Portfolio Committee

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Portfolio Committee
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ACCOUNTING OFFICERSREPORT
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Accounting Officers 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.

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The Mandate

• The DPE has the following mandate
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• 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

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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.
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The Strategic Goals
During the year 2003-04, the strategic goals of
the DPE are outlined as follows
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Discharging the Mandate
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SA Governments results machine
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Critical areas of SOE performance
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DPE Strategy
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GOVERNANCE OVERSIGHT SYSTEMS
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DPE Internal Governance

• Governance and Financial Management
• 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

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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.

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PROGRAMME PERFORMANCE
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PROGRAMME 1

• 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

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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.

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PROGRAMME 2
Restructuring of SOEs

• 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

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PROGRAMME 3
Performance Monitoring and Shareholder management

• 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
  SOEs participation in driving the NEPAD
  programme.

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PROGRAMME 4
Alternative Service Delivery

• To support DPEs 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.

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KEY SECTORS OFOVERSIGHT
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Energy
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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)

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Energy Sector

• New Directions
• Strategy to include IPP in new 30 Generation
• Eskom to continue as supplier of last resort

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Transport
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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.

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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.

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Transport Sector

• Transnet
• Transnet strategy
• Vertical separation of Operations from
  Infrastructure

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Mining
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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

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Defence
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Defence Sector

• Denel
• Denel (Pty) Ltd is a strategic high-technology
  defence company that accounts for more than half
  the output of South Africas defencerelated
  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

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FINANCIALSTATEMENTS
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DPE APPROPRIATION STATEMENT

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DISCLOSURE ITEMS
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DPE ANNUAL TURNOVER RATES
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DPE PROMOTIONS PER BAND
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DPE PROMOTIONS BY OCCUPATION
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DPE TOTAL No. EMPLOYEES
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DPE PERFORMANCE REWARDS
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DPE DISABILITY LEAVE
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DPE CAPPED LEAVE
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AUDITOR GENERALS REPORT
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AUDITOR GENERALS 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.

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STRATEGIC SHIFTAND STRUCTURE
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DPEs Strategic Processes

• Policy Translation
• No bargain-basement, fire sale of state assets.
• Need for strategic shift in emphasis.
• Review the departments 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.

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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

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DPE Revised Structure