presentation to the portfolio committee on public enterprises by portia molefe director-general

PRESENTATION TO THE

PORTFOLIO COMMITTEE ON PUBLIC ENTERPRISES

By

PORTIA MOLEFE

DIRECTOR-GENERAL

ON THE 3RD QUARTER PERFORMANCE OF DPE

28 MARCH 2007

OUTLINE OF THE PRESENTATION

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•Overview of the 3rd Quarter Performance

•Review per Programme

•Administration- (Rashida Issel - COO)

•Energy, Mining and Broadband Enterprises (James Theledi - DDG)

•Legal, Governance, Risk and Secretariat (Sandra Coetzee - DDG)

•Manufacturing Enterprises (Litha Mcwabeni - DDG)

•Transport Enterprises (Andrew Shaw - DDG)

•Joint Project Facility (Katherine Venier - JPF Coordinator)

Overview of the 3rd Quarter

• Developed dashboard for Eskom and Transnet as part of monitoring progress.

• Cabinet approved the establishment of six wall to wall Regional Electricity Distributors

as Public Entities to be regulated by the National Energy Regulator of South Africa

(NERSA)

• Commenced with legislative processing of Transnet Pension Fund Amendment

(“TPFA”) Bill

• Processing SOE applications in terms of section 54(2) PFMA• 9 Transnet applications approved• 8 Eskom applications approved• 5 Denel applications approved

• Five non-core businesses (Denel) have been disposed of, realising income of R400m.• Cabinet memorandum on Competitive Supplier Development program was finalised

and approved. • SOE have put in place plans to make optimal use of training facilities for internal skills

development programmes.

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4

PROGRAMME 1 - ADMINISTRATIONSub programme

Output Progress 3rd quarter Oct, Nov and Dec 2006

Follow-up action

Human resources

Employment Equity plan

Employment Equity statistics submitted and presented to EXCO, Transformation Committee, Department of Labour, and Portfolio and Select Committees.

Continue monitoring the department’s performance against the employment equity plan

Management of the internship programme

20 interns placed at DPE, attended various training sessions with different service providers. In-house training was also organised to enhance their skills in preparation for the world of work.

Assist all interns with placements in the job market

Corporate services

Management of off-site document storage

400 hundred boxes of old documents were indexed and sent for off-site storage

Continue to sort and index old documents

Efficient production room with centralised fax and photocopy machines

Tender process was followed and a service provider was appointed to enhance the efficiency in the production room

Service provider will be on site from January 2007

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PROGRAMME 1 - ADMINISTRATIONSub program


Follow-up action

Comms Crisis management strategy

DPE SOE Shareholder Crisis Plan has been adopted by joint CEO / Chairpersons forum

DPE branding

Folders, paper bags, letter heads and notepads are branded in DPE colours

Distribution

Finance Adjustments estimates 06/07

Adjustments were approved for additional funds for re-capitalisation of SOE for the current year, as well as internal movement of funds

Transfers will be effected to SOE in tranches

Expenditure 06/07

The Department has spent R68,780,531 of its operational budget made up of Compensation of Employees, Goods and Services and Capex which amounts to 66.6% of the operational budget (excluding commitments) which, if based on flat line expenditure (75%) over the past nine months reflects an 8.4% underspend, however large projects are being completed during the fourth quarter which will ensure a less than 2% saving overall on operational expenditure. The 54.6% balance reflected on transfer payments will be paid to the SOE over the next three months.

