Department of Public Enterprises Strategic Plan and Annual Performance Plan for 2022/23; with Deputy Minister

Meeting report

The Chairperson opened the virtual meeting and welcomed everyone in the meeting. He asked for apologies.

The apologies received from the National Council of Provinces (NCOP) Select Committee were Mr J Nyambi (ANC, Mpumalanga), Ms L Bebee (ANC, KwaZulu-Natal) and Ms C Labuschagne (DA, Western Cape). For the National Assembly (NA) Portfolio Committee, apologies were received from Mr N Kwankwa (UDM) and Ms O Maotwe (EFF). The Minister of Public Enterprises, Mr Pravin Gordhan, also gave apologies as he was in Cabinet. Deputy Minister Mr Phumulo Masualle would be leading the delegation.

Opening Remarks by the Chairperson
Chairperson Magaxa said that the meeting was for the Joint Committee to receive a briefing on the Annual Performance Plan and budget for the Department of Public Enterprises for the 2022/23 financial year. This was a joint meeting with the Portfolio Committee on Public Enterprises and Select Committee on Public Enterprises and Communication.

Chairperson Magaxa reminded Members that this briefing came just two weeks after their oversight visit, where they interacted with the South African Airways (SAA), Denel, and South African Express Liquidators. They had also met with Eskom and the National Union of Mineworkers (NUM) on their complaints against the irregularities at Koeberg power station. This process is still in progress, and this meeting will go ahead as a Joint Committee with the Department of Mineral Resources and Energy. He also reminded Members that their state-owned companies were in a dire situation, and if nothing was done to assist these entities, particularly Denel, those companies would face liquidation. They could not afford to lose such significant industrial and manufacturing capabilities for the South African state. Therefore, they want these companies to be saved, and for the jobs at stake to be saved, so that they could continue with these businesses. In their oversight session, they were invited by the Appropriations Committee to a meeting where they had the opportunity to interact with the Defence and Military Veterans and other related stakeholders, which was a very productive session. In all these sessions, whether with SAA, Denel or SA Express liquidators, or Eskom, they were empowered to be in a position to develop informed views. Undertaking public engagement without having sufficient information can be embarrassing. Part of their responsibility, as public representatives, was to oversee – this involved directly interacting with stakeholders, the governance and executive of these entities. This was where the information would come from. It would not come from gossip in the media or from people in those corners. The information was gained from those who had the responsibility to run these entities – the boards and the executives. So, it was very important for them, as politicians and members of entities, to receive and use this information to advance and save these entities. Being critical without the necessary information amounted to nothing. It was just shouting. So, the gathering of relevant information was crucial. This did not mean that they could not gather information from whistleblowers, but they needed to enmesh this information with that received from those charged with the responsibility of running the institutions.

The last issue he wanted to raise was that they could not be critical about how the entity executives were part of improving the situation of these entities. The reality of the situation was that the six administrations were trying to resolve these issues. They were trying to clean the mess that they had inherited from the previous administrations in those entities. They could differ in their opinions on how they did this, and could develop their own opinions in contesting how they were part of improving their situations. The Chairperson noted that he personally had problems with how some of these entities were being run, and how alternative measures were being applied. But the reality of the situation was that all those measures were put in place to rescue the situation in which they found themselves.

Department of Public Enterprises Annual Performance Plan 2022/23
Deputy Minister Masualle said that the Department appreciated the opportunity to present to the joint meeting of the Committees about what the Department had been looking at in the forthcoming years as part of their efforts to contribute to securing the much-needed reconstruction and revival of the economy. They wanted to demonstrate the role they played as a Department in contributing to these efforts. 

He noted that he was pleased with the Chairperson’s contextualising of the environment in which these entities operate. It was an environment that did have difficulties, some as a direct consequence of the era of state capture, but they were on the path of recovery, which was taking the entities out of this era towards contributing to the well-being of this country. Deputy Minister Masualle said that the Department was technically led by the Acting Director-General, Ms Jacky Molisane, who would be giving the presentation. After this, they would respond to questions from Members of the Committees. It was their earnest view that they must be measured on the strength of the interventions that had been put in place, and they could see some of them bearing fruit. They believed the future could only be better with the intensification of some of these interventions. Yes, some of these companies would need financial injection. However, with the scarcity of financial resources in the country, this was one of the challenges that needed to be confronted by all of them. He was also happy with the strides referred to concerning the plight of Denel, as one of the key institutions to be looked after in our country..

