ATC221129: Report of the Standing Committee on Appropriations on the Special Appropriation Bill [B24 – 2022] (National Assembly – Section 77), Dated 29 November 2022

Standing Committee on Appropriations

Report of the Standing Committee on Appropriations on the Special Appropriation Bill [B24 – 2022] (National Assembly – Section 77), Dated 29 November 2022

 

Having considered the Special Appropriation Bill [B24 – 2022], referred to in terms of Section 13 of the Money Bills Amendment Procedure and Related Matters Act No. 9 of 2009 (as amended by the Money Bills Amendments Procedure and Related Matters Amendment Act, No. 13 of 2018), the Standing Committee on Appropriations reports as follows:

 

1. Introduction

 

Section 213(2) of the Constitution of the Republic of South Africa, provides that money may be withdrawn from the National Revenue Fund only in terms of an appropriation by an Act of Parliament. The Bill proposes to Parliament to appropriate additional funds in the 2022/23 financial year for the requirements of the Vote (10) of Public Enterprises and Vote (40) Transport, and to provide for matters connected therewith. This proposed additional funding is allocated to three State Owned Companies located across the Public Enterprises and Transport Votes, namely, Transnet SOC Limited (Transnet), Denel SOC Limited (Denel); and South African National Roads Agency SOC Limited (Sanral). In executing this mandate, the Standing Committee on Appropriations, hereinafter referred to as the Committee, is established in terms of section 4(3) of the Money Bills Amendment Procedure and Related Matters Act, 2009 (as amended), and herein referred to as the Act.

 

The Bill was tabled by the Minister of Finance on 26 October 2022 during the tabling of the 2022 Medium Term Budget Policy Statement (MTBPS). The Bill was referred to the Committee for consideration and report to the National Assembly as prescribed in section 13 of the Act. In processing the Bill, the Committee invited National Treasury to brief the Committee on the Bill in its entirety. Furthermore, section 4 (4) (c) of the Act also requires the Committees on Appropriations of both Houses to consult with the Financial and Fiscal Commission (FFC). In addition to consulting with the FFC, the Committee also invited the Parliamentary Budget Office to comment on the Bill. The Committee also engaged with Department of Public Enterprises, along with Transnet Holdings SOC Limited on the Bill. In addition to this, the Committee requested Sanral and Denel to provide written submissions on the Bill.

Section 13(2) of the Act also requires the Committees on Appropriations to hold public hearings on the Bill and for the Committee to report to the House on the comments and amendments to the Bill. In ensuring compliance with the requirements of the Act, advertisements were published in national and regional newspapers from 27 to 30 October 2022 inviting the general public and interested parties to comment on the Bill. The public hearings on the Bill were held on 25 November 2022 via the Zoom virtual meeting platform. In response, written and oral submissions were received by the Committee for consideration, and in line with the requirements of the Act from the following individuals and organisations:

 

• Organisation Undoing Tax Abuse;
• Congress of South African Trade Unions; and
• Public Service Accountability Monitor.

 

1. Provisions of the Bill

 

The Bill proposes that additional money to be withdrawn from the National Revenue Fund (NRF) for the requirement of these Votes as follow:

 

• A proposed additional allocation of R6.278 billion is appropriated to the Vote of Public Enterprises for the 2022/23 financial year. This proposed allocation is distributed to Public Enterprises entities as follows:

 

• A proposed total of R 3.378 billion is allocated out of the National Revenue Fund to Denel SOC Limited for the implementation of its turnaround strategy; and
• A proposed total of R2.9 billion is allocated out of the National Revenue Fund to Transnet SOC Limited for acceleration of the repairs and maintenance of locomotives.

 

• A proposed additional allocation of R23.736 billion is appropriated to the Vote of Transport for the 2022/23 financial year. This proposed allocation is appropriated out of the National Revenue Fund to the South African National Roads Agency Limited for the redemption of government guaranteed debt.

 

 

1. Comments and hearings on the Bill with identified and interested stakeholders

 

The sections below provide an overview of the submissions made by the identified as well as interested stakeholders in response to the published advertisement.

