Report of Select Committee on Labour and Public Enterprises on study tour to Germany, dated 28 May 2003:
The Select Committee on Labour and Public Enterprises, having undertaken a study tour to Germany from 22 to 25 April 2003, reports as follows:
Table of Contents
Page Topic
1 A: Terms of Reference
2 B: Background
2 C: Logistical arrangements
3 D: Findings
24 E: Recommendations
25 F: Concluding remarks
25 G: Abbreviations
A. TERMS OF REFERENCE
The aim of the study tour was:
· To interact with Government officials, policy-makers and role-players that have contributed to or participated in the spheres of communications, labour and public enterprises. These interactions were expected to provide the delegation with valuable insight into how these strategies could be applied to South Africa.
· To allow the delegation to gain further insight into the partnerships between government, civil society, organised labour and other role-players that have facilitated the successful implementation of privatisation and restructuring strategies.
· To get a clear understanding of the policy and legislative framework that underpins the privatisation and restructuring programmes with regard to the public enterprises sector.
· To meet with labour and non-governmental organisations in order to learn how these strategies impacted on the labour markets of Germany.
To reach the objectives, the delegation requested to meet with the following stakeholders in Germany:
· Relevant government departments/ministries.
· Regulatory bodies.
· Industry forums.
It was agreed that the delegation, on return, would submit a report to the NCOP, which aims to:
· Highlight the successful strategies in Germany, which could be beneficial to South Africa.
· Make recommendations as to how some of these strategies or programmes could be adopted and possibly implemented.
B. BACKGROUND
South Africa’s public enterprises are undergoing privatisation processes in varying degrees. The privatisation and restructuring process will benefit all South Africans by introducing competition between businesses, by ensuring a provision of services that are of a high quality and reasonably priced and by strengthening economic development and black economic empowerment.
The telecommunications sector has also been going through a process of liberalisation, with the introduction of three cellular operators and the envisaged introduction of a second national operator in due course. State-owned entities in the telecommunications sector are also being restructured to accelerate the penetration of services into under-serviced communities and streamline the regulatory framework.
The Government is also considering various restructuring strategies of state-owned enterprises in such a way so as to support job creation.
C. LOGISTICAL ARRANGEMENTS
The delegation consisted of the following persons:
Ms C Nkuna (Chairperson)
Ms M P Themba
Mr T S Setona
Mr F Adams
Mr L Lever
Ms G Abdullatief (Committee Secretary).
The South African Embassy in Berlin assisted in arranging the meetings and drafting the programme based on the delegation’s terms of reference (see Annexure A).
D. FINDINGS
1. Meeting with Mr Josef Hoffmann, Secretary of the Conservation and Reactor Safety Committee in the Bundesrat
The Bundesrat in the Federal Republic of Germany is the equivalent of the National Council of Provinces (NCOP) in the South African Parliament. Its operations and functions are also similar to that of the NCOP.
The term ‘Federalism’ means collective statehood, the unification of several individual (constituent) states to form an overall state (union). The overall state is responsible for those matters, which must be dealt with in a uniform manner in the interests of the people. Other matters are determined by the constituent states. In the Federal Republic of Germany, therefore, both the Federal Government and the states have their own prerogatives and their own responsibilities.
a) The general meeting
The general meeting of the Bundesrat is the plenary session. Its aim is to pass resolutions. The Bundesrat has 69 ordinary members and, depending on the sizes of the state governments, about 130 deputy members. The deputy members have exactly the same rights and obligations as ordinary members.
Much of its work is thus carried out in the state capitals rather than at the Bundesrat itself.
b) Deciding on bills requiring Bundesrat consent ("consent bills")
Laws affecting the interests of the states cannot come into force unless the Bundesrat expressly consents to them (hence the term consent bills). The Bundestag cannot override rejection. All the Bundestag and the Federal Government can do, is approach the Mediation Committee, whose function is quite similar to that of the South African model, in an attempt to reach agreement. In practice consent bills make up half of all federal legislation. If a consent bill is to reach the statute book, the Bundestag and Bundesrat simply have to agree.
Laws requiring the consent of the Bundesrat:
· Bills that would change the constitution.
· Bills affecting state finances.
· Bills that affect the administrative jurisdiction of the states.
c) Stating its views on government bills
In the Federal Republic of Germany the origin of most legislation is a bill proposed by the Federal Government. The Basic Law provides that the Bundesrat has the right of "first say" on these government bills. It is entitled to "state its views" on such draft legislation within six weeks or, in certain cases, within three to nine weeks. The Bundesrat always exercises this right in respect of a first reading. It subjects the draft legislation to technical, financial and political analysis, as well as considering it in terms of constitutional law.
