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This report outlines the Department of Public Enterprises' structured approach to restructuring state-owned enterprises (SOEs) in South Africa. It focuses on improving their economic and social impact, aligning their activities with government policy, and advocating alternative service delivery options. The report also highlights the department's achievements in governance, oversight systems, and program performance.
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Accounting Officer’s Report • The Department of Public Enterprises has focused on a structured approach to determining what businesses government should be in, what businesses government should exit and what businesses government should expand. • Inherent in this is the objective to ensure that the entities are ran and managed in the best possible manner. • Inherent in this is the oversight responsibility to ensure that we have profitable and efficiently managed state-owned enterprises. • Government has repeatedly maintained that we are not going to have bargain-basement-wholesale sell-off of state asset. • What assets have been alienated in the current fiscal year are those that government considered to be of a non-core, non-strategic nature. • The next financial year, commencing April 2004, will add further insight into the mandate of the State Owned Enterprises in relation to broad government policy objectives.
The Mandate • The DPE has the following mandate: • Developing and directing a coherent approach to the restructuring and transformation of state-owned enterprises (SOEs) to ensure improved economic and social impact; • Creating and implementing restructuring frameworks for state-owned enterprises; • Developing a systematic method for monitoring the performance of state-owned enterprises and ensuring the alignment of their activities with Government policy; • Developing a comprehensive approach to advocating alternative service delivery options as a means of restructuring and transforming state-owned enterprises
The Vision VISION Excellence in SOE shareholder management. MISSION To provide an enhanced SOE shareholder management system, inclusive of restructuring in support of promoting economic efficiency towards a better life for South Africans.
The Strategic Goals During the year 2003-04, the strategic goals of the DPE are outlined as follows;
DPE Internal Governance • Governance and FinancialManagement • • Fourth year in succession in which unqualified audit opinion • • Unqualified Audit Report and No matter of emphasis • • A Governance Committee has been established • Developed Audit Committee and Internal Audit Charters in-house • Initial Risk Assessment performed and updated regularly • Developed Fraud Prevention Plan and implemented accordingly • Developed and implemented departmental policies and procedures in terms of financial management and business processes, compliant to the PFMA
DPE SOE Oversight Systems • Guarantee Exposure Monitoring System (GEMS) is an automated system used to monitor guarantees issued to SOEs on a quarterly basis. This arises when the SOEs in the DPE stable cannot access the capital markets due to weak balance sheets and therefore need Government support in order to access these. • The SOE database is a system whereby you can access the quarterly results plus annual results of the SOEs. This system will also have standing data required from a corporate governance point of view, e.g. Names of Board of Directors, terms of service etc. • Investment Map, which is used to monitor the SOE investments inclusive of those approved under section 54 of the PFMA. This show the country where the investment is made, partners, initial investment amount, guarantees issued by parent company, projected return, actual return etc.
Administration • A Governance Committee has been established • Developed Audit Committee and Internal Audit Charters in-house • Initial Risk Assessment performed and updated regularly • Developed Fraud Prevention Plan and implemented accordingly • Developed and implemented departmental policies and procedures in terms of financial management and business processes, compliant to the PFMA • Consistently providing an appropriately enabling operational environment • Always putting the needs of the core business of the department first PROGRAMME 1
Administration • Consistently exceeding the expectations of core business of DPE • Having a customer-centric view of our work • Establishing, as a department, to increasingly demand more stringent, transparent and accountable corporate governance systems of SOEs, so our internal corporate practices should be of impeccable credentials. • Strengthen our corporate governance framework from governance, risk management and compliance point of view so that we enhance accountability for properly aligned performance management practices that adequately measure execution of the strategic intent of the department for effectiveness and efficiency. PROGRAMME 1
Restructuring of SOEs PROGRAMME 2 • To co-ordinate, develop and implement Restructuring and Transaction Plans • To promote wider economic participation in the SA economy • To realise proceeds from Restructuring transactions • To enhance global competitiveness of SOEs • To promote long-term sustainable employment • To ensure stakeholder support for Restructuring Plans • To safeguard the integrity and transparency of the Restructuring process
Performance Monitoring and Shareholder management PROGRAMME 3 • Clear mandate to address the development of a Shareholder Management Framework and to drive the Cabinet Lekgotla shareholder priorities. • Effective Business Modelling to address the overall performance of SOEs focusing on the financial, Socio-Economic and • The development role of Government and to assess risk management. • Included in this unit is a division that looks at SOE’s participation in driving the NEPAD programme.