Ms Molisane said the Department’s mandate was to accelerate the restructuring of State-Owned Enterprises (SOEs). They were the shareholder representative for government and were instructed by the executive to oversee core strategic State-Owned Companies (SOCs). Their mission was to provide clear strategic direction and oversight to the Department’s SOCs by seeking to ensure they were financially stable, adequately funded, and operationally stable.

The Department had three programmes. Programme One was responsible for the Administration and Corporate Management, Programme Two managed Governance Assurance and Performance of their SOCs, and Programme Three was Business Enhancement, Transformation and Industrialisation.

The Department followed a robust strategic planning and review process. This process was followed by SOCs in order to provide the Department with the necessary oversight they are mandated to undertake (see presentation diagram).

In terms of the strategic plan for 2020-2025, the Department would be reviewing this plan in the current financial year in order to align with the revised Medium Term Strategic Framework (MTSF) (2019-2024). The targets sought to be achieved in the five-year strategic plan include (i) Socio-economic impact (ii) Oversights of their SOCs and (iii) Sustainability of SOCs, which covers operations and financial performance.
 
Concerning departmental priorities, there were new ones for SOCs in 2022/23. Some key priorities included the restructuring of struggling SOCs (special skills would be needed to run and manage the office), establishing a Centre of Excellence for Governance, and establishing a SOC Holding Company which would then culminate into a Bill that would be shared with Members of Parliament. Strategies on cable theft and infrastructure vandalism, especially an issue for Eskom and Transnet, would also be a key priority for the coming financial year, as this adversely impacted SOC sustainability as well as economic recovery. Other priorities included the development of a framework for a Shareholder Oversight Model for SOCs with a minority government shareholding (South African Airways), proposing financial options to resolve Eskom’s debt, revitalising Alexkor and Denel, developing a roadmap for unbundling Eskom, sourcing ICT expertise, conducting a skills audit, and implementing the District Development Model.

For the Department’s budget, there had been a decrease from R23.9 billion in the 2022/23 financial year to R310.9 million in the 2024/25 financial year, at an average annual rate of 76.5%. This was due to substantial allocation made to Eskom, Denel, and SAA in 2021/22 for the settlement of government-guaranteed debt and the implementation of the business rescue plan. Excluding payments for financial assets, compensation of employees (COE) was the Department’s largest cost driver, spending on which was expected to increase at an average annual rate of two percent from R177.4 million in the 2022/23 financial year, to R188 million in the 2024/25 financial year. Payments for financial assets included R21.9 billion for Eskom in 2022/23, and R1.8 billion for SAA to settle government guarantee debt.

[See attached presentation for details]

Discussion
Mr S Gumede (ANC) said that the presentation combined with the Annual Performance Plan document was a very helpful document to give a forward-looking strategy. It was strong on reforms, and it had broadened structures in terms of monitoring because they had set up a number of priorities, which may necessitate a close monitoring process in all those assignments. However, this called into question whether the Department would have the capacity to oversee all these activities that had been suggested. He concurred with the opening remarks of the Chairperson. He did not have much to remark on concerning the budget of the SOEs, but there were two elements he wanted to comment on. He understood from the explanation that the COE was always given a bigger portion of the budget compared to other programmes. Looking at the density of the programme, the amount allocated to COE needed to be taken on board. But it seemed to him that the Department was not too keen to recruit from the public sector, rather focusing on the private sector, and he wanted to know why. His understanding was that recruitment was based on the relevant skills required, and so they could not stop a person from the public sector from applying for a position if they had these skills. The members of the committees’ terms of office were coming to an end soon, and he was worried about the 2023/24 allocation of about R300 million. This had to be reviewed, as he was not sure if Eskom would be ready at that point to sustain itself. He requested that they critically look at this allocation and the possibility of increasing it. The 2023/24 financial year was critical for the Committees, because it was an election year, and they would not want load shedding to occur due to lack of funds to undertake the critical work needed within Eskom. Also, they all wanted to leave a positive legacy, not remain with the state capture and corruption stigma. It would be better that, from then onwards, if they had the capacity, they would have more meetings and reports on structures proposed by the Department, and increased feedback on what needed to be done. However, he maintained that the presentation and report gave hope of improvement if the recommended programmes, structures and reforms were followed.

