ATC190320: Report of the Portfolio Committee on Public Enterprises on its activities undertaken during the 5th Parliament (May 2014 – March 2019)

Public Enterprises

Report of the Portfolio Committee on Public Enterprises on its activities undertaken during the 5th Parliament (May 2014 – March 2019)

Key Highlights

Reflection on committee programme per year and on whether the objectives of such programmes were achieved

The mandate of the Committee is to consider legislation referred to it; exercise oversight over the Department of Public Enterprises (DPE) and the seven State-Owned Companies (SOCs); consider international agreements referred to it; consider the budget vote of the Department of Public Enterprises and its Entities; facilitate public participation in its processes; and to consider all other matters referred to it in terms of legislation and the rules of the National Assembly.

The Chairperson of the Committee was Ms Dipuo Letsatsi-Duba who was later deployed by the ruling party, the African National Congress (ANC), to lead the Ministry of Public Service and Administration and she currently serves as the Minister of State Security. An Acting role was assumed by the ANC Committee Whip, Ms. Daphne Rantho, until a new Chairperson of the Committee Ms. Lungi Anette Mnganga-Gcabashe. The Committee membership was comprised of Members of Parliament from the African National Congress, African Christian Democratic Party, Democratic Alliance, Economic Freedom, Inkatha Freedom Party and United Democratic Movement (Please refer to Master Attendance List, Section 17.p.41). The Committee composition changed during the PC Inquiry into Eskom due to interest of political parties in the process.

Committee’s focus areas during the 5th Parliament

The Committee focus areas were to provide oversight to improve governance, financial sustainability, performance and ensuring that all issues referred to it by the 4th Parliament have been sufficiently addressed.
The Committee was taken through an induction process by the Centre for Public Entities and Institute for Directors to appraise them with the prescripts on governance and oversight.
The focus was on oversight of the Department of Public Enterprises and SOCs.
The Department reported to the Committee on their strategic plan, annual performance plans, and quarterly reports.
The Committee received briefings on audit outcomes by the Auditor General was done on the Department and SOCs.
The Department would present to the Committee corrective actions based on the Auditor General’s audit plans applicable to them and State Owned Companies.
The Committee received reports from State Owned Companies on their annual financial plans, integrated reports and sustainability reports. These reports would include audit outcome from the Auditor General.
The Committee undertook oversight visits to Denel, Transnet, Eskom and South African Express Airways.
The Committee met residents of Soweto to address municipal debt, petition by resident on Eskom billing mechanism and refusal of the community to accept the installation of prepaid electricity to address non-payment.
The Committee developed Budget Review Recommendations Report (BRRR) on annual basis to motivate the budget applications for the Department of Public Enterprises.
The Portfolio Committee instituted an Eskom Oversight Inquiry to address the governance and financial challenges faced by the SOCs.
The Repeal of the Overvaal Resorts Bill was finalised.
The transfer of South African Airways from the Department of Public Enterprises to the National Treasury (NT) was done on the 12 December 2014. The intention was to stabilise the carrier’s financial status and implement the turnaround strategy. The SOCs was transferred back to the Department of Public Enterprises from the National Treasury effective from the 1 August 2018.
The Committee undertook an inquiry into Eskom as part of restoring governance in State Owned Companies. The Committee designed terms of reference with the intention to investigate governance, procurement and financial practices at Denel, Eskom and Transnet. However due to time limitations the investigation into Denel and Transnet could not be completed. The investigations into these two entities were meant to form part of the phase 2 of the Portfolio Committee Inquiry of the State Owned Companies.
LeadSA presented a ChangeMakers Award to the Portfolio Committee on Public Enterprises. This award was earmarking South Africans who are making positive change. Previous recipients of the award included the former Public Protector Advocate Thuli Madonsela and Chief Justice Mogoeng Mogoeng. The Chairperson of the Inquiry into Eskom, Ms. D. Rantho accepted the award on behalf of the Portfolio Committee on Public Enterprises. The achievement shows the Committee’s commitment in building a society based on accountability and integrity. The work done by the Committee has set the foundation for the Commission of Inquiry into State of Capture which is chaired by the Deputy Chief Justice Raymond Zondo.

