminal (RBCT), hence access to the port was largely owned by big mining conglomerates. Furthermore, it was alleged that the big mining companies do not assist emerging companies with machinery. The NPA will include developmental clauses in the business contracts before awarding licences, especially on skills development and support for local businesses. Transnet will undertake a study tour to India to investigate the feasibility of having a dedicated port for coal and how support can be given to small and emerging mining companies.

4.3.4 Community involvement and development

The NPA reported that it has a forum with civil society where they discuss the needs of the communities before the entity decides on the corporate social investment projects. They will also re-introduce port festivals and community centres in order to involve communities and assist them with relevant information. They have identified Khombindlela High School situated in Ngwelezane and Siphosethu High School located in Eshowe for adoption. Assessments were underway to determine the needs of the schools in terms of academic intervention and infrastructural needs.

4.3.5 Health and safety

Workers complained that they were adversely affected by the wood, coal and manganese particles at the port. They were not satisfied with how the diseases and health problems were handled at the port. The port has a clinic with two full-time professional nurses. The nurses complained about the poor co-ordination of referrals from the Sheq (safety) officers, as they did not refer employees as frequently as expected for screening. The consulting room was too small and compromised the privacy and confidentiality of patients. There was a lack of support in terms of tools of trade, for instance a vehicle to attend to emergencies on site. The most prevalent health problem that the nurses were treating was hearing injuries.

4.4 Recommendations

The Committee noted that the management of the port was not ready for the oversight visit, could not answer all questions and lacked motivation. The Committee recommended that the management should forward a detailed plan on how it will improve the development of women in the organisation, and how to address non-representation of women at top management level within 3 months. The union should be involved in the development of the skills development plan to ensure that it was linked to the personal development plans of employees. Transnet should provide workers with protective clothing, especially for dust, and should consult operators when procuring equipment in order to purchase machinery which is user friendly, effective and economical. The Committee resolved that it would communicate with the Department of Higher Education and Training to address the outstanding certificates of competence which had not been issued by the merseta.

5. Visit to South African Airways

The Committee was welcomed by the Chairperson of the Board, Ms Cheryl Carolus, and the Chief Executive Officer, Ms Siza Mzimela. During the visit the Committee interacted with the customers of SAA, the staff and organised labour. It further undertook a tour of the facilities at OR Tambo International Airport, including Mango offices, Airchefs, SAA Technical, SAA cargo and the baggage handling facilities.

5.1 Interaction with staff and customers

The Committee interacted with the staff to find out what challenges were facing the entity, and with staff to hear how they felt about the service and what improvements they recommended. These were the issues raised by the different respondents:

5.1.1 Concerns raised by staff of SAA

Most employees were satisfied with SAA as an employer of choice, but raised the following concerns: cancellation of the London flight within six weeks; illegal porters at the port bribing and threatening SAA staff; overbooking of flights causing abuse of SAA staff by customers; no platform to engage with management on challenges facing workers; the need for training in customer service and people management; lack of security for staff at the counters; the need for comfortable chairs for frontline staff; media support staff has been on contract for 4 years and the resistance from customers to comply with aviation rules (e.g. excess luggage).

5.1.2 Concerns raised by customers

Customers expressed their frustrations regarding the cancellation of flights, the overbooking of flights, flight delays, high airport taxes and the quality of aircraft from OR Tambo to Buenos Aires . There was a need for SAA to improve its on-time performance and service it rendered to the public.

5.2 Baggage facilities

The Committee visited the baggage handling facilities to see how baggage was handled and monitored. The Committee was impressed with the surveillance cameras and security measures that ACSA had put in place to curb pilferage. The Committee visited the baggage control room where all the bags were monitored and tracked. It was informed that all the staff was vetted and screened when they entered and left the premises. The incidents of baggage pilferage had since dropped significantly due to the joint approach between law enforcement agencies, ACSA and SAA.

5.3 SAA Cargo

SAA Cargo is specialising in air transportation of cargo to 35 destinations in Africa . It transports 200 tonnes of cargo per year, and the range of goods included minerals, agricultural products and mining products. There are no incidents of pilferage and the cargo was insured in terms of the regulations. There are four dedicated cargo aircraft, and there were plans to move to new premises for health and safety reasons. The employees complained about dust in the warehouse, and that management did not provide dust masks as the level of dust did not warrant the usage thereof.

5.4 Issues raised by the union (Satawu)

The union raised concern regarding the unhealthy relations between management and the union, and highlighted the following as matters that needed the attention of management: night shift allowance for flight attendants; bargaining forum was not operational because the funds had been frozen; and parity between benefits of pilots and other cabin crew members.

5.5 Meeting with members of the board of directors of SAA

The Committee had a courtesy meeting with the board members of SAA as it had not met the full complement of the board before. They introduced themselves and their responsibilities on the board. The Committee could not discuss organisational matters in depth as there was not sufficient time available to do so.

5.6 Recommendations

The Committee resolved that SAA Cargo should supply employees with dust masks to prevent infections until such time that the facility is upgraded. The management of SAA should address the concerns raised by the employees, organised labour and customers listed in this report and provide feedback to the Committee by 30 September 2012.

6. Visit to Transnet Rail Engineering (Koedoespoort)

The Committee was welcomed by the Chief Executive of Transnet Rail Engineering, Mr Richard Vhallihu. The Committee visited the plant to interact with students at the School of Rail Engineering and to learn more about the capabilities of Transnet Rail Engineering.

6.1 Overview of the Plant

Koedoespoort was one of the six Rail Engineering plants in the country and had the following capabilities:

- Body assembly of locomotives, production of small parts of the locomotives and it is claimed to be the fastest setup production plant in the world.

- Capacity to manufacture, assemble and produce one locomotive every two days.

- There are 6 rail engineering plants and 130 depots in the country.

- The first ever new diesel locomotive (Class 39-200) was built in South Africa by Transnet Rail Engineering.

- Fourty percent of content was produced locally but there was a move to improve local content.

6.2 School of Engineering

The school is providing a 3-year Electrical and Mechanical Engineering training that was accredited by Transport Education and Training Authority (Teta). There are 383 learners going through the training and 40% are women. Transnet recruits through FET colleges and schools. There were 140 employees who were sent overseas for advanced training. Transnet has a campaign of taking 300 “technogirls” from schools during school holidays, over three years, to expose girls to the field of engineering.

6.3 Challenges faced by the School

The students raised the following concerns:

- Some of the machines required for training were broken and materials used for training took time before they were delivered, leaving students idle.

- Some learners were being trained as section 28 learners but were issued with section 13 certificates.

- There was a shortage of tutors to assist students during training.

Transnet made the following observations:

- There was a need for Cabinet Ministers to visit the plant (Koedoespoort) and develop a programme to utilise the plant’s capabilities optimally.

- Teta was not issuing certificates on time, and some students have been waiting for 8 years since completion of their courses.

- Transnet was struggling to get funding from Teta. They had requested R5m for training and only received R250 000. However, Transnet was spending R200m on training yearly.

- The Committee should lobby the relevant authorities for the new locomotives to be built by Transnet Rail Engineering.

6.4 Recommendations

The Committee resolved that Transnet Rail Engineering should continue with the excellent work it did, and should address the concerns that have been raised by the learners noted in this report. It should ensure that there are adequate machines and materials for learning to take place. It resolved that it would engage the Minister of Higher Education and Training on the challenges that Transnet was faced with in dealing with the Setas.

Report to be considered.


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