Amendments, additions or alternatives are often proposed, but only rarely is draft legislation rejected completely. At this stage of the legislative process the view of the Bundesrat is not yet binding on the Federal Government, which responds by making its own counter-observations in writing. The bill, the Bundesrat's view and the government's counter-observations are sent to the Bundestag, which decides whether it wishes to adopt the bill with or without the amendments proposed by the Bundesrat, and then passes it into law.
d) Involvement in objections to laws passed by the Bundestag ("Objection Bills")
With objection bills the Bundesrat can only enter an objection after mediation proceedings have been completed, and the Bundestag may override this.
e) Originating legislation of its own
The Bundesrat has the right to introduce bills of its own. Once the Bundesrat has passed a bill, it is submitted to the Bundestag by the Federal Government for comment within six weeks. The Federal Government is required to state its view on the bill. The Bundestag is then free to reject the bill if it sees fit.
f) Involvement in Foreign Affairs
In certain cases treaties under international law, which regulate the political relations of the Federal Government or affect federal legislation require the consent of the Bundesrat. This means that treaty laws (the so-called ratification laws) can often come into force only with the co-operation of the Bundesrat. All the major treaties relating to the European Union, therefore, require the consent of the Bundesrat.
g) Plenary sessions
The Bundesrat usually meets in public plenary session on Fridays at 09:30 at three-weekly intervals. The agenda, which often contains more than 50 items is processed in a rapid and concentrated manner. The President is usually in a position to close the meeting after three to four hours.
h) Voting
Each state must cast its number of votes. In a plenary session of the Bundesrat only one member votes on behalf of each state, casting all the state's votes. Adopting a neutral posture by abstaining is not possible in the Bundesrat. Bundesrat resolutions require an absolute majority of the total number of votes, or a two-thirds majority where changes to the constitution are required. To abstain is the same as voting against something. There are no secret ballots in the Bundesrat: Voting is conducted by a show of hands. The President of the Bundesrat simply declares that a resolution has been passed or lost without actually counting the votes. For constitutional changes and other particularly important resolutions voting is conducted by "calling the roll" of the states.
i) The Members
Bundesrat membership is confined to voting members of a state government. The members are generally the state premier and his ministers or, in the case of the city states of Berlin, Hamburg and Bremen, the mayors and senators.
j) The Committees
The heart of parliamentary activity is work done by committees. The Bundesrat has 16 committees. Their division of responsibilities essentially coincides with that of the federal ministries.
k) President and Presidium
The President and the three vice-presidents of the Bundesrat constitute the Presidium. The presidency of the Bundesrat, rotates annually on 1 November. A state premier is elected president. The order of the regions is determined by the size of their population.
The main task of the President is to convene and conduct plenary sessions of the Bundesrat. He is the legal representative of the Federal Republic of Germany in all Bundesrat affairs. If the Federal President is unable to perform his or her duties, the President of the Bundesrat is able to stand in.
l) The Chamber of Europe
The Basic Law provides that the Bundesrat may constitute a Chamber of Europe for EU affairs, and the Bundesrat has indeed exercised that right. This forum is used to discuss urgent and confidential issues affecting the European Union. The Chamber of Europe only becomes active if the President of the Bundesrat expressly refers a matter to it.
m) Time Limits
The dates of plenary sessions are set in advance for each calendar year. Some 13 sessions are held at three-wek intervals. Six weeks or, in exceptional cases, three to nine weeks before each plenary session the Bundesrat receives submissions from the Federal Government. Submissions from the Bundestag arrive three weeks before the session and are immediately passed to the relevant committees. The committees must conclude their deliberations two weeks before the plenary session. Even before the committee meeting, the attitudes of the states must be discussed and agreed among the various state ministries.
n) Other rights and responsibilities
· The Bundesrat elects half the members of the Federal Constitutional Court. It may state its views on proceedings before the Constitutional Court and initiate such proceedings itself.
· The Bundesrat appoints representatives to the administrative board of the Federal Labour Office and to other public bodies.
· It has the right to propose and approve candidates for a number of offices (e.g. Federal Prosecutor and presidents of state central banks).
· If the Federal Chancellor no longer has the confidence of the Bundestag, the Federal Government may enact laws with the consent of the Bundesrat.
· The Bundesrat also has supervisory responsibilities in the event of states of emergency and natural disasters.
2. Meeting with Ms N Heizmann, Policy and Government Affairs: Deutsche Telekom AG (DT)
Deutsche Telekom AG is represented in 65 countries on all six continents, in all major markets, and with about a third of its employees working outside Germany.
DT offers integrated solutions from its core business areas, namely, mobile communications (T-Mobile), Internet (T-Online), fixed-line networks (T-Com) and system (T-Systems).
a) Human Resources
DT’s mid-term human resources planning is aimed at a marked reduction in personnel, mainly in Germany and particularly within the fixed-line sector by the end of 2005. Standard personnel restructuring measures such as retrenchment payments and early retirement plans have already been largely depleted. DT aims to prioritise the placement of employees from areas with surplus personnel to other areas having vacant positions within and outside the company group.
In June 2002, DT and the German trade union, ver.di accepted a tariff agreement centered on personnel rationalisation protection and job guarantees. This tariff agreement defined protection guidelines in the case of job cuts due to rationalisation for contract employees and trainees of DT.
The centre-piece of this tariff agreement was the establishment of the so-called Personnel Service Agency (PSA). The main objective of this unit was to manage employees in Germany whose positions were affected by rationalisation, to support them and after any necessary retraining to place them in vacant positions within or outside the DT group.
b) Traineeships
By the end of 2002, the total number of trainees and apprentices reached 11 709, which represented an increase of 19 % over the previous year. In 2002 alone, DT provided about 4 000 new traineeships, which was an increase of 500 over 2001. In 2003, DT will provide 3 840 new traineeships as well as 160 student internships in the company-owned college in Leipzig.
DT participates in more than 50 national and international initiatives intended to bring about lasting change. The company launched its own public private partnership programme to help speed up Germany's transformation in becoming an information society.
c) Empowerment programmes
In Germany, DT offered women and senior citizens courses tailored to their specific needs. In 2002, 100 000 people took part in Internet seminars sponsored by DT, and over a quarter of those were over 50 years old. The "Senior citizens on the Internet" seminars took place in 90 towns and cities across Germany.