Key Areas for Future Work

The key areas for future of the Committee will be to continue with the work to improve oversight on the Department of Public Enterprises and SOCs.
To continually monitor and provide leadership in the SOCs environment in the following areas: governance, financial sustainability, procurement environment.
To address issues relating to the proposed SOCs Shareholder Management Bill.
Conduct an international study tour in order to inform the Committee on the proposed SOCs Shareholder Management Bill.
Continually monitor the implementation of the audit plan.
Monitor implementation recommendations of the Eskom inquiry report.
Consider pronouncements made on the reconfiguration of Eskom. The President pronounced that there will be a creation of three entities under Eskom. These entities will include Generation, Transmission and Distribution with Eskom remaining as a holding company. This reconfiguration should be closely monitored by the Committee through oversight and providing guidance to the Department and Eskom.
Provide oversight in order to monitor cost overruns on project delivery at Eskom.
Address issues related to inadequate maintenance, along with serous operational problems leading to unplanned electricity shortages.
Provide oversight on the build programme and operational effectiveness of Medupi and Kusile power stations.
Deal with high municipal debt which is affecting Eskom balance sheet.
Monitor the emerging issues on forensic investigations on the acquisitions of Transnet 1064 locomotives
Monitor improvements of key procurement governance and controls at Transnet.
Monitor Denel’s balance sheet and liquidity concerns.
Closely provide oversight on Denel’s financial sustainability and turnaround plan.
Provide oversight on South African Airways financial performance.
The Committee should address issues raised by the Auditor General.
Consider instituting an investigation into the entities: Transnet and Denel, regarding lapses in governance subject to the outcome of the Commission on State Capture led by the Deputy Chief Justice Raymond Zondo.
Filling of vacant posts in the Department due to negative impact on budget and it oversight function.
Monitor and provide guidance on the integration of South African Airways, Mango and South African Express.
The pronouncement on the renewal of a capable developmental state has commenced.
The Committee will have to interpret the work on the reconfiguration of the State.
In his 2019 State of National Address, the President outlined that, a new structure and form of Government will be revealed after 2019 National and Provincial Elections.
The DPE and NT are spearheading the work of optimizing SOC to ensure an effective agents of development.
This involves identifying of assets suitable for disposal, involvement of private capital, formation of new entities.
The Committee should ensure that this work is prioritized and provide oversight mechanism that will strengthen this objective.
The Department has sought credible plans from boards to put in place the right skills and expertise to manage these companies so that they can shift the focus from immediate stability to long-term sustainability.
The DPE has also sought to build a pragmatic and cooperative relationship between government, organised labour and private sector stakeholders, where they can jointly determine a strategic path for SOCs to create jobs, enable inclusive growth and become operationally and financially sustainable.
The DPE is developing, in consultation with Policy Departments and NT, appropriate SOC restructuring options.
The Committee should prioritise this work in its strategy and operational planning.
The Department has established the Presidential SOE Council, which will provide political oversight and strategic management in order to reform, reposition and revitalize state owned enterprises, so they play their role as catalysts of economic growth and development.
The Committee should monitor and provide guidance on how this is objective is going to be realized.
The Committee should continue to monitor and provide oversight on the capacity internal committee audit function in SOCs in order to improve audit outcomes.
Monitor issues that have been referred for prosecutions in conjunction with the Justice and Constitutional Development and Police Committees.

Key Challenges Emerging

The Department of Public Enterprises should address issues related to its vacancy rate as it has an impact on its budget and oversight functions.
SOCs should improve on their audit outcomes.
Strengthening of SOCs balance sheets.
Access to information, specifically the Shareholder Compacts
The capacity of internal audit function and audit and risk committees has a negative impact on SOCs audit outcome.
Going concern issues in the SOCs not sufficiently addressed.
Review areas addressed by the Budget Review and Recommendations Report.
Contingent liabilities remain high with SOCs guarantee and debt at high levels.
Transnet pensioners continue to raise dissatisfaction with implementation of their benefits.

The following instances of corruption have come to light as a result of investigations into SOCs:

Transnet overpaid by R509 million in the purchase of 100 locomotives from China CRRC and Japan Mitsui, of which CRRC returned R618 million to Transnet;
Transnet in the purchase of 1064 locomotives overpaid by R17.4 billion;
Eskom without a valid contract paid R1.6 billion to McKinsey and Trillian, of which R902 million was recovered from McKinsey;
Denel wiped out R3 billion of revenues through corruption conceived Denel Asia against the advice of everyone including their owned due diligence report, which advise against doing business with VR Laser in its various incarnations.

