Report of the Portfolio Committee on Public Enterprises on its activities undertaken during the 5th Parliament (May 2014 – March 2019)

Key Highlights

1. Reflection on committee programme per year and on whether the objectives of such programmes were achieved

The mandate of the Committee is to consider legislation referred to it; exercise oversight over the Department of Public

Enterprises (DPE) and the seven State-Owned Companies (SOCs); consider international agreements referred to it;

consider the budget vote of the Department of Public Enterprises and its Entities; facilitate public participation in its

processes; and to consider all other matters referred to it in terms of legislation and the rules of the National Assembly.

The Chairperson of the Committee was Ms Dipuo Letsatsi-Duba who was later deployed by the ruling party, the African

National Congress (ANC), to lead the Ministry of Public Service and Administration and she currently serves as the

Minister of State Security. An Acting role was assumed by the ANC Committee Whip, Ms. Daphne Rantho, until a new

Chairperson of the Committee Ms. Lungi Anette Mnganga-Gcabashe. The Committee membership was comprised of

Members of Parliament from the African National Congress, African Christian Democratic Party, Democratic Alliance,

Economic Freedom, Inkatha Freedom Party and United Democratic Movement (Please refer to Master Attendance List,

Section 17.p.41). The Committee composition changed during the PC Inquiry into Eskom due to interest of political parties

in the process.

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2. Committee’s focus areas during the 5th Parliament

The Committee focus areas were to provide oversight to improve governance, financial sustainability, performance

and ensuring that all issues referred to it by the 4th Parliament have been sufficiently addressed.

The Committee was taken through an induction process by the Centre for Public Entities and Institute for Directors to

appraise them with the prescripts on governance and oversight.

The focus was on oversight of the Department of Public Enterprises and SOCs.

The Department reported to the Committee on their strategic plan, annual performance plans, and quarterly reports.

The Committee received briefings on audit outcomes by the Auditor General was done on the Department and SOCs.

The Department would present to the Committee corrective actions based on the Auditor General’s audit plans

applicable to them and State Owned Companies.

The Committee received reports from State Owned Companies on their annual financial plans, integrated reports and

sustainability reports. These reports would include audit outcome from the Auditor General.

The Committee undertook oversight visits to Denel, Transnet, Eskom and South African Express Airways.

The Committee met residents of Soweto to address municipal debt, petition by resident on Eskom billing mechanism

and refusal of the community to accept the installation of prepaid electricity to address non-payment.

The Committee developed Budget Review Recommendations Report (BRRR) on annual basis to motivate the budget

applications for the Department of Public Enterprises.

The Portfolio Committee instituted an Eskom Oversight Inquiry to address the governance and financial challenges

faced by the SOCs.

The Repeal of the Overvaal Resorts Bill was finalised.

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The transfer of South African Airways from the Department of Public Enterprises to the National Treasury (NT) was

done on the 12 December 2014. The intention was to stabilise the carrier’s financial status and implement the

turnaround strategy. The SOCs was transferred back to the Department of Public Enterprises from the National

Treasury effective from the 1 August 2018.

The Committee undertook an inquiry into Eskom as part of restoring governance in State Owned Companies. The

Committee designed terms of reference with the intention to investigate governance, procurement and financial

practices at Denel, Eskom and Transnet. However due to time limitations the investigation into Denel and Transnet

could not be completed. The investigations into these two entities were meant to form part of the phase 2 of the

Portfolio Committee Inquiry of the State Owned Companies.

LeadSA presented a ChangeMakers Award to the Portfolio Committee on Public Enterprises. This award was

earmarking South Africans who are making positive change. Previous recipients of the award included the former

Public Protector Advocate Thuli Madonsela and Chief Justice Mogoeng Mogoeng. The Chairperson of the Inquiry into

Eskom, Ms. D. Rantho accepted the award on behalf of the Portfolio Committee on Public Enterprises. The

achievement shows the Committee’s commitment in building a society based on accountability and integrity. The work

done by the Committee has set the foundation for the Commission of Inquiry into State of Capture which is chaired by

the Deputy Chief Justice Raymond Zondo.

3. Key Areas for Future Work

The key areas for future of the Committee will be to continue with the work to improve oversight on the Department of

Public Enterprises and SOCs.

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To continually monitor and provide leadership in the SOCs environment in the following areas: governance, financial

sustainability, procurement environment.

To address issues relating to the proposed SOCs Shareholder Management Bill.

Conduct an international study tour in order to inform the Committee on the proposed SOCs Shareholder Management

Bill.

Continually monitor the implementation of the audit plan.

Monitor implementation recommendations of the Eskom inquiry report.