Finance is closely monitoring and liaising with the units on operational expenditure

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DPE STATISTICSas at 2 March 2007

Total Posts Filled Posts Vacancies TerminationsApril to date

Turnover RateApril to date

Vacancy RateApril to date

157 140+1

Secondment

16 19 12% 10%(if 5 posts in interview

stage are filled)7%

Level 1 - 10 65 6

Level 11 - 12 27 2

Level 13 - 15 48 + 1 Secondment

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Interviews in progress

5

Advertised Posts 4

Resignations 16

Contract Expiry 1

Transfers 2

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DPE Organisation – EE STATSTOTAL 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 28/2/2007

138

57

44 6

1

9

3

14

4

2

1 disabled employee joining in 1/05/07

Posts:28/2/2007 as a % 100 % 41.30% 31.88% 4.35% 0.72% 6.52% 2.17% 10.14% 2.90%

Vacancies 19(12-SMS) &(7 Level 1-12)

4 9 2 2 2

Target: Number of people with disabilities

6 1 1

Males needed in DPE: People with Disabilities needed in DPE:• African and White: Lower level i.e., 1 – 12 The status of 4 people needs to be confirmed - Coloured and Indian: All levels which will affect this total

Females needed in DPE: • African with the emphasis on SMS level. Current Gender compilation on SMS level: 59% male and 41% female - Target 50/50 % by 31 March2009.

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SALARY GRADING LEVEL TOTALPOSTS

TOTALFILLED

TOTAL VACANT

DISABLED AFRICAN INDIAN COLOURED WHITE

LEVEL F M F M F M F M

MINISTER1

1 1

DIRECTOR GENERAL

16 1 1 11

SPECIAL ADVISOR: 151

1

DEPUTY-DIR. GENERAL

15 4 3 1 2 1

CHIEF DIRECTORS14 16 12 4 2 6 1 1 1 1

DIRECTORS 1335

29 6 5 12 2 1 3 1 3 2

TOTAL SMS’s 13 - 16 58 46 12 8 20 3 1 4 2 4 4

DEPUTY DIRECTORS(11&12)

11 - 1229

27 2 2 11 7 3 2 4

ASST DIRECTORS(9&10)

9 - 1010

9 1 3 5 1

LEVEL (7 & 8) 7 - 8 49 47 2 29 9 3 1 5

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

TOTAL LEVEL 1-12 1 - 12 99 92 7 2 49 24 3 5 1 10

TOTAL DPE 157 138 20 57 44 6 1 9 3 14 4

TOTAL FUNDED POSTS

156

TOTAL UNFUNDED POSTS

1Spec Adv

1

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EXPENDITURE REVIEW

DEPARTMENT TOTAL

EXPENDITUREAPRIL –

DECEMBER 2006

ADJUSTEDAPPROPRIATION

COMMITMENTS

AVAILABLE BUDGET

JANUARY - MARCH 2007

% OF TOTAL

BUDGET USED

(excluding commitments)

Compensation of Employees 34,572,015 54,005,000 0 19,432,985 64.02

Goods and services 32,624,555 47,331,000 4,917,214 9,789,231 68.96

Transfers 1,510,990,154 2,766,752,000 0 1,255,761,846 54.61

Payment for capex 1,583,961 1,835,000 145,553 105,486 86.31

TOTAL 1,579,770,686 2,869,923,000 5,062,767 1,285,089,548 55.05*

The Department has spent R68,780,531 of its operational budget made up of Compensation of Employees, Goods and Services and Capex which amounts to 66.6% of the operational budget (excluding commitments) which, if based on flat line expenditure (75%) over the past nine months would reflect an 8.4% underspend, however large projects are being completed during the fourth quarter which will ensure a less than 2% saving overall on operational expenditure. The 54.6% balance reflected on transfer payments will be paid out to the SOE in tranches over the next three months.

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PROGRAMME 2 – ENERGY, MINING AND BROADBAND ENTERPRISES

Sub programme Output Progress 3rd quarter Oct, Nov and Dec 2006

Follow-up action

Energy Sector

Eskom

GENERATION

Monitor Return to Service of the Mothballed Plants (Camden, Grootvlei & Komati)

Monitor the construction of the Open Cycle Gas Turbine (OCGT) plants

Developed dashboard as part of monitoring progress.

Reports on progress incorporated in quarterly report.

Reports on progress incorporated in quarterly report.

Expansion plan

Reserve Margin and the Security of Supply

Waiting for DME to finalise the reserve margin policy.

Engage DME at technical sub-committee meetings.

