PUBLIC ENTERPRISES 2007-2010 STRATEGIC PLAN AND FINANCIAL OVERVIEW 2 & 3 MAY 2007 Ms Portia Molefe...

PUBLIC ENTERPRISES

2007-2010 STRATEGIC PLAN AND FINANCIAL OVERVIEW

2 & 3 MAY 2007

Ms Portia Molefe

Director General

2

Introduction

• The presentation is informed by: • The specifications issued by the Office of the Chief Whip of the Majority

Party• The Committee’s 2006 Report on the Budget

• The Chief Whip’s office requires an overview of the extent to which the department has contributed to broader developmental objectives

• The salient issue arising from the Committee’s 2006 Budget Vote report is that of shareholder management legislation and the transaction guidelines

• A common request was that targets in the strategic plan be defined in respect of

• Measurable objectives• Priorities and time frames• Budget allocations

2

Contents

Developmental alignment Political mandate

Budgetary trends analyses

Gender and equity transformation

Departmental strategy Mandate, vision and mission

Key achievements & changes to structure

Priority areas and planned activities

3

4

Political mandate

4

Objectives set in May 2004• Halve poverty from about one third of households in 2004 to less than

one-sixth of households by 2014 • Halve unemployment from about 30% in 2004 to lower than 15% by

2014• This requires growth averaging over 5% between 2004 and 2014• The objective we set was to average >4.5% growth up to 2009 and

>6% growth after 2010

ASGISA interventions

• Infrastructure programmes

• Sector investment strategies• Education and skills• 2nd economy & SMME interventions

• Macro-economic issues• Public administration issues / delivery

5

DPE’s contribution

5

• Strengthening SOE and departmental governance and administration systems

• Management of SOE for reliable, cost-effective, commercially viable logistics infrastructure and services• Delivery efficiency• Lower production costs• Improved competitiveness• Support the creation of cutting-edge, technologically driven

industries for long-term growth (Infraco, PBMR, DENEL)• Attraction and development of a world-class skills base

• Overseeing an accelerated infrastructure investment programme• Increase capital formation in a fiscally sustainable manner• Strengthen local supplier capabilities• Crowd in private sector investment • Contribute to local economic development and job creation

6

Analysis of Budget Trends

6

(R Thousand) 2003/2004 2004/2005 2005/2006 2006/2007 2007/2008 2008/2009 2009/2010

Programme 1 44.2 5.9 1.7 1.8 5.6 42.3 40.8

Programme 2 38.5 2.0 0.8 25.2 1.0 8.9 8.9

Programme 3 9.5 2.5 0.6 0.6 2.1 13.6 13.5

Programme 4 7.0 89.4 96.9 71.9 89.0 9.5 9.1

Programme 5 0.8 0.2 0.0 0.2 1.0 9.5 10.2

Programme 6 0.0 0.0 0.0 0.4 1.4 16.2 17.5

TOTAL 100.0 100.0 100.0 100.0 100.0 100.0 100.0

The table below indicates the percentage of total DPE budget allocated to each programme (as per the ENE). A broad analysis of the departmental budget reflects that the department has responded to the ASGISA objectives in that:

1. responsibilities assigned to infrastructure maintenance and expansion have increased (programmes 2 & 4)

2. expectation for SOE contribution to development goals, particularly manufacturing has increased (programme 4)

3. joint projects (including skills, 2nd Economy interventions, continental issues, and enhanced coordination) have become more significant (programme 6)

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Transformation of SOE

7

Transformation is an integral responsibility of all SOE and is closely monitored by the department through:

• Board appointments

• Setting KPIs in corporate plans

• Monitoring implementation of national policy on gender and equity

• Progress captured in Annual Reports and presented to Parliament

Generally the department is satisfied that:

• All SOE have set gender and equity targets

• All SOE have management capacity building programmes

• Although ranging in content, SOE have programmes in place to make the workplace more gender and disability friendly

THE DPE STRATEGYTHE DPE STRATEGY

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9

Mandate of the department

The key objective of the Department of Public Enterprises is to provide effective shareholder management to nine SOE (Transnet, Eskom, Denel, SAA, Safcol, Alexkor, PBMR, Infraco and SAX), to support and promote economic efficiency, competitiveness and growth for a better life for South Africans in particular and the African continent in general