Consider pronouncements made on the reconfiguration of Eskom. The President pronounced that there will be a

creation of three entities under Eskom. These entities will include Generation, Transmission and Distribution with

Eskom remaining as a holding company. This reconfiguration should be closely monitored by the Committee through

oversight and providing guidance to the Department and Eskom.

Provide oversight in order to monitor cost overruns on project delivery at Eskom.

Address issues related to inadequate maintenance, along with serous operational problems leading to unplanned

electricity shortages.

Provide oversight on the build programme and operational effectiveness of Medupi and Kusile power stations.

Deal with high municipal debt which is affecting Eskom balance sheet.

Monitor the emerging issues on forensic investigations on the acquisitions of Transnet 1064 locomotives

Monitor improvements of key procurement governance and controls at Transnet.

Monitor Denel’s balance sheet and liquidity concerns.

Closely provide oversight on Denel’s financial sustainability and turnaround plan.

Provide oversight on South African Airways financial performance.

The Committee should address issues raised by the Auditor General.

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Consider instituting an investigation into the entities: Transnet and Denel, regarding lapses in governance subject to

the outcome of the Commission on State Capture led by the Deputy Chief Justice Raymond Zondo.

Filling of vacant posts in the Department due to negative impact on budget and it oversight function.

Monitor and provide guidance on the integration of South African Airways, Mango and South African Express.

The pronouncement on the renewal of a capable developmental state has commenced.

The Committee will have to interpret the work on the reconfiguration of the State.

In his 2019 State of National Address, the President outlined that, a new structure and form of Government will be

revealed after 2019 National and Provincial Elections.

The DPE and NT are spearheading the work of optimizing SOC to ensure an effective agents of development.

This involves identifying of assets suitable for disposal, involvement of private capital, formation of new entities.

The Committee should ensure that this work is prioritized and provide oversight mechanism that will strengthen this

objective.

The Department has sought credible plans from boards to put in place the right skills and expertise to manage these

companies so that they can shift the focus from immediate stability to long-term sustainability.

The DPE has also sought to build a pragmatic and cooperative relationship between government, organised labour

and private sector stakeholders, where they can jointly determine a strategic path for SOCs to create jobs, enable

inclusive growth and become operationally and financially sustainable.

The DPE is developing, in consultation with Policy Departments and NT, appropriate SOC restructuring options.

The Committee should prioritise this work in its strategy and operational planning.

The Department has established the Presidential SOE Council, which will provide political oversight and strategic

management in order to reform, reposition and revitalize state owned enterprises, so they play their role as catalysts of

economic growth and development.

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The Committee should monitor and provide guidance on how this is objective is going to be realized.

The Committee should continue to monitor and provide oversight on the capacity internal committee audit function in

SOCs in order to improve audit outcomes.

Monitor issues that have been referred for prosecutions in conjunction with the Justice and Constitutional Development

and Police Committees.

4. Key Challenges Emerging

The Department of Public Enterprises should address issues related to its vacancy rate as it has an impact on its

budget and oversight functions.

SOCs should improve on their audit outcomes.

Strengthening of SOCs balance sheets.

Access to information, specifically the Shareholder Compacts

The capacity of internal audit function and audit and risk committees has a negative impact on SOCs audit outcome.

Going concern issues in the SOCs not sufficiently addressed.

Review areas addressed by the Budget Review and Recommendations Report.

Contingent liabilities remain high with SOCs guarantee and debt at high levels.

Transnet pensioners continue to raise dissatisfaction with implementation of their benefits.

The following instances of corruption have come to light as a result of investigations into SOCs: Transnet overpaid by R509 million in the purchase of 100 locomotives from China CRRC and Japan Mitsui, of which

CRRC returned R618 million to Transnet;

Transnet in the purchase of 1064 locomotives overpaid by R17.4 billion;

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Eskom without a valid contract paid R1.6 billion to McKinsey and Trillian, of which R902 million was recovered from

McKinsey;

Denel wiped out R3 billion of revenues through corruption conceived Denel Asia against the advice of everyone

including their owned due diligence report, which advise against doing business with VR Laser in its various

incarnations.

In his Budget Speech, the Minister of Finance outlined the following as it relates to guaranteed utilisation in SOCs:

During this past financial year, total guarantee utilisation increased by R51.1 billion:

1. Eskom used an additional R50 billion of its R350 billion guarantee in 2018/19. 2. Denel was granted a further R1 billion guarantee.

3. SAA guaranteed debt increased by R6.2 billion.

State Owned Companies remain highly indebted and guarantee usage continue to expose the proposals such as placing

them under administration and finding other suitable means of easing the burden of Government support are emerging. A

balance and trade-offs should be explored between organised labour, private sector and government as pronouncements

from different quotas are viewed as threatening jobs. Another threat is South Africa’s position in the financial markets as

credit ratings could downgrade the Sovereign resulting from poor financial performance of State Owned Companies.