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Follow-up action

Energy Sector

Eskom

Distribution

Establishment of the six Metro REDs

On 25 Oct. 06, Cabinet approved the establishment of six wall to wall Regional Electricity Distributors as Public Entities to be regulated by the National Energy Regulator of South Africa (NERSA)

Prepare a position paper on implementation of Cabinet decision and alternative scenarios.

New Gen Independent Power Producers

Deal with the Revised Power Purchase Agreement and the Fuel issue. DG and Minister updated on progress.

Performance monitoring

Analyse 2nd quarterly report.

Identify strategic KPIs for inclusion in 2007/8 shareholder compact

Memo approved by Minister.

Letter sent to CEO of Eskom on identified KPIs

Prepare for 3rd quarter report.

Analyse the targets for these KPIs on receipt of Corporate Plan.

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Follow-up action

Mining Sector

Alexkor

Recapitalisation R81.9 million received from National Treasury through the Adjusted Estimates process. R80 million transferred

Monitoring thereof to take place.

Conduct performance review of Alexkor

Monthly reports review for Oct, Nov completed and approved by Minister. Quarterly report review completed and approved by DG.

Minister to sign the memo.

Separation of ABT from Alexkor

ABT has been incorporated. Transfer of movable assets to ABT

Settlement agreement with RVC

MOU signed Finalisation of agreement.

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Follow-up action

ICT Sector

Infraco

Establishment of InfraCo

Commissioning of FSN

Cabinet Decision on the establishment of InfraCo pending

Work plan presented to Joint Steering Committee and agreed. Testing in March 2007

International Connectivity

Long distance network being commissioned.

High level traffic study and draft West Coast marine cable study completed and report tabled Dec 2006.

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PROGRAMME 3 - LGRS

Sub programme


Follow-up action

Legal PBMR

Reviewing the shareholders agreement and cooperation agreement

Input to the institutional restructing of the SA Nuclear Industry and Eskom/PBMR’s role

TOR for advisors to finalize comment on Shareholders Agreement

Denel Guarantee Review and comment on Heads of Agreement relating to guarantee between DPE and Denel

Submit draft Heads of Agreement to Denel for review and comment

ALEXKOR

MOU with Richtersveld Community

Management of legal processes and principles with State Attorney and Senior Council

Confirmation of settlement through PSJV Agreement; Final Settlement Agreement and Order Court

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PROGRAMME 3 - LGRS

Sub programme


Follow-up action

Legal SAA

Separation from Transnet and transfer to Government – Fulfillment of suspensive conditions

Commencing legislative processing of Transnet Pension Fund Amendment (“TPFA”) Bill

Public Hearings on, deliberation and adoption of TPFA Bill by National Assembly

Preparing SAA Bill, first reading debate of SAA Bill at National Assembly

Debate and voting on PFA Bill by NCOP

Public Hearings, deliberation and voting on SAA Bill by National Assembly

SAX

Cabinet Memorandum

Draft Bill

Transaction Documents

Draft Cabinet Memorandum

Draft Bill

Transaction Steering Committee

Preparation and review of due diligence reports and valuation by transaction advisors

Cabinet Decision

Review of draft transaction agreements and commence negotiations

Commence processing draft enabling SAX Bill

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PROGRAMME 3 - LGRS

Sub programme


Follow-up action

Legal INFRACO

Cabinet Decision

Infraco Bill

Transaction Agreements

Cabinet Memorandum prepared

Draft Bill prepared

Legal advisors appointed to assist in reviewing and drafting various agreements between DPE, Eskom and Transnet and between DPE and Neotel and attending negotiations on the agreements

Sale of shares and loan account agreement signed.

Draft FSN sale agreements

Draft agreements for FSN network lease to NeoTel

Cabinet Decision

Processing of draft Bill

Negotiate and finalise establishment lease and related agreements with Eskom, Transnet and Neotel (Pty) Ltd

GENERAL

Processing SOE applications in terms of section 54(2) PFMA

•9 Transnet applications approved•8 Eskom applications approved•5 Denel applications approved

Review progress reports from SOE on approved transactions

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PROGRAMME 3 - LGRS


Follow-up action

Governance Governance workflow project

ToRs for this project submitted and approved by Bidding Committee

Advertisement and appointment of service provider

Director appointments



Board remuneration

Study completed. The Remuneration Guidelines in process of being submitted to the Minister for approval.