Mr Gumede’s first question concerned the allocation of R40.9 million the previous financial year to the Secretariat for the Presidential Council. He wanted to know if the Department was satisfied with the performance of the Secretariat, which was assigned to assist in the Shareholder Management Bill. It was critical to know how it performed. Concerning his second question, it looked as if the finalisation of the Stakeholder Management Bill had constantly been deferred. Ever since he joined Parliament, the Bill had been pushed back, and now it had been deferred to 2023. He was aware that they had augmented the Presidential Council and number of consultants to assist with the mammoth task presented by the Bill, but he wanted to know exactly what the challenges were, so they could understand what was causing all the delays. They could not keep structures that were not helpful. He doubted the use of the Presidential Council and consultants to assist with the drafting of the Shareholder Management Bill – did it really need this much capacity? Did they have the necessary skills to be able to ensure that in 2023 the Bill would be delivered? Further, he commented that the Board Evaluation Framework sounded like it was effective and critical, but had it worked? The responsibility of the Presidential Council appeared critical; it dealt with the shareholders and most of the critical priorities (which in fact had been enlarged). But how did the Presidential Council get evaluated? Did it have the right skills to execute all these responsibilities assigned?

Lastly, on Denel, he wanted to know what the revitalising of this entity entailed – what was there that could give them hope that it could be saved before the next financial year? They could not afford to lose Denel.

Mr C Smit (DA, Limpopo) noted that he did not pick up in the presentation any mention of infrastructure damage or vandalism due to theft of Transnet’s railway cables from Gauteng towards Limpopo. This whole line was vandalised and was out of service. He did not hear any mention of recapitalising this, or ensuring the necessary security was there to prevent continuation of this behaviour. Continued vandalism would cost them billions. He wanted to know who was responsible for this.

His second question concerned infrastructure development and the announcements by the President in terms of railway structures linking mines and smelteries within Limpopo. He wanted to know how far the Department had gone in its evaluation of the economic viability and necessity of this railway infrastructure development.

Mr G Cachalia (DA) said that priorities and monitoring were necessary and useful – for example monitoring the increase of energy availability in Eskom was crucial to see that it rose above 70%. However, impact was the proof of the pudding regarding monitoring and priorities. This helped them see how allocations measured against impact. He had three questions about how they measured impact against the stated priorities. The first question arose from slide 11, which spoke about financial performance and targets achieved. To help them understand this, he wanted to ensure the details, if not currently available, were provided to the Committee at a later stage. For example, he wanted to know how much the various operating companies were currently losing in Rand terms, on a daily basis; this would help them understand the burden on the fiscus and the prognosis in terms of financial performance. If they got this information, they could measure impact very quickly, which was needed. In terms of SAA on slide 15, they spoke specifically of its minority shareholding in the new consortium – again, there was an issue of impact on the fiscus and on state coffers. So, they needed to understand what the contingent liability was that the state would have to honour the agreement with the Takatso consortium. Finally, in terms of Eskom’s debt, which was the largest factor, they needed to understand how this would be addressed. They needed to know, in detail, the financial options being considered, so that they could measure the impact over and above the high-level idea of “sustainability”. The information provided needed to be more granular.

Mr M Nhanha (DA, Eastern Cape) said the issue he wished to raise he had raised before. When he raised the matter before, it was only about damage to roads in small towns in the Eastern Cape. He knew it was not part of the Department’s presentation, but he thought it was appropriate to raise the issue in this platform. The issue was that of Transnet transporting manganese from the Northern Cape to Port Elizabeth. He had met with the Minister previously, and at that time he was raising problems that were emanating as a result of so many trucks on their roads. Those trucks were simply affecting road infrastructure, but now they were actually causing real havoc in the Eastern Cape, and were beginning to take lives. He was very emotional when it came to this risk of taking lives, because a friend of his was killed by one of these trucks in December. At what stage would they be serious about shifting to rail instead of trucks? He could not tell them how many accidents he had witnessed as a result of these manganese-transporting trucks in the small stretch of road between Nanaga and Port Elizabeth, which was about 56 kilometres. What was the Department’s plan with Transet to take these trucks off the road, and get the manganese onto rail?