Standards and Poor Credit Rating Agency provided the following overview in its opinion on SA:

1. Anemic economic growth in 2018 and sizable contingent liabilities continue to weigh on South Africa's fiscal prospects

and debt burden.

2. Nevertheless, the new government is pursuing a series of economic reforms that should help boost the economy from

2019 onward, despite structural impediments, chronic skills shortages, and high unemployment.

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3. We are affirming our long- and short-term foreign currency ratings on South Africa at 'BB/B', our local currency ratings

at 'BB+/B', and our national scale ratings at 'zaAAA/zaA-1+'. The outlook is stable.

The Committee should provide a mechanism in which the transition is carefully managed while sustaining key imperatives

such as Program of Action (POA) which measures the implementation of the National Development Plan through the

Medium Term Strategic Framework (MTSF).

5. Recommendations Develop the Strategic Plan for the Committee with annual performance plan for the Committee.

The Committee to continue to request the Shareholder Compacts from SOCs.

The Committee to conduct oversight visits to all entities within the portfolio of the Department of Public Enterprises on

a regular basis.

Implement recommendations by the Auditor General on the Department and SOCs.

Address areas of policy alignment areas with policy departments.

Provide guidance on the future role of Alexkor and SAFCOL

Institutionalise Presidential Review Committee on State Owned Enterprises.

Monitor the turnaround strategy of major SOCs including the rationalisation of State Assets.

Monitor procurement spend in all SOCs, and the impact on socio-economic outcomes.

Monitor and implement BRRR recommendations.

Monitor commitments made by the President, the Minister of Finance and Minister of Public Enterprises in ensuring

improvements in good corporate governance and financial performance of SOCs.

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Notes the market’s opinion on continent liabilities and debt burden, policy and structural reforms and credit ratings

opinion.

1. Introduction

1.1 Department/s and Entities falling within the committee’s portfolio

Narrative on the department(s) and entities falling within the committee’s portfolio and if there were any changes during

the term. Example of new entities being established and/or shifted from or to the Department; department being split

and/or newly established.

a) Department of Public Enterprises

Core mandate/strategic objectives

b) Entities:

Name of Entity Role of EntityEskom Generates, transmits and distributes electricity to industrial, mining, commercial,

agricultural and residential customers and redistributors

Transnet A focused freight transport company, delivering integrated, efficient, safe,

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Name of Entity Role of Entityreliable and cost-effective services to promote economic growth in South Africa.

South African Express Airways A regional airline which operates predominantly on routes which are secondary

in South Africa and the region.

Denel Arms manufacturer and operates in the military aerospace and landward

defence environment

Alexkor Mines diamonds and is committed to the profitable and sustainable

development of mineral and natural resources for the economic benefit of the

Namaqualand region and all its stakeholders

Safcol Dedicated to growing its business in the forestry and forest products industry.

South African Airways The national airline carrier delivering sustainable profits and growth through

world-class service to customers internally and externally

1.2 Functions of committee:

Parliamentary committees are mandated to:

Monitor the financial and non-financial performance of government departments and their entities to ensure that

national objectives are met.

Process and pass legislation.

Facilitate public participation in Parliament relating to issues of oversight and legislation.

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1.3 Method of work of the committee (if committee adopted a particular method of work e.g. SCOPA.)

The Committee held a strategic planning session at the beginning of the term of Parliament. Where at the Committee

developed a strategic plan that was informed by the broader policy imperatives and priorities of government of the five

years. The Committee identified instruments that it will use to conduct oversight, these included: Briefings by entities,

scrutinising of annual reports, interaction with the Auditor General and robust oversight visits. The Committee developed

Budget Vote Report, Budgetary Review and Recommendations Report to outline recommendations for the budget. During

oversight visits the Committee interacted with workers, labour representatives, local business representative and the

relevant stakeholders, in order to assess the impact of the SOCs on communities. The Chairperson established a

Management Committee which comprised of the Chairperson, Whip of the ANC and all the support staff of the

Committee. The role of the management committee was to implement resolutions of the Portfolio Committee.

1.4 Purpose of the report

The purpose of this report is to provide an account on the work of the Portfolio Committee Public Enterprises work during

the 5th Parliament and to inform the members of the new Parliament of key outstanding issues pertaining to the oversight

and legislative programme of the Department of Public Enterprises and its entities.

