Department of Public Enterprises strategic plan: briefing

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Public Enterprises

19 March 2003
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Meeting Summary

A summary of this committee meeting is not yet available.

Meeting report

19 March 2003

Chairperson: Mr B.A.D Martins

Documents handed out:
Department Strategic Plan Powerpoint Presentation

The Minister briefed the Committee on the Department of Public Enterprises restructuring mandate. Achievements in 2002/2003 were outlined and planned activities for 2003/2004 were highlighted. MTEF budget allocations were discussed.

Briefing by Minister Jeff Radebe
Minister Jeff Radebe explained the Department of Public Enterprises (DPE) restructuring mandate by stating that the primary mandate of the DPE's was to restructure and transform state owned enterprises (SOE) so that they could fulfill the requirements of government's developmental agendas in an efficient and sustainable manner. SOE's which had been targetted for restructuring were the energy, telecommunications, defence, transport, forestry and the restructuring of non-strategic and non-core assets.

Among some of the achievements for 2002/2003 were:
-the financial model to evaluate SOE's financial performance had been developed and was at its implementation phase;
-shareholder compacts were in place with Transnet, Eskom and Denel; the protocol on Corporate Governance in the Public Sector had been revised
-the SOE Boards had been restructured in terms of government policy for board appointments; an audit of compliance with corporate governance in SOE's was completed
-the design of the SOE Database was now complete
-consistent policy for Affirmative Procurement within SOE's were finalised.

Some of the projects planned for 2003/2004 included
-finalization of the Remuneration Policy for SOE Boards; completion of an investment map for SOE's; research on socio-economic and other best practice and benchmarks for each SOE -finalization of post-restructuring proposals for governments shareholdings in SOE's
-ongoing training and development for current and potential directors
-implementation of the ESOP policy for SOE's
-implementation and monitoring of the affirmative procurement framework at an SOE level.
All these projects were designed to meet the objectives of the department in terms of its role as a shareholder in SOE's.

The MTEF allocations for year 2003/2004 were also discussed.

Please refer to presentation for further details.

Mr Komphela (ANC) stated that the committee was under the impression that the Aventura Resorts was doing fine, then suddenly the resorts dropped drastically in value. Perhaps the committee was given the wrong information. Could this have had an influence on confidence of market buyers of Aventura? What about the long contracts for Aventura? How did the Department handle this contractually? Another member also added a question enquiring as to the difficulties surrounding selling prices and liabilities of the resorts?

The Department's Director General, Dr Gounden, stated that in 1993 timeshare of Club Prive was sold to a range of people. The money generated from the selling of timeshare was used for operational expenses not the building up of assets. The current government was stuck with the problem. The current liability was estimated at 70 million. People were given a loan which had to be paid back to the state in ten years, however the state could buy the rights back, but it would cost 130 million. In the beginning it was a cash injection then the government had to intervene and give letters to comfort their funders. Seven Club Prive's had been sold already, however eight remained under the responsibility of the state. In the sale transaction, whoever acquired the asset also acquired the liability.

Dr Odendaal ( NNP ) expressed concern about Eskom tariff hikes being more than the inflation rate, and secondly enquired as to whether the Department would be incorporated into another department.

Minister Radebe stated that tariffs and Eskom was a misperception. The NER decided on this. State owned enterprises did not do things that had unintended consequences. It was carried out in a coherent manner.

Secondly, with regards as to whether the Department would be incorporated into another department, Minister Radebe stated that the Department was initially an office now it was a whole department. State owned enterprises were playing a bigger and bigger role as the Stellenbosch Conference and 'State of the Nation' address pointed out. There were no plans to incorporate this department into another.

Mr Komphela ( ANC ) stated that Club Prive was a huge burden and should be disposed of. He also posed the question of who would assume responsibility for Club Prive.

Minister Radebe stated that Club Prive was not a creation of the ANC, it was created by the previous government.

A member said that Telkom was going to retrench 20 000 workers which spoiled the initiative of restructuring. It was no good if restructuring was taking place, but people were leaving their jobs.

Minister Radebe said that with regards to Telkom and retrenching, there was no plan to retrench thousands of workers. The CEO of Telkom had expressed no such plans.

Mr Komphela ( ANC ) stated that in all these state owned enterprises greater interference should be taking place to enable government to stop the wrong doings. He pointed out the example whereby Eskom should have a more clearly defined responsibility as Eskom was not doing what it was supposed to do, therefore it needed intervention.

Minister Radebe said that Eskom had made many positive contributions. In the last financial year Eskom exceeded its targets for the rural areas. It was also emphasised that the government would ensure that state owned enterprises comply with developmental contributions to the state. State owned enterprises must align to the priorities of government. There should also be a tighter oversight of the department that SOE's comply to developmental motivations.

Dr Odendaal (NNP) wanted to clarify if the Minister and Director General awarded a contract to the Skerterville Press and not the company initially indicated. There had also been allegations of Skerterville Press being a front company for fundraising for political purposes.

Minister Radebe said that neither himself or the Director General instructed Transnet to give the tender to anyone. Transnet had apologised for this misunderstanding.

A member asked if retrenchments would occur due to restructuring with regards to the Aventura Resorts.

In all the Aventura Resort disposals it was specified that no one should lose their jobs. Even with the remianing eight resorts it had already been organised that no one will lose their jobs.

Mr Komphela (ANC) enquired as to what impact the budget programme would have on disadvantaged communities?
Minister Radebe stated that the department had various programmes to help communities through SOE's. Telkom donated computers to schools. Transnet organized a train to disadvantaged areas transporting doctors and various other medical professionals in order to treat the people who were in need of attention. State owned enterprises created a lot of jobs and encouraged black economic empowerment. State owned enterprises aligned with departments of provincial and local governments on various developmental initiatives.

Meeting was adjourned.


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