Mr Nhanha’s next issue concerned Alexkor. He was glad the Acting Director-General had touched on Alexkor, but he hastened to mention that, in the presentation, Ms Molisane used the words “we are looking into” more than 10 times. From his perspective, this did not inspire any confidence. It insinuated that the Department was telling everyone to calm down, that they had it under control, but the house was on fire. In the Select Committee, they had met with Alexkor, and the issues they raised with them concerned the impact of state capture. It was clear to everyone that Alexkor was struggling with the after-effects of state capture. But what was worrisome to him was that the Department just continued to say they were “looking at improving things”. It seemed to him that there was no plan in place to ensure that indeed Alexkor was given the muscle to rid itself of the effects of state capture, but he hoped he was wrong.

He was concerned about infrastructure theft. They could talk about this “until the cows came home”, but the fact of the matter was that the problem was not the business of recycling steel.  This was not where the problem lay, despite the fact that the Minister wanted them to believe that. Recycling was the feature of the universe if they were to preserve planet Earth for generations to come. The problem was with illegal scrap material dealers, and this had nothing to do with steel recycling – they could not paint everyone with the same brush, and lead everyone to suffer by shutting down the scrap metal recycling business simply because there were a few rogue elements in the sector. What needed to be done was to undertake a concerted effort amongst all role players in the state, including law enforcement agencies, to inspect all outlets dealing in scrap metals. If it was found that an outlet was operating illegally, it would be shut down. Shutting down the entire industry due to problems of infrastructure theft in some outlets was not the answer.

Lastly, Mr Nhanha pointed out that, in an interview between Judge Dennis Davis and the CEO of Eskom, André de Ruyter. Mr De Ruyter said that there was a large criminal syndicate in Eskom. They would manage to plug fraud and theft, and then suddenly another crime was committed. For instance, Mr de Ruyter said that they managed to successfully stop the theft of Diesel, but the thieves then shifted focus and now management had discovered that R1.1 billion worth of stock has been stolen from Eskom. Another example was that, when they delivered coals, they had found rocks and metals in amongst the coals, and the purpose was to enhance the weight of the coal so as to be paid more. Mr de Ruyter also complained about thieves who were released on the instruction of senior policemen in the service. He was on record as saying that he could not fix Eskom on his own. He was correct. What support did the Department give Eskom to deal with these problems, so that they could overcome issues of load shedding? Mr de Ruyter had made it public that there were problems, and he needed support. What was the Department doing on this front? He would appreciate concrete outlines of what they would do to support Eskom, rather than telling them what the Department wanted to do.

Ms R Komane (EFF) thanked the Department for the presentation. She then said that she was becoming very emotional in her response to the presentation. As the previous speaker said, she did not know if the Department was really serious about some of the matters. When they spoke of shifting to rail, she struggled to take them seriously, as they had spoken about it for such a long time without any progress. They always received plans, not results. Perhaps some of these matters would not be addressed until they actually “hit home” for the Department, and became a serious issue affecting them. She saw with other matters that they were only addressed when they “hit home” for the Department.

On Denel, they went on an oversight visit, and it was so emotional – the Committee Members could attest to that. But then they must ask themselves whether the Department really assessed the damage caused. Did they discover how many people were affected by the delays in rescuing Denel? If they had taken note of what she had just said, it would not have taken them that long to rescue Denel. They always heard of the plans, but there was nothing tangible in those plans telling them what exactly would happen. This was very disappointing. The Department needed to indicate to them why they were being so slow, and they should be specific about how they intended to rescue Denel.

On the matter of cable theft, they also went for an oversight at Eskom and other places. But she wondered whether there was interdepartmental communication. If there was, why did it take so long for this matter to be addressed? They had law enforcement agencies, but what were they doing? Why were they now only giving the Members a plan? As Committee Members were seated there, they were expecting to receive a result of what the Department had done already. Further, this cable theft is a matter of urgency that needed to be attended to immediately. The Department should take the lead in these matters, yet they had not done anything about it. They were just giving the Committees plans that were not even measurable. She did not know if, in terms of the Alexkor matter, the Department genuinely had any tangible plans with time frames, indicators of how they would carry out the plan, or any sense of the urgency of the challenges faced by the entity. In conclusion, she was afraid. They were a committee almost halfway into their term, were they going to be judged as a committee that only ticked the boxes, or that was just there to receive plans that were not implemented? She did not want to be rude, but this song of state capture had been sung for ages, without anything being done. Could they not have a life beyond the state capture? Particularly in relation to the Eskom matter, whether one believed it or not, it was politically driven. There were political giants involved in these matters. They could not only now be speaking about the debts owed to Eskom; this was a song they had been singing since 2019.