Alternative Service Delivery PROGRAMME 4 • To support DPE’s initiatives in realising restructuring and socio-economic objectives of the State in respect of SOEs • To assist DPE to seamlessly integrate into Government programmes • To provide useful advice and guidance relevant to DPE objectives and Government policy • To maintain and enhance the information and knowledge management resources • To assist DPE to develop policy frameworks in support of the restructuring process • To provide support and leadership in DPE internal excellence.
Energy Sector • Energy • Cabinet policy regarding ESI restructuring had the following • objectives: • To introduce competition into generation • To divest 30% of generation capacity with a minimum of 10% to Black Economic Empowerment (BEE) groups • To create a separate Transmission company as a separate National entity • To establish the Multi Market Model (MMM) for wholesale electricity trading • Ring fencing of Eskom Generation into Generation Clusters • Ring fencing of Eskom Transmission • Establishing an MMM and drafting market rules • Establishment of the South African Power Exchange (SAPEX)
Energy Sector • New Directions • Strategy to include IPP in new 30% Generation • Eskom to continue as supplier of last resort
Transport Sector • Railways • Be used mainly for infrastructure investment, including signaling and safety improvements. • Government is gearing towards a policy decision to move forward with rail restructuring and the underlying restructuring models. • Further investigation into access issues will highlight ways to deal with the light and low-density network. • A draft national and provincial strategy for the branch lines is being developed.
Transport Sector • Ports • The National Ports Authority (NPA) Bill will be finalised by December 2004. It will create an enabling legal environment for concessions to private sector terminal operators. • South African ports, was initially charged with the phasing out of public sector participation. • In late 2003, the need for a continued public sector presence was recognized and a compromise reached on the employment guarantees in any Public Private Partnership.
Transport Sector • Transnet • Transnet strategy • Vertical separation of Operations from Infrastructure
Mining .
Mining Sector • Alexkor • Cabinet approved the disposal of a 51% stake in Alexkor to an SEP. • The land claims lodged by the Richtersveld community resulted in the suspension of the restructuring process for Alexkor. • Negotiations currently underway with communities to design a settlement
Defence Sector • Denel • Denel (Pty) Ltd is a strategic high-technology defence company that accounts for more than half the output of South Africa’s defence–related industries. The restructuring model selected for Denel was to introduce an SEP. • It was terminated by Government because an agreement on outstanding broader contractual and strategic considerations relating to important export markets could not be reached. • Denel strategy under development
AUDITOR GENERAL’S REPORT • The audit was conducted in accordance with Statements of South African Auditing Standards. • The financial statements fairly present, in all material respects, the financial position of the Department of Public Enterprises at 31 March 2004.
DPE’s Strategic Processes Policy Translation • No bargain-basement, fire sale of state assets. • Need for strategic shift in emphasis. • Review the department’s structure in the light of the policy priorities. • Review skills composition and attendant budget required to implement priorities. • Locating Transnet, Eskom and Denel within the realm of Public-Private Partnership.
STRATEGIC SHIFT • The emphasis is now on ensuring that we increase the levels of investment and that the SOEs are well placed to achieve this objective • There is a need to further increase the efficiency and effectiveness of the key SOEs • Key sectors to commence with are Energy, Transport and Defence
Minister Public Enterprises Office of the Minister (support staff) Special Advisor Director General Public Enterprises Executive Office Office of the Director-General (support staff) Chief Financial Officer (CFO) Director Internal Audit Chief Director Legal Counsel Chief Director Communications & External Liaison DDG Analysis & Risk Management DDG Governance & Policy DDG Corporate Strategy and Structure DDG Corporate Finance & Transactions Functional Level CHIEF OPERATIONS OFFICER Support Level DPE Revised Structure
