Report of the Portfolio Committee on Public Enterprises on the Budget Vote 30 and Strategic Plan (2009/10 – 2011/12) of the Department of Public Enterprises and its Entities, dated 17 June 2009:

 

The Portfolio Committee on Public Enterprises, after receiving a briefing from the Department of Public Enterprise, and the following entities: ESKOM, Denel, Transnet, SAA and the South African Express Airways, reports as follows:

 

Introduction

 

Guided by the Rules of Parliament, promulgated in terms of the Constitution, the Portfolio Committee on Public Enterprises plays an oversight role on the Ministry, Department and the Entities. The Committee has to scrutinise the Strategic Plan of the Department and its Entities in order to evaluate if the funds requested are aligned to the objectives as stated in the respective strategic plan documents.

 

1. Department of Public Enterprise

 

1.1.             The Department of Public Enterprises 2009/10 – 2011/12 Strategic Plan is        

            informed by the following Vision:

            To have State Owned Enterprises that:

-           are efficiently managed and meeting domestic and international industry operational benchmarks

-           play a role in the industry in which they operate to ensure an optimal allocation of

            responsibilities between the public and private sector

-           undertake investment programmes with a “reserve margin” to accommodate faster economic growth

-           leverage their investment programmes to the benefit of the South African and African economies on a sustainable basis

 

 

1.2      The Department of Public Enterprises oversees the following State Owned     

           Enterprises (relative size by asset base 2007/8):

-                      Alexkor - R418m

-                      Broadband Infraco - R1,3b

-                      Denel - R5b

-                      Eskom - R171,1b

-                      Pebble Bed Modula  Reactor - R1b

-                      South African Forestry Company Limited (SAFCOL) - R3,6b

-                      South African Airways - R17,6b

-                      South African Airways Express - R1,1b

-                      Transnet - R98,9b

 

1.3    The Department of Public Enterprises has direct responsibility in three strategic

         areas in the Economy, namely:

-           Ensuring the security of supply and the efficient and competitive provision of key economic infrastructure 

-   Facilitating the development of advanced manufacturing capability through:

    • direct investment via current or new SOE
    • SOE investment and procurement programmes
    • strategic partnership engagements with global enterprises

-          Utilisation of SOEs by the state can be used to sort out economically stifling market or regulatory failures especially in the area of network infrastructure

 

1.4    The Department has the following support programmes to other national

          government departments:

-          Aligning skills development programmes within the SOE with the programmes and objectives of the responsible national government departments

-          Aligning investments in and by SOE with the national innovation development programmes of the responsible national government departments

-          Supporting government strategies focused on labour absorption and rural development by providing infrastructure investments and SOE-services with marginal commercial viability

 

1.5      The Program of Action of the Department of Public Enterprises is as follows:

 

§         Providing critical infrastructure to prioritised small rural towns with mining, agriculture sectors, tourism and cultural industries

§         Developing a protocol for integrated servitude utilisation for all infrastructure projects

§         Extending Strategically Important Development System (SIDS) to other areas of infrastructure

§         Examining alternative funding mechanisms to continue with the economic infrastructure programme to support growth and employment creation

§         Rolling out ICT infrastructure (Broadband) to Increase connectivity and reduce costs of international communication

§         Programme to maintain and upgrade electricity infrastructure, including generation, distribution and reticulation to ensure sufficiency and sustainability of supply

§         Programme to expand logistics infrastructure (road, rail, air and ports) for the transportation of goods and services including agro logistics for farming and agricultural products

§         Ensuring adequate infrastructure for the supply of liquid fuel to inland provinces and the country at large

§         Continue the programme to build, maintain and upgrade water infrastructure and ensure its safety for human consumption, industrial activity and for agricultural activity

§         Standard policies to guide in the implementation of infrastructure projects

§         Climate change response of the Infrastructure sector to ensure an integrated response to climate change

§         Awareness and education campaigns for energy efficiency

 

1.6     The challenges facing State Owned Enterprises

§         Lack of clear definition of the role of SOEs in national economic strategy

§         Non-commercial history of the SOEs

§         Capitalisation challenges and funding constraints

§         Accumulated infrastructural investment deficit in South Africa

§         Disenabling policy and regulatory environment facing the SOEs

§         Lack of clarity of Department on Public Enterprises shareholder management powers

 

1.7    Budget:

 

Over the MTEF period, total forecasted expenditure decreased substantially from  R3.8 billion in 2009/10 to R3.1 Billion in 2010/11. Further total expenditure decreased from R3.1 Billion in 2010/11 to R183.6 million in 2011/12. The significant decline in 2010/11 is as a result of reduced transfer payments to the SOE.  Transfers to SOE amount to R6.9 billion: R3.5 billion to PBMR, R1.5 billion to South African Airways, R724.1 million to Broadband Infraco and R259.1 million to Alexkor.

 

1.8.     Committee Observations:

 

          The Committee raised the following key issues:

 

·               Concern regarding the State of financial distress and constant non profitability of some State Owned Enterprises

·               Concern regarding ESKOM’s tariff increase application

·                Strategies  to ease the burden of tarrif increase on the poor

·               Underutilisation of infrastructure, theft and destruction thereof and strategies to ensure safety of infrastructure

·               Concern regarding equity profile of entities, specifically Denel

·               Concern regarding constant financial bailout of  state owned enterprises

 

1.9     Recommendation

 

Having deliberated on the budget vote of the Department, and acknowledged the limitations of time, the Committee resolved that it would engage further with State Owned Enterprises on matters emanating from the briefing session so as to assess progress made by the Department and state owned enterprises. The Committee recommends that budget vote 30 be passed. The DA and IFP were not in support of the budget vote.

 

Report to be considered.