Ms J Mkhwanazi (ANC) noted that Mr Gumede had covered her points in most of his comments. She would go straight to her questions. She wanted to hear the Department’s take on their ability, the current budget and current APPs that they would be able to deliver on one of the Department’s mandates to support SOEs to create an able environment to contribute to South African economic development, to drive investment, to drive industrialisation, to unlock growth and to create jobs and develop skills. In their opinion, would the current budget and plan be able to deliver on this particular mandate? Secondly, she was concerned with the Shareholder’s Compact in programme three. She requested their comments on the signing of the Shareholders’ Compact, why they had not signed, and what the time frames were for this.

From the recent oversight they undertook as a Portfolio Committee, issues were raised concerning the Koeberg Power Station. She wanted the Department’s comments on the nuclear operating license, and the issues around that, and the issues raised by the National Union of Mineworkers (NUM) on the unreliability of the power station. Thirdly, she asked whether the Department could comment on the proactive measures they had taken, especially in connection with the lesson learned from the South African Express issue, to deal with the operational and financial instability of SOEs. Were they learning anything, and did they have any proactive plans going forward? Next, she wanted to deal with the issue of stimulation of the private sector in order to invest in capital. As per the priorities of innovative funding, as part of the Performance Plan for 2022/23, how was the Department planning to stimulate the private sector on this performance plan?  She also requested that the Department comment on its capacity in comparison to the 2021/22 budget – in one of the reports, the Department said they surrendered some of the money to the National Treasury due to the vacant post. She also asked if they could comment on the issue of using consultants in their capacity as the Department. Mr Gumede and Ms Komane did touch on part of her next question – the issue of Denel and its operation and financial situation, especially concerning staff salaries based on the recent oversight visit by the Committee. Lastly, according to the Auditor-General, the Department did not give them adequate time to assess and provide input to the APP for 2022/23, and she wanted an explanation from the Department around that issue.

Mr A Arnolds (EFF, Western Cape) noted that the Department had increased its priorities for SOEs from eight in the previous financial year to 14 in the current financial year. He asked whether it was realistic to implement all these outcomes and priorities listed, considering that they had capacity constraints. He pointed out that, in the previous financial year, the expenditure on goods and services was insufficient due to delays in implementation of projects as well as outstanding invoices, etc. What would be different in this financial year in terms of expenditure on goods and services? He was also concerned about irregular expenditure. In the previous financial year, the Department was not compliant in terms of its own supply chain management policy and Treasury regulations in terms of irregular expenditure when paying service providers. What would be different that financial year, and would such irregular expenditure happen again? They must not waste scarce resources. In terms of the R177.4 million allocation to the compensation of employees, he asked if the Department could comment on the impact of the R70 million on the previous financial year, and explain whether they would see improved performance from the Department as a result of the increase in allocation.

Ms W Ngwenya (ANC, Gauteng) noted that the Department was midway through the MTSF. She wanted to know how the APPs and budget presented would contribute to the achievement of the seven priorities of the government as stated in the MTSF. She also wanted to know the cost of irregular expenditure in SOEs in the 2020/21 financial year. She noted that R15 billion in irregular expenditure was reported by SOEs of the Department of Public Enterprises. She wanted to ensure that the Department had a plan as an oversight authority to assist these SOEs in preventing irregular expenditure. Lastly, she wanted to check whether any boards of SOCs were due to end their terms of office that year. If there were, she wanted to get the names of these SOCs. In terms of Programme one of the APP priorities, which spoke about vacancy rate and the plans to fill those vacancies, she recommended to the Department that women and persons with disabilities be strongly considered for appointment for these vacancies within the Department and its SOCs. This would assist the country to achieve transformation and the objective of the National Democratic Revolution (NDR).

Ms C Phiri (ANC) noted that one of the priorities of the Department was that they wanted to attract the private sector. But it could not be their key priority for this year only, as she believed that in previous years it was one of their priorities. So, what had they achieved in previous years on this priority? What steps had they taken to stimulate the private sector and what were their plans so that investors put more capital into their SOEs?