In his Budget Speech, the Minister of Finance outlined the following as it relates to guaranteed utilisation in SOCs:

During this past financial year, total guarantee utilisation increased by R51.1 billion:

1. Eskom used an additional R50 billion of its R350 billion guarantee in 2018/19.

2. Denel was granted a further R1 billion guarantee.

3. SAA guaranteed debt increased by R6.2 billion.

State Owned Companies remain highly indebted and guarantee usage continue to expose the proposals such as placing them under administration and finding other suitable means of easing the burden of Government support are emerging. A balance and trade-offs should be explored between organised labour, private sector and government as pronouncements from different quotas are viewed as threatening jobs. Another threat is South Africa’s position in the financial markets as credit ratings could downgrade the Sovereign resulting from poor financial performance of State Owned Companies. Standards and Poor Credit Rating Agency provided the following overview in its opinion on SA:

1. Anemic economic growth in 2018 and sizable contingent liabilities continue to weigh on South Africa's fiscal prospects and debt burden.

2. Nevertheless, the new government is pursuing a series of economic reforms that should help boost the economy from 2019 onward, despite structural impediments, chronic skills shortages, and high unemployment.

3. We are affirming our long- and short-term foreign currency ratings on South Africa at 'BB/B', our local currency ratings at 'BB+/B', and our national scale ratings at 'zaAAA/zaA-1+'. The outlook is stable.

The Committee should provide a mechanism in which the transition is carefully managed while sustaining key imperatives such as Program of Action (POA) which measures the implementation of the National Development Plan through the Medium Term Strategic Framework (MTSF).

Recommendations

Develop the Strategic Plan for the Committee with annual performance plan for the Committee.
The Committee to continue to request the Shareholder Compacts from SOCs.
The Committee to conduct oversight visits to all entities within the portfolio of the Department of Public Enterprises on a regular basis.
Implement recommendations by the Auditor General on the Department and SOCs.
Address areas of policy alignment areas with policy departments.
Provide guidance on the future role of Alexkor and SAFCOL
Institutionalise Presidential Review Committee on State Owned Enterprises.
Monitor the turnaround strategy of major SOCs including the rationalisation of State Assets.
Monitor procurement spend in all SOCs, and the impact on socio-economic outcomes.
Monitor and implement BRRR recommendations.
Monitor commitments made by the President, the Minister of Finance and Minister of Public Enterprises in ensuring improvements in good corporate governance and financial performance of SOCs.
Notes the market’s opinion on continent liabilities and debt burden, policy and structural reforms and credit ratings opinion.

Introduction

Department/s and Entities falling within the committee’s portfolio

Narrative on the department(s) and entities falling within the committee’s portfolio and if there were any changes during the term. Example of new entities being established and/or shifted from or to the Department; department being split and/or newly established.

Department of Public Enterprises

Core mandate/strategic objectives

Entities:

Name of Entity	Role of Entity
Eskom	Generates, transmits and distributes electricity to industrial, mining, commercial, agricultural and residential customers and redistributors
Transnet	A focused freight transport company, delivering integrated, efficient, safe, reliable and cost-effective services to promote economic growth in South Africa.
South African Express Airways	A regional airline which operates predominantly on routes which are secondary in South Africa and the region.
Denel	Arms manufacturer and operates in the military aerospace and landward defence environment
Alexkor	Mines diamonds and is committed to the profitable and sustainable development of mineral and natural resources for the economic benefit of the Namaqualand region and all its stakeholders
Safcol	Dedicated to growing its business in the forestry and forest products industry.
South African Airways	The national airline carrier delivering sustainable profits and growth through world-class service to customers internally and externally

Functions of committee:

Parliamentary committees are mandated to:

Monitor the financial and non-financial performance of government departments and their entities to ensure that national objectives are met.
Process and pass legislation.
Facilitate public participation in Parliament relating to issues of oversight and legislation.

Method of work of the committee (if committee adopted a particular method of work e.g. SCOPA.)

The Committee held a strategic planning session at the beginning of the term of Parliament. Where at the Committee developed a strategic plan that was informed by the broader policy imperatives and priorities of government of the five years. The Committee identified instruments that it will use to conduct oversight, these included: Briefings by entities, scrutinising of annual reports, interaction with the Auditor General and robust oversight visits. The Committee developed Budget Vote Report, Budgetary Review and Recommendations Report to outline recommendations for the budget. During oversight visits the Committee interacted with workers, labour representatives, local business representative and the relevant stakeholders, in order to assess the impact of the SOCs on communities. The Chairperson established a Management Committee which comprised of the Chairperson, Whip of the ANC and all the support staff of the Committee. The role of the management committee was to implement resolutions of the Portfolio Committee.

