PRESENTATION TO THE

PORTFOLIO COMMITTEE

By

DDG:JAMES THELEDI

ON 2ND QUARTER PERFORMANCE OF DPE

08 NOVEMBER 2006

OUTLINE OF THE PRESENTATION

2

•Overview of the 2nd Quarter Performance

•Review per programme

•Administration- (Rashida Issel - COO)•Analysis and Risk Management (James Theledi - DDG)•Legal, Governance and Secretariat (Sandra Coetzee - DDG)•Corporate Structure and Strategy (Litha Mcwabeni - DDG)•Joint Project Facility (Katherine Venier - JPF Co-ordinator)

•Summary

• Investment Dashboard Demonstration- Ntombifuthi Rapetsoa

Overview of the 2nd Quarter

-Completion of Shareholder compacts with Strategic Key Performance

Indicators for Eskom and Transnet

-Analysis of performance for all SOE completed

-Significant progress made on Alexkor deal, establishment of Infraco and

recapitalisation of Denel and PBMR

-Completed the study on the future of SAFCOL

-Separation of SAA from Transnet fairly advanced

-Successful management of the CEO, Chairpersons and the Risk fora to

improve co-ordination

-Budget expenditure on track, 45 % of the operational budget has been spent.

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11

InfraCo will participate in the national long distance and international connectivity only.

PotentialAbuse ofMarketPower

PotentialAbuse ofMarketPower

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ContentContent

ApplicationsApplications

ServicesServices

Tier 3 AccessInfrastructure

Tier 3 AccessInfrastructure

Tier 2 National Long DistanceInfrastructure

Tier 2 National Long DistanceInfrastructure

Tier 1 International MarineCable Infrastructure

Tier 1 International MarineCable Infrastructure

Impact ofGovernmentIntervention

Impact ofGovernmentIntervention

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Sco

pe o

fIn

terv

enti

on

InfraCoPhase I

InfraCoPhase I

InfraCoPhase II

InfraCoPhase II

Tier 3Operators

Tier 3Operators

Tier 3Operators

ISP

Tier 1 & 2Operators•Telkom•InfraCo

Intervention

Intervention

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Tier 2: National Long Distance Infrastructure

EskomEskom

TranstelTranstel

PIETERMARITZBURG

BEAUFORT WEST

DE AAR

NELSPRUIT

PHALABORWA

RICHARD'S BAY

George

Namibia

Bethlehem

Botswana

Klerksdorp

Mozambique

Poseidon

Swaziland

CAPE TOWN

DURBAN

EAST LONDON

PORT ELIZABETH

PRETORIA

Umtata

Kenhardt

Maputo

ManziniErmelo

Gaberone

Ellisras

Welkom

LadybrandLesotho

Copperton

KIMBERLEY

Rustenburg

Mosselbay

Stellenbosch

Potchefstroom

Cape Peninsula

Tongaat

New Castle

Alice

BritsZeerust

Leeudoringstad

Rhodes

Aggeneys

Witbank

Vereeniging

Saldanha

POLOKWANE

KOMATIPOORT

BLOEMFONTEIN

JOHANNESBURG

Musina

Future Future

InfraCo will take over Transtel’s and Eskom’s infrastructure and will lease it back to the private sector.

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PROGRAMME 1 - ADMINISTRATION

Sub programme

Output Progress 2nd quarter 1 July - 30 Sep 06

Follow-up action

Planning, monitoring & evaluation

Organizational performance reporting

Technical information on progress

reports approved (1st quarter, 2nd

quarter and annual reports).

Co-ordinate submission of 3rd quarter performance report to the Portfolio and Select committees

Human resources

Implement and monitor Employment Equity

Monthly EE report to EXCO, Dir. HR

and Transformation Committee.

Draft Employment Equity Report

Employment Equity on

line system was not

working until 28

September 2006.

Corporate services

Communication and IT Security

Scrambler devises installed where

needed

NIA did Information Audit assessment.

Still waiting for the assessment report from NIA.

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PROGRAMME 1 - ADMINISTRATION

Sub programme Output Progress 2nd quarter 1 July - 30 Sep 06

Follow-up action

Communications DPE News-letter Develop concept, undertake process to give publication a name.

Gathering of information and inputs from different Units and SOE.

