Report of the Portfolio Committee on Public Enterprises on the oversight visit to the Department of Public Enterprises and state-owned companies, dated 25 January 2012
The Portfolio Committee on Public Enterprises (the committee) undertook an oversight visit to the Department of Public Enterprises (the department), Infraco, Safcol and Transnet from 29 November to 2 December 2011.
The main purpose of the visit was to understand the department’s monitoring systems and how the department executes its oversight responsibilities over state-owned companies. Furthermore, the committee’s intention was to assess the department’s oversight tools such as the Isibuko Dashboard, including the department’s staff and especially their sense of responsibilities in enhancing the department’s oversight responsibilities over state-owned companies (SOCs).
Furthermore the committee’s visit to state-owned companies such as Transnet, Safcol and Infraco was premised on the constitutional mandate of the committee to oversee these entities, to familiarise itself with the challenges faced by these entities, to assess working conditions of workers, job creation and skills development initiatives and developmental projects of these entities.
The committee delegation included the following members: Mr Peter Maluleka (Chairperson of the committee (ANC)), Ms G Borman (ANC), Mr C Gololo (ANC), Dr GW Koornhof (Committee Whip (ANC)), Miss C September (ANC), Mr A Mokoena (ANC) and Mr JK Dikobo (Azapo). The delegation was accompanied by the following parliamentary officials: Mr D Mocumi (Committee Secretary), Mrs X Mnyute (Committee Assistant) and Mr E Boskati (Researcher).
to the Department of Public Enterprises (Hatfield,
The delegation of the department was led by the Deputy Minister, Hon B Martins, and the Director-General, Mr Tshediso Matona. The department made a presentation on the oversight model of the department and the tools that it used to exercise that responsibility. It also highlighted the legislative challenges that the department was facing. These are some of the matters raised in the presentation:
2.1 Legislative challenges
The committee was informed that the Companies Act does not refer to state-owned companies and that SOCs have to comply with various pieces of legislation enacted by departments other than the Department of Public Enterprises. Such departments include the Department of Energy (Eskom), the Department of Mineral Resources (Alexkor), the Department of Trade and Industry (Procurement), as well as the Constitution. Legislation such as the Preferential Procurement Framework Act, Broad-Based Black Economic Empowerment Act and the Companies Act made it difficult for entities to efficiently advance their developmental role as they are treated as private companies. The department was the only one that had no legislative basis for its existence, and there was no government policy on state-ownership.
The Shareholder Management Bill was initiated by the Department of Public Enterprises aimed at addressing some of these discrepancies to centralise and provide legislative guidelines for all SOCs under the auspices of the Department of Public Enterprises. The department hoped that the Presidential Review Committee would address these areas of concern.
2.2 Oversight tools for Monitoring and Evaluation
Tools for effective oversight from the side of the department do exist. The challenge however is the tension between the interests of the shareholder and those of the state-owned companies. The challenge was that SOCs do not give adequate information to make oversight efficient and effective. A study has been commissioned and a report was underway to assess the effectiveness of the department’s oversight function over SOCs in terms of what was working or not working.
The Isibuko Dashboard (data capture screen) has been operating for the past three years in the DPE system. The dashboard has been developed by the department but has external backup. The department reviews SOCs’ performance quarterly in accordance with National Treasury Regulations (TR29.3) and annually in accordance with section 55 of the Public Finance Management Act (PFMA) and section 286 of the Companies Act through the Isibuko Dashboard. The dashboard requires SOCs to report on financial performance, job creation and skills development, risk management and progress on capital expenditure projects. The Minister also issues investor briefs to SOC boards on emerging SOC performance trends, risks that have been identified and highlighting the need for corrective action in the event of any deviation from agreed key performance areas and indicators. The department does not tamper with the information provided by the SOCs but measures it against set targets.
2.3 Departmental Premises and Signage
The committee raised a concern that the building that housed the department did not have adequate signage, especially the name of the department which was not visible to the public. Furthermore, the committee asked the department to update itself with the contents of the lease agreements in order to ensure that the department was not overcharged for occupancy.