This report provides an overview of the activities the committee undertook during the 5th Parliament, the outcome of key

activities, as well as any challenges that emerged during the period under review and issues that should be considered for

follow up during the 5th Parliament. It summarises the key issues for follow-up and concludes with recommendations to

strengthen operational and procedural processes to enhance the committee’s oversight and legislative roles in future.

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2. Key statistics

The table below provides an overview of the number of meetings held, legislation and international agreements processed

and the number of oversight trips and study tours undertaken by the committee, as well as any statutory appointments the

committee made, during the 5th Parliament:

Activity 2014/15 2015/16 2016/17 2017/18 2018/19 TotalMeetings held 6 16 17 38 24 101Legislation processed 0 0 0 0 1 1Oversight trips

undertaken

3 1 1 1 0 6

Study tours undertaken 0 0 0 0 0 0International

agreements processed

0 0 0 0 0 0

Statutory appointments

made

0 0 0 0 0 0

Interventions

considered

0 0 0 0 0 0

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Activity 2014/15 2015/16 2016/17 2017/18 2018/19 TotalPetitions considered 0 0 3 0 0 3

3. Stakeholders: Department of Public Enterprises.

Eskom Holdings.

Denel.

Transnet.

South African Airways.

South African Express Airways.

Safcol.

Alexkor.

Auditor-General.

National Treasury.

Policy Departments for state-owned companies.

Regulatory bodies of state-owned companies.

Academic research institutions

Private Companies contracted to SOCs.

Communities where SOCs are providing essential services.

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4. Briefings and/or public hearings

The Committee had regular interactions with state-owned companies through briefings and joint meetings with sister

Committees overseeing the same state-owned companies. During this term the Committee undertook to robustly perform

its oversight, and most notably, it conducted an inquiry into the governance, procurement and financial sustainability of

Eskom. The inquiry was meant to have three phases that would also cover Denel and Transnet, however due to time

constraints, the Committee could only investigate Eskom.

5. Legislation

The following pieces of legislation were referred to the committee and processed during the 5 th Parliament:

Year Name of Legislation Tagging Objectives Completed/Not Completed

2014/15 None

2015/16 None

2016/17 None

2017/18 None

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Year Name of Legislation Tagging Objectives Completed/Not Completed

2018/19 Repeal of the Overvaal

Resorts Limited Bill

[B 36 – 2017] The purpose of the Bill is to repeal the Overvaal

Resorts Limited Act, 1993 (Act No.127 of 1993)

7 November

2018

a) Challenges emerging

The following challenges emerged during the processing of legislation:

There were no content or technical challenges experienced, this was mainly due to the fact that it was a straight

forward and very short Bill.

b) Issues for follow-upThe 6th Parliament should consider the concerns that arose through this process:

There are still unresolved land claims on the affected land. The Committee made a recommendation that the

Department of public Enterprises should work with the Department of Rural Development and Land Reform to

speedily resolve the land claims.

The former employees of Aventura resorts made substantial submissions on the Bill. These related to the lack of

implementation of the purchase agreement, particularly 30% equity shares being for Broad Based Black Economic

Empowerment. They further allege that Forever Resorts has illegally acquired 100% shares, as the terms of the

purchase agreement, prohibited Forever Resorts from acquiring the 30% shares whether directly and indirectly.

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6. Oversight trips undertaken

The following oversight trips were undertaken:

Date Area Visited Objective Recommendations Responses to Recommendations

Follow-up Issues

Status of Report

6 February

2015

Port of

Saldanha

To familiarise the

Committee with

the operations of

the port and

progress that has

been made with

regard to

infrastructural

developments at

the port

The Committee recommended that the

Minister of Public Enterprises should:

- ensure reduction of energy

consumption by placing solar panels

on the roofs of the corporate buildings

at the port.

- ensure that Transnet updates the

local community on its plans,

opportunities and progress on

developments on the port on a

quarterly basis.

- ensure that Transnet educates local

businesses on energy efficiencies and

form

The Department of

Public Enterprises and

Transnet responded and

presented progress

made in responding to

the recommendations of

the Committee

Report

was

adopted

by the

House.

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Date Area Visited Objective Recommendations Responses to Recommendations

Follow-up Issues

Status of Report

partnerships regarding this matter. -

ensure that the Department of Public

Enterprises communicates and

markets the good work done by state-

owned companies in terms of their

Corporate Social Investment

projects.

- ensure that Transnet assesses the

impact of its CSI programmes to

ensure sustainability.

3 February

2015

Port of

Durban

To assess the

socio-economic

impact of the

investments in

terms of job

creation, skills

development,

promotion and

support of local

businesses and

The Committee recommended that the

Minister of Public Enterprises should:

- consider introducing specialised schools

that will equip young people at secondary

level with need to change the education

policy to introduce dedicated schools

specialising in Marine and engineering

education.