A critical task to effect this, is aligning SOE business strategies with Sector department policies and regulatory authorities, whilst ensuring that SOE are sustainable businesses

10

Vision of the department

Our vision is to have SOE that:

• are efficiently managed, meeting domestic and international industry operational benchmarks

• play a role in the industry that ensures an optimal allocation of responsibilities between the public and private sector

• undertake investment programmes that provide the necessary capacity to accommodate faster economic growth

• implement their investment programmes in such a manner that the national economy is strengthened in a sustainable way

• Contribute to advancing the infrastructure objectives in NEPAD

11

Mission of the department

Our mission is to provide SOE with:

• clear mandates

• simple, implementable governance systems

• effective performance Management

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Key commitments in 2006

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• Implement an effective shareholder management system

• Ensure the implementation of the infrastructure investment programme

• Strengthen SOE balance sheets

• Leverage the SOE’s Capex programme to “catalyse” economic activity

13

Key achievements for 2006

• Internal structural readjustments to – Allow greater sector focus– Enhance oversight of SOE activity

• Legislative and policy directives– Transnet Pension Fund Amendment Bill processed– South African Airways Bill processed– Infraco and South African Express Bills submitted to Cabinet– Extensive consultation on Shareholder management legislation (including transaction

guidelines)– Stakeholder engagements around SAA restructuring, proposal developed– SAFCOL restructuring proposal developed and submitted to Cabinet

• Build programme– Business plans for procurement capability and capacity upgrading for Transnet and Eskom

finalised – Investment dashboard developed– Quarterly reports submitted to the Portfolio Committee and placed on website– Competitive Supplier Development Programme Concept Document approved by Cabinet -

Bootcamp conducted with procurement managers

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14

Changes to DPE structure

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The ENE for 2007/2010 indicates a move away from a specialisation based structure to a sector based structure, with specialists incorporated in each SOE team. – Energy, Mining and Broadband: Programme 2 (formerly ARM)– Manufacturing Enterprises: Programme 4 (formerly CSS)– Transport Enterprises: Programme 5 (used CFT DDG post)

Subsequently Infraco was moved to Manufacturing and PBMR to Energy –this will be reflected in business plans and the adjustment estimates

Given the volume and risk attached to legal and transactions issues we retained Legal, Governance and Secretariat as a specialist function and incorporated the Risk function into this unit: Programme 3

Joint Projects Facility is no longer a sub-programme and is now Programme 6.

1515

Chief Operations Officer(COO)

Director General

Minister

Public Enterprises

DDGTransport Enterprises

Andrew Shaw

DDGManufacturing Enterprises

Litha Mcwabeni

DDGLegal, GovernanceRisk& SecretariatSandra Coetzee

Director Internal Audit

Chief Financial Officer

(CFO)

ORGANISATIONAL STRUCTURE

DDGEnergy, Mining and Broadband

EnterprisesJames Theledi

CoordinatorJoint Project Facility

Katherine Venier

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DPE BUDGET

ITEMSR thousand

BUDGET 06/07 BUDGET 07/08

Programme 1 : Administration 49 705 59 260

Programme 2 : Energy, Broadband Infrastructure & Mining Enterprises 723 361 10 374

Programme 3 : Legal, Governance and Risk 17 192 22 676

Programme 4 : Manufacturing Enterprises 2 063 586 2 270 425

Programme 5 : Transport Enterprises 4 670 10 126

Programme 6 : Joint Projects Facility 11 409 14 678

TOTAL 2 869 923 2 387 539

Adjustments as per 25 April 2007 included (Programme 4)

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DPE Statisticsas at 16 April 2007

Total Posts Filled Posts Vacancies

157 137+1 Secondment

19

Level 1 - 10 63 8

Level 11 - 12 26 3

Level 13 - 15 48 + 1 Secondment 8

Appointments 1

Interviews in progress 0

Advertised Posts 4

Offers made 4

Terminations April to date 23

• Resignations 18

• Contract Expiry 1

• Transfers 4

PRIORITY AREAS AND PRIORITY AREAS AND PLANNED ACTIVITIESPLANNED ACTIVITIES

PROGRAMMESPROGRAMMES

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19

Programme 1: Administration

Management and Administration Purpose: Responsible for the overall direction and management of the Ministry

and the department and provision of administrative support services to the department.