The department informed the committee that it had considered moving to a new building due to lack of adequate space, but due to budget constraints it was forced to renew the lease. The rent for the building was reasonable in terms of what the market could offer and the department was satisfied with the arrangement.
2.4 Meeting the Departmental Officials
The committee walked about the offices of the department to interact with staff, assess the morale of staff and also encourage them for the important responsibilities that they had.
2.5 Committees observations
2.5.1 The committee acknowledged the monitoring systems of the department, but was concerned that the cases of financial and management irregularities were too prevalent in SOCs such as Transnet, Infraco and South African Express Airways (SAX). Why could the department not detect such irregularities timeously?
2.5.2 What would the department do in order to sharpen its oversight to detect irregularities and discrepancies?
2.5.3 The committee raised concern that not all SOCs were audited by the Auditor- General and about the lack of legislation that guides SOCs to be what they are intended to be.
2.5.4 Clarity was sought on why the committee could not access the shareholder compacts and corporate plans.
2.5.5 The committee raised concern at the slow pace of finalising the executive remuneration recommendations report.
2.5.6 The view of the department was that SOCs, which have the same mandate, should be consolidated and those which are commercial in nature should be clustered.
In response the department stated the following:
The committee resolved that the department should consider better premises conducive for the work of the department. Furthermore, the signage on the premises should be improved to ensure that the department is clearly identifiable and accessible to the public.
visit to Broadband Infraco (
The committee was welcomed by the Acting CEO, Dr A Shaw, who informed the committee that the board meeting was in session, hence the board would not be part of the oversight visit. The committee met briefly with members of the board of Infraco.
The committee was given an overview of the mandate and business of the entity, its operations, challenges and networks nationally and internationally.
3.1 Visit to Network Operation Centre
The committee visited the network operation centre, which is a 24-hour monitoring centre. Through the centre Infraco is able to do the following:
· Assess information about traffic on the network (24 hours)
· Detect where there is a loss of signal or power failure
· Inform the client/company to dispatch a technician to address the problem.
3.2 Visit to Minerva – Point of Presence (POP)
The committee was informed that Minerva was one of the
major containers in
3.3 Conclusion and Recommendations
The committee raised concern about the safety of field engineers, especially women who had to respond to calls at night. The committee proposed that Infraco should ensure that women are protected and should be accompanied by security when they visit the POPs at night. The department should ensure an enabling legislative environment for Infraco to deliver on its public mandate as intended by the Broadband Infraco Act (No 33 of 2007).
4. Oversight visit to Safcol (
The committee visited plant operations, interacted with employees and visited research and training centres.
4.1 Visit to the Komatiland Forests (KLF)
Komatiland Forests owns and manages the prime softwood
saw log forestry assets in the Mpumalanga, Limpopo and Kwazulu-Natal provinces
and consists of 18 plantations covering a total area of 187 320 hacters. Its
main business is the conducting of forestry, timber-harvesting,
timber-processing and related activities. KLF is one of the largest producers
of high-quality saw logs in
4.1.1 Land claims
Safcol and KLF do not hold the title deeds for the majority of the land on which it operated. The State held the title deeds to the claimed land on which KLF operated. Safcol has been instructed by the shareholder to facilitate the speedy resolution of land claims. The process of resolving land claims rests with the Department of Rural Development and Land Reform.
According to Safcol’s records 61% of the forests under KLF’s management are subject to land claims. Various communities, families and individuals have lodged claims against the state in terms of the provision of the Restitution of Land Rights Act, 1994, as amended, with respect to forestry land upon which the Safcol Group conducts its business. The magnitude of these claims is in different stages of the restitution process. All these impacted on the future of Safcol.
4.2 Visit to Vlakfontein village
Vlakfontein is a small village of hostels built by Safcol
to house its workers. The hostel has quarters for both married and single
workers and has 144 occupants in total. The common practice is that every
weekend workers will leave their quarters to visit their families in and around
Villagers use communal toilets which, at the time of the committee’s visit, were faulty and not in good condition. Not a single worker in the small village ever benefited from SAFCOL’s study opportunities to become a manager in any of SAFCOL’s business enterprises. There is no school in the small village, and learners from the village are transported (subsidised by government) to a school in another village. There were a number of children in the village who were idle because there were no recreational parks to play in during their leisure time.