 

1. Financial and Fiscal Commission

 

The Financial and Fiscal Commission (FFC) gave an overview of the purpose of the Bill and submitted that it appreciated government’s commitment to continue promoting a growth friendly, fiscal consolidation policy path geared towards stabilising government debt. However, the maturity of SOCs' debt and poor functionality posed a substantial risk to the fiscus. The challenges of SOCs have resulted in poor service delivery, poor financial management, less growth, massive unemployment, corruption and low business confidence. The FFC further cautioned that the poor performance of SOCs will result in persistent government guarantees and bailouts to ensure the survival of these entities. SOCs which considered themselves too big to fail and expect constant bailouts, imposed further pressure on contingent liabilities.

 

The FFC further submitted that SOC bailouts were not fiscally sound and implored government to include stringent conditions that deter these SOCs from indulging in moral hazard behaviour. The FFC further noted that National Treasury advised that the pre-conditions and post-conditions required for a bailout include financial and operational reports to ensure that money was used to repay debt and facilitated sustained development of the affected SOCs. The FFC further cautioned against the use of a Special Appropriation Bill to provide funding for SOCs, namely Sanral, Denel and Transnet, atop the Adjustments Appropriation Bill, as this signalled fiscal uncertainty, perpetuating the cycle of bailing out poorly performing SOCs. The FFC recommended that stringent conditions to be attached to the provision of funding and that National Treasury and the respective SOCs, i.e. Denel, Transnet, and Sanral, be transparent during the bailout period and make all reports and conditions publicly available.

 

1. Parliamentary Budget Office

 

The Parliamentary Budget Office (PBO) explained the rationale for appropriating additional funds to the Department of Public Enterprises and the Department of Transport for the 2022/23 financial year. A proposed total of R3.4 billion was allocated to Denel for the implementation of its turnaround strategy whilst R2.9 billion was set aside for Transnet to accelerate repairs and maintenance of locomotives. Furthermore, a proposed R23.7 billion is allocated to Sanral for debt redemption. The PBO submitted that the 2022 national budget revealed that Sanral’s debt guarantee exposure increased by R11.7 billion to R49.1 billion as at the end of the 2021/22 financial year mainly due to accrued interest and re-evaluation of inflation-linked bonds. The PBO reported that:

 

• A total of R47 billion of Sanral’s debt will be shared between the Gauteng provincial government and the national government;
• There will be a 30 per cent to 70 per cent split (Gauteng/national) to unblock the impasse surrounding the Gauteng Freeway Improvement Project (GFIP);
• An amount of R23.7 billion of the R47 billion debt will mature soon and will be paid by the national government; and
• The aforementioned payment was conditional on implementation of a solution to phase 1 of the GFIP.

 

In terms of the GFIP, the PBO submitted that due to under-collection of e-tolls, government assistance has become a significant supplementary source of funding for the toll portfolio over the past three financial years.  In the 2021/22 financial year, Sanral was given R3.85 billion in the form of a GFIP grant, up from the R2.72 billion grant allocated in the 2020/21 financial year. The PBO further highlighted that the Gauteng provincial government has resolved to set up task teams that will look at sources of funding for their 30 per cent share of the GFIP debt and to investigate how the entire e-toll infrastructure can be repurposed to deal with crime issues.  The PBO also submitted that the Gauteng provincial government has indicated that it intended to stagger repayment of its 30 per cent share in respect of the GFIP debt over 20 years in order to avoid pressure on the province’s finances, delivery on social services and other obligations.

 

With regard to Transnet, the PBO submitted that SOE’s operational and financial performance for the 2021/22 financial year was below target. The main reasons for this underperformance was security problems, constraints on locomotive availability, and subdued economic trading conditions. The PBO stated that the volume of goods transported in South Africa decreased by 20 per cent between 2018/19 and 2021/2022. In summary, the PBO submitted that the cash injection will assist Transnet Freight Rail to address declining volumes and revenue since 2018 and with the help of state support it should be able to improve its revenue flows and liquidity position by improving its operational efficiency, and leveraging its balance sheet.