Measurable objective: • To provide strategic direction and leadership• To provide support services to enable the department to deliver on its

organisational objectives in an environment where the human capital within DPE is both motivated and empowered

• To improve the quality of corporate governance and performance monitoring systems by ensuring that appropriate policies, processes and procedures are developed and implemented within DPE

Sub-programmes: Ministry, Office of the Director-General, and Corporate

Services. Corporate services include strategy and business planning, human capital, information technology, communications, finance, security services, legal counsel and internal audit.

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Measurable objective: Strategic direction and leadership and appropriate support services.

Sub programme

Output Measure/Indicator 20007/08 target/milestone

2008/09 target/milestone

2009/10target/milestone

Human Resources

Job evaluation All DPE employees have their jobs evaluated

Continuous evaluation of posts

Evaluation of all filled posts

Effective performance monitoring of individuals

Corporate Services

Improve security measures on physical, document and information security

Proper system to access documents in place

Effective document management



Information Management

Network enhancement and optimisation

Improved network speed and enhanced information security

98% network availability

Effective information technology systems

Effective information technology systems

Communications

Communication strategy

Communication strategy in place and implemented

Communication protocol followed by all officials

Effective communication

Effective communication

21


ITEMSR thousand


COMPENSATION OF EMPLOYEES 26 430 29 109

GOODS AND SERVICES 21 070 28 681

TRANSFERS 620 620

OTHER 30 0

CAPITAL 1 555 850

TOTAL 49 705 59 260

Goods and Services in this programme have increased due to the centralisation of equipment contracts, Telephones, Stationery, Recruitment advertising, and all software licences. In addition remuneration of interns has been centralised to the Administration budget and not allocated to the business units.

Sub-programmes• Minister• Management• Corporate Services• Property Management

22

Programme 2: EMBE

Energy, Mining and Broadband Infrastructure

Purpose: align corporate strategies of Eskom, Alexkor and Infraco with government’s strategic intent and monitor their performance

Sub-programmes:

Energy–monitor Eskom’s performance: Build Programme, Generation, Transmission and Distribution.

Mining–oversight of the turnaround of Alexkor with a particular focus on the settlement negotiations and the separation of ABT from ABM.

Broadband–establish Infraco, monitor the commissioning of the full service network and provide overarching shareholder management.

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Programme 2:EMBE

Measurable objective: Exercise oversight of SOE and their impact on the economy (locally and internationally)

Sub prg Key projects Measure/Indicator 2007/08 target/milestone



ESKOM Monitoring of Eskom Performance (Dashboard)

Implementation and monitoring of Eskom’s dashboard

Ongoing Annually Annually

Reserve Margin Policy

Review and monitor the current reserve margin in Eskom and plans to get the 15% best practice

Engage with DME on the recommendations from the study such as the integration of ISEP and NIRP and their publications, and clarity on import and export policy

Consultation with DME & Regulator

July 07 Annually Annually

Private sector participation

Monitor and advise on the implementation of the 70/30% policy and the ongoing tender process.

Ongoing Annually Annually

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Programme 2:EMBE





ESKOM Electricity Distribution Industry

Submit proposals on the Eskom distribution given the Cabinet decision

Monitor the roll-out plan of DME and EDI and advise on the REDS

Submit proposals on the transitional participation of Eskom in the REDS

Make inputs on the location of KSACs

Engage DME on the Electricity Regulation Bill and advise on the implications to Eskom Business

June 07 Annually Annually

New Build Programme

Evaluate the Accelerated Build Program.Work with JPF on the Competitive Supplier development programme

May 07 Annually Annually

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Programme 2:EMBE Measurable objective: Exercise oversight of SOE and their impact on the economy (locally and internationally)




ALEXKOR Development Alexkor’s Dashboard

Development and implementation of Alexkor’s dashboard

July 07 Ongoing Ongoing

Negotiations with the Community and township development

Facilitate implementation of Agreement with CommunityEngage DBSA on the township development project

Aug 07 Ongoing Ongoing

Restructuring of the business

Analyse the implications of discontinuing own land mining, and closing down ABT and other units in Alexkor