Secondly, in programme three, they spoke about business enhancement. However, according to her observation, in the recent year, SOEs performed poorly with respect to procurement. What measures did the Department put in place to address such challenges? In one of their slides, the Department also spoke about government guarantees that were transferred to SOEs. What would the impact of these government guarantees be, specifically looking at the amount put aside to assist with debts? They were no longer the majority shareholder in SAA – so, what was the benefit of giving all this money to the entity? Yes, they wanted the pride of South Africa to be flying high, but how did it benefit them as South Africans to give all this money to SAA? As a layperson, how could they understand why they should give all this money to entities such as SAA?

As South Africans, giving to Eskom would be a priority, but they were giving more to SAA – an entity in which they were not a majority shareholder. Also, what had the Department learned from what happened to Telkom back in 1996? What would they do that Telkom did not do in order to avoid this situation from happening again? They needed to be given a framework of what the Department had and had not achieved in terms of their APPs from last year, why they did not achieve these APPs, and how they were planning to achieve these APPs in the coming years. Sometimes there needed to be a comparison between the previous year and this year. She was also concerned about the South African Express – it had been liquidated. While this was happening the Department was supposed to tell the Committee what legal processes would be required. Now it was no longer part of the SOEs; what was the Department’s plan in the APP in terms of South African Express?

Ms V Malinga (ANC) said that her questions had been covered by her colleagues.

Ms J Tshabalala (ANC) said the purpose of the APPs was for them to check the performance of the Department, and while they might be tempted to raise many other issues related to other SOEs, they should not forget that in this important exercise the committees should really focus on issues of performance and be able to ask critical questions about issues concerning the programmes. In the programme on annual performance plans analysis, she outlined the six percentages the Department provided on APPs they had achieved (see presentation for more details). She wanted to ask questions concerning those they had not achieved. On programme one, they had allocated the largest budget in relation to programme two and three, excluding payments of financial assets. Yet, the regulatory and oversight work of the Department with regard to the SOEs was conducted in programme two and three. She questioned why there was a disparity between the budget and performance outcomes of the programmes. National Treasury estimates of expenditure in 2022/23 stated that the estimated number of personnel for programme one was 123 for the 2022/23 financial year. Why did the Department spend so much on consultants in programme one, when that programme was more staffed than the other two programmes? In the Department, the APP 2021 performance plan target on the number of training interventions provided was set at 10 for the 2022/23 financial year. Why was this target dropped in the current financial year, considering that the Department was not really capacitated? On the performance plan target on sub-programme four, there was assessment and investment support in a number of SOCs, development of business plans, and a restructuring unit established. How different was the work of this unit from the work of the Presidential SOE Council?

Her next question was about IPPs. She asked what the exact percentage was that they envisaged the Independent Power Producers and APPs to deliver in the grid. There was also the issue of load shedding – it was disheartening. They were facing winter season, and part of the programmes on their targets included allocation around communication. She did not understand why they would have communication in the programme if it already had so much money allocated to it, and they were not seeing communication in other areas. Perhaps this was the time when the Department and Eskom ought to communicate with each other. The matters around load shedding and communication were very important, so she wanted to ask the Deputy Minister exactly which unit was down for a reason? There was this notion that Eskom did not have enough capacity because the old system that was taking a real beating. This was said by the COO. He also said that Eskom knew which unit was down and why, including the unplanned breakages. The lights were kept on during Worker’s Day and into Monday courtesy of a lower demand that could be met by running 60 open gas turbines during Monday evening peak. The COO further said that due to the depleted capacity and delay in returning to service, with a higher demand for electricity as the cold weather set in. There was insufficient power to meet South African demands. She asked: at what stage are they, looking at going into the winter season? Eskom needed about 4 000 to 6 000 megawatts of additional capacity for the grid. Where would they get this, and how? Stage five of the IPP bid window was coming online, and was reported to be in July 2022, but it was set back from the original anticipated date in April 2022. These delays were a cause for concern. She wanted to know if they were running on time with this IPP bid window five that was to come, and wanted to know the involvement of the Department to get the synergy and communication around this issue.

Mr N Dlamini (ANC) asked if there been any effort to try engage the people of Soweto to try to gauge if they could afford to pay? It is not that they did not want to pay, it was that their debt had grown so much that it was not affordable anymore.