Purpose of the report

The purpose of this report is to provide an account on the work of the Portfolio Committee Public Enterprises work during the 5th Parliament and to inform the members of the new Parliament of key outstanding issues pertaining to the oversight and legislative programme of the Department of Public Enterprises and its entities.

This report provides an overview of the activities the committee undertook during the 5th Parliament, the outcome of key activities, as well as any challenges that emerged during the period under review and issues that should be considered for follow up during the 5th Parliament. It summarises the key issues for follow-up and concludes with recommendations to strengthen operational and procedural processes to enhance the committee’s oversight and legislative roles in future.

Key statistics

The table below provides an overview of the number of meetings held, legislation and international agreements processed and the number of oversight trips and study tours undertaken by the committee, as well as any statutory appointments the committee made, during the 5th Parliament:

Activity	2014/15	2015/16	2016/17	2017/18	2018/19	Total
Meetings held	6	16	17	38	24	101
Legislation processed	0	0	0	0	1	1
Oversight trips undertaken	3	1	1	1	0	6
Study tours undertaken	0	0	0	0	0	0
International agreements processed	0	0	0	0	0	0
Statutory appointments made	0	0	0	0	0	0
Interventions considered	0	0	0	0	0	0
Petitions considered	0	0	3	0	0	3

Stakeholders:

Department of Public Enterprises.

Eskom Holdings.

Denel.

Transnet.

South African Airways.

South African Express Airways.

Safcol.

Alexkor.

Auditor-General.

National Treasury.

Policy Departments for state-owned companies.

Regulatory bodies of state-owned companies.

Academic research institutions

Private Companies contracted to SOCs.

Communities where SOCs are providing essential services.

Briefings and/or public hearings

The Committee had regular interactions with state-owned companies through briefings and joint meetings with sister Committees overseeing the same state-owned companies. During this term the Committee undertook to robustly perform its oversight, and most notably, it conducted an inquiry into the governance, procurement and financial sustainability of Eskom. The inquiry was meant to have three phases that would also cover Denel and Transnet, however due to time constraints, the Committee could only investigate Eskom.

Legislation

The following pieces of legislation were referred to the committee and processed during the 5th Parliament:

Year	Name of Legislation	Tagging	Objectives	Completed/Not Completed

2014/15	None

2015/16	None

2016/17	None

2017/18	None

2018/19	Repeal of the Overvaal Resorts Limited Bill	[B 36 – 2017]	The purpose of the Bill is to repeal the Overvaal Resorts Limited Act, 1993 (Act No.127 of 1993)	7 November 2018

Challenges emerging

The following challenges emerged during the processing of legislation:

There were no content or technical challenges experienced, this was mainly due to the fact that it was a straight forward and very short Bill.

Issues for follow-up

The 6th Parliament should consider the concerns that arose through this process:

There are still unresolved land claims on the affected land. The Committee made a recommendation that the Department of public Enterprises should work with the Department of Rural Development and Land Reform to speedily resolve the land claims.
The former employees of Aventura resorts made substantial submissions on the Bill. These related to the lack of implementation of the purchase agreement, particularly 30% equity shares being for Broad Based Black Economic Empowerment. They further allege that Forever Resorts has illegally acquired 100% shares, as the terms of the purchase agreement, prohibited Forever Resorts from acquiring the 30% shares whether directly and indirectly.

Oversight trips undertaken

The following oversight trips were undertaken:

Date	Area Visited	Objective	Recommendations	Responses to Recommendations	Status of Report

