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Minister Lynne Brown Budget Vote 9 Speech - National Council of Provinces

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Minister Lynne Brown Budget Vote 9 Speech - National Council of Provinces
18/06/2015

Honourable Chairperson,
Honourable Ministers and Deputy Ministers [Deputy Minister Bulelani Magwanishe],
Chairperson of the Select Committee,
Honourable Members,
The Acting Director-General of the Department, Matsietsi Mokholo,
DDGs of the Department,
Ladies and gentlemen,
Chairperson,

The Department of Public Enterprises is somewhat unusual. It does not deliver services directly to citizens or private companies. However, its work, when executed effectively, has a profound positive impact on the quality of life of all citizens, businesses and the economy as a whole.

Last month I delivered a Budget Vote to the National Assembly meant to highlight our Departmental activities for the past and the incoming financial years. Today, I would like communicate with this honourable House with a special focus to the Department of Public Enterprises’ activities in our Provinces.

Formally, the sole purpose of this Department is to assist the Minister to play certain roles as the designated representative of Government in relation to Eskom, Transnet, Denel, South African Express, SAFCOL, Alexkor and the Pebble Bed Modular Reactor Company. For periods in the past fiscal year, this included South African Airways and Broadband Infraco.

This presentation is meant to give expression and find relevance to this House. This House monitors our relationship with Provincial Governments and ensures that contact is increased.

In giving a glimpse of our activities in the provinces, I intend to keep it high-level with respect of events that I together with Deputy Minister Magwanishe attended.

Allow me to say what has been done internally to increase oversight of the SOCs. The Department has adopted a 3-point strategy over this Medium-term Expenditure Framework (MTEF) period. Currently, we are stabilising our State-Owned Companies by strengthening the Boards and adapting the Department’s structure. This is to be more responsive to the environment that they are operating in.

The Department has amended its Strategic Plan to enhance its operational imperatives. This plan amongst others:
  • is focused on improving the performance of the portfolio to ensure that the companies can efficiently and effectively carry out their mandates; and
  • it recognises the role that SOCs needs to play in the current economic context to support the aspirations of the developmental state.
 
Provincial Engagements

The Department through the Inter-Governmental unit initiated the Provincial Engagement Programme aimed at ensuring that the SOCs reporting to DPE and the provincial governments are strategically and operationally aligned so as to optimise joint developmental impact.

To date 7 Provinces, Gauteng, Northern Cape, Eastern Cape, North West, Free State, KwaZulu-Natal and Limpopo, have been engaged where various issues were identified ranging from infrastructure, energy, and logistics to economic opportunities to the small and emerging entrepreneurs. This will continue in this fiscal year.

Activities in Provinces

Let me return to our activities in the provinces.

Eastern Cape

The Eastern Cape hosted a variety of events which included electricity and expansions at the Port of Nqguera:The Vuyani sub-station, which is worth R392-million, was launched in Umthatha. The province’s biggest sub-station has strengthened the electricity supply network of the Eastern Cape; andIn the Port of Nqguera, berths 3 and 4 were officially opened by Transnet. This expansion amounted to R2-billion and to date Transnet has invested R12-billion in developing the Port.

Gauteng

Gauteng, the economic hub of the country, hosted the handover of the last of 95 electric locomotives that were recently received in Koedoespoort by Transnet Engineering. The contract of R3-billion was awarded to a Chinese company.

It is significant that 85 of the 95 units were assembled locally and some 65% of the contract or R1.7 billion in value involved the supply of components and services by South African firms.

Eskom, in partnership with Gauteng Province, is continuing its investment of R6.056-billion over a period of four years (2014/15 to 2017/18) to ensure security of supply to the Gauteng province and to support key strategic infrastructure projects.

KwaZulu-Natal

Last year Transnet’s Maritime School of Excellence inducted its first intake of 83 trainees in various maritime disciplines. This is the first time Transnet has taken charge of training and employing its own aviation pilots.
 
North West

Transnet Engineering launched its ground-breaking level crossing system, which will provide a much needed solution to railway level crossing fatalities and incidents in Rustenberg. The technology makes it nearly impossible for a vehicle to cross a railway line by providing physical barriers, preventing vehicles from entering a level crossing when a train is approaching.