 

In terms of Denel, the PBO submitted that the SOE’s guarantee facilities and debt was at R3.4 billion in

2021/22. This was afterR2.5 billion in revenue lapsed following the cancellation of the Egyptian missile contract as well as the maturity of R1 billion debt.  Denel was allocated R3 billion in the 2022 national budget to cover capital and interest payments on guaranteed debt that reduced its debt to R290 million. The SOE’s financial challenges resulted in it struggling to pay employee salaries during the COVID-19 pandemic and failing to submit financial results within the required time frame, which led to the JSE suspending trading of its bonds earlier in 2022.  This resulted in Denel being unable to sell more debt on the primary market and its bonds could not be traded on the JSE's secondary market.

 

The PBO continued that in 2019, the government announced a R230 billion 10-year support package for Eskom in order for the SOE to remain financially viable from which R140 billion of this package has been disbursed to date.  In addition, Eskom had used R323.9 billion of its R350 billion government guarantee facility as at 30 June 2022 and since then this number increased to R327.9 billion due to additional drawdowns.  The PBO expressed concerns that the 2022 MTBPS and other government plans did not adequately explain government’s long term plans for Eskom’s debt relief programme and the financial implications. Concerns were raised that much of the details of the programme have not been communicated and were yet to be finalised in consultation and negotiation with stakeholders. Furthermore, conditions will be informed by an independent review of Eskom’s operations. Further details on the programme, according to the 2022 MTBPS, will be announced in the 2023 national budget.

 

1. Transnet Holdings SOC Limited

 

Transnet submitted that it launched a review application in the High Court in March 2021 to set aside the 1064 locomotive transactions and for it to retain all non-defective locomotives delivered as per the contract. Alstom and the China Railway Rolling Stock Corporation (CRRC) voluntarily submitted self-reports to the Directorate for Priority Crime Investigation (DPCI), more commonly known as the Hawks, enabling Transnet to focus on its civil litigation whilst allowing for any criminal proceedings to continue. To date, Transnet reported that it has reached settlements with GE/Wabtec and reached, in-principle agreements, with Bombardier/Alstom and CRRC. These will be formalised into Definitive Settlement Agreements. These Definitive Settlement Agreements, which are contingent on the CRRC obtaining a valid tax certificate from the South African National Revenue Service (SARS) are likely to be concluded and take effect by mid-January 2023. These will provide for the following:

 

• Immediate rehabilitation of non-operating locomotives as well as long term material reliability and support agreements to avoid circumstances currently experienced; and
• Independent and competent price verification of locomotive price.

 

In terms of its 2022/23 corporate plan, Transnet reported that it was driving a strategy to restructure the balance sheet and manage the debt to sustainable levels. The medium to long term target was to maintain a gearing ratio of 45 to 40 per cent to allow for headroom while continuing to leverage the balance sheet. It was in the process of driving a partnering approach with third parties to deliver on critical projects without extensive increase in debt levels. Transnet further reported that its debt maturity profile in the next five years was significantly high, hence the proposed allocation of R2.9 billion from the fiscus will allow it to improve rolling stock availability without increasing borrowings. Both the R2.9 billion government support for locomotives and the R2.9 billion for the Kwazulu-Natal floods were included in the 2022/23 estimate for borrowings.

 

Transnet submitted it was uniquely positioned to drive growth in the economic activity of South Africa benefiting both businesses as well as the citizens of the country. However, it has been directly impacted by global macro-economic trends, trade flows, and the low economic activity in South Africa. This has resulted in a decline in performance over recent years. The key binding constraints facing Transnet were reported as the decrease in locomotive availability, infrastructure challenges as a result of under-investment, and security challenges such as theft and vandalism resulting in operational disruptions. To this end, Transnet reported that it envisaged to repair 143 non-operating locomotives between December 2022 and March 2023 at an estimated cost of R892.7 million. Furthermore, between the period April 2023 and March 2024, a total of 181 locomotives will be returned to service at an estimated cost of R1.818 billion. The total cost of repairs to locomotives over the two years will amount to R2.7 billion, excluding cost escalations. Transnet further reported that an estimated 255 new locomotives will be delivered by CRRC and Alstom between the 2022/23 and 2025/25 financial years.