4.3 Visit to
Safcol, through Komatiland, built an additional block
Komatiland works with community forums to identify community needs, especially those communities that are adjacent to Safcol’s plantations. The committee was informed that Safcol had built similar structures for early childhood development centres in the communities.
4.4 Visit to Jessievale plantation
The Jessievale plantation is a highly contested piece of land. The surrounding community claims ownership of the land and also sees the piece of land as suitable for cattle grazing while Safcol treats it as one of its plantations. In an apparent act of protest and defiance, the community burnt down the field, destroying Safcol’s newly-planted pine trees.
The community’s belief is that while the land is still under dispute, Safcol continues to make a profit. For this reason, the community expects Safcol in the meantime to pay rent. Safcol is unable to do so as the community does not have the title deed for the land and the land is still under dispute.
The committee also had the opportunity to engage one
of the residents in the
4.5 Visit to
Komatiland has donated 20 computers to
4.6 Visit to Pitskop plantation
On visiting one of Safcol’s plantations called Pitskop plantation, the committee learned that the plantation occupies about 54 hectares of land. The plantation has about 680 workers in total and about 381 of them were on contract while the rest were permanent. At the time of the visit by the committee, workers were busy felling (cutting) pine trees.
Felling is one of the dangerous activities in forestry and for that reason it is best to mechanise it. One person can operate a felling machine and cut about 500 trees a day. Females also operate felling machines. The committee witnessed a female who was busy felling trees. The machine cut the logs according to the customer’s needs or specifications. Although the use of a machine goes against job creation efforts, Komatiland believes that more jobs are created in the value chain of processing the product.
Members were concerned about workers who were in the field, especially during bad weather conditions (heavy rains or heat). A supervisor in the field pointed out that besides workers protective gear, workers had to look after themselves. This included bringing their own food and taking their lunch under trees. The supervisor however alluded to the Brazilian practice where a mobile container with all the basic kitchen facilities (microwave to warm food) and shelter needs were on site, something they were looking at introducing in the long term.
4.7 Visit to Sabie
When the committee visited the Sabie plantation (nursery), workers were at the seed planting stage of the plantation.
4.7.1 Interaction with workers
The committee interacted with workers in order to familiarise itself with the conditions under which they worked and to assess the morale of the workforce. The workers were affiliated to the Food and Allied Workers Union. In the interaction, workers raised the following concerns:
· Unhappiness with the low wages and lack of benefits.
· Unnecessary delays in the implementation of salary increases.
· Workers being overlooked for opportunities such as learnerships and bursaries.
· Lack of implementation on the part of management on agreed principles and matters.
4.8 Visit to Research Centre
The research centre is situated at Tweefontein plantation, about 6 km from Sabie, and is staffed by a diverse group of dedicated scientists and technicians. The centre consists of divisions such as the tree improvement division which runs breeding programmes aiming to improve the growth quality of future generation trees. An important task of the research team is to ensure that improved techniques, processes and genetic material emerging from the research efforts reaches production staff for possible implementation. The seed centre serves to supply the KLF nurseries with seeds for planting and for generation of hedge plants which are used to produce cuttings.
4.9 Visit to Platorand Training Centre
The Platorand Training Centre’s main objective is to promote forestry as a career of choice. In an effort to achieve this, KLF invests in education and skills development of employees, communities living adjacent to KLF’s plantations and women and youth from previously disadvantaged communities.
The training centre facilitates and co-ordinates the following learning programmes:
The learning and development division, in conjunction with enterprises development and Socio-economic development, is responsible to ensure that the group renders skills development interventions to the adjacent communities. These programmes included furniture making, entrepreneurships skills, carpentry, and many other skills programmes.
