Ms Portia Molefe Director General

1
Department of Public EnterprisesAnnual Report
Presentation to the Portfolio Committee2004
05 Financial Year
Ms Portia Molefe Director General
2
Contents

1. Introductory Remarks
2. Mandate
3. Vision
4. Mission
5. State Owned Enterprises (SOE) reporting to the
   DPE
6. Priority Areas
7. Achievements
8. Challenges
9. Financial Overview
10. Planned activities
11. Conclusion

3
Introductory Remarks

• DPE has undergone a significant change in the
  last financial year
• The mission last year was to provide mandate
  clarity for the SOE
• Focus on core operations
• Policy certainty
• We have produced and published a 3 year strategy
  implementing the three year business plan and are
  now planning our first mid-term review
• New Shareholder Management Model will be
  implemented next year

4
Introductory Remarks Continued

• DPE has been reorganised at a programme level
• DPE had four programmes during the 2004/05
  financial year
• Administration
• Restructuring of SOEs
• Performance Monitoring Benchmarking, and
• Policy Development Business Planning.

5
Introductory Remarks Continued

• Restructuring of SOEs was divided into two
  programmes, Corporate Strategy and Structure, and
  Corporate Finance and Transactions.
• The sub-programme Shareholder Management in the
  Performance Monitoring and Benchmarking programme
  was moved to the Governance and Policy programme,
  and the Business Operations sub-programme is now
  the Analysis and Risk Management programme.

6
THE MANDATE, VISION and MISSION
7
Mandate of the department

• The DPE has the following mandate
•  
• To coordinate with policy and regulatory
  Departments and Ministries and to provide
  oversight and strategic direction for the SOE
  reporting to the Department.

8
Vision of the department

• Facilitate economic growth through locating SOE
  in an optimal industry structure and ensuring the
  efficiency of their operations and the economic
  effectiveness of their investment Programmes
• Play a leadership role within the economy in the
  areas of corporate governance and national policy
  implementation
• Catalyse sector and regional economic development
  opportunities.

9
Mission of the department

• Agree optimal industry structure with policy and
  regulatory departments
• Thereby ensuring a clear policy and operational
  environment for the SOE
• Monitor enterprise efficiency and risk exposure
  of the state
• Provide exemplary owner and shareholder
  management and by implication corporate
  governance
• Optimise SOE investment to enhance sector and
  regional economic development potential, with a
  strong focus on the Second Economy.

10
State Owned Enterprises reporting to DPE

• ALEXKOR
• AVENTURA
• DENEL
• ESKOM
• SAFCOL
• TRANSNET
• SOUTH AFRICAN AIRWAYS

11
Five priority areas for the DPEs activities

• Implement an effective shareholder management
  system
• Ensure the implementation of the infrastructure
  investment programme
• Leverage opportunities that catalyse new economic
  activities and investment in the second economy
• Strengthen SOE balance sheets
• Introduce private sector operators where optimal

12
Achievements Operations

• DPE achieved an unqualified Audit Report
• no matters of emphasis for the second
  year in a row.
• Spending was within the 2 margin
• Generated and implemented an approved
  Employment Equity Plan
• Launched the Telkom Initial Public Offering
  Reference Manual
• Fraud prevention plan and policy implemented
• Designed, developed and implemented intranet
• Implemented automated procurement systems in
  order to improve process efficiency
• Developed implemented a manual accrual
  basis monthly management report, which
• dramatically improved expenditure management
  and cash flow requirements

13
Achievements Analysis And Risk Management

• Implementation of Holt Evaluation model for
  financial benchmarking of SOE
• Regular reports on SOE performance
• Published two reports on SOEs
• Financial performance of SOEs
• Risk Management in SOEs
• The closure of the SAA Hedge Book
• Analysed and approved Infrastructure plans of
  SOEs

14
Achievements Governance And Policy

• Remuneration and benefit guidelines for SOE
  CEOs Board members
• Guidelines for the development of SOE
  Shareholder Compacts
• New Board members for State Owned Enterprises
  were appointed

15
Achievements Corporate Structure And Strategy

• Energy Review of generation policy in
  conjunction with DME, approval of
  Eskoms PFMA application for OCGT Cabinet
  approval for the Developmental
  Electricity Price
• Transport Approval of Transnets 4 point
  turnaround strategy, Revision of NPA
  Act to ensure the retention of NPA within
  Transnet and the removal of
  Regulatory function.
• Defence Reviving SAs Aerospace Industry
  through the allocation of
• work packages for selected
  components for the A400M Aircraft
  Change strategy for Denel.
• Forestry Concluded business sale and
  shareholder agreements on
  
  
  
• the divestiture of SAFCOL from MTO
  and Amatola.