"Women on the Internet" courses were also very popular, and 22 000 women participated in these seminars in 2002 alone. In 2003, the range of courses was extended to 2 300 beginners' courses and 700 practical courses.
The EQUAL program is a European Union initiative aimed at developing innovative concepts to reduce unemployment and to increase employment and social integration of the disadvantaged. DT is participating in this program through its "Company culture - Diversity" project.
d) The privatisation of Deutsche Telekom AG through "Posts and Telecommunications Reforms I, II and III"
i. Posts and Telecommunications Reform I (1989)
The law concerning the Structure of Posts and Telecommunications marked the start of the liberalisation of the telecommunications market in the Federal Republic of Germany. The Deutsche Bundespost was divided into three businesses, namely, Deutsche Telekom, Deutsche Postbank and Deutsche Postdienst. At first the regulatory functions remained with the Federal Ministry for Posts and Telecommunications. At the network level DT retained its monopoly, but private providers could henceforth also carry out all remaining services.
The first posts and telecommunications reform laid the groundwork for privatisation and deregulation of the monopoly.
ii. Posts and telecommunications reform II (1994)
With the second posts and telecommunications reform, the three ex-Deutsche Bundespost companies were converted into stock corporations under German law. Thereafter postal and telecommunications services were provided throughout the country as private business activities by the former Deutsche Bundespost companies and by private competitors. This required a change to the Basic Law.
The Federal Government remained responsible for regulatory functions pertaining to posts and telecommunications. The regulatory functions included ensuring a nationwide, adequate and suitable service for users and were extended to matters relating to standardisation, frequency regulation, the issuing of licenses for radio equipment, and precautions in the case of a crisis or disaster.
The second posts and telecommunications reform was restricted to privatisation and did not change the structure of competition at all.
The posts and telecommunications reform was the subject of public controversy: The key points of contention included the question of pension payments to be made by the three ex-Bundespost companies, which amounted to about 50 billion euros.
iii. Posts and telecommunications reform III (1996)
The third posts and telecommunications reform was also subject to lively public debate. Contentious issues included the requirement for a universal service. This reform also included the setting up of an independent regulatory authority.
Competition with the main fixed line operator was introduced in phases. In the first phase competition was allowed in long-distance overseas calls. In the next phase competition was allowed in internal long-distance calls, and finally competition was allowed with regard to local calls.
iv. Current legal framework for the telecommunications industry
The current Telecommunications Act has regulated market access for telecommunications since 1998. The key areas of the Act, passed in July 1996, included the following regulations:
· Licensing: The regulatory authority undertakes control duties.
· Universal service: Only the dominant provider is obligated to provide basic services to all customers throughout the country at affordable prices.
· Price control: Dominant providers must have their rates approved by the regulatory authority.
· Interconnection: The competing companies must allow switched connections to competitors’ networks.
· Call interception: Telecommunications companies must give security agencies information free of charge.
At the moment the Telecommunications Act is being revised to comply with EU requirements. The legal framework must be adapted to the liberalised market and amended by the end of this year.
3. Meeting with Mr M Ortlieb, Deputy Head of Section: Privatisation Policy, Federal Ministry of Economics and Labour
a) Tasks and Goals of the Ministry of Economics and Labour
The central concern of economic policy and therefore of the Federal Ministry of Economics and Labour is to lay the foundations for economic prosperity in Germany, spread broadly throughout its population. Derived from this overriding interest are various objectives that act as guidelines for economic policy measures. These included:
· A high level of employment.
· Sustained opportunities for the German economy to grow and compete with other economies.
· Social security.
· Promoting new technologies and innovation to maintain the economy's competitiveness.
· Linking economic and ecological goals.
· Intensifying the worldwide division of labour and a free system of world trade.
· Economic assistance to Germany's new states.
At German reunification, these objectives took on a new dimension in light of the new and unusual challenges to be faced. Important goals, for example in the field of social security and price stability, have largely been accomplished. In many respects, however, the economic reality in eastern Germany is far from reaching levels and conditions that would be desirable for Germany as a whole. As long as this situation persists, the pursuit of economic policy goals such as reliable social protection and the preservation of the natural environment must continue.
The Federal Ministry of Economics and Labour is confronted by the ongoing task of shaping the conditions for economic activity on the basis of personal and entrepreneurial freedom, competition, and stability. The Ministry's legislative, administrative, and co-ordinating functions in areas such as competition policy, regional policy, small and mid-size business policy, energy policy, and external economic policy are geared to this task.
A policy oriented to the principles of the social market economy has proven to be effective in difficult phases of economic development. It has helped Germany to overcome rapidly the recent worldwide recession. A forward-looking economic policy must ensure sustained conditions for more employment in Germany. Of vital importance in this context is support for and stabilisation of the economic recovery in Germany's new states. Despite the considerable successes achieved to date, an important part of the recovery process still lies ahead.
b) The postal reforms of 1989 and 1994
Until 1989, the postal sector in Germany, like in most countries worldwide, had been organised as a "classic" posts and telecommunications administration. The Federal Ministry of Posts and Telecommunications acted as "head office" for all activities. The Minister assumed both political and entrepreneurial responsibilities.