On IPPs, he said that there needed to be more information sharing concerning how they would help deal with load shedding. Yes, at face value it would appear that with more IPPs they would have more energy availability. But, in the current state, they were still a bit expensive. So, from a research point of view, IPPs were technologies, most still breaking ground. But as they developed, they would become cheaper. This was how electricity would be affordable. But currently, was it affordable? Was it helping? How involved was Eskom in terms of looking at the research and development of the new technologies in the renewable space?

On Transnet, they needed to understand how TFR worked with mining houses. As things stood, outside of the issues of infrastructure, theft, etc., there was a bigger issue of capacity. Transnet had reached its maximum capacity. They needed to apply for more so that they were able to move manganese and iron ore on the line from Northern Cape to Cape Town and Saldanha Bay. This was an issue that needed the Department of Transport. How it worked was that the mining companies would project that in the next five years the output would be at least level, then Transnet would make this capacity available based on the projected demand. When that demand changes, it was not fair to make it as if it was Transnet’s problem, because the problem also includes the mining houses in terms of their planning and projections. So, they needed to be able to look into that and decide how they were going to solve the problem. Throwing money at the problem would not solve it, as they would still have issues of encroachment (people building too close to the rail), etc. But cable theft was the reality. The challenge was that, when people were arrested, both Transnet and PRASA were not coming forward to claim the stolen copper as theirs. Hence, those people hardly get arrested, because the stolen property does not belong to anyone. So, these people get released, and there is a snowball effect of people continuing to steal.  Measures needed to be put in place by the Department of Public Enterprises and the Department of Transport to deal with this problem.

In terms of the APPs, it would have been better if they received the opinion of the Auditor-General to tell them how they had performed in terms of each APP from the previous year, what the shortfalls were, and what the recommendations were for the next year. Then, the Department could tell them how they had responded in terms of the recommendations of the Auditor-General.

Chairperson Modise, on the appointment of the Board members, asked whether there were any criteria stating that they could not sit in 10 or 15 boards, before they get re-appointed to serve as board members of SOEs. Was there no limit as to how many boards they could sit on?  She also noted that very little was said about the South African Forestry Company SOC Limited (SAFCOL) in the presentation. She knew the company was dealing with a lot of issues lately, but she wanted to know how the Department was assisting SAFCOL in reaching an agreement with the land claimant, as far as the settlement model is concerned.

Chairperson Modise then handed back to the Department to respond to the questions. She proposed that the Department should answer in summary, but by the end of the following day, they could give Members all the answers in writing.

Responses
The Deputy Minister agreed that, for many of the questions, it would be preferable for the Department to have time to consider their responses and then submit them to the Committee in writing. But he said he would speak on a few of the matters raised.

Concerning Denel, he noted that the Department had been doing as much as it could in terms of offering support, given the challenges the entity had been facing for a considerable time. It had reached a point that, had they had the authority, they could have provided a financial injection to undertake some of the programmes that could help bring Denel back to life. They were now at the point where they were looking to have a trilateral between themselves, Treasury and Defence, as well as Denel, to look at how the challenges Denel was facing would have an impact, not only on Denel internally, but also on matters to do with national defence of the sovereign. They were awaiting this process, and they had had some good feedback and were hoping to get to a point where money could be made available. The processes have been put in place.

On the issues of Transnet and the removal of some of the traffic on the roads, particularly the National Road Network, into rail: it was desirable, and it was something the Department was working towards. But, given the resource constraints in terms of the immediate infrastructure requirements and investment towards it, there has been some opportunity for the private sector in some stretches of the rail network, without giving away the rail network per se. Again, this was a function in which a lot of matters needed to be taken into account – the speed with which goods reach their destinations, the issue of the means to transport (locomotives, etc). It was something towards which there was a concentrated effort to achieve some turnaround. On the viability of the rail networks: this still needed to be finalised, together with the private sector, in the final analysis.

On IPPs: it was an area in which the Department of Mineral Resources and Energy had authority.  The Minister of this Department said that, when they made an announcement on a bid window, it did not suggest that, on the day the announcement was made, which was part of what was procured through that window would be made available immediately. Sometimes, the lead time was 18-24 months before it was available. Since after the announcement, there had to be a rollout of the infrastructure before the delivery. It is of course done on the back of the offtake agreement that had to be in place with Eskom. It was something they had very little control over, but they hoped that as many of those bid windows announced would be seen to be put into the grid.