Monitor and advise on Alexkor’s funding needs and plans

Research on the business model for Alexkor

April 07

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Programme 2:EMBE Measurable objective: Exercise oversight of SOE and their impact on the economy (locally and internationally)




INFRACO Establishment of Infraco Legal contracts and agreements signed (including Neotel & Transtel)

Funding of InfracoAgreement on Infraco price transparency with NeotelOperationalisation of Infraco

International connectivity established

Business plan developed

Oversight InfraCo operating effectively as a broadband service provide

Analyze Operations, Identify SKPIsPopulate dashboard

Compile Benchmark, Price Service level, Capacity against global standards

Review InfraCo impact on SA broadband pricing

27

Programme 2:EMBE ITEMS

R thousandBUDGET 06/07 BUDGET 07/08



TRANSFERS 712 683 0

CAPITAL 74 15

TOTAL 723 361 10 374

The final transfer payment for the Diabo Trust, as well as allocations made during the adjustments for Alexkor (R82,1m) and InfraCo (R627m) are reflected in the 2006/07 budget. No allocation has been made for these entities in the coming year. The functions and funds in the Risk Management sub-programme, which previously resided in this programme, have been moved to Programme 3 : Legal Governance and Risk.

Sub-programmes• Management• ICT Sector : Broadband - InfraCo• Mining Sector - Alexkor• Energy Sector - Eskom

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Programme 3:LGRS

Legal, Governance, Risk and Secretariat (LGRS)

Purpose: To provide effective legal services, corporate governance systems, risk management frameworks and secretariat services to the department and SOE

Sub-programmes:

Legal-internal legal services and oversight support to SOE. Legal also provides legal support for all commercial transactions involving the Department, including, but not limited to the establishment of SOE.

Governance-develops effective corporate governance and shareholder management systems for SOE

Risk Management-proactively identifies, manages and monitors significant risks related to the SOE and their activities as well as across SOE.

Secretariat-provides advisory and Secretariat services to the department and the economic and employment cluster

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Programme 3:LGRS Measurable objective: Efficient and equitable transactions, effective governance oversight, detection and implementation of risk and effective secretariat support

Sub Prg Key Projects Measure/Indicator 2007/08 2008/09 2009/10

LEGAL 1. Transfer of SAA2. Infraco

Establishment3. Transfer of

South African Express

4. PBMR Restructuring

5. KLF restructuring

6. Inflona7. Richtersveld8. Inhouse counsel 9. Litigation

1. SAA established2. Infraco established FSN assets transferred3. SAX established as a

standalone entity 4. New signed

Shareholder agreement

5. Restructuring completed

6. Restructuring completed

7. Settlement processed

1.Legislation & transaction docs



4.Review & draft new Shareholders Agreement

5.Transaction to be executed

6.Transaction to be executed

7.Deed of settlement to be made an order of court

8.Continuous9.Continuous

1. Continued implementation

2. Licensing of Infraco

3. Continued implementation

4. Appropriate location of PBMR within SA Nuclear sector

5. Implementation & winding up

6. Implementation & winding up

7. TSJV to be implemented

8. Continuous9. Continuous

1.Continued implementation




5.N/A

6.N/A

7.TSJV to be implemented

8.Continuous 9.Continuous

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Programme 3:LGRS

GOVERNANCE 1.SOE Legislation

2.Review founding documentation & shareholder agreements

3.Strengthen SOE Boards

Harmonise government-wide Shareholder Management Align founding docs with SMM legislation & sound corporate governance

Board Remuneration GuidelinesBoard profiling & appointments Legal & Governance Database WorkflowBoard Induction and TrainingBoard performance appraisals

Legislation enacted•Guidelines approved

•Guidelines approved

Wider skills base on boardsSMM implementation manualGuidelines and ToolkitGuidelines

Annual updates

Annual updates

Annual updates

Annual updates

Annual updates

Annual updates

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Programme 3:LGRS

Sub Prg Key Projects Measure/Indicator 2007/08 2008/09 2009/10

SECRETARIAT Service existing & new committees & bilaterals

Accurate records of proceedings & decisions emerging from internal management, SOE Fora, Bilaterals with Policy Departments and interactions with Labour.