In the course of the postal reform of 1989 (postal reform I), this organisation for the first time underwent a fundamental change. Deutsche Bundespost was divided into three independent companies (Deutsche Bundespost Telekom, Deutsche Bundespost Postdiens and Deutsche Bundespost Postbank). A managing board headed these companies.
The Federal Ministry of Posts and Telecommunications continued to fulfill the political and sovereign tasks of the former Deutsche Bundespost, such as the preparation of Acts and Ordinances, monitoring certain corporate decisions to the extent that it was necessary to guarantee the nation-wide provision of postal and telecommunications services and fair competition (regulation).
In a second step (postal reform II), the postal companies were transformed into stock companies as of 1 January 1995, at first with the German government as the sole shareholder. Since 20 November 2000 Deutsche Post AG held a 100% interest of Deutsche Postbank AG and since 1 January 1999 it was listed on the stock exchange.
The Federal Ministry of Posts and Telecommunications was dissolved as of 31 December 1997. Since then the Federal Ministry of Economics and Technology has been responsible for the postal sector. The Regulatory Authority for Posts and Telecommunications (RegTP) was an authority within the scope of the Federal Ministry of Economics and Technology. As regards State ownership in Deutsche Post AG, the Federal Ministry of Finance was in charge of relevant matters. A policy of gradual market opening was pursued in line with the structural reforms.
Initially, liberalisation policy focused on the telecommunications markets (market opening in the field of mobile communications and competition in the field of terminal equipment), but in the postal sector individual niche markets were opened to competition. This policy was aimed at guaranteeing more efficient postal services in the interest of customers and was geared to their needs through a competitive approach.
i. The Postal Act
The Postal Act, which came into effect on 1 January 1998, stated for the first time that after a transitional period all postal services had to be offered under competitive conditions. In order to facilitate the transition of Deutsche Post AG from a public administration to a modern service provider, the Postal Act provided for a statutory exclusive licence for Deutsche Post AG, which covered about 75% of letter service turnover. Originally, the exclusive licence would have expired on 31 December 2002. In the interest of a harmonised approach to liberalising the postal sector within the European Union, the exclusive licence was extended by 5 years in 2001.
ii. Licensing
Licensing in the postal sector is the responsibility of the RegTP. By the end of 2001, it had granted licences to more than 1000 companies. In accordance with the Postal Act, services distinct from universal services having special features and higher quality are not subject to the exclusive licence of Deutsche Post AG and are, therefore, open to competition.
For the regulatory authority an important criterion for the assessment of higher quality is the same-day delivery of consignments.
iii. Universal service
In Germany the provision of postal services to the population is of great political significance. In the course of the postal reform II, legislators even incorporated this objective in the German constitution:
Pursuant to Article 87 f of the Basic Law, the state shall ensure the availability of adequate and appropriate postal and telecommunications services throughout the federal territory.
The Universal Service Ordinance enacted in 1999 on the basis of the Postal Act sets out the content and scope of the basic postal services stipulated in the Basic Law.
The second amendment to the Postal Act of 30 January 2002 stipulates that Deutsche Post AG is directly obliged to provide universal services during the time of validity of the exclusive licence.
iv. Rates regulation
The rates regulation is one of the cornerstones of the competition-based legal framework of the Postal Act. It makes possible the control of the price policies of market-dominating providers without unreasonably restricting their scope of action. The rates regulation plays a key role especially in the transitional period from monopolistic to competition-based market structures. The RegTP is in charge of rates regulation.
Companies that have a market-dominating position in the licenced area of the postal system are subject to prior authorisation with respect to final user rates. This is to guarantee that the companies do not abuse their market positions by fixing excessive prices. On the other hand, it should prevent tariffs from falling too low and discrimination in order to avoid restraints for the emerging competition.
All other tariffs for postal services (not licensed), for example the conveyance of parcels and courier services that are offered by companies with a market-dominating position, are not subject to prior authorisation, but the RegTP may review them. The companies concerned are obliged to submit to the regulatory authority the documents that are necessary for reviews (especially information on costs).
c) Results of the reform policy
In the last few years, Deutsche Post AG efficiency has risen considerably. At the same time, competition offered new opportunities to private firms. Today competition is intensive, especially in the courier, express, parcel (CEP) markets, which resulted in a number of new and innovative services. In respect of the conveyance of letters, the situation is different. Competition is possible only in niche markets due to the exclusive licence. Therefore, the market share of other private companies in the licenced field is less than 1%. Turnover in the licenced area amounted to roughly DM 21 billion in 2000. In spite of growing competition, Deutsche Post AG recorded a rise in turnover in the field of conveyance of letters in the past few years.
d) The European environment
Within the EU Germany was one of the countries, which advocated without reservation that markets be opened further and that exclusive rights in the letter conveyance sector be limited over time. The German government will proceed with the opening of the national market in line with development at the European level. In the interest of consistency, Deutsche Post AG's statutory exclusive licence had to be extended, as the expiry of the exclusive licences would have resulted in a one-sided opening of the German postal market.
4. Meeting with Mr Rudolf Mertens, Director International Co-ordination, and Ms Cäcilie Engelmeyer, Legal Matters: Die Bahn AG (DB)
a) The railway reform
The following measures were adopted to transform the state-owned Bundesbahn and Reichsbahn into a market-conforming company:
· Strict separation of state and business tasks to ensure entrepreneurial independence and the strengthening of the company’s competitive capability.