 

In conclusion, Transnet submitted that it received no fiscal support over the last 15 years from government which has resulted in a growing debt burden for the entity. Rail infrastructure required significant maintenance and the full recovery of such investments by the entity will not assist with the mandate to lower cost of logistics in South Africa. Transnet further submitted that it was advancing the Private Sector Partnership strategy to increase capacity without adding the debt burden on the country’s balance sheet and that it was aligned to the Balanced Funding Model advocated for in the Rail Reform White Paper.

 

1. South African National Roads Agency Limited

 

The South African National Roads Agency (Sanral), in its submission to the Committee, stated that it operated two ring-fenced portfolios, being the non-toll and toll portfolios. The non-toll portfolio was fully funded from government grants and Sanral may not spend its earmarked allocation on anything other than declared non-toll national roads. Non-toll roads represent 87 per cent of the proclaimed national road network of 23 536km.  The toll portfolio, representing 2 952 km (12.6 per cent) of national roads was required to be fully self-funding, and utilised the toll revenue collected to finance the maintenance, upgrade and operations of the declared national toll roads. Sanral further submitted that toll revenue collected may not be utilised on anything other than a declared national toll road. Sanral granted three concessions, which were Build-Operate Transfer contracts, and were therefore funded and maintained from the balance sheet. This represented 1 271 km of the declared toll roads. Sanral submitted that it operates and maintains the remaining 1 681 km with toll revenue collected on these declared toll routes. Its toll portfolio has accumulated losses over the past three years due to the impact of civil disobedience (non-payment of GFIP invoices). The table 1 below shows income and expenditure in respect of toll businesses of Sanral.

 

Table 1: Toll segment reported income and related expenses

Description (R’000)	2020	2021	2022
Toll revenue	4 370 120	3 706 874	4 522 032
Other income	972 739	1 074 217	1 471 613
Finance income	696 158	386 939	532 694
Net fair value gains	281 871	(252 922)	(97 581)
Total income	6 320 888	4 915 108	6 428 758
Total expenses	(8 553 391)	(8 092 453)	(9 104 300)
Other expenses	(2 713 212)	(2 492 638)	(2 872 229)
Depreciation and amortisation	(1 742 221)	(1 909 691)	(1 915 329)
Finance costs	(4 097 958)	(3 690 124)	(4 316 742)
Profit (loss) for the year	(2 232 503)	(3 177 345)	(2 675 542)
GFIP Grants received	2 667 939	2 721 793	3 857 101
Surplus/(Deficit) after grant	435 436	(455 552)	1 181 559

  Source: South African National roads Agency Limited (2022)

 

Sanral submitted that in an attempt to resolve the funding issue on the GFIP Phase1, the Minister of Finance and the Premier of the Gauteng Province have agreed to repay the outstanding debt owed to investors for the project in a 70/30 split.  The R23.7 billion will represent a portion of the 70 per cent to be paid by the national government. The allocation will therefore be used to reduce Sanral’s debt obligations by repaying bonds as they mature. The finalisation of the resolution regarding the tolling/non-tolling of GFIP will ensure the entity’s financial sustainability and therefore it would not require any further bailouts. Sanral submitted that other toll roads were fully self-funding with the existing toll revenues. It also emphasised that it will still be required to have a borrowing programme to finance capital projects required on the other existing toll roads, however these will be repaid with the existing toll revenues from conventional toll plazas, at the existing toll tariffs, which are kept at real rates, i.e. adjusted by inflation annually.

1. Denel SOC Limited

 

Denel made a written submission to the Committee and stated its performance has deteriorated over the years. The impact of liquidity, COVID-19 and declining local spending has impacted the company’s revenues. Denel reported that the net losses were as a result of the reduced sales and increased under-recoveries caused by low levels of manufacturing activity across the group. It further submitted that primarily due to the worsening liquidity constraints and difficult trading conditions, the entity found it-self in hostile trading conditions with suppliers and a demotivated work force on the back of non-payment of full salaries since May 2020. The table below provides an overview of the financial performance over the past three financial years.