Annually Annually Annually

RISK MANAGEMENT

1.Review SOE Risk Management Practices2.Risk Management Software System3.SOE Risk Reporting Dashboard

Report on SOE risk management practices.Operational Risk Management software system Operational SOE Risk Reporting Dashboard

Dec 07

June 07

March 08

Annual updates Annual updates

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Programme 3:LGRS

ITEMSR thousand




TRANSFERS 2 038 0

CAPITAL 156 15

TOTAL 17 192 22 676

The increase in budget under Compensation of Employees and Goods and Services for the coming year, is due to the Risk Management function having been shifted from Programme 2 to this Programme, as well as the need to outsource capacity to meet the output target for the coming year. The transfer reflected in 06/07 was in respect of settlement of a claim as well as Regional Service Council Levies which has now been discontinued.

Sub-programme• Management• Legal and Litigation• Governance and Secretariat• Risk Management

33

Programme 4:Manufacturing Purpose: to analyze SOE strategies against government’s strategic intent

as well as SOE financial and operational performance monitoring and benchmarking. In addition, the unit needs to develop proposals around how the SOE can play a catalytic role in the development of the associated manufacturing cluster.

Sub-programmes

Denel: Denel’s key strategic role is to supply South Africa’s armed forces with defence capabilities and to stimulate the transference of advanced manufacturing capabilities to the defence sector. The DPE’s role is to exercise shareholder oversight and add value to Denel’s restructuring and its contribution to advanced manufacturing.

SAFCOL: Monitor the company’s activities, which include forestry management, timber harvesting, timber processing and related activities, both domestically and internationally; and oversee its restructuring

PBMR: Support the acceleration of pebble-bed technology and the production of reactors within Eskom; and facilitate the development of an appropriate shareholder management agreement

34

Programme 4:Manufacturing

Measurable Objective: Strategies and structures for SOE and the industries in which they operate that will ensure delivery on the government’s economic growth objectives

Sub prg Key projects Measure/Indicator 2007/08 Indicator 2008/09 target/milestone


Denel Shareholder Oversight• Denel’s funding • Consolidation of Denel• Compliance

Maximum consolidation of Denel, reduction of costs, disposal of remaining non-core assets and equity partnerships at business unit level

• Disposal of all remaining non-core assets• 2 to 3 equity partnerships• Funding for restructuring

• Finalisation of equity partnerships• Consolidation of Denel

Denel to finalise establishment of key clusters

Sector Strategy(now finalised as at 31 March 2007) – to be implemented by Govt. Depts and industry

Sector growth and contribution to GDP

Implementation of sector strategy: • Funding for strategic capabilities• Export forums and support• Streamlined export regulatory processes• Streamlined policy

Industry consolidation Establishment of industry clusters

SOE National Interest Facility (NIF) to support strategic SOE exports.

Increased exports and employment

Establishment of the NIF

Review of export impact

35


Measurable Objective: Strategies and structures for SOE and the industries in which they operate that will ensure delivery on the government’s economic growth objectives



Denel 10 year Research and Development Strategy

R&D funding to be focussed on strategic capabilities

R&D strategy Implementation of R&D strategy

Assess impact

Establishment of DERI by DoD

Consolidated national research, test and evaluation functions.Enhanced impact on DoD and industry

Establishment of DERI by 31 March 2008

DERI Operational Review DERI’s effectiveness

Aerostructures industry development(with JPF)

Industry segment growth and product competitiveness

• Pre-scoping report• Stakeholder workshops • Appointment of project manager

Facilitate investments in composites (if feasible)

Establishment of aerostructures cluster and development of supplier base for Denel

36




SAFCOL Implement Cabinet decision regarding future role of SAFCOL and KLF

Successful implementation of the new SAFCOL mandate

Implementation plan and monitoring and evaluation plan in place, and full consultation with key stakeholders undertaken

Rollout of the strategy/plan

Ongoing monitoring and evaluation by relevant state department

Detailed structuring and design for requisite disposals

Disposals effectively and competitively executed

Resources to complete the disposal process mobilised.All components of transaction identified and designed in detail to allow the transaction to commence and be completed.

disposal commences. Disposal completed.