· The merger of the former special assets of the Federal Government, namely the ‘Deutsche Bundesbahn’ and the ‘Deutsche Reichsbahn’, to form the ‘Federal Railway Property Fund’.
· Hiving-off and transformation of the business part of the ‘Federal Railway Property’ into a public company (Deutsche Bahn AG) acting on its own responsibility in the transport market and therefore liberating the railway from political directives not conforming to the market.
· Reorganisation of Deutsche Bahn AG into at least four divisions, free to operate in the transport market on their own responsibility (Track Infrastructure, Local Passenger Traffic, Long Distance Passenger Traffic, and Freight Traffic) with their own profit and loss accounts.
· Hiving-off and conversion of the divisions so formed into independent public limited companies in three years at the earliest and five at the latest, under the umbrella of DB Holding.
· An option to be explored later is the dissolution of the holding and formation of completely separate public limited companies for Track Infrastructure, Local Passenger Traffic, Long-Distance Passenger Traffic, and Freight Traffic.
· Opening the rail network to outside companies.
· Transfer of functional and financial responsibility for public rail-bound local passenger traffic to the federal states. As of 1 December 1996, the local transport was regionalised.
· Discharging Deutsche Bahn AG of its old debt and assumption of the old debt by the Federal Railway Property Fund.
· The Federal Government to take over the additional burden on Deutsche Bahn AG caused by the productivity lag of the former Deutsche Reichsbahn.
· The Federal Government to take over the investment backlog of the former Deutsche Reichsbahn.
b) Implementation of railway reform
i. The first stage
The new company, Deutsche Bahn, accomplished the first stage of the railway reform over a period of five years. The benefit of this was that the first stage of the railway reform was used to prepare the target structure legally specified in the second stage, which stipulates a group consisting of independent public limited companies with a holding company at their head. These activities included:
· The adaptation of structures and business processes, as well as manpower levels after the merger of the former Bundesbahn and Reichsbahn.
· The initial orientation of staff to the new corporate goals in a training scheme involving some 72 000 employees, reported by the press as being the largest in Europe’s economic history.
· Permanent work on the implementation of the goals of the railway reform (more traffic onto rail). In a work programme covering more than 100 items, procedures were improved and company efficiency increased.
· The establishment of the corporate divisions stipulated in the DB foundation statutes.
ii. Results of stage 1 of the railway reform
The first stage of the railway reform made the customer the focal point of all activities.
The railway’s management board no longer used macro-economic criteria geared to the welfare of the Federal Republic of Germany, but rather focused on costs. It aimed at generating profits to enable the company to operate in the market and serve the customer in a way that was economically viable.
Co-operation with other transport operators was put to much greater use in order to design services that conformed as closely as possible to the market. An extensive programme of investments supported this. Therefore, between 1994 and 1999, the group invested a total of €45 billion. Average annual investments by DB over this period amounted to €7.5 billion, while the comparable average amount invested by the two Federal Special Funds, namely the Bundesbahn and Reichsbahn, over the last 10 years amounted to €3.97 billion.
iii. The Second Stage (target structure)
The second stage of the railway reform implemented the target structure prepared in the first stage and was determined essentially in terms of company law.
After this, the DB company was organised under corporate law as a multi-level group under the management of a holding company. DB was the parent company of the group. The company and the hived-off public limited companies, as well as further affiliated companies, have direct and indirect participating interests in other companies.
c) The reason for railway reform
While DB was a state-run enterprise:
· There were staff costs.
· It was bound by public service and budgetary legislation.
· It was experiencing political intervention by central and regional governments.
· There was a mixing up of sovereign and business functions.
· The capital expenditure on infrastructure was neglected in favour of other budgetary items.
· There was lack of customer and market focus.
· There was a lack of transparency of its own economic processes.
d) Railway Reform: Measures and Objectives
· The old Bundesbahn and Reichsbahn debt (approx. DM 67 billion) was written off.
· The assets were re-evaluated.
· A transition was made to private legal status (AG).
· The federal government assumed the burdens inherited in the course of the German unification until 2002.
· The federal government financed network development.
· The federal government retained responsibility for infrastructure.
· DB AG was released from social inclusion requirements (‘regionalisation’ of local transport).
· Responsibility for long-distance services was transferred to the railway.
· DB adopted private business structures.
· Competitive conditions for the railway were improved and a level playing field was created with other modes of transport.
· DB underwent financial restructuring.
· The burden on the public purse was made lighter.
· Greater participation by DB in growth of traffic was anticipated nationally and internationally.
· Environmentally compatible mobility was ensured.
e) Successes caused by railway reform
· The Government Railway Commission calculated that, without the railway reform, the burden of the taxpayer for the period 1994 to 2001 would total DM 431 billion.
· The model calculation for the railway reform indicated that reform would reduce the burden to DM 341 million.
· The burden on the federal budget was actually DM 280 billion, which was DM 151 billion less than if the railway had not been reformed and DM 60 billion less than forecast in model calculations.
· Productivity increases since the railway reform began in 1994 were equivalent to roughly DM 1 billion per year.
· By 2001 local passenger traffic was performing 34% better, long-distance passenger traffic 6% better and freight traffic 15% better than in 1994.
5. Meeting with Dr Jűrgen Siewert, ‘Ministerialdirigent’, Dr Dieter Knoll: Head of Division, and Dr Eberhardt Rolle, ‘Ministerialdirektor’ from the Federal Ministry of Finance (BMF)
a) Causes for privatisation
In past years privatisation activities in Germany were largely driven by factors such as:
· The continuation of a general trend toward reducing the role of the state in the economy.