 

Table 2: Abridged Income Statement

INCOME STATEMTN  (Rm)	2020	2021	2022
Revenue	2 729	2 794	1 455
Cost of sales	(2 146)	(2 230)	(1 267)
Gross profit	583	564	188
Other income	132	151	60
Other operating expenses	(2 229)	(1 813)	(864)
Operating profit/(loss)	(1 515)	(1 098)	(616)
Net finance income (costs)	(576)	(464)	(333)
Share of profit/(loss) of associated companies	62	46	2
Profit/(loss) before tax	(2 029)	(1 516)	(947)
Income tax expense	67	1	33
Profit/(loss) for the year	(1 962)	(1 515)	(914)

Source: Denel SOC Limited (2022)

 

Denel reported that its liquidity constraints continued to affect the business despite the entity’s effort to raise its own funding and the efforts by the Shareholder to repay its debt amounting to R2.9 billion. Denel submitted that it required the R3.4 billion cash injection to deal with its legacy debts including unlocking its supplier base in order to execute on the current order book. The abridged balance sheet of Denel over the past three financial years is reflected in table 3 below.

Table 3: Denel SOC Limited abridged balance sheet

	Audited Mar 20 Rm	Unaudited Mar 21 Rm	Unaudited Mar 22 Rm
ASSETS
Non-current assets	3 670	3 220	2 349
Current assets	4 856	4 270	3 868
Assets classified as held for sale			622
Total assets	8 526	7 490	6 839
EQUITY AND LIABILITIES
Total equity	(2 227)	(3 074)	(931)
Non-current liabilities	3 189	3 239	2 772
Current liabilities	7 614	7 325	4 998
Total liabilities	10 803	10 564	7 770
Total equity and liabilities	8 526	7 490	6 839

Source: Denel SOC Limited (2022)

 

Denel submitted that it required an estimated R5.2 billion in recapitalisation to restructure and turn the company around to profitability. From this, R3.4 billion will be received from the proposed recapitalisation in the Bill, whilst the balance of R1.8 billion will be raised through the sale of Denel non-core assets. Based on progress to date, Denel submitted that it was confident it will be able to raise the R1.8 billion from the sale of its own assets over the next six months to augment the recapitalisation and complete the turnaround and restructuring process. To this end, Denel assured the Committee that no further bailouts request is foreseen in the short to medium term.

 

In conclusion Denel submitted that the success of its turnaround plan was premised on the timeous cash inflow of working capital to execute operations and the restructuring costs. This required access to some of the recapitalisation funds before the completion of the sale of all non-core assets. Denel therefore requested the release of recapitalisation funding proportional to the funds raised from the sale of non-core assets, subject to fulfilling all other conditions as stipulated, in the short term until targeted funds are raised for full recapitalisation consideration.

1. Organisation Undoing Tax Abuse

 

The Organisation Undoing Tax Abuse (OUTA) submitted that, with regard to the GFIP, it would have preferred that government had not embarked on the costly exercise of implementing e-toll infrastructure in the first place or paying exorbitant amounts to a collection agency. Notwithstanding, OUTA welcomed the resolution of the matter and the acknowledgement by government that Gauteng commuter roads (social infrastructure) should be funded by the fiscus. OUTA submitted that it was important that there be improved transparency and clarity around the finances of Sanral before the Bill was finalised in Parliament. OUTA noted that in the 2012 court papers, the cost of the GFIP upgrade has been given as R20 billion. Sanral borrowed R20 billion to fund this. Since 2011/12, national government has authorised government grants totalling R30.053 billion to Sanral, explicitly for the GFIP (this included the R3.740 billion transferred in July 2022 but excluded the proposed R23.736 billion transfer) and that Sanral has also raised about R6.2 billion in e-toll revenue. However, the Sanral and the GFIP debt remained inexplicably high. OUTA also noted that of the R25.648 billion in GFIP grants to the entity from 2011/12 to 2021/22, Sanral recorded these as receipt of only R22.440 billion, leaving a discrepancy of R3.208 billion. To this end, OUTA submitted that an independent investigation was required on the entity’s actual expenditure on the GFIP project. The said investigation should ascertain the following:

 

• how much was spent on the various road construction packages of GFIP;
• how much was spent on the e-toll infrastructure;
• why the costs escalated significantly from approved budgets in 2012; and
• how was National Treasury’s GFIP allocations to Sanral applied between 2012 and 2022.