6 February 2015	Port of Saldanha	To familiarise the Committee with the operations of the port and progress that has been made with regard to infrastructural developments at the port	The Committee recommended that the Minister of Public Enterprises should: - ensure reduction of energy consumption by placing solar panels on the roofs of the corporate buildings at the port. - ensure that Transnet updates the local community on its plans, opportunities and progress on developments on the port on a quarterly basis. - ensure that Transnet educates local businesses on energy efficiencies and form partnerships regarding this matter. - ensure that the Department of Public Enterprises communicates and markets the good work done by state-owned companies in terms of their Corporate Social Investment projects. - ensure that Transnet assesses the impact of its CSI programmes to ensure sustainability.	The Department of Public Enterprises and Transnet responded and presented progress made in responding to the recommendations of the Committee	Report was adopted by the House.
3 February 2015	Port of Durban	To assess the socio-economic impact of the investments in terms of job creation, skills development, promotion and support of local businesses and the beneficiation.	The Committee recommended that the Minister of Public Enterprises should: - consider introducing specialised schools that will equip young people at secondary level with need to change the education policy to introduce dedicated schools specialising in Marine and engineering education. - ensure that Transnet makes a deliberate effort to promote rural development by ensuring youth in rural communities have access to opportunities. - ensure that Transnet develops and supports businesses owned by youth, women and people with disability - ensure that Transnet regularly engage with all stakeholders including the government of KZN, the business community and civil society regarding the opportunities and how they could collectively participate.	The Department of Public Enterprises and Transnet responded and presented progress made in responding to the recommendations of the Committee.	The report was adopted by the House.
8 September 2-15	Koeberg Nuclear Power Station, Cape Town	To familiarise the Committee with operations of Koeberg Nuclear Power Station
5 February 2015	Denel Aviation 2015	visit is to familiarise the Committee with the capabilities, operations and challenges facing the Denel Aviation.

Challenges Emerging

The following challenges emerged during the oversight visit:

A full report on the priorities set for the development of Saldhana Bay should be presented in writing to the Committee.
Port efficiency and effectiveness should be addressed and a strategic to fully optimise Port usage developed.
Traffic remains a challenge at the Port and mechanism should be developed with the City of Ethekwini to ease inflows to the Port.
A mechanism to maximise volume performance target should be adopted at the Port. Targets set on the Market Demand Strategy were not reached, this should be addressed in the newly adopted Transnet strategy, Transnet 4.0.
Denel has financial challenges impact on the subsidiaries a mechanism to address going concerns will ease and allay fears experienced by employees and increase the sustainability of Denel.

Issues for follow-up

The 6th Parliament should consider following up on the following concerns that arose:

Monitor Transnet capital plans and implementation of commitment made on the Port of Saldhana.
Provide oversight on the efficiency of South African Ports and commitment made on Port of Durban.
Provide oversight on the financial sustainability of Denel.

Study tours undertaken

The following study tours were undertaken:

Date	Places Visited	Objective	Lessons Learned	Status of Report
N/A	N/A	N/A	N/A	N/A

Challenges emerging

The following challenges emerged during the study tours:

Due to the work prioritised on oversight and Eskom Inquiry little time was allocated for study tours.
The Committee had little room to benchmark on the best practise of other SOCs elsewhere.

Issues for follow-up

The 6th Parliament should consider following up on the following concerns that arose:

To prioritise learning from countries which have reconfigured SOCs in particular the OECD countries.
To understand from these countries what reconfiguration of State and SOCs have improved competitiveness.
Best practices should be introduced to the Committee through interaction with international counterparts.

International Agreements:

The following international agreements were processed and reported on:

Date referred	Name of International Agreement	Objective	Status of Report	Date of enforcement
N/A	N/A	N/A	N/A	N/A
N/A	N/A	N/A	N/A	N/A

Challenges emerging

The following challenges emerged during the processing of international agreements:

There were no countries that committed to co-operation with the Committee.

Issues for follow-up

The 6th Parliament should consider following up on the following concerns that arose:

Putting a cooperation framework that will be guided by the Parliament International Relations Division and the Department of International Relations and Cooperation.
Cooperation should address broader Parliament’s strategic objectives and government’s priorities in its electoral period.

Statutory appointments

The following appointment processes were referred to the committee and the resultant statutory appointments were made:

Date	Type of appointment	Period of appointment	Status of Report
N/A	N/A	N/A	N/A
N/A	N/A	N/A	N/A

Challenges emerging

The following challenges emerged during the statutory appointments:

No appointments were made to the Committee.

Issues for follow-up

The 6th Parliament should consider following up on the following concerns that arose:

There are no follow ups to made on this deliverable.

Interventions

The following interventions were referred to and processed by the committee:

Title	Date referred	Current status
N/A	N/A	N/A
N/A	N/A	N/A

Challenges emerging

The following challenges were experienced during the processing of interventions:

No interventions made by the Committee.

Issues for follow-up

The 6th Parliament should consider following up on the following concerns that arose:

No follow ups as it relates to this deliverable.