- ensure that Transnet makes a deliberate

effort to promote rural development by

The Department of

Public Enterprises and

Transnet responded and

presented progress

made in responding to

the recommendations of

the Committee.

The report

was

adopted

by the

House.

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Date Area Visited Objective Recommendations Responses to Recommendations

Follow-up Issues

Status of Report

the beneficiation. ensuring youth in rural communities have

access to opportunities.

- ensure that Transnet develops and

supports businesses owned by youth,

women and people with disability

- ensure that Transnet regularly engage

with all stakeholders including the

government of KZN, the business

community and civil society regarding the

opportunities and how they could

collectively participate.

8 September

2-15

Koeberg

Nuclear

Power

Station,

Cape Town

To familiarise the

Committee with

operations of

Koeberg Nuclear

Power Station

5 February

2015

Denel

Aviation

2015

visit is to

familiarise the

Committee with

the capabilities,

operations and

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Date Area Visited Objective Recommendations Responses to Recommendations

Follow-up Issues

Status of Report

challenges facing

the Denel

Aviation.

a) Challenges Emerging

The following challenges emerged during the oversight visit:

A full report on the priorities set for the development of Saldhana Bay should be presented in writing to the

Committee.

Port efficiency and effectiveness should be addressed and a strategic to fully optimise Port usage developed.

Traffic remains a challenge at the Port and mechanism should be developed with the City of Ethekwini to ease

inflows to the Port.

A mechanism to maximise volume performance target should be adopted at the Port. Targets set on the Market

Demand Strategy were not reached, this should be addressed in the newly adopted Transnet strategy, Transnet

4.0.

Denel has financial challenges impact on the subsidiaries a mechanism to address going concerns will ease and

allay fears experienced by employees and increase the sustainability of Denel.

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b) Issues for follow-up

The 6th Parliament should consider following up on the following concerns that arose:

Monitor Transnet capital plans and implementation of commitment made on the Port of Saldhana.

Provide oversight on the efficiency of South African Ports and commitment made on Port of Durban.

Provide oversight on the financial sustainability of Denel.

7. Study tours undertaken

The following study tours were undertaken:

Date Places Visited Objective Lessons Learned Status of ReportN/A N/A N/A N/A N/A

a) Challenges emerging

The following challenges emerged during the study tours:

Due to the work prioritised on oversight and Eskom Inquiry little time was allocated for study tours.

The Committee had little room to benchmark on the best practise of other SOCs elsewhere.

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b) Issues for follow-up

The 6th Parliament should consider following up on the following concerns that arose:

To prioritise learning from countries which have reconfigured SOCs in particular the OECD countries.

To understand from these countries what reconfiguration of State and SOCs have improved competitiveness.

Best practices should be introduced to the Committee through interaction with international counterparts.

8. International Agreements:

The following international agreements were processed and reported on:

Date referred

Name of International Agreement

Objective Status of Report Date of enforcement

N/A N/A N/A N/A N/AN/A N/A N/A N/A N/A

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a) Challenges emerging

The following challenges emerged during the processing of international agreements:

There were no countries that committed to co-operation with the Committee.

b) Issues for follow-up

The 6th Parliament should consider following up on the following concerns that arose:

Putting a cooperation framework that will be guided by the Parliament International Relations Division and the

Department of International Relations and Cooperation.

Cooperation should address broader Parliament’s strategic objectives and government’s priorities in its electoral

period.

9. Statutory appointments

The following appointment processes were referred to the committee and the resultant statutory appointments were

made:

Date Type of appointment

Period of appointment Status of Report

N/A N/A N/A N/AN/A N/A N/A N/A

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a) Challenges emerging

The following challenges emerged during the statutory appointments:

No appointments were made to the Committee.

b) Issues for follow-up

The 6th Parliament should consider following up on the following concerns that arose:

There are no follow ups to made on this deliverable.

10. Interventions

The following interventions were referred to and processed by the committee:

Title Date referred Current statusN/A N/A N/AN/A N/A N/A

c) Challenges emerging

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The following challenges were experienced during the processing of interventions:

No interventions made by the Committee.

d) Issues for follow-up

The 6th Parliament should consider following up on the following concerns that arose:

No follow ups as it relates to this deliverable.

11. Petitions

The following petitions were referred to and considered by the committee:

Title Date referred Current statusEskom failed to respond to

a petition delivered to it by

the residents (Community

of Orlando East)

14 September

2015

The Committee visited the community and made recommendations. The

report was adopted by the House.