· Budgetary constraints.
· A need to attract investment.
· A combination of technological change, liberalisation and globalisation of product and financial markets.
b) Federal Republic of Germany - the philosophy of privatisation
The "privatisation model" in the German social market economy covers not only the DT IPO as one of the biggest IPOs in world history, but also the transformation of a state economy of what was formerly the German Democratic Republic into a market economy, including the privatisation of about 16 000 SOEs and smaller business entities.
The Federal Republic of Germany started with a social market economy in 1949. Since then there have been no attempts to nationalise companies for public purposes or in the public interest as was the case in France and Great Britain. As a result of many years of consistent privatisation policy in Germany, the number of public sector undertakings has been reduced from about 1 000 in 1982 to about 375 in 2000 (about 128 companies are direct holdings).
After reunification in 1989 Germany gained experience in transforming a centrally planned system into a free-market economy. As a result, the TREUHANDANSTALT, which was founded in 1990 and closed in 1994, privatised about 16 000 companies and other entities and obtained guarantees for DM 210 billion in investments and 1,5 million employees.
c) Privatisation of State-owned enterprises (SOEs)
With the privatisation of SOEs the German administration intended to secure the future of a company and its employees in competition with other private companies. Through privatisation the company should be able to expand its business, secure its independence, broaden the capital basis and therefore participate in future market development. After privatisation the assets of a former monopoly rose in value while avoiding privatisation will cause its assets to depreciate in value.
In particular, wherever possible, the German privatisation concept prefers the "going public model" as this:
· Strengthens the capital market and the share-acceptance in Germany.
· Provides share-offers to employees of SOEs.
d) Privatisation and labour market
Privatisation is of special relevance for the labour market. In many cases the main reason for inefficiency was because these companies had just too many employees. Privatisation caused a progressive reduction in the number of employees. This must not be an additional burden for the labour market where older employees retire partly due to their age and partly by giving them a severance package, and the privatised companies do not hire younger employees.
For privatisation to be a success the administration as well as the privately - managed SOE must pay special attention to this problem. As far as possible both should try to avoid dismissing employees while restructuring the company. In the long run there is a tendency for privatised companies, including their affiliated companies abroad, to employ more people.
e) Principles of privatisation for the administration
Private acitivity takes priority over public activity, that is it must be ensured that the purpose intended by the Federal Government cannot be achieved better or more economically by any other means. Section 7 of the Federal Budget Code (BHO) requires a permanent review to which extent public functions and commercial action for public purposes can be carried out by outsourcing or privatisation.
Section 65 of the BHO states that if the "important public interest" no longer exists or the function can be fulfilled just as effectively or better by a private-sector enterprise, the Federal Government should privatise the SOE.
f) The role of the Federal Ministry of Finance
As the government department in charge of the budget, the Federal Ministry of Finance has central responsibility for the administration of SOEs and their privatisation:
· The BMF draws up the annual report on government holdings.
· The BMF issues guidelines for appointments to supervisory boards.
· The BMF provides the central privatisation know-how among government departments. The operative phase of privatisation takes place in close collaboration between the specialist government departments as owners and the BMF as a privatisation know-how provider.
· There are about 100 public servants in the BMF responsible for all aspects of the privatisation of SOEs.
g) Restructuring and Privatisation
Most SOEs in Germany had been administrative units or monopolies before they had been transformed into a private-law company. Whether there is already a plan or intention to privatise a company or not, in most cases the former heads will be replaced by professional management from privately-owned companies. Their first job is to raise efficiency and to make their company as competitive as compared to privately-owned enterprises. This automatically included an internal process of restructuring which the specialist departments as owners of the SOEs attend.
If privatisation and going public is intended or necessary, the SOE must be as competitive as private companies are. So from an early stage the process of restructuring has to be initiated and translated into action. This process of restructuring can last for quite a long time.
6. Meeting with Mr J Sander, Vice-president, Mr H W Gűnther, International Affairs, and Mr M Heringer, Director: International Affairs, Regulatory Authority for Telecommunications and Posts (RegTP)
The former monopoly operators in the postal and telecommunications markets, Deutsche Post AG and Deutsche Telekom AG, will be able to maintain their dominant position long after market liberalisation. The core task of state regulation must, therefore, be to keep a check on each dominant provider's position in the market and to create a level playing field to protect new entrants. The federal government's regulatory approach goes beyond merely policing anti-competitive behaviour. The tasks associated with such regulation are too specialised to be fulfilled under general competition law. Therefore, there is a need for sector-specific regulation, at least until effective competition is established in the postal and telecommunications markets.
A structurally separate authority with the maximum possible independence is needed to perform these tasks. The RegTP was established on 1 August 1996, as prescribed by the Telecommunications Act. It is a higher federal authority within the scope of business of the Federal Ministry of Economics and Labour, and has its headquarters in Bonn.
The RegTP is tasked with promoting the development of the postal and telecommunications markets through liberalisation and deregulation. It is equipped with effective procedures and instruments with which to enforce the regulatory aims. These include information and investigative rights as well as a set of sanctions.
· Its Ruling Chambers makes the regulatory authority’s determinations.
· The companies directly concerned take part in the Ruling Chamber proceedings.
· Representatives of business circles affected may be summoned to attend proceedings.