Petitions

The following petitions were referred to and considered by the committee:

Title	Date referred	Current status
Eskom failed to respond to a petition delivered to it by the residents (Community of Orlando East)	14 September 2015	The Committee visited the community and made recommendations. The report was adopted by the House.
Stop Eskom from installing prepaid meters without consultation (Community of Soweto)	2 November 2015	The Committee visited the community and made recommendations. The report was adopted by the House.
Eskom grant senior citizens 100 per cent rebates on their electricity (pensioners of Diepkloof)	26 April 2016	The Committee visited the community and made recommendations. The report was adopted by the House.

Challenges emerging

The following challenges were experienced during the processing of petitions:

The community was divided on the issues raised regarding the installation of prepaid meters.
Some community members who could afford to pay electricity were using the plight of the poor to escape the responsibility of paying for electricity.
The opposition to prepaid was due to the culture of non-payment in the community of Soweto.

Issues for follow-up

The 6th Parliament should consider following up on the following concerns that arose:

There is an urgent need to find a lasting solution to the ever rising municipal debt, and the culture of non-payment for electricity among South Africans.
There are also government departments and private companies that owed Eskom billions of rands.

Obligations conferred on committee by legislation:

Progress Report on Portfolio Committee on Public Enterprises Budget Review Recommendations Report (BRRR)

RECOMMENDATIONS	KEY INTERVENTIONS	PROGRESS
Capacitate SOCs internal audit functions	Undertake a comprehensive governance and risk gap analysis. Organisational review to assess the capacity and skills gaps undertaken during 2017/18 financial year.	Gap analysis report completed.
Increase and strengthen oversight over SOCs through robust and regular interaction with CEOs, Board Members, Audit Committees, regular visits to construction sites of major infrastructure projects	Quarterly site visits on SOCs major infrastructure programmes. Executive Forum for SIP 09 and 10 established to review status, challenges and impact of various projects/components forming part of SIP 09 and 10. Establishment of DPE/SOC Audit Committee Forum to assess SOCs major audits, risks and mitigating plans.	Minister, DG and Senior Officials have made site visits to the major power plant projects. Minister is having regular session with Chair of Board and Chairs of Committees (Safcol Board: October 2018, Denel Board: monthly, Transnet: All Board Chairs: 4 January 2019). CFO Forum held quarterly.
Increase and strengthen oversight over SOCs through robust and regular interaction with CEOs, Board Members, Audit Committees, regular visits to construction sites of major infrastructure projects	Review 5 existing boards and appointment of new boards Filling in of SOC vacant executive positions	During 2018 new Boards were appointed at Transnet, Denel, SA Express and SAFCOL. 4 NEDs were re-appointed to Alexkor Board pending the review on the future state of Alexkor. Executive Director positions being filled including Interim Appointments New CEO and CFO appointed at Eskom, New CEO appointed at Denel, Interim CEO appointed at SA Express, Interim CFO appointed at SAA, Interim CEO and CFO appointed at Transnet, finalisation of recruitment processes underway at SA Express (CEO and CFO), Safcol (CFO), Denel (CFO),
Fast-track the introduction of the Shareholder Management Bill to empower the department to carry out its oversight responsibilities	Procure services of a service provider to assist the Department to develop the Green Paper the Bill	TORs for service provider to assist the Department have been developed. Consultations with Government Departments held in December 2018 to look at the various models for shareholding. In December 2018, Cabinet approved the TORs of the Presidential SOE Council (PSEC) which will oversee SOE reforms. Governance structures are being put in place, such as the DGs Technical Task Team to support the PSEC
Develop SOC guiding frameworks and ensure their implementations to provide stable working environment for SOCs	Development and implementation of the Remuneration Guidelines and Executive Board Appointment Guidelines(DPSA	The Remuneration Guidelines have been developed. Implementation within the portfolio is underway with all SOCs having to review and submit new Remuneration Policies. Government interaction and awareness will be conducted as part of the work of the PSEC.
Ensure finalisation of the future strategic roles for Alexkor and SAFCOL	Part of SOC Reform process	Alexkor Task Team established to assess: Undertake extensive exercise on how best the State should re-organise its current mining assets; and Provisional position of Alexkor has been determined, this requires further approval from Minister, subsequently Cabinet. Safcol The role of SAFCOL in assisting DAFF to manage State Owned Forestry Assets (Category B+C) being explored by DPE, DAFF and SAFCOL
Finalisation of the Whole of State policy to bring alignment and synergy amongst state aviation assets i.e SAA, SAX and Mango	Consultation with relevant stakeholders on the development of the Optimal Corporate Structure for the realignment of the state owned airlines. Develop action plan to guide the finalisation of the Optimal Corporate Structure.	the development of a Whole of State policy has been developed and consultation has taken place with DOT, DEA, DWS, DTI and DMR. A Cabinet Memo was submitted proposing the implementation of an optimal corporate structure for the airlines, which is still being considered by Cabinet.
Greater emphasis on the monitoring and evaluation of SOCs' implementation of Government's policy objectives.	Annual review or reaffirmation of the SOCs Strategic Intent Statement (SIS). The SIS and SHC strengthened to reflect Government priorities as per NTSF 2014-2019. Timely conclusion of the Shareholder Compact (SHC).	Strategic intent statements reviewed and, where necessary, amendments proposed (but still to be signed off by Minister) Majority of the SHCs are at an advanced stage of negotiation.
Progress on the municipal debt	Intergovernmental engagements	Municipal debt increased by R1,6bn from R17bn in September 2018 to R18,6bn in December 2018; Top 11 defaulting Municipalities constitute 77% of the total debt. Free State Municipalities are leading with 44% of the debt followed by Mpumalanga. On Revenue Management, a committee was established comprising of the different IMTT members to deal with the following: Funding and the implementation framework for revenue collection mechanism and the roll-out of prepaid meters; Establishment of an independent centralised collection mode; Management of default including triggers and consequence management; Program to deal with the “culture of non- payment”