Challenges due to external factors and over which the company has no control include:
The learning centre and development section remain crucial and if funding permits future plans will be to expand:
4.10 Challenges faced by Safcol
The entity highlighted the following key challenges:
4.11 Conclusion and Recommendations
· The committee raised serious concerns regarding the lack of certainty regarding the future role of Safcol, and recommended that the department resolve this urgently. The department should forward a report to the committee on this matter as soon as a cabinet decision has been taken.
· The committee acknowledged the developmental projects of the entity, but urged Safcol to engage more on developmental programmes in order to improve the lives of the immediate communities and its workers.
· The committee proposed that there was a need for a peaceful co-existence with the community.
· Safcol should provide sanitary facilities for women working in the plantation nurseries and ensure their physiological health due to the nature of their work.
· The committee resolved to convene a meeting with the Provincial and Local Government of Mpamulanga in order to resolve the conflict that existed in the communities and the illegal occupation of state land.
· Safcol should renovate the houses of workers and ensure that the sanitary facilities were in working order. Safcol should construct recreation facilities for the children who stayed in Safcol villages. The committee would expect a progress report on the implementation of these recommendations by the end of March 2012.
5. Oversight visit to the Transnet
The committee was welcomed by the chief Executive of Transnet Pipeline, Mr Charl Moller, and the Chief Executive of Transnet Ports Authority, Mr Tau Morwe. The committee explained the purpose of the visit to the Transnet delegation and made an appeal that Transnet should not make presentations and that time should be spent on observing the entity’s operations.
A brief overview was done on the layout of the harbour, the extent of the expansion project and progress made thus far. Similarly an overview of the New Multipurpose Pipeline was done, which showed the extent of the project and progress as far as the project was concerned.
5.1 Visit to
The first site the committee visited was the automotive
terminal which has a capacity of 14 000 units. Cars are transported by
Transnet’s freight rail mainly from
From the automotive terminal the Transnet team took
the committee around the harbour to further familiarise it with Transnet’s operations.
Very close to the harbour was the wharf road. Transnet indicated that one of
the challenges of that road was traffic congestion as it accommodated not only
cars destined for the harbour but also those passing through. According to
Transnet, the road needed to be maintained but Transnet could not do that because
the road belonged to the City of
5.2 Visit to the Container Terminal
The committee was also made aware of the container and break bulk terminals, including refrigerated containers, that store fresh products for import and export purposes. There was also a ship maintenance workshop not far from the break bulk terminal, and a crane mechanical workshop opposite the container terminal. Within the harbour South African Revenue Services was scanning some of the containers. Transnet indicated that the refurbishment of the container terminal was underway and R9 billion had already been spent. A total of R20 billion would be spent to complete the project.
In the container terminal the committee had an opportunity to engage with the workers, especially crane operators, their trainers and mentors. One trainer in particular who had been working for Transnet port terminal for the past 38 years explained to the committee the process of recruiting crane operators. He explained that they advertised in newspapers stating the requirements and usually matric and a driver’s licence were the pre-requisites. Those selected were trained for four months and the training included theory and mentorship.
Transnet indicated that they were using new cranes and that with the old ones, container movement was 26 containers per hour. With the new cranes, container movement increased to 35/6 container per hour. As for crane drivers, they took a
break of two hours to rest. Transnet commissioned a study of their employees’ sick leave focusing on ergonomics. The study recommended the two-hour break and that improved employees’ sick leave days.
5.3 The Multi-Purpose Pipeline
The committee travelled to Kwamakuta and Adam’s
On arrival at the pump station the committee was taken to the control room. In the control room the screens showed how the product travelled through the pipeline. It also showed the speed at which petroleum travelled through the pipeline. The site manager explained that through the control room Transnet can easily pick up leaks or damage caused and can dispatch technicians to fix the problem.
Outside the control room the committee was shown how the pump station worked and which components (e.g. receiver) of the pipes stored the petroleum during maintenance and which components purified it. When rain water gets into contact with the pipes or some of the pump station’s facilities, it is contained, then sampled and tested before it goes to the spill dam. This practice is to ensure that the pump station adheres to the country’s environmental regulations.
The committee was impressed with Transnet ports and pipelines infrastructure programme and appreciated the fact that funding came from their balance sheet rather than from the shareholder.
Report to be considered.