Submission to Chairpersons Forum

Review of Founding Documents

ToRs for this project submitted and approved by Bidding Committee.


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PROGRAMME 3 - LGRS


Follow-up action

Governance SOE Shareholder’s Compacts

Signed compacts: SAFCOL, Denel

Transnet, Eskom, Alexkor-outstanding due to land claim,

SAA, SAX, Infraco-await passing of bill & incorporation

Board Induction toolkit & training



Board performance appraisals

ToRs currently being developed Submit ToRs for review and Approval

Subsidiary Boards

ToRs currently being developed Submit ToRs for review and Approval

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PROGRAMME 3 - LGRS

Sub program


Follow-up action

Risk Review Risk management plans

Risk profiles for each SOE completed. Level 1 risks per SOE documented.

Follow-up with the SOE on level 1 risk mitigation plans and monitor the same on quarterly basis.

Develop a Risk Management Framework

The CEO forum noted the framework in its Feb 07 meeting and approved it as a working document.

Present the framework to the PC and implement the plan w.e.f. 07/08 financial year

Determine effectiveness and appropriateness of risk management in SOE

2006/07 SOE risk management survey was completed.

Assist the SOE with deficient risk management practices to improve thereon.

Manage and reduce risks government is exposed to through the activities of SOE

SOE risk profiles completed. Monitor the SOE profiles for impact on Shareholder level risks.

Maintain the SOE/DPE risk governance structure

Risk Forum meeting on 10 November

Quarterly forum meetings

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PROGRAMME 3 - LGRS


Follow-up action

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

10xEXCO

8Xproject meetings

9XEconomic Cluster meetings

2 Cluster workshops

6XCEOs Forum

4XRisk Forums

3XCFOs Forum

4XChairpersons’ Forum

10XMANCO

3xLabour Forums (additional forums)

3xBilaterals (additional forums)

2xImbizo’s (additional)

Continued activity

Communication of key decisions to Stakeholders.

All decisions communicated to members of various forums (records of minutes available)

Continued activity

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PROGRAMME 4 - MANUFACTURING


Follow-up action

Defense Sector

Denel

Oversight of implementation of Denel’s business strategy

1. Denel’s recaptialisation

2. Business alliance negotiations

3. Disposal of non-core businesses

4. Strategy implementation

1. Guarantee of R233 m finalised with Treasury. R567 m cash injection in December 2006.2. Indemnity with Saab in process with National Treasury.

Denel has signed the transaction with Zeiss Optronics. Government will retain a 30% golden share.

3. Five non-core businesses have been disposed of, realising income of R400m.Negotiations on sale of properties continuing.

4. Review of Denel’s monthly and quarterly reports.

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Follow-up action

Defence Sector

Denel

Defence sector strategy

Local and international experts appointed to develop a comprehensive strategy for the industry. Research commenced in December 2006. Project to be completed by 31 March 2007. Joint DoD, DTI, DST, DPE, AMD and Denel funded project.

SOE National Interest Facility (NIF) – to support large SOE medium and long-term exports

Research completed. Meeting held with the DTI and ECIC - agreed that ECIC would implement, subject to Treasury approval. Joint presentation to Treasury will be made.

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Follow-up action

Defence Sector

Denel

Acquisition policy, the 10 year defence Capex plan and NIP and DIP policy alignment

DoD benchmarked acquisition policy with global best practice and will continue to review on an on-going basis. Sector strategy will determine industry niches for future investments under NIP and DIP.

Establishment of DERI

Migration and governance teams that will establish DERI set up and planning process commenced.

Draft Cabinet Memorandum prepared by DoD.

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Follow-up action

Forestry Sector

Safcol

Determination of the future role for SAFCOL in forestry development

Research completed during this Quarter. Analysis on various scenarios for the future role done and completed.