Consider introducing relevant systems and evidential requirements during the annual strategic planning process in order to ensure that all predetermined targets are achieved.	Review of the department planning processes Development of the Action Plan to support the implementation of the Strategic Plan and APP	2018/19 integrated Action Plan was developed factoring in these directives/guidelines
Ensure that the Department's vacancies are filled, as well as the acting position in the entities with an outcome of developing strategic capacity of the Department Ensure that spending on compensation is fast tracked through acquiring critical skills.	Review of the structure to ensure conducive integration of roles and responsibilities Enforce stringent turnaround time on the filling of vacant positions	The new structure implementation with effect from 01 January 2019. However new capacities required in line with changed priorities Subsequent to implementation of the approved Re-aligned Structure, priority posts were identified and advertised. Accelerated recruitment process planned for Q1 of 2019/20 financial year.
Complete the objective on Business Mapping Process	Standardisation of the processes for effective coordination of information and decision making process	The project will be reinitiated in 2019/20 after being abandon in 2017/18. an IT architecture unfolding in 2018/19 shall form the foundation of this work
Ensure that service providers are paid within timeframes and project management capacity is enhanced in the Department	Enforce turnaround time of 30 day payments	The standard operating procedures were developed during 2018/19 financial year to improve the internal control measures which help to identify and prevent late payments and ensure full compliance with the PFMA. The department on average pays service providers within 3 days of receiving invoices.

Address issues relating to SOCs going concern	Recapitalisation of SOCs to address issues of insolvency and liquidity.	Recapitalisation requests submitted on behalf of SOCs. Approved allocations of R5 billion for SAA and R1.249 billion for SA Express' transferred to the companies. Engagements with potential lenders underway to secure debt financing to meet liquidity requirements.
Ensure that the Department continues to work closely with policy departments in order to influence the policy environment in which SOCs operate	Cluster participation and individual policy Departments' working arrangements	Engagements with DOT, DOE, DOD and National Treasury with the aim of achieving policy alignment.
Department to rectify wrong audit opinion reported by Denel.	Intervention by the Minister, Denel and SNG to amend the audit report.	Done. Denel 2017 Annual Report re-tabled in Parliament early in 2018.

Summary of outstanding issues relating to the department/entities that the Committee has been grappling with.

The following key issues are outstanding from the committee’s activities during the 5th Parliament:

Responsibility	Issue(s)
Alexkor and DPE	The establishment of a legitimate CPA for the community of Richtersveld, in order to enable the disbursement of the dividends and properties to the community. Appointment of local contractors instead of outsourced contractors. The longevity of the mine is in dispute between the community and the entity. The diversification strategy of the entity into coal mining is questionable.
Safcol and DPE	The implementation of the diversification strategy in order to expand the portfolio of Safcol and increase its participation in the value chain. Safcol need to participate in the manufacturing of processed goods, and should stop selling timber in its raw form to increase its return on investment. IFLOMA to be taken out of care and maintenance and made to become profitable.
Department of Rural Development and Land Reform	Outstanding land claims on Safcol used land and the Aventura land. Assist in formalising the community structures in Alexanda Bay in aiding Alexkor to finalise the Deed of Settlement.
Department of Co-operative Governance and Traditional Affairs	Municipal debt owed to Eskom, assist Alexkor to transfer Alexanda Bay to the local municipality
Department of Public Enterprises	Forensic investigations into procurement, maladministration, governance and financial irregularities in Eskom, Transnet, Denel, Alexkor, South African Airways, South African Express Airways and Safcol. SOC Shareholder Management Bill
DPE and National Treasury	Financial sustainability of Eskom, SAA, SAX, Denel
Department of Defence and Military Veterans and DPE	Role of Denel in the defence industry