Uploading of PDF file on both intranet and website

Finance Adjustments Estimates 2006/07

The adjusted estimates were submitted on due date and the department is awaiting the outcome of the submission.

Finance MTEF 2007/08 Operational and SOE recap budgets prepared and submitted on time. National Treasury has proposed that a task team be set up with DPE/NT to address the complexities of the SOE recap.

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DPE STATISTICSas at 6 November 2006

Total Posts Filled Posts Vacancies Terminations to date (April to date)

Turnover Rate(April 06 to date)

November Appointments

December appointment

157 131 26 14 119

(If calculated using resignations only)

5 1

Level 1 - 10 62 8 3 1

Level 11 - 12 24 5

Level 13 - 15 45 13 2

Interviews in progress

8

Advertised Posts

7

Resignations 11

Contract Expiry

1

Transfers 2

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Males needed in DPE: African and White: Lower level i.e., 1 – 12Coloured and Indian: All levelsFemales needed in DPE: African with the emphasis on SMS level.People with Disabilities needed in DPE: 4 People with Disabilities to be appointed on all levels and all racesCurrent Gender compilation on SMS level: 56% male and 44% female: Target 50/50 % by 31 March 2009.

TOTAL POSTS

AFRICAN INDIAN COLOURED WHITE DISABLED

Statistics South Africa (Mid year population estimates 2004)

79.3% 2.4% 8.8% 9.5% (4% of total as per Strategic Planning decision = 6)

F40.1%

M 39.2%

F1.2%

M1.2%

F4.5 %

M 4.3 %

F4.9 %

M 4.6 %

Total posts plus vacancies: Should be:

157

62 62 2 2 7 7 8 7

Total posts as at 7/11/2006 131

55

40 5

1

9

3

14

4 2

Posts:7/11/2006 as a % 100 % 41.98% 30.53% 3.82% 0.76% 6.87% 2.29% 10.69% 3.05%

Vacancies 26(13-SMS) &(13 Level 1-12)

5 16 1 2 2

Target: Number of people with disabilities

6

4 (potential candidates pending medical results)

DPE TARGETS IN COMPARISON WITH NATIONAL STATISTICS

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SALARY GRADING LEVEL TOTALPOSTS

TOTALFILLED

TOTAL VACANT

DISABLED

AFRICAN INDIAN COLOURED WHITE

LEVEL FEMALE MALE FEMALE MALE FEMALE MALE FEMALE MALE

MINISTER 1 1

1

DIRECTOR GENERAL 16 1 1 0 11

SPECIAL ADVISOR: 15

1 1

DEPUTY-DIR. GENERAL 15 4 3 1 2 1

CHIEF DIRECTORS14

16 10 6 2 4 1 1 1 1

DIRECTORS13

3530 5 6 12 2 1 3 1 3 2

TOTAL SMS’s13 - 16 58 45 13 9 18 3 1 4 2 4 4

DEPUTY DIRECTORS(11&12) 11 - 12

29 24 5 1 10 6 2 2 4

ASST DIRECTORS(9&10) 9 - 10 10 8 2 3

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1

LEVEL(7& 8) 7 - 8 49 45 4 27 9 3 1 5

LEVEL(1-6) 1 - 6 11 9 2 6 3

TOTAL LEVEL 1-121 - 12 99 86 13 1 45 21 2 5 1 9

TOTAL DPE 157 131 26 55 40 5 1 9 3 14 4

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EXPENDITURE REVIEW

DEPARTMENT TOTAL

EXPENSES APRIL -

SEPTEMBER 2006

TOTAL BUDGET

COMMITMENTS

AVAILABLE BUDGET

OCTOBER 2006 – 31

MARCH 2007

% OF TOTAL

BUDGET USED

Compensation of Employees 23,483,978 54,004,637 0 30,520,658 43.49

Goods and services 19,324,362 47,331,363 4,129,142 23,877,858 40.83

Transfers* 580,042,648 584,422,000 0 4,379,351 99.25

Payment for capex 1,120,159 1,835,000 161,132 553,707 61.04

TOTAL 623,971,149 687,593,000 4,290,275 59,331,575 90.75*

*The departmental operational expenditure, amounts to R48 261 424 which is 44.85% of the budget excluding the transfer to the PBMR (R580 million). The expenditure will level out in the coming months as the Diabo Trust transfer is also currently pending which affects the overall percentage expenditure to budget.