Transnet is currently introducing the technology at two sites in the Western Cape at Muldersvlei (Stellenbosch) and Chavonnes (Worcester). It is anticipated that the technology will be rolled out to all 4 000 railway crossings in South Africa.

The North West Province has been the only province that did not have scheduled flight service operations despite its potential for trade and tourism. With the recently revamped Mahikeng International Airport, SA Express will be launching a new route between OR Tambo International Airport and Mahikeng. Operations are planned to commence in August 2015 with three weekly round-trips.

Limpopo

Medupi’s unit 6 is doing well. The ramp-up towards full capacity has passed the 800MW milestone. Over the next weeks, it will deliver the equivalent of more than 40 percent of the output of the Koeberg Nuclear Power Plant.
The town of Lephalale has developed into one of the first major post-apartheid towns to be established.

Eskom has invested R2.3-billion in infrastructure development in Lephalale, including the building of 995 houses and purchasing a further 321 houses, plus upgrades to Lephalale’s two sewage plants and diverting the provincial road that passed near the power station.

Furthermore, the Medupi Legacy Programme has invested R4.9-billion in procurement and infrastructure development as part of Eskom’s goal of ensuring a positive socio-economic legacy for the area and its communities.

Mpumalanga

An advanced feasibility study is being conducted for the establishment of a strategic rail link from Davel (Mpumalanga) to Sidvokodvo (Swaziland) as part of the Maputo Corridor between South Africa, Swaziland and Mozambique. The project will cover a distance of ±150km of rail and will also serve as an alternative general freight line to Richards Bay, freeing up capacity on export coal line and creating an alternative route to and from Maputo.

Northern Cape

Transnet was involved in two major infra-structure launches in the province. Firstly, the Kamfersdam Manganese Export Railway Line was reopened after about 1.5km of railway tracks were submerged in water in 2011. The reopening means that the number of trains running on the line has increased from 18 to 24 trains per day.

Secondly, a Wagon facility and a Youth Precinct were launched in De Aar. The initiative by Transnet Engineering, a division of Transnet through the investment made, established the Wagons Refurbishing facility that will maintain various types of wagons for Transnet Freight Rail (TFR) operations.

An additional investment of R3-million was made available to establish a Youth Precinct where shelter is given to 20 homeless boys.

The Government has set an example with Alexander Bay on what it means to revitalise depressed mining towns after the land claim settlement with the Richtersveld Communities in the Northern Cape. The settlement required Government to upgrade the Alexander Bay mining town township into a formal town which could be incorporated into the Richtersveld Municipality.
To date R130-million has been spent by Alexkor in upgrading the towns’ road network including installation of basic services such streetlights, storm and waste water system including establishing a sewerage treatment plant, electrical and water reticulation system, rezoning and registration of properties.
 
Western Cape

In December 2014, Eskom successfully completed the construction of the 100MW Sere Wind Farm near Koekenaap on the West Coast. What pleased me most was that the project was delivered ahead of schedule and within budget. So, a huge thank you to the Sere Wind Farm team as well.

In this financial year, we also launched the second Transnet business Hub in Saldanha Bay. Transnet is committed to rolling out Enterprise Development Hubs to other provinces and will replicate this programme across South Africa, particularly in rural and poorer economic areas over the next few years.

Saldanha Bay and the surrounding areas will also benefit from Operation Phakisa. There are exciting Transnet projects that should catapult the economy of this region to another level. Transnet and the private sector will invest about R13.2-billion and this is expected to create about 15 000 jobs.

Observations from State of the Provinces

Allow me to make few observations about the respective State of the Provinces addresses.
The critical issues raised by the Premiers in their 2015 State of the Province Addresses covered the following sectors: energy, transport, infrastructure, mining and manufacturing.
The main cross cutting elements found are:
  • Firstly, energy with respect to energy generation, alternative energy sources energy efficiency and debt collection by municipalities.
  • Secondly, the issue addressed in most Provinces is transport, and the focus is on directing funds to road construction, widening and maintenance thereof. KwaZulu-Natal, Mpumalanga and Gauteng are working with Transnet to expedite the migration from road to rail in order to relieve pressure on road networks.
  • The third cross cutting element is on Strategic Infrastructure Projects whereby provinces have undertaken projects in road construction and maintenance, industrial corridors, generation of renewable solar, hydro and wind energy.