Other matters referred by the Speaker/Chairperson (including recommendations of the High Level Panel)

The following other matters were referred to the committee and the resultant report was produced:

Date of referral	Expected report date	Content of referral	Status of Report
April 2018	April 2019	Issue of State Capture an investigation in Eskom	Finalised by March 2019

Challenges emerging

The following challenges emerged during the processing of the referral:

The Committee has delays due to processes of appointing Evidence Leader.
Additional resources could not be made available to provide support – requested additional Committee Secretary and Committee Assistant, Content Advisor
A list of witnesses could not be exhausted due to unavailability of witnesses who were called to provide evidence.

Issues for follow-up

The 6th Parliament should consider following up on the following concerns that arose:

Consider investigations into Denel and Transnet as suggested by the Eskom Inquiry Report.
Monitor and provide oversight on recommendations to be made by State Capture Commission led by Deputy Chief Justice Raymond Zondo.

Recommendations

The Committee to have more joint meetings with the Committees on the Economic Cluster.
The Committee should provide members orientation into the Department of Public Enterprises and State Owned Companies.
Capacity building should on financial and economic governance in preparation of the new role of SOCs.
International oversight should be prioritised and best practices be adopted for improved SOCs oversight.
The report into investigations on the Eskom Inquiry and recommendations from the State Capture Inquiry should be followed up in conjunction with the Portfolio Committees on Justice and Constitutional Development and Police.
Transnet’s road to rail strategy should be fast tracked the Portfolio Committee on Public Enterprises.
Transnet should present to the Committee progress on employees implicated on cable theft.
The Committee should meet internal and external auditors to address issues faced by SOCs.
The reconfiguration of the State should be prioritised by the Committee.
The Committee should engage and guide Government in its plan to turnaround SOCs.
A key area of focus of the Committee should be to engage the Department on the rationalisation of State assets and selling of non-core strategic assets of governance to maximise the financial position of SOCs.
Engage and guide the Department on the formation of Eskom’s three entities on Distribution, Generation and Transmission.
The Committee should provide guidance on the competitive advantage, economy, efficiency, effectiveness and performance of SOCs.
Sustainability issues in forms of corporate social investment in communities should be prioritised by the SOCs and they should set the agenda for the Committee.
The Committee should monitor Transnet’s 4.0 strategy which migrate from the Market Demand Strategy.
Outstanding issues on future roles of Alexkor and SAFCOL should be prioritised and the guidance should be provided to the Department.
The Committee should the work of the Presidential task team on Eskom.
The Committee should continue to monitor the financial aspects of SOCs and develop mechanisms with which to curb guarantee utilisation in SOCs.
The Committee should invite the Department to outline guidelines and criterion to be adhered to when choosing a strategic equity partner for SOCs. The Committee should design a framework to assess suitability of the strategic equity partner based on South Africa’s macro environmental factors.

Committee strategic plan

Attach Committee Strategic Plan as an annexure

Master attendance list

Name of Member	Political Party
Ms L Mnganga-Gcabashe (Chairperson)	African National Congress
Mr RM Tseli
Ms DZ Rantho
Ms T Mahambehlala
Ms G Nobanda
Mr E Marais	Democratic Alliance (DA)
Ms N Mazzone	Democratic Alliance (DA)
Mr N Singh	Inkatha Freedom Party (IFP)
Mr S Swart	African Christian Democratic Party (ACDP)
Ms N Mazzone	Democratic Alliance (DA)
Mr M Dlamini	Economic Freedom Fighters (EFF)
Mr Kwankwa	United Democratic Movement (UDM)

Documents

No related documents

ATC190320: Report of the Portfolio Committee on Public Enterprises on its activities undertaken during the 5th Parliament (May 2014 – March 2019)

Public Enterprises

Documents

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