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PROGRAMME 2 - ARM

Output Progress 1st quarter1 April – 30 June 06

Progress 2nd quarter 1 July - 30 Sep 06

Follow-up action

Analysis of quarterly performance of SOE

1st quarter reports due from SOE on 18 August 2006 Analysis only prepared on receipt of 1st quarter reports from SOE

1st quarter reports analysed and briefing provided to Minister

The site visit and the appointment of consultants

2nd quarter reports due from SOE on 17 November 2006

Analysis to be prepared on receipt of 2nd quarter reports

Analysis of Annual reports of SOE

AGMs held after June with 21 day notice period for submission

Analysis of annual reports for SOE completed in preparation for AGMs

Benchmarking: Identify operational KPIs and peer group designation.

Developed project plan with specific focus SAA and the key divisions of Eskom and Transnet

Developed project plan with specific focus on SAA and the key divisions of Eskom and Transnet

Discussions held with relevant key management of abovementioned SOE on suitable operational KPI and possible peer groups

More research with the assistance of sector specialists culminating in memo to Minister.

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PROGRAMME 2 - ARM

Output Progress 1st quarter1 April – 30 June 06

Progress 2nd quarter 1 July - 30 Sep 06

Follow-up action

Develop a standardised quarterly reporting template to be completed by SOE

Planning to address problem of previous quarterly reports focusing on financial performance

Agreed that next report to include progress on infrastructure investment, non-core disposals, risk management and socio-economic performance

Comprehensive quarterly reporting template completed and sent to CFOs of SOE for comments

Template to be discussed at CFO forum

Develop a standardised corporate plan template that complements the Treasury Regulations framework

Planning to address lack of consistency ito contents and quality of corporate plans received from SOE

Comprehensive corporate plan template draft to be sent to CFOs of SOE for comments

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PROGRAMME 2 – RISK MANAGEMENT

Output Progress 1st quarter1 April – 30 June 06

Progress 2nd quarter 1 July - 30 Sep 06

Follow-up action

Risk management

Review Risk management plans

Only three (Transnet, Eskom & Safcol) of our SOE risk management plans were formally reviewed and assessed. Report was approved

Reporting requirements for annual risk management plans developed in consultation with SOE and included in draft risk management framework.

Draft framework to be discussed at Risk Management Committee meeting on 03 November and with DG and Minister on 10 November.

Risk management Development of the Risk Framework

The Concept document was approved by Exco in March 2006.

EXCO Risk Management sub-committee was established in May 2006.

Draft Framework developed in consultation with SOE and others.

Risk management committee held its first meeting on 26 July.

Draft framework to be discussed at Risk Management Committee meeting on 03 November and with DG and Minister on 10 November.

Risk management Reports from SOEs outlining risk profile and identified risks

The department has not yet formally identified SOE risks that could negatively impact government and its objectives.

Draft risk profiles prepared for each SOE. Same will be discussed at the next DPE Risk Management Committee meeting scheduled for 03 November 2006.

Developed a draft list of key cross-cutting shareholder level risks.

SOE risk profiles to be reviewed by SOE teams and Exco. Monitoring procedures will be implemented for Shareholder level risks.

Incorporate comments from Exco

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PROGRAMME 3 - LGT

Output Progress 1st quarter1 April – 30 June 06

Progress 2nd quarter 1 July - 30 Sep 06

Follow-up action

Section 54 PFMA application Guidelines

Consultation draft presented to SOE at CEO and Chairman Fora

Formal response from only 1 SOE, limited response from SOE

Infraco

Establishment

Draft Bill ready for Cabinet Approval

Transnet Pension Fund Amendment Bill

Bill before Portfolio Committee

Getting the Bill to be passed into law within a short space of time (i.e by the end of the year)

Litigation: Defending the legal action instituted by the Pahapur / Londoloza Consortium

The Department has filed all the necessary documents with the registrar of the High Court

Tracing all the documents required in the legal action

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PROGRAMME 3 - LGTOutput Progress 1st quarter

1 April – 30 June 06Progress 2nd quarter 1 July - 30 Sep 06

Follow-up action

Shareholder management legislative framework

Draft framework completed

Document discussed internally and presented to Minister

Legislative processes to follow the conclusion of the SMM Conceptual framework

Board remuneration Study completed. The Remuneration Guidelines have been submitted to the Minister for approval.