Stop Eskom from installing

prepaid meters without

consultation (Community

2 November

2015

The Committee visited the community and made recommendations. The

report was adopted by the House.

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Title Date referred Current statusof Soweto)

Eskom grant senior

citizens 100 per cent

rebates on their electricity

(pensioners of Diepkloof)

26 April 2016 The Committee visited the community and made recommendations. The

report was adopted by the House.

e) Challenges emerging

The following challenges were experienced during the processing of petitions:

The community was divided on the issues raised regarding the installation of prepaid meters.

Some community members who could afford to pay electricity were using the plight of the poor to escape the

responsibility of paying for electricity.

The opposition to prepaid was due to the culture of non-payment in the community of Soweto.

f) Issues for follow-up

The 6th Parliament should consider following up on the following concerns that arose:

There is an urgent need to find a lasting solution to the ever rising municipal debt, and the culture of non-payment

for electricity among South Africans.

There are also government departments and private companies that owed Eskom billions of rands.

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12. Obligations conferred on committee by legislation:

Progress Report on Portfolio Committee on Public Enterprises Budget Review Recommendations Report (BRRR)

RECOMMENDATIONS KEY INTERVENTIONS PROGRESS

Capacitate SOCs internal audit

functions

• Undertake a comprehensive

governance and risk gap

analysis.

• Organisational review to assess

the capacity and skills gaps

undertaken during 2017/18

financial year.

• Gap analysis report completed.

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Increase and strengthen oversight over

SOCs through robust and regular

interaction with CEOs, Board

Members, Audit Committees, regular

visits to construction sites of major

infrastructure projects

• Quarterly site visits on SOCs

major infrastructure

programmes.

• Executive Forum for SIP 09 and

10 established to review status,

challenges and impact of

various projects/components

forming part of SIP 09 and 10.

• Establishment of DPE/SOC

Audit Committee Forum to

assess SOCs major audits,

risks and mitigating plans.

• Minister, DG and Senior

Officials have made site visits to

the major power plant projects.

• Minister is having regular

session with Chair of Board and

Chairs of Committees (Safcol

Board: October 2018, Denel

Board: monthly, Transnet: All

Board Chairs: 4 January 2019).

• CFO Forum held quarterly.

Increase and strengthen oversight over

SOCs through robust and regular

interaction with CEOs, Board

Members, Audit Committees, regular

visits to construction sites of major

infrastructure projects

• Review 5 existing boards and

appointment of new boards

• Filling in of SOC vacant

executive positions

• During 2018 new Boards were

appointed at Transnet, Denel,

SA Express and SAFCOL. 4

NEDs were re-appointed to

Alexkor Board pending the

review on the future state of

Alexkor.

• Executive Director positions

being filled including Interim

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Appointments

• New CEO and CFO appointed

at Eskom, New CEO appointed

at Denel, Interim CEO

appointed at SA Express,

Interim CFO appointed at SAA,

Interim CEO and CFO

appointed at Transnet,

finalisation of recruitment

processes underway at SA

Express (CEO and CFO),

Safcol (CFO), Denel (CFO),

Fast-track the introduction of the

Shareholder Management Bill to

empower the department to carry out

its oversight responsibilities

• Procure services of a service

provider to assist the

Department to develop the

Green Paper the Bill

• TORs for service provider to

assist the Department have

been developed.

• Consultations with Government

Departments held in December

2018 to look at the various

models for shareholding.

• In December 2018, Cabinet

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approved the TORs of the

Presidential SOE Council

(PSEC) which will oversee SOE

reforms.

• Governance structures are

being put in place, such as the

DGs Technical Task Team to

support the PSEC

Develop SOC guiding frameworks and

ensure their implementations to

provide stable working environment for

SOCs

• Development and

implementation of the

Remuneration Guidelines and

Executive Board Appointment

Guidelines(DPSA

• The Remuneration Guidelines

have been developed.

• Implementation within the

portfolio is underway with all

SOCs having to review and

submit new Remuneration

Policies.

• Government interaction and

awareness will be conducted as

part of the work of the PSEC.

Ensure finalisation of the future

strategic roles for Alexkor and

SAFCOL

• Part of SOC Reform process • Alexkor• Task Team established to

assess:

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• Undertake extensive exercise

on how best the State should

re-organise its current mining

assets; and

• Provisional position of Alexkor

has been determined, this

requires further approval from

Minister, subsequently Cabinet.

• Safcol • The role of SAFCOL in assisting

DAFF to manage State Owned

Forestry Assets (Category

B+C) being explored by DPE,

DAFF and SAFCOL

Finalisation of the Whole of State

policy to bring alignment and synergy

amongst state aviation assets i.e SAA,

SAX and Mango

• Consultation with relevant

stakeholders on the

development of the Optimal

Corporate Structure for the

realignment of the state owned

airlines.

