Minister Lynne Brown’s speech delivered at the Portfolio Committee of Public Enterprises on the 5 April 2016
The global economy has been facing serious head winds that have pose challenges to most emerging market economies including South Africa. This has made the implementation of our policies and programmes more challenging. In 2016, the economy is expected to grow below 1 percent. Our focus is to ensure that we turn the growth story around and position our SOCs to drive economic recovery and set the economy on the growth trajectory with better developmental outcomes. SOCs investment has been essential to minimize the impact of the economic crisis in 2008 and remains essential for the economy going forward.
Our position as a Department is to ensure that we leverage our SOCs to drive the industrialization programme, accelerate transformation of the economy and support Africa development. The Strategy of the Department is intended to ensure that this is realized.
When I assumed the position of Minister of Public Enterprises, some of the SOCs under my portfolio were facing governance challenges. I immediately embarked on a roadmap which entailed a programme of intervention with a view to review leadership and create stability on SOC Boards. I can report that today there is stability in SOCs.
The success in the turnaround of Eskom centers around four pillars, stable leadership, execution of the maintenance plan, delivery of the build program and financial sustainability.
Over the last year we have made progress in executing each one of these pillars particularly, there has been:
Great improvement in leadership stability. The board and management have been able to demonstrate sound performance and governance with all the executive roles filled;
Significant improvement in the execution of maintenance that ensures required maintenance is executed while the lights stay on. Load shedding has become a thing of the past and I am very comfortable with the approach taken. The usage of diesel has also reduced significantly, with monthly budget reduced from almost R1bn per month to R40m per month The Group Chief Executive Officer, Brian Molefe, has assured me that there is no prognosis for load shedding over the winter months
Improvement in financial position particularly liquidity despite the unfavourable decisions from NERSA. The company has worked diligently with my Department to ensure compliance with equity conditions set by the Minister of Finance to ensure financial improvement and compliance.
Great progress with the executing of the build programme including the delivery of Medupi, Kusile and Ingula. Over the last month we have seen the delivery of two units at Ingula adding 666MW to the national grid. This is greatly commendable, and I am confident that I have the right team at Eskom to execute.
Over the next year, Eskom will focus on the delivery of the additional units, achieving cost cutting measures, strengthening transmission grid to support IPP programme and electrification expansion. This turnaround approach can be replicated at all the other SOCs even outside of the DPE as a dashboard for operational performance and sustainability.
The incoming Board of Directors has reviewed the SOC strategy. This has led to the acquisitive strategy that the SOC had embarked on, driven by a need to build strategic capabilities informed by the 2014 Defence Review, being pegged back to preserve resources.
The focus of the Board in the medium term will be on improving cash management focused on improving working capital management and opening new markets through strategic partnerships in identified markets.
The cash situation at the SOC has stabilised and the R850-million note brought to the market in Quarter 4 of 2015/16 by the SOC was over-subscribed showing the market confidence in the interventions at the SOC.
The SOC has embarked on an aggressive product portfolio augmentation programme. Notable programmes are the launching of the SARA regional aircraft to address African air travel requirements and the midlife upgrade to the Rooivalk attack aircraft. The launch of the Rooivalk upgrade programme is a product of the deployment of the helicopter in a peacekeeping mission in DRC, where it acquitted itself quite well. These developments must be celebrated by all South Africans, as they show that Africa is playing its role in giving the world complex technological products.
Alexkor is continuing to show pleasing progress in its recovery and the operations are being maintained contributing positively to the socio-economic recovery of the Richtersveld region.
The land restitution programme through the implementation of the deed of settlement is coming to an end. The focus going forward will be on assisting the community to utilize proceeds from mining for development of agricultural, maricultural and industrial enterprises, in order to ensure economic activity beyond the life of the mine.
The Board of SAFCOL has reviewed its strategy and it is placing greater emphasis on beneficiation going forward, without compromising sawlog security of supply to SMME sawmills. In this regard, the SOC has developed plans to upgrade the Timbadola sawmill in Limpopo and the re-establishment of a Sabie sawmill complex. This will have a positive impact on the SOC’s plans to stimulate the furniture manufacturing and timber-framed building industries in these rural regions of our country.
In the wake of slow and declined economic growth, Transnet continues to drive a countercyclical investment strategy. The company is rephrasing its investment plan to a longer-term plan in order to better align capacity creation to expected demand. Transnet is also shifting its focus towards capturing greater market share in the domestic market and extending its footprint in the wider African market. This will also see Transnet diversifying its commodities more to increase the amount of General Freight traffic that is moved to support the road to rail strategy.
In order to increase its revenue opportunities and support local and regional economies, Transnet Engineering is increasing its focus on developing the second prototype of the Trans-Africa locomotive. This is over and above the locomotive acquisition program that is already being implemented to support the Road to rail strategy. Earlier in March, Transnet Engineering recently delivered the first batch of coaches to Botswana Railways and continues to grow its business in the continent.
The airline is working towards achieving financial sustainability amidst a very difficult operating environment in the aviation sector as well as a generally weak global economic environment. As announced in the Budget Vote Speech the Minister of Finance and I are also exploring the possibility of merging SA Express with South African Express to create better opportunities of leveraging on these state-owned assets in support of government’s strategic objectives.
Growth opportunities / Africa Strategy
In terms of expanding market opportunities and growing the market share of our SOCs, the DPE is pursuing the African market as a potential growth area in response to the regional integration as by the National Development Plan. The SOCs will be pursuing opportunities in the following countries; In terms of Transnet the following countries have been identified Tanzania, Kenya and Burundi. With regards to Eskom, the following countries will be focusing on DRC, Mozambique and Uganda. Denel will be looking at Egypt and SAX looking at Ghana. These will form some of the continental engagements that the Department and the SOCs will be prioritizing in the new financial year. Furthermore, it is important that these projects are structured in the most financially viable and optimal manner and assist us in pooling resources in a way that fosters regional economic integration and strengthen economic relations as well as benefits.
There is a deliberate effort by the SOCs to develop scarce and critical skills that are required to support the economic growth, including training of artisan, technical and engineering skills. They train for their current and future operational requirements as well as for the broader economy. The Transnet and Eskom new build programmes have developed critical skills base which can be leveraged on to develop new businesses and economic development centres.
For enquiries contact Colin Cruywagen on 082 3779916.