· The determinations are underpinned by the Telecommunications Act and the Postal Act, and are subject to judicial review.
· The determinations cannot be overruled by the supervisory authority, namely the Economics and Labour Ministry, in the event of legal action. Under the provisions of the Restraints of Competition Act, there is no scope for ministerial decisions.
· There are no appeal proceedings.
Actions against determinations may be brought directly before the administrative courts, but do not automatically have a suspending effect.
a) Functions of the RegTP
The RegTP's main functions under the Telecommunications Act ("TKG") and the Postal Act (PostG) are, through liberalisation and deregulation:
§ To safeguard the interests of telecommunications, postal and radio communications users and maintain telecommunications and postal secrecy.
§ To ensure fair and effective competition, in rural as well as urban areas, in the markets.
· To ensure provision throughout Germany of basic telecommunications and postal services (universal services) at affordable prices.
· To promote telecommunications.
· To ensure efficient, interference-free use of frequencies while accommodating broadcasting requirements.
· To protect public safety interests.
In addition the RegTPs, apart from regulation duties, is responsible for:
· Licence awards.
· The provision of input for standardisation solutions.
· Frequency management and number administration.
· Tracing and eliminating radio frequency interference.
· Market watch.
· Consumer advice, especially on new regulations and their implications.
Its regional offices act as local contact points, therefore giving the RegTP a nation-wide presence that benefits consumers and the industry alike.
b) Postal Regulation
The German postal market is currently worth more than DM 40 billion. Some parts of the market were already open to competition before the current Postal Act came into effect. By 1997, for example, the courier, express and parcel delivery market alone had grown to over DM 16 billion. The Act extended competition to other parts, and provided the scope for a fully liberalised market by abolishing Deutsche Post AG's restricted statutory monopoly from the beginning of 2003.
c) Human Resources
The RegTP's highly inter-disciplinary field of activity required experts from a wide range of backgrounds such as law, economics, engineering, mathematics, information technology, and administration. The RegTP has around 2 260 members of staff whose posts are taken from four civil service grades (senior, upper, medium, basic). This is also applicable to the roughtly 230 non-civil servants. In 2002, the RegTP again provided places for trainees. In total, 16 young office communication trainees took advantage of this opportunity.
d) Universal Services in Telecommunications
Under sections 18 and 19 of the TKG, the RegTP only commits an enterprise to provide a universal service if gaps in supply are identified in the relevant product market. To date, this has not been the case. DT AG is required by section 97(1) of the TKG to notify the RegTP, even after abolition of the voice telephony monopoly, of any changes in the extent to which or in the terms under which it provides universal services one year before they are introduced.
Therefore the RegTP's activity in respect of universal service is in line with the European Union’s universal service philosophy to let market forces work and to intervene solely in the event of a deficit becoming apparent. The RegTP was in many instances able to help customers in stating their case for network access (telephone line) and for entry in a public directory.
Further RegTP activities included the service "Provision of public telephones". In light of the full fixed-line coverage and more than 57 million mobile users, there was agreement between DT, local authority associations and the RegTP to adapt to the changed usage patterns and to the extremely low demand for public telephones by introducing a new structural concept to ensure coverage even at uneconomic locations. In such locations it was planned to retain the functionality of the telephones, but to do without added features using so-called basic telephones. DT had assured the RegTP it intended to continue to fulfil its mandate of providing public telephones and planned to carry out a pilot project, in order to continue serving sparsely frequented locations across the country in a cost-effective manner.
e) Interconnection
Setting up telephone calls often involved the participation of more than one network operator. The basis for this co-operation is an interconnection agreement. At the end of 2002, 81 competitors had signed such an agreement with DT. Competitors also co-operated with one another to lessen their dependence on DT.
f) Number of providers/service trends
At the end of 2002, 2 100 providers had registered with the RegTP. A total of 496 companies held an unrestricted network and/or voice telephony licence. The number of licence holders continued to grow in 2002. A total of 250 companies provided voice services in the fixed network, 100 of these offered call-by-call, pre-selection and direct access over their own core and access networks. The others operated purely as resellers, buying call minutes from the network operators and marketing and billing these in their own name.
All this has added to the diversity in the German voice and value-added services market.
g) Growth of competition in the local access market
At the end of 2002 the number of telephone channels in Germany totalled
53 716 million. This resulted from 29 154 million analogue lines, which included public telephones; 10 451 million ISDN basic rate lines and 122 000 primary rate ISDN lines. There were also 3 195 million DSL lines in operation.
Regionally, the competitors enjoyed different degrees of success in increasing their share of the telephone line market. In northern Germany in particular, the national average of 4,4 % was often exceeded. A mix of wholesale products from DT, facilities of their own, large-scale marketing strategies and competitive pricing made it possible for regional telephone companies to attract business and residential customers alike and to achieve success at regional level.
E. RECOMMENDATIONS
1. The dates of plenary sessions in the Bundesrat are set in advance for each calendar year. The Committee recommends that the NCOP look into adopting a similar programme. This would entail that the government departments should have their legislative programmes drafted timeously and the committees could then plan their programmes appropriately.
2. South Africa should continue to develop projects in co-operation with Germany within the framework of skills training and bursary assistance, especially in the area of science and technology, as this would be a crucial contribution to South Africa’s economic growth and development.
3. The Department of Trade and Industry should further explore and promote investment opportunities of German businesses in South Africa.