• Develop action plan to guide the

• the development of a Whole of

State policy has been

developed and consultation has

taken place with DOT, DEA,

DWS, DTI and DMR.

• A Cabinet Memo was submitted

proposing the implementation of

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finalisation of the Optimal

Corporate Structure.

an optimal corporate structure

for the airlines, which is still

being considered by Cabinet.

Greater emphasis on the monitoring

and evaluation of SOCs'

implementation of Government's policy

objectives.

• Annual review or reaffirmation

of the SOCs Strategic Intent

Statement (SIS). The SIS and

SHC strengthened to reflect

Government priorities as per

NTSF 2014-2019.

• Timely conclusion of the

Shareholder Compact (SHC).

• Strategic intent statements

reviewed and, where necessary,

amendments proposed (but still

to be signed off by Minister)

• Majority of the SHCs are at an

advanced stage of negotiation.

Progress on the municipal debt • Intergovernmental

engagements

• Municipal debt increased by

R1,6bn from R17bn in

September 2018 to R18,6bn in

December 2018;

• Top 11 defaulting Municipalities

constitute 77% of the total debt.

Free State Municipalities are

leading with 44% of the debt

followed by Mpumalanga.

• On Revenue Management, a

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committee was established

comprising of the different IMTT

members to deal with the

following:

• Funding and the implementation

framework for revenue

collection mechanism and the

roll-out of prepaid meters;

• Establishment of an

independent centralised

collection mode;

• Management of default

including triggers and

consequence management;

• Program to deal with the

“culture of non- payment”

Consider introducing relevant

systems and evidential

requirements during the

annual strategic planning

• Review of the department

planning processes

• Development of the Action Plan

to support the implementation of

• 2018/19 integrated Action Plan

was developed factoring in these

directives/guidelines

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process in order to ensure

that all predetermined targets

are achieved.

the Strategic Plan and APP

Ensure that the Department's

vacancies are filled, as well

as the acting position in the

entities with an outcome of

developing strategic capacity

of the Department

Ensure that spending on

compensation is fast tracked

through acquiring critical

skills.

• Review of the structure to ensure

conducive integration of roles

and responsibilities

• Enforce stringent turnaround time

on the filling of vacant positions

• The new structure

implementation with effect from

01 January 2019. However new

capacities required in line with

changed priorities

• Subsequent to implementation of

the approved Re-aligned

Structure, priority posts were

identified and advertised.

Accelerated recruitment process

planned for Q1 of 2019/20

financial year.

Complete the objective on

Business Mapping Process

• Standardisation of the processes

for effective coordination of

information and decision making

process

• The project will be reinitiated in

2019/20 after being abandon

in 2017/18. an IT architecture

unfolding in 2018/19 shall form

the foundation of this work

Ensure that service providers • Enforce turnaround time of 30 • The standard operating

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are paid within timeframes

and project management

capacity is enhanced in the

Department

day payments procedures were developed

during 2018/19 financial year to

improve the internal control

measures which help to identify

and prevent late payments and

ensure full compliance with the

PFMA. The department on

average pays service providers

within 3 days of receiving

invoices.

Address issues relating to

SOCs going concern

• Recapitalisation of SOCs to

address issues of insolvency

and liquidity.

• Recapitalisation requests

submitted on behalf of SOCs.

• Approved allocations of R5

billion for SAA and R1.249

billion for SA Express'

transferred to the companies.

• Engagements with potential

lenders underway to secure

debt financing to meet liquidity

requirements.

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Ensure that the Department

continues to work closely

with policy departments in

order to influence the policy

environment in which SOCs

operate

• Cluster participation and

individual policy Departments'

working arrangements

• Engagements with DOT, DOE,

DOD and National Treasury with

the aim of achieving policy

alignment.

Department to rectify wrong

audit opinion reported by

Denel.

• Intervention by the Minister,

Denel and SNG to amend the

audit report.

• Done. Denel 2017 Annual

Report re-tabled in Parliament

early in 2018.

13. Summary of outstanding issues relating to the department/entities that the Committee has been grappling with.

The following key issues are outstanding from the committee’s activities during the 5 th Parliament:

Responsibility Issue(s)Alexkor and DPE The establishment of a legitimate CPA for the community of Richtersveld, in order to enable

the disbursement of the dividends and properties to the community. Appointment of local

contractors instead of outsourced contractors. The longevity of the mine is in dispute

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Responsibility Issue(s)between the community and the entity. The diversification strategy of the entity into coal

mining is questionable.