Intergovernmental interventions for the development of the forestry sector

Successful implementation of forestry activities in line with DWAF’s objectives

Intergovernmental team established to determine a programme for the development of the Forestry Sector

Forestry Development Programme completed

Roll-out of programme

37






PBMR Development of PBMR Dashboard

Development and implementation of PBMR dashboard

July 07 Ongoing Ongoing

Licensing Engage PBMR and NRR on the licensing

Oct 07

Nuclear Policy/Strategy

Engage DME and review the expected Nuclear Policy and implications on ISEP/NIRP

Analyse the nuclear electricity capacity to be built and advise

Engage Eskom on their conventional nuclear plan

May 07

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ITEMSR thousand




TRANSFERS 2 051 411 2 256 573

CAPITAL 50 30

TOTAL 2 063 586 2 270 425

Goods and Services increase slightly in order to accommodate the need to outsource capacity to meet the output targets for the coming year.

Sub-programme• Management• Forestry Sector - SAFCOL• Nuclear Sector – PBMR (R1,323,573,000) approved 25 April 2007• Defence Sector – Denel (R933,000,000)

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Programme 5:Transport Purpose: To ensure that the strategy, investment plans, commercial

philosophy and operational performance are aligned with government’s strategic intent for these enterprises.

Sub-programmes

Transnet: provide oversight over the capital expansion programme and its transformation into a focused freight transport company and the effective operation of its business units namely Spoornet, Petronet, SA Port Operations and the National Ports Authority. South African Airways (SAA): Monitor SAA’s transformation into a commercially successful national carrier that will contribute to the development of trade and tourism domestically and on the rest of Africa.

South African Express (SAX): Oversee the establishment of SAX as a stand alone entity and support is operational efficiency

40

Programme 5:Transport Measurable objective: Proposals and strategies to ensure that the strategies and operations of Transnet and SAA are aligned with

government’s strategic economic intent

Sub programme Output Measure/Indicator 2007/08 2008/09 target/milestone


TRANSNET Transfer of Sosholoza MeylMonitor and review Transnet’s financing and funding plansMonitor rollout of Capex programmeMeasure the impact of the SOE (Transnet) on the economyContinuous refinement of Port and Rail master plans

Private Sector Participation in Ports and Rail

1. Transfer to SARCC/DOT completed by 31st March 2008

2. Annual review of financing and funding plans

3. Proposals/recommendations for corrective measures

4. functional “dashboard”

5. Quarterly and annual review

6. Develop a basic performance measurement/monitoring tool

7. Perform a baseline study of the current impact of Transnet on the economy

31st March 2008

Annual review coinciding with review of Corporate Plan

Dashboard ‘live’ by June 07Report on Quarterly and annual reviewBasic tool developed by Aug 2007Baseline study completed by Nov 2007

Annual review coinciding with review of Corporate Plan, & functionality – Feb 08

Report on Quarterly and annual reviewEnhance basic tool – Aug 2008

Review of baseline study – Dec 2008

Annual review coinciding with review of Corporate Plan& functionality – Feb 09

Report on Quarterly and annual reviewEnhance basic tool – Aug 2009

Review of baseline study – Dec 2009

41

Programme 5:Transport Sub

programmeOutput Measure/Indicator 2007/08 2008/09

target/milestone2009/10 target/milestone

AVIATION Finalise funding requirements and recapitalisation of the turn-around strategy for SAA (Balance sheet and Core Business

Approved corporate plan by DPE in concurrence with National Treasury

Work with SAA & National Treasury to develop a corporate plan

Monitoring Monitoring

Align restructuring plan to long-term Aviation strategy

Sustainable integrated Aviation Strategy for South Africa

Work with other government departments to develop key measurement indicators and options

Sustained implementation


Legislation / PFMA listing of SAA to DPE

Await Presidential enactment of Bill

SAA established as a stand alone SOE reporting directly to DPE

Legislation / PFMA listing of SAX to DPE

Cabinet and Parliamentary processing of Bill

SAX established as a stand alone SOE reporting directly to DPE

SAX Africa Strategy Agreed and finalised SAX strategy



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Programme 5:Transport ITEMSR thousand




TRANSFERS 0 0

CAPITAL 0 15

TOTAL 4 670 10 126

This unit was previously a sub-programme in Programme 4. The historical figures related to the work in the transport sector for this unit have been aggregated accordingly for 06/07. The increase in the budget for this unit is to establish a fully operational unit with sufficient capacity to deal with the new SOE in the aviation industry.