Consultation with the Chairpersons of SOE concluded, stakeholder consultation ongoing

Additional work on the guidelines following consultations

Governance workflow

None – have other priority projects

ToR updated and submitted for approval

Finalisation of procurement processes

Conclusion of SOE Shareholder's Compacts

Generic compact developed and approved by Minister

The following compacts have been signed:

Eskom and Transnet

SAFCOL, Denel, Alexkor and SAA to be signed

Management of SOE forums: Chairpersons’, CEOs’, CFOs’, Risk Officers’, company secretary/legal

1x Chairpersons’ Forum

2x CEOs’ Forum

1x CFOs’ Forum

1x Risk Officers’ Forum

0x Governance Forum

1x Chairpersons Forum

2x CEOs Forum

0x CFO Forum

1x Risk forum

0x Governance Forum (Terms of Reference approved on 2nd October 2006)

Development of calendar for 2007

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PROGRAMME 4 - CSS

Output Progress 1st quarter1 April – 30 June 06

Progress 2nd quarter 1 July - 30 Sep 06

Follow-up action

Transnet

Performance management

Signed compact imminent

Progress monitored against strategic KPIs

Annual Report reviewed

SKPIs incorporated in shareholder compact.

Transnet

Coega PSP

DPE position paper on transaction structure finalized.

Transnet PSP Framework developed, DPE engaging Transnet on proposed framework.

Urgent engagementwith DOT necessaryas part of the POA.Info memo and RFP tobe published afterprocess is agreed withTransnet.

SAA

Separation from Transnet

A re-evaluation of SAA done by Deutsche Bank on 20 March 2006

A draft Act and a Cabinet Memo has been done

The Sale Agreement has been signed subject to finalization of some suspensive conditions

Take over of Transnet guarantees is in progress and a request forwarded to NT in this regard

The team must still review the SOE pension rules. Awaiting NT response to our request

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PROGRAMME 4 - CSSOutput Progress 1st quarter

1 April – 30 June 06Progress 2nd quarter 1 July - 30 Sep 06

Follow-up action

PBMR

Successful Demonstration Power Plant and Pilot Fuel Plant

EIA and NNR licensing processes underway

EIA and NNR licensing processes continue to be a challenge

A fuel license (Nukem) has been obtained and approved by all shareholders.

SAFCOL

SAFCOL mandate and future role reviewed, and in place by March 2007.

Project Plan finalised.

Interdepartmental task team (DWAF, DTI) established.

Initial research on saw log data and industry structure completed.

Consultations with task team

ongoing.

Research ongoing on separate areas that will inform the review.

Initial scenarios for the future role of SAFCOL identified.

To bring on board the DLA and the National Treasury

SAFCOL

Transfer of SAFCOL 25% shareholding in privatised packages to workers, communities and NEF.

Consultations with National

Treasury and DTI done.

Meetings scheduled with

DWAF and DLA.

Way forward to expedite the process identified

Further consultations with the DTI and National Treasury

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PROGRAMME 4 - CSSOutput Progress 1st quarter

1 April – 30 June 06Progress 2nd quarter 1 July - 30 Sep 06

Follow-up action

Denel

1. Denel’s recapitalisation

• Presentation to Treasury Guarantee Certification Committee (GCC)• MTEC submission

• Guarantee secured• Further cash recapitalisation of R567m secured

Monitoring

Denel

2. Shareholder oversight

• Assisted with closing the Saab transaction• Analysis of revised Denel Corporate Plan finalised• Input into Shareholder Compact: SKPI’s

• Quarterly review of Denel’s 1st quarter’s performance completed

On going performance monitoring

Denel

3. Enabling projects (national task teams)

a. Defence Fund (financing/guarantee fund)

b. Sector strategy

c. Policy alignment

d. Rationalisation of national functions

a. Terms of reference (TORs) finalised

b. Behind schedule

c. Acquisition process alignment on major contracts by DoD.

d. Functions and budgets for units that will be moved into DERI identified.

a. Team of local and international experts appointed and initial research has commenced

b. TORs complete and tender advertised

c. Expecting 2 major contracts to be placed with Denel.

d. Cab Memo on DERI finalised and Schedule 3A listing with Treasury sought by DoD

Finalisation of research and implementation

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JOINT PROJECT FACILITYProject name Progress 1st quarter

1 April – 30 June 06Progress 2nd quarter 1 July - 30 Sep 06

Follow-up action

Rest of Africa

Review of current SOE investments on the Continent

Benchmark on SOE investments

Lessons learnt report Country analysis report

Sector analysis report

Energy & pipelines

A review of current state of SOE pipeline activities

Liquid fuels demand analysis being reviewed for Sasol IV shift case, & Eskom/ Mintek methodologies;

Mega-Terminal concept being reviewed and included in design.