4. In our visit to the German railway operator they indicated that they used a system of signals based on digital radio, which cut out the problem of cable theft and in their opinion was a safer alternative. The Committee recommends that the South African railway operator investigate whether this will be the same for us.
F: CONCLUDING REMARKS
1. Most labour market issues in Germany are covered in the South African Restructuring Framework.
2. The casualisation of employment (one-year contract jobs) was a major policy issue, which needed exhaustive discussions and consideration. South Africa was not yet ready for this, given the state of our economy and unemployment.
3. It is worth mentioning that South Africa’s restructuring plan was on track in specific relation to mitigation plans on retrenchments.
4. The delegation observed on the study tour the importance of a skilled labour force and recommends that we focus our efforts on achieving this goal, as this is the key to a growing and competitive economy.
G. ABBREVIATIONS
1. BHO Federal Budget Code
2. BMF Federal Ministry of Finance
3. DB Die Bahn AG
4. DT Deutsche Telekom AG
5. PostG Postal Act
6. RegTP The Regulatory Authority for Posts and Telecommunications
7. SOEs State-owned enterprises
8. TKG Telecommunications Act
Report to be considered.
______________________________
Chairperson
SC on Labour and Public Enterprises
Committee Rooms
Parliament of South Africa
28 May 2003
Annexure A
VISIT BY NCOP COMMITTEE 20 April – 25 April 2003 IN GERMANY
Ms C Nkuna, Chairperson of Select Committee on Labour and Public Enterprises
Mr Lawrence Lever (DP)
Mr F Adams (NNP)
Mr T Setona (ANC)
Ms MP Themba (ANC) (not in Bonn)
Ms Gadija Abdullatief
Driver: Mr Michael Sass (0173 – 2529772), licence no. B-UL980
Sunday, 20 April 2003 – Easter Sunday
08:05 Arrival in Berlin (LH1688 from Frankfurt)
· Park Inn Berlin – Alexanderplatz
Alexanderplatz
10178 Berlin
Tel. : 23890
Fax. : 23894305
Monday, 21 April 2003 – Easter Monday
Easter Monday
Tuesday, 22 April 2003
10:30 Depart hotel
11:00 Meeting with the Senator for Economics
Mr Harold Wolf (with Ms Grobler, interpreter)
· Senatsverwaltung fur Wirtschaft, Arbeit und Frauen
Martin - Luther- Str. 105
10825 Berlin
Tel. : 90138100
12:00 Depart for restaurant
12:15 Lunch hosted by Ms Sibanda–Thusi, Minister
· Mark Brandenburg
Mohrenstr. 30
10117 Berlin
13:40 Depart Mark Brandenburg
14:00 – 15:30 Meeting with Mr Josef Hoffman, Secretary of the Committee:
Conservation and Reactor Safety
· Bundesrat
Leipziger Str. 3-4
Tel : 01888 – 9100180
15:40 Depart Bundesrat
16:00 Meeting with Ms Heizmann (tour and meeting)
Deutsche Telekom (with Ms Grobler, interpreter)
· Deutsche Telekom AG
Franzosische Str. 33a-c
10117 Berlin
Tel : 20919201
17:00 Depart Deutsche Telekom for hotel
Wednesday, 23 April 2003
09:40 Depart hotel
10:00 Meeting with Ambassador Prof Dr Bengu
Briefing of staff
· Embassy
11:45 Depart Embassy
12:00 Lunch at Dressler
· Unter den Linden 39
10117 Berlin
13:40 Depart for Ministry
14:00 Meeting with Mr Ortlieb, Deputy Head of Section: Privatisation Policy, Federal Ministry for Economics and Labour
· Bundesministerium fur Wirtschaft und Arbeit
Scharnhorststr. 34-37
10015 Berlin
Tel : 20146387
15:30 Depart for hotel
Thursday, 24 April 2003
09:30 Depart hotel
10:00 – 11:30 Meeting with Mr Rudolf Mertens, International Relations, and
Ms Cäcilie Engelmeyer and Mr Christoph Bohl, Legal Matters
· Deutsche Bahn
Potsdamer Platz 2
10785 Berlin
Tel : 29762142
13:30 Depart Potsdamer Platz for hotel
14:00 Depart hotel for Zoo
14:30 Zoo station
14:56 Depart for Bonn: Berlin Zoo Station
14:30 Depart Ms Themba for Tegel airport LH 1071, Departure 16:15
19:35 Arrival in Bonn
· Bristol Hotel Bonn
Prinz-Albert-Str. 2
53113 Bonn
Tel : 0228 – 26980
Fax : 0228 – 2698222
Friday, 25 April 2003
08:00 Depart hotel
08:30 – 10:30 Meeting with Dr. Jűrgen Siewert, Director: Privatisation, Federal Ministry of Finance
· Bundesfinanzministerium
Husarenstr. 32
53117 Bonn
Tel : 0228 – 6821538
10:30 Depart for Regulatory Office
11:00 – 13:00 Meeting at the Regulatory Office with Vice-President Dr Sander and Director Mr Heringer
· Regulierungsbehőrde fűr Telekommunikation und Post
Tulpenfeld 4
53113 Bonn
Tel : 0228 – 141132
13:00 Lunch with Regulierungsbehőrde
15:55 Depart hotel
16:13 Depart Bonn For Frankfurt Airport
18:00 Arrival Frankfurt Airport Train Station
20:45 Depart for Johannesburg