16
AchievementsCorporate Finance Transactions

• R2,474m to Khulisa Trust and R3,152m to Diabo
  Trust as part of the
• Telkom Initial Public Offering (IPO).
• Alexkor Settlement negotiations with
  Richtersveld Community
• CPPP package approved
• Eskom Finalised RFP for disposal of Eskom
  Finance Company.
• Transnet Work plan for the implementation of
  SAA separation
• from Transnet.
• Denel Approval of sale of equity by Denel in
  Arivia.com
• Acquisition negotiations for
  Airbus Aircraft for SANDF
• Aventura Land transfer to Forever Resorts

17
Challenges Experienced (2004 / 2005)

• Access to suitably qualified and experienced
  staff
• Lack of synchronisation between SOE and DPE

18
BUDGET VOTE 09
19
VOTE 09 DPE 2004/05 MTEF
20
VOTE 09 DPE 2004/05 MTEF
21
Expenditure vs Budget
22
Expenditure vs Budget
23
Expenditure vs Budget
24
Expenditure vs Budget
25
Expenditure Composition
26
Departmental Income
27
Planned Activities Next 3 Years

• SECTOR ENERGY
• Monitor the implementation of the
  infrastructure investment programme (Eskoms Open
  Cycle Gas Turbine, return to service of Simunye
  Plants, upgrading the Transmission lines and
  maintenance of the distribution lines)
• Implementation of the NewGen Project
  (Independent Power Producers) (IPP) OCGT
• Multi Year Price Determination (MYPD)
• Electricity Distribution Industry (EDI)
  Restructuring
• Benchmarking of Eskoms performance
• I Implementation of new shareholder management
  model
• Accelerate the development of the Pebble Bed
  Modular Reactor.

28
Planned Activities Next 3 Years

• SECTOR TRANSPORT
• Introduction and roll-out of private sector
  participation (PSP) in ports sector
• Introduction of PSP onto the rail network
• Branch lines
• Blue Train and
• Operations on core network
• Support the implementation of Transnets 4 point
  turnaround strategy
• Separation of SAA from Transnet
• Establish operational benchmarks and monitor
• Implement new shareholder management model

29
Planned Activities Next 3 Years

• SECTOR DEFENCE
• Approve and implement Denels change strategy
• Sale of Denels non-core assets
• Work with DoD on the development of a 10 year
  defence CAPEX plan to provide signals to enable
  production and technology planning by the local
  DRI
• Recapitalise Denel
• Partnership programme for Denel
• Work closely with the DoD, the CSIR and DST to
  facilitate further RD support for the local DRI.
  
• Locate Denel within an optimal industry
  structure, in partnership with DTI, to stimulate
  advanced manufacturing in the non-defense economy
  eg. Composites, the Aerospace cluster initiative.
• Facilitate further market access for defence
  related procurement by working with the DoD and
  Armscor.

30
Planned Activities Next 3 Years

• SECTOR FORESTRY
• Carry out supply and demand analysis on the
  forestry sector.
• Review forestry and downstream industry analysis
  that has been carried to date by DTI and DWAF.
• Review research carried out by DWAF on community
  forestation and forestry related enterprise
  development initiatives.
• Consider the viability of industrialising
  certain indigenous tree species
• Develop a strategy for the future role of SAFCOL
  in forestry based on prevailing local industry
  conditions, developmental enterprise
  imperatives, and international best practice.
• Define SAFCOLs reporting relationship to
  Government based on its future role.

31
Planned Activities Next 3 Years

• SECTOR ICT
• Assess state investments in the ICT sector
  namely Arivia, Telkom and the Second Network
  Operator (SNO).
• Determine the extent to which state ICT assets
  can be consolidated.
• Define Governments role with respect to this
  sector.
• Define Arivias role in the ICT sector and its
  future operations based on the above assessments.
• Implement the recommendation from the review

32
Planned Activities Next 3 Years

• Joint Project Facility
• Africa Investments
• Optimise SOE investments on the continent,
  identify new opportunities and develop a vehicle
  that minimises the risk to SA operations
• Human Resources Development and Capacity Building
• The effective leveraging of SOE training
  facilities to fast-track the development of
  targeted skills.
• ICTs
• Increase access to, and minimise cost of,
  broadband connectivity. Leverage off SOE assets
  to introduce Business Process Outsourcing
  opportunities in the second economy.

33
Planned Activities Next 3 Years

• Joint Project Facility continued
• Pipelines and Energy
• Develop a pipeline master plan
• Property
• Maximising economic, developmental and social
  impact of SOE properties
• Industrial Cluster development
• Leverage SOE capex (investment) programmes,
  reducing export leakage and maximising growth
  potential for the economy.

34
Planned Activities Next 3 Years

• CROSS-CUTTING PROJECTS
• Establish Enterprise-Wide Risk Management
  System for SOE
• Introduce benchmarking programme to track the
  operational efficiency of
• SOE
• Tighten target setting and oversight role of
  the Department on SOE
• Implement new shareholder management model

35
Conclusion

• The ultimate aim of the custodianship and
  oversight processes should be (and is), intended
  to bring about the congruence between the broader
  objectives of the government and the SOEs
• Mindful of the commercial operations of the SOE
• Governance of the department and SOE

36

• THANK YOU