He noted that there were a number of questions, and asked which questions he should prioritise in his current response. He said the rest of the questions would be answered in the written response that would be furnished to the Committee the following day.

Ms Molisane said that she would comment on the questions concerning the bid window and its timing. She indicated that bid window five had been signed and approved by the board, so they were actually looking at other bid windows they had received in terms of PFMA applications for bid window six. They wanted to finalise those bid windows by the end of the month.

Ms Molisane also wanted to respond to the issues on Eskom’s operations. Yes, the operations were challenged, and they did need 4 000 to 6 000 megawatts surplus to deal with the stabilisation of the energy supply. This would give them the space and time to undertake the necessary maintenance. Load shedding was having a severe impact, and what was required now was for Eskom to undertake the necessary maintenance. They needed to know how long this maintenance would take, so they could have clarity and stability, and proper investor confidence. She said that the Members rightly articulated the issue of cable theft. This was a serious crime hampering the economy. What was important, over and above reporting this to the police, was to get the prosecution to close these cases. These people must not only be arrested but also prosecuted. Eskom signed a collaboration with the SIU to make sure that some of the issues articulated could be dealt with. So, it is important to arrest the thieves, but also important that people are prosecuted, since it was impacting people’s lives. Then, back to the Eskom matter: it was correct that, in terms of the breakdowns of the power stations, the Department was being very active in terms of monitoring this. They relied on the quarterly reports but also received regular updates in terms of what was happening. They were being proactive in monitoring what was happening in terms of generation performance. This also spoke to the issue of debt. Until they stabilised operations at Eskom, the entity would continue to use Diesel and OGGTs, which would ultimately increase Eskom’s debt. So, they needed to stabilise operations first. She also wanted to give Members some perspective in terms of how the Department actually monitored this – they were aware of the specifics of the power stations. They were not only looking at operations from a top-down level; they were also monitoring specific power stations for their specific issues.

Ms Molisane said she would respond to questions on PISEC and what they were doing in terms of that. This work was being undertaken by the Presidency, and the Department was working as a secretariat in terms of that project. Strides have been made on this project, with the Bill being worked on to make sure it actually goes through to Parliament. This would be shared with the Committees once it was finished. She confirmed that Members were correct to indicate that the Department had been steered much more into the administration direction, and the vacancy rate was a challenge. They were dealing with this challenge.

On the involvement of the private sector in this vacancy problem, she needed to underscore that, when they recruited for vacancies, they looked at both the public and private sector to attract the required skills. They have tried to advertise the vacancies, but the challenge they have had in the past was that they were unable to find suitable candidates when recruiting began. So, it was also important that they did not fill vacancies simply for the sake of filling them, but that fulfilling them it would enable them to fulfil the mandate they set for themselves and ensure that the people employed could execute this mandate satisfactorily.

On the questions surrounding the boards, she explained that, when the boards were appointed, they undertook an assessment on how many boards they were sitting on. This was because they understood that people had become professional board members. If one was stretched, they would not give the necessary attention and time required to serve on each board. So, this was one of the considerations they took into account when appointing board members, as well as the fact that the member actually understood what was happening in the sector. In terms of state capture and the Zondo Commission, the boards of the respective SOCs were working on implementing the recommendations of the Commission. The reality was that the Commission had taken many good professionals out of the SOCs, so the Department needed to ensure that they reskilled the SOCs to undertake their mandate.

The matter of cable theft needed a wider collaboration between law enforcement agencies and prosecution. It was a very expensive and serious issue having an adverse impact on schools, hospitals and businesses. They were working closely with security clusters to deal with these issues. The Department had also taken note of the issues to do with road to rail strategy needing to be fast tracked due to the impact the trucks were having in terms of damage to roads, extra costs and security issues. The most efficient manner of transporting coal to power stations was through conveyor belts.

Ms Molisane said that they would be happy to provide a much more comprehensive response on the other issues raised. They supported the issues raised by Members concerning the recruitment of women and people with disabilities.

Chairperson Magaxa then said that, in light of the time constraints, they had asked the Department to give written responses before the end of the next day.

Mr Smit then requested that the Department give them a full written report laying out Transnet’s rail infrastructure damage per province, and what the estimated cost of damage was to that infrastructure.  

The Chairperson thanked the Department and Members for attending.

The meeting was adjourned.