Consultations with Interdepartmental Task Team undertaken.

Briefing to the Minister to present final recommendations done on 5 December 2006.

Drawing up of a possible implementation plan.

Cabinet decision on the recommendation

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

Further meetings held with the DTI and DWAF.

Decision taken that a workshop needs to be held by all affected departments.

Decision also taken internally that a consultant will be contracted to conduct work and advise on the entire 25%.

Legal advice on the optimal way to dispose of the 25% shareholding.

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Sub program


Follow-up action

Nuclear Sector

PBMR

Demonstration Power Plant

EIA Process - New Plan of Scoping delivered to libraries for public comment.

New Project Master Plans and Information Memorandums expected in February

Pilot Fuel Plant EIA Process - Positive RoD expected during January 2007.

New Project Master Plans and Information Memorandums expected in Feb

Eskom Contract:•Positive RoD.•NNR Licence.•Plant Price.•Premature•Decommissioning Fund.•Nuclear Indemnity

No progress made with negotiating a contract to build the Demonstration Power Plant

DPE to arrange a meeting between Eskom and PBMR

Demonstration

Power Plant

EIA Process - New Plan of Scoping delivered to libraries for public comment.

New Project Master Plans and Information Memorandums expected in Feb

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Sub program


Follow-up action

Nuclear Sector

PBMR

Guarantees:•Letter of Comfort•Premature closure costs

All guarantees to be delayed until completion of NT investigation.

DPE to request timeframe of NT investigation

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PROGRAMME 5 - TRANSPORT


Follow-up action

Transport Sector

Transnet

Disposal of Metrorail

Employee liabilities quantified, National Treasury set aside over R400m

Disposal of Blue Train

Presentation on disposal strategy given to DPE in Dec.

Advert for Expression of Interest to be released in local and international media in first quarter 2007.

Normalization of Railway Concessions

New agreement between Spoornet and CFM concluded

Coega PSP Transnet discussed their proposal for Coega PSP with Minister

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PROGRAMME 5 - TRANSPORT


Follow-up action

Aviation Sector

SAA

Separation of SAA from Transnet

DPE, SAA and Transnet made presentation to the GCC for replacement of Guarantees in December 2006. NT requested verification of amounts outstanding from various creditors, which information will be forwarded.

Withdrawal from ATCL

The shares in ATLC were sold for $1 to the Government of Tanzania on 29 August 2006. ATLC was reflected as a discontinued operation at the end of August 2006was fully disposed out at the end of September 2006

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PROGRAMME 6 – JOINT PROJECT FACILITY


Follow-up action

Competitive Supplier Development Programme

Development of SOE supplier development plans

Cabinet memo on CSDP prepared for submission

SOE procurement capacity building

Finalised curriculum and business plan completed for large-scale five year procurement capacity and capability building programme.

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Follow-up action

Environment Impact Analysis

Report on SOE EIA capacity

Report on SOE EIA capacity finalised and submitted for approval.

Further bi-laterals held between DEAT and DPE to establish way forward.

Human Resources and Capacity Building

Audit of the SOE Skills requirements

Information gathered on internal SOE skills requirements.

Further information required regarding suppliers’ skills requirements

Assessment of the current SOE training facilities

Assessments underway and presentation made to CEO Forum on Denel Youth Foundation.

SOE must put in place plans to make optimal use of training facilities for internal skills development programmes.

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Follow-up action

Information Communications Technology

Call Centres Capital structure incentives secured from DOE for three sites at 40% of budget capex.

Data network rationalisation

High level proposal on options to pursue submitted to CEO’s Forum.

Property Project

SOE non-core property disposals

Transnet-Servcon negotiations underway. Disposal of most of Denel’s non-core property in progress.

SOE property developments

Proposal to facilitate property development submitted to Transnet for consideration. Response pending.

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Follow-up action

Rest of Africa Identify and implement infrastructure projects (2-4) in Africa

sector analysis and country analysis reports finalised and submitted to CEO Forum.

Prepared TOR and memorandum for appointment of project manager

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Thank you