Sub-programme• Management• Transport Sector - Transnet• Aviation Sector – South African Airways and South African Express

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Programme 6: JPF

Purpose: To enable the development of projects that leverage the assets, activities and/or capabilities of the SOE to the benefit of the SOE and the economy as a whole.

Sub-programmes:

Aerostructures Industry will examine the opportunities the SOE build programme offers to develop an aerostructures industry in South Africa.

Rest of Africa aims to develop infrastructure projects in key countries in Africa.

A project between South Africa and Belarus will bring Belarussian capabilities in earth moving and defence related industries to SA while providing business opportunities for SA firms in that country. The project aims to sign 2-4 Joint Venture agreements by 2009.

44

Programme 6: JPF

Competitive Supplier Development Programme is responsible for finding innovative ways to leverage SOE procurement spend so as to build local world-class manufacturing capabilities to supply our SOE with capital goods in their build programme. The programme also involves co-ordinating industry support measures across government involving DTI, DST and the IDC and building SOE strategic procurement capability.

Energy and Pipelines co-ordinates liquid fuels and gas pipelines planning to ensure there is sufficient pipeline capacity in liquid fuels, natural gas and slurry pipelines to enable growth in the economy.

Environmental Issues develops proposals to ensure that the government policy balances the needs of environmental conservation with the need to rapidly build more infrastructure to grow the economy and become globally competitive.

45

Programme 6: JPF

Human Resources and Capacity Building focuses on ensuring that there are sufficient skills in South Africa to meet the requirements of our SOE build programme. Maximising the training infrastructure of our SOE to deliver artisans and technicians needed to build infrastructure, together with Further Education and Training Colleges, is a crucial output for this project.

Information Communications Technology seeks to utilise SOE ICT infrastructure to the advantage of our SOE and country as a whole. Developing call centres in rural areas and providing cheap broadband infrastructure for South Africa are two key outputs for this project.

Property Project is focused on optimising the value and developmental impacts on non-core properties. The project has established a policy framework for disposals and a set of B-BBEE guidelines to guide the disposal of SOE non-core property. From 2007, the majority of property will be sold in an open and competitive manner. Negotiations are underway for the disposal of property in support of the national housing programme.

46

Programme 6: JPF Measurable objective: Strategic direction and leadership and appropriate support services.

Sub programme

Output Measure/Indicator 2007/08 target/milestone



•Competitive Supplier Development programme

1.Finalisation of Supplier Development Programme2.Procurement officers mini-MBA3.Steel and scrap sourcing strategy4.Cabinet approval for exemption from NIPP5.SOE supplier database

Eskom, Transnet strategic supplier development plans ready by July 2007Procurement officers training started by March 2007

Supplier development plans implemented

Procurements costs down by 5% and national value add up by 10%

•Human Resources and Capacity Building

1.Skills requirements- Broader horizon, i.e. 20 years- Look beyond artisanal skills – engineering and high level skills- Supplier skills requirements 1.Training facilities - Establishment of an SOE Training Academy- Consolidation of training facilities - Co-operation with DoE and DoL regarding funds for training

Vacancy rate of artisans, engineers and technologists decreased in SOEReduction in suppliers’ claims that skills shortages prevents capex rollout

SOE to complete comprehensive Capex –related skills plans by April 2007Business plan for artisan training programme approved by May 2007

Artisan training programme starts by April 2008Capex-related skills plans implemented

SOE internal artisan, engineer and technologists vacancy rate kept below 10%1000 certified artisans produced through artisan training programme by end 2009/2010

47

Programme 6: JPF •Energy and

Pipelines1.Implementation phase for Petronet pipeline2.Participation in slurry line study3.Further work on coastal mega-terminal4.Engage with Eskom on gas pipeline requirements

Sufficient liquid fuels capacity in South Africa to support economic growth.

Scenario planning and business planning for pipelines (liquid fuels, gas, slurry)

Implementation of preferred options for pipelines.