 

OUTA noted that as one of the conditions attached to the Sanral’s bailout, the Department of Transport should submit a draft Road Funding Policy to National Treasury by 31 January 2023.  OUTA submitted that it would like to be sure that this policy will go out for public comment and that the public must be given sufficient time to comment and that those comments will be taken into account. OUTA requested the Standing and Select Committees on Appropriations to request the Portfolio Committee on Transport to encourage the Department of Transport to make this process as transparent as possible while drafting this policy, to ensure public buy-in on this crucial matter.

 

OUTA expressed concerns around the ongoing failure of SOEs as well as government’s continued failure to reassess this sector. It submitted that Eskom, will be a significant drain on the fiscus for years to come. It made reference to the 2022 MTBPS which stated that financial support for Eskom amounted to R224.6 billion from the period 2019/20 until 2025/26. This was likely to be more when National Treasury takes on a significant amount of Eskom’s debt. OUTA stated that whilst it agreed that Eskom needed support, it was distressing to see funds which should be used for improving quality of life having to be used to clean up the results of state capture. OUTA emphasised that government has repeatedly promised to overhaul the SOE sector but has to date done nothing. It submitted that it was time for the unnecessary SOEs to be shut down or amalgamated, and for much more stringent controls over them. OUTA was of the view that it was pointless for the government to continue to pour massive sums into Eskom while failing to address the key problem of the debt owed to it by customers, particularly delinquent municipalities.

 

1. Congress of South African Trade Unions

 

The Congress of South African Trade Unions (Cosatu) welcomed the proposed allocation of R23.7 billion to reduce the GFIP debt and submitted that a final solution was now needed to correct this policy mistake for good.  Cosatu was of the view that government has listened from struggling commuters who cannot afford to continuously bail out SOEs.

 

Cosatu also noted and welcomed the proposed allocation of R2.9 billion to repair Transnet’s infrastructure and locomotives. It submitted that more must be done by law enforcement agencies to protect South Africa’s railway infrastructure. Cosatu also commented that the failure by government to provide similar support to Metro Rail, where many lines have not been returned to service two years after the 2020 lockdown, was extremely disappointing.

 

Cosatu noted with appreciation, the proposed R3.6 billion allocation to Denel, especially for those workers who have not been paid their salaries for years.   It submitted that government needed to provide assurances that the money owed to the workers at Denel will now be paid.  Cosatu stated that it was a mark of great shame that those workers were left for more than 18 months without their salaries and that unions were forced to take Denel to court repeatedly in this regard.  It proposed that government must share the envisaged turnaround plan to restore Denel to its once world-renowned status and that this plan needed to include saving the employees’ jobs.

 

1. Public Service Accountability Monitor

 

The Public Service Accountability Monitor (PSAM) was concerned that bail-outs to state-owned entities (SOEs) continued despite very little evidence that these entities would become self-sufficient, or that conditions attached to bail-outs had any impact; as it continued to pose a threat to public finances; and made the following recommendations:

 

• The Committees should insist that the conditions applied to SOE bailouts (including those in the past few years) must be made available to the public, together with clear plans for less reliance by SOEs on government assistance.
• The Committees should urge that the National Treasury, the Department of Public Enterprises and other departments ensure transparency and timely reporting in the operations of SOEs who receive public funds.
• The Committees should request national departments responsible for SOEs to facilitate the opening of annual general meetings (AGMs) of SOEs to the public, and to make information on remuneration and incentives of board members and executives public.