Safcol and DPE The implementation of the diversification strategy in order to expand the portfolio of Safcol

and increase its participation in the value chain. Safcol need to participate in the

manufacturing of processed goods, and should stop selling timber in its raw form to increase

its return on investment. IFLOMA to be taken out of care and maintenance and made to

become profitable.

Department of Rural

Development and Land

Reform

Outstanding land claims on Safcol used land and the Aventura land. Assist in formalising the

community structures in Alexanda Bay in aiding Alexkor to finalise the Deed of Settlement.

Department of Co-

operative Governance

and Traditional Affairs

Municipal debt owed to Eskom, assist Alexkor to transfer Alexanda Bay to the local

municipality

Department of Public

Enterprises

Forensic investigations into procurement, maladministration, governance and financial

irregularities in Eskom, Transnet, Denel, Alexkor, South African Airways, South African

Express Airways and Safcol.

SOC Shareholder Management Bill

DPE and National

Treasury

Financial sustainability of Eskom, SAA, SAX, Denel

Department of Defence

and Military Veterans

Role of Denel in the defence industry

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Responsibility Issue(s)and DPE

14. Other matters referred by the Speaker/Chairperson (including recommendations of the High Level Panel)

The following other matters were referred to the committee and the resultant report was produced:

Date of referral

Expected report date

Content of referral Status of Report

April 2018 April 2019 Issue of State Capture an

investigation in Eskom

Finalised by March 2019

g) Challenges emerging

The following challenges emerged during the processing of the referral:

The Committee has delays due to processes of appointing Evidence Leader.

Additional resources could not be made available to provide support – requested additional Committee Secretary

and Committee Assistant, Content Advisor

A list of witnesses could not be exhausted due to unavailability of witnesses who were called to provide evidence.

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h) Issues for follow-up

The 6th Parliament should consider following up on the following concerns that arose:

Consider investigations into Denel and Transnet as suggested by the Eskom Inquiry Report.

Monitor and provide oversight on recommendations to be made by State Capture Commission led by Deputy Chief

Justice Raymond Zondo.

15. Recommendations

The Committee to have more joint meetings with the Committees on the Economic Cluster.

The Committee should provide members orientation into the Department of Public Enterprises and State Owned

Companies.

Capacity building should on financial and economic governance in preparation of the new role of SOCs.

International oversight should be prioritised and best practices be adopted for improved SOCs oversight.

The report into investigations on the Eskom Inquiry and recommendations from the State Capture Inquiry should be

followed up in conjunction with the Portfolio Committees on Justice and Constitutional Development and Police.

Transnet’s road to rail strategy should be fast tracked the Portfolio Committee on Public Enterprises.

Transnet should present to the Committee progress on employees implicated on cable theft.

The Committee should meet internal and external auditors to address issues faced by SOCs.

The reconfiguration of the State should be prioritised by the Committee.

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The Committee should engage and guide Government in its plan to turnaround SOCs.

A key area of focus of the Committee should be to engage the Department on the rationalisation of State assets

and selling of non-core strategic assets of governance to maximise the financial position of SOCs.

Engage and guide the Department on the formation of Eskom’s three entities on Distribution, Generation and

Transmission.

The Committee should provide guidance on the competitive advantage, economy, efficiency, effectiveness and

performance of SOCs.

Sustainability issues in forms of corporate social investment in communities should be prioritised by the SOCs and

they should set the agenda for the Committee.

The Committee should monitor Transnet’s 4.0 strategy which migrate from the Market Demand Strategy.

Outstanding issues on future roles of Alexkor and SAFCOL should be prioritised and the guidance should be

provided to the Department.

The Committee should the work of the Presidential task team on Eskom.

The Committee should continue to monitor the financial aspects of SOCs and develop mechanisms with which to

curb guarantee utilisation in SOCs.

The Committee should invite the Department to outline guidelines and criterion to be adhered to when choosing a

strategic equity partner for SOCs. The Committee should design a framework to assess suitability of the strategic

equity partner based on South Africa’s macro environmental factors.

16. Committee strategic plan

Attach Committee Strategic Plan as an annexure

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17. Master attendance list

Name of Member Political Party

Ms L Mnganga-Gcabashe (Chairperson) African National Congress

Mr RM Tseli

Ms DZ Rantho

Ms T Mahambehlala

Ms G Nobanda

Mr E Marais Democratic Alliance (DA)

Ms N Mazzone

Mr N Singh Inkatha Freedom Party (IFP)

Mr S Swart African Christian Democratic Party (ACDP)

Ms N Mazzone Democratic Alliance (DA)

Mr M Dlamini Economic Freedom Fighters (EFF)

Mr Kwankwa United Democratic Movement (UDM)

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