CSI Projects

Corporate Social Investment (CSI) has received serious attention to enhance focus on transformation, thus the importance of ensuring alignment of SOC CSI contributions towards achievement of national objectives and empowerment of disadvantaged communities.

SOCs within DPE portfolio have collectively spent approximately R430-million as contribution across the length and breadth of our country, bringing hope in empowering communities.  About 50% of the funds have been a direct investment in improving the quality of education through various interventions including installation of Telematics System in schools.

During 2014/2015 three Telematics Centres were connected and launched at Harding High School and Zikode Secondary School in KwaZulu-Natal and at Vaal Reef Technical High School in North West.
  
SOCs
Let me move to our State-Owned Companies and what they are planning in this financial year in our provinces.

Transnet
Chairperson,
I would like to touch briefly on the forecasts of Transnet’s performance over the 2014/2015 fiscal year.
  • On the freight rail side, Transnet is expected to have moved approximately 225 million tonnes, a 7 percent year-on-year volume growth.
  • Container volumes for the 2014/2015 financial year are likely to be slightly below target at approximately 4.6 million Twenty-foot Equivalent Units.
  • Transnet Pipelines is expected to achieve the 2014/2015 volume target of 16.7 billion litres.
  • During this fiscal year the Department and I expect the General Freight Business volumes to increase by 18 percent given that about half of Transnet’s Market-Driven Strategy capital investments has been allocated to this area.
Denel
Chairperson,
Denel continues to show a pleasing improvement in financial performance. Its subsidiary, Denel Aero-structures is on course to achieve break even in the next fiscal year. With an order book of R30-billion, Denel is on a solid footing.

SAX
Chairperson,
While the South African Express Airline still requires high care, the support provided by the Department and the National Treasury over the past year, has given us reason to be cautiously optimistic.
However, the future viability of SA Express is intrinsically linked to South African Airways.

Eskom
All signs are there that Eskom has turned the corner. Since December last year, the availability of Eskom’s plant performance has improved from 65% to 75%. Going forward, Eskom plans to continue with its maintenance programme in an effort to reduce the backlog that has accumulated over the past few years. Most importantly, it plans to execute the maintenance drive without having to implement load shedding. I again appeal for your patience. We are all in it together and it will take us about 24 months to get us out of this position.

An additional 160 000 households were connected to the grid, improving the lives of thousands without additional capacity being added to increase capacity.

SAFCOL
SAFCOL has been progressively proceeding without any reliance on the national fiscus. The company invested R5.1-million on social economic development while R1.5-million was directed towards enterprise development.
True to our commitment to develop rural communities, SAFCOL signed Social Compacts with 13 communities where it operates. The company’ spend on Socio-Economic Development increased to R6.8-million in the past financial year.

Alexkor
Alexkor continues to make progress to financial sustainability. Investment in the mining operations led to improvement in diamond production and job creation. In the past financial year, Alexkor realised growth in the operations of the mine. This enabled Alexkor to effect greater impact in the socio-economic conditions of the people of Namaqualand. The 2013/2014 financial year saw an increase in diamond production from 46.000 carats to 79.000 carats in the 2014/2015 financial year. Revenue from the sale of diamonds increased from R277-million in2013/2014 to R414.2 million in 2014/2015.
    
Closing

In conclusion, I want to repeat what I said in my Budget Vote Speech on 14 May in the Extended Public Committee. Over the next five years the highest priority goals which the Department and I are required to drive are set out in the NDP-rooted Medium-Term Strategic Framework.
Foremost among these are critical initiatives to lower the cost of doing business to stimulate job-creating growth and to increase the efficiency of the economy:
  • First, Eskom must ramp up the electricity generation reserve margin from its current levels to 19 percent by 2019;
  • Second, Transnet must increase the tonnage moved on rail from the current 207 million tonnes to 330 million tonnes by 2019;
  • Third, Transnet must also improve the operational performance of sea ports and inland terminals by increasing the average gross crane movements per hour by 25 percent by 2019; and
  • Fourth, use the Eskom and Transnet infrastructure development and replacement investment spend to drive the overall national investment rate to 25 percent in a way that crowds in private sector investment and creates opportunity for new suppliers and sectors.
I thank you

For enquiries contact Colin Cruywagen on 082 377 9916
Issued by Ministry of Public Enterprises
18 June 2015  

Page last modified:18/06/2015 17:55