 

1. Committee Findings and Observations

 

Having deliberated and considered all the submissions made by the above stakeholders on Special Appropriation Bill [B24-2022], the Standing Committee on Appropriations makes the following findings and observations:

 

1. The Committee notes and welcomes the Bill proposed allocation of R3.378 billion to Denel SOC Limited for the implementation of its business turnaround strategy. The Committee views Denel as not only critical to South Africa through the creation of jobs, but also through its vital role to South African National Defence Portfolio. The Committee also views Denel ass very crucial to the defence ecosystem through its ability to provide various defence equipment for the South African National Defence Force without whom it will have to rely on imports. This might compromise the sovereignty of the country.

 

1. The Committee notes and welcomes the Bill proposed allocation of R2.9 billion to Transnet SOC Limited for the acceleration of repairs and maintenance of locomotives. The Committee views Transnet as key to both the South African economy and the global supply chain. Therefore, the acceleration and speedy repairs of Transnet locomotives are critical to the economy, more so in the current climate of slow economic growth, coupled with high levels of unemployment.  

 

1. The Committee notes and welcomes the proposed reallocation of R23.736 billion to the South African National Roads Agency Limited for the redemption of government-guaranteed debt. It supports this proposed allocation that will ensure that Sanral does not default on its government-guaranteed debt, with adverse consequences to all government-guaranteed debt obligations.

 

1. The Committee notes the submission by the FFC that the maturity of SOCs debt payments coupled with poor functionality poses a substantial risk to the fiscus. The Committee views SOCs as very important and have a crucial role to play in ensuring that government achieves its primary objectives of reducing unemployment, poverty, and inequality.

 

 

1. The Committee notes and supports the FFC submission that cautions government against perpetuating a cycle of bailouts for poorly performing SOCs. Like the FFC, the Committee supports the call for National Treasury to ensure that stringent conditions are applied to the provision of this funding and ensures that all reports and conditions are made publicly available, in the interest of transparency and prudent public finance management.

 

1. The Committee notes and supports the National Treasury proposed conditions attached to the allocation to Sanral SOC Limited, Denel SOC Limited and Transnet SOC Limited. However, the Committee encourages National Treasury to strictly implement these conditions and be transparent and fair on their implementation. 

 

 

1. Recommendations

 

The Standing Committee on Appropriations, having deliberated and considered all the submissions made by various stakeholders on Special Appropriation Bill [B24 - 2022], recommends as follows:

 

1. That the Minister of Transport ensures that Sanral SOC Limited meets all the National Treasury conditions before disbursement of any portion of the proposed R23.736 bill proposed allocation and also ensures compliance by Sanral when these funds are utilised.

 

1. That the Minister of Public Enterprises ensures that the proposed R3.378 billion allocation to Denel SOC Limited is used only for the purpose specified on the Bill and ensures that Denel complies and meets all the National Treasury conditions.  Furthermore, the Minister must ensure that Denel provides regular quarterly reports to Parliament on progress made and challenges encountered in implementing its business turnaround strategy. 

 

1. That the Minister of Public Enterprises ensures that the proposed R2.9 billion allocation to Transnet SOC Limited is utilised only for the purpose as specified on the Bill and ensures that Transnet complies and meets all the National Treasury conditions. Furthermore, the Minister must ensure that Transnet provides regular quarterly reports to Parliament on progress made and challenges regarding the repairs and maintenance of its locomotives as envisaged by this proposed allocation. 

 

1. That the Minister of Finance ensures that National Treasury strictly implement all conditions on the proposed allocation to Sanral SOC Limited, Denel SOC Limited and Transnet SOC Limited. Furthermore, the Minister of Finance must ensure that National Treasury produces regular quarterly reports to Parliament on the implementation these conditions and the disbursement of the proposed allocations as envisaged on the Bill. 

 

1. Committee Recommendation on the Bill

 

The Standing Committee on Appropriations recommends that the National Assembly adopts the Special Appropriation Bill [B24-2022], without amendments.

 

1. Conclusion

 

The responses to the recommendations as set out in section 5 above by the relevant Executive Authorities must be sent to Parliament within 60 days of the adoption of this report by the National Assembly.

 

 

Report to be considered.