Project complete

•Rest of Africa Identify 3-4 countries / projects to pursue (pre-feasibility and feasibility stage)

Infrastructure investments in 3-4 countries, to provide key infrastructure to that country/region as well as capacity building in those institutions

Identification of 3 possible countries and projects

Pre-feasibility and feasibility work for identified projects

Implementation phase for projects

•Information Communications Technology

1.Call Centres in under-privileged areas

2. Broadband Infrastructure Light the fibres and become operational

3 call centres in FETs in Phase 1

Secure funding and clients for the 3 call centresby March 2007

Operationalisation of call centres and transfer to DTI

Project complete

48

Programme 6: JPF •Environmental

issues1.In collaboration with DEAT, formulate Strategically Important Development (SIDs) criteria and development2.Provide assistance to DEAT regarding Strategic Sectoral Plans (SSPs)3.Enhance SOE and DEAT capacity on EIA issues

Enhancing SOE EIA capacity where gaps are identified, to ensure better planning and EIA process in future.

Strategic Sectoral Plans for Ports, Energy and Telecomummunications

EIAs processed efficiently by SOE and DEAT

Build programme not hindered by EIA process

Property 1.Non-core property disposalsFinalise Housing transactionLift moratoriumRoad show to publicise disposalsTransnet, Eskom and SAA to begin disposals2.Properties for developmentAgreement on which properties will be in this categoryFinalise transaction

Integrated, mixed use developments and significant socio-economic development impact to be secured

Packaging and disposal of non-core properties to begin

Monitor sales according to B-BBEE guidelines

75% of non-core SOE properties to be sold by 2009

49

Programme 6: JPF ITEMS

R thousandBUDGET 06/07 BUDGET 07/08



TRANSFERS 0 0

CAPITAL 0 0

TOTAL 11 409 14 678

This unit was previously a sub-programme in Programme 4, where the funds were earmarked within the programme. The increase in the budget for this unit is mainly due to additional capacity requirements and outsourcing of technical and specialist expertise required to meet the objectives of the unit.

Sub-programme• Management• Joint Project Facility

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“The portfolio of state assets contains entities and agencies that operate in various ways in our country and play a fundamental and strategic role in the ongoing development of our country and our continent. Significant progress has been made since 1994 to align state enterprises and agencies with priorities of our developmental agenda. However, inefficiencies continue to hamper the optimal operation of those assets and hence the quality of the service they provide to our people and the economy as a whole” 51st ANC NC

The first priority of the department in the second decade of democracy was to eradicate the inefficiencies in the SOE that report to us. This required a disposal of non-core assets; exiting from non-core activities; and institionalising governance and administrative systems. This task remained a challenge at every level:

– The SOE hold large portfolio’s and it was necessary to carefully define and identify non-core activities and assets

– Workers had to be included in the transformation process– The strategic direction for each SOE had to be located to address changes and demands at

domestic and global levels, which required significant research and consultation– A process for disposals needed to be determined– Legislation had to be put in place– New patterns of reporting and control had to be introduced

At the same time the department had to ensure that SOE expand and modernise to meet the needs of South Africa’s rapidly growing economy

Conclusion

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Conclusion

• The restructuring of Transnet is well underway. Metrorail has been shifted to SARCC; SAA is off the Transnet books; and Shosholoza Meyl and SAX are in the process of being exited.

• A turn-around strategy for DENEL and SAA is in place; the strategic location of SAFCOL is in the process of being finalised; and we are making breaking entries into the nuclear and broadband sectors.

• Effective shareholder management required a realignment of the department’s structure. As we better understood our role, the department’s structure was refined, and we believe that the current structure best enables us to exercise our oversight function

• Sustainable platforms of engagement have been introduced and we now have improved information sharing and co-ordination SOE activities

• While we are still engaging other government departments on the precise nature of shareholder management legislation, we are actively involved in the determination of corporate plans; and we receive quarterly reports that enable us to monitor and support the programmes of SOE

• A settlement has been reached with the Richtersveld community and we are now ensuring that is processed as an order of court.

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THANK YOU

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PUBLIC ENTERPRISES 2007-2010 STRATEGIC PLAN AND FINANCIAL OVERVIEW 2 & 3 MAY 2007 Ms Portia Molefe...

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