Submitted memo to the Minister in this regard.

Initiated review of Moerane Commission impacts with Petronet, for incorporation into design.

Moz-SA pipeline: Introduced project to the DME re FSSTT & Strat Stocks;

Seeking mandate for ensuring that national strategic considerations bear on land use in South Durban Industrial Basin)

Finalise key project parameters: Pipeline routing & size

Moz-SA liquid fuels pipeline

Develop Gas Pipeline options

Develop Slurry Pipeline options

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JOINT PROJECT FACILITYProject name Progress 1st quarter

1 April – 30 June 06Progress 2nd quarter 1 July - 30 Sep 06

Follow-up action

Human resources & capacity building

Audit of the SOE Skills requirements

Skills requirement by SOE compiled and presented to DPE and JIPSA

Report on the SOE skills requirements findings is near completion.

Findings are scheduled to be presented at the CEO ‘s forum on 20th November 2006

Findings are scheduled to be presented at the CEO Forum on 20th November 2006

Information Communication Technology

Broadband Infrastructure

Complete. Business Plan submitted to National Treasury in June 2006.

Commissioning of FSN underway to ensure “lighting up” on 15th Dec

Information Communication Technology

Data network rationalisation

Suspended until Second Network Operator is operational.

Suspended until Second Network Operator is operational.

ICT team to make a presentation to DG on the implementation plan

29

JOINT PROJECT FACILITYProject name

Progress 1st quarter1 April – 30 June 06

Progress 2nd quarter 1 July - 30 Sep 06

Follow-up action

SOE Properties

SOE non-core property disposals

Cabinet approved •framework for non-core disposals•B-BBEE guidelines for disposals

Negotiating sale of SOE non-core properties with government departments, particularly Department of Housing and Department of Education.

Disposal policy and B-BBEE guidelines disseminated to SOE.

B-BBEE guidelines loaded on DPE website in July.

User friendly guide on B-BBEE guidelines to be developed

SOE property developments

Preliminary negotiations with Development Finance Institutions for the development of non-core properties.

Finalisation of model for development and disposal.

Rationalisation of non-core properties available for development.

Further meetings with Development Finance Institutions to discuss the institutional arrangements and determine the way forward.

Further negotiations likely to define the nature of a possible transaction.

30

JOINT PROJECT FACILITYProject name Progress 1st quarter

1 April – 30 June 06Progress 2nd quarter 1 July - 30 Sep 06

Follow-up action

Competitive Supplier Development Program

Development of SOE supplier development plans

SOE Procurement capacity building

Benchmark database of suppliers

Development of overarching policy and strategy re supplier development – approach accepted by the Minister and Chair’s forum

First phase industry research

completed by Wits and focus areas

for second phase defined with

SOEs.

KPIs for the program presented at workshop with SOEs

Procurement capacity building program proposal received from UK Procurement Professional Institute and Transnet and Eskom aligning job descriptions with program.

Draft cabinet memo written for exclusion from IPP.

Pilot supplier benchmarking program launched with Ekurhuleni

Work with DTI on NIPP issue and get Cabinet approval on the NIPP issue

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SUMMARY

-Great progress has been made against Medium Term Expenditure Framework (as outlined in the MTSF)

-The achievements during the second quarter are a good spring board for the remaining quarters

-The department will be working with other national departments to close the processes on Infraco, Electricity distribution, adding further capacity to the electricity distribution, the separation of SAA from Transnet, out of Court settlement with the Richtersveld community, finalising SAFCOL strategy and securing clear policy on PMBR

-Completion of the Risk Management Framework and the Shareholding Management model

-Complete the standards and framework for quarterly , corporate, annual reports and implement guidelines on Section 54, PFMA applications

-Improve co-ordination with other government departments in rolling out the Infrastructure investment and achieving goals as outlined in ASGISA