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Public Enterprises Budget Vote Debate: Yunus Carrim

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Public Enterprises Budget Vote Debate: Yunus Carrim
05/06/2006

​​There are 3 key inter-related issues that emerged in our consideration of the Department of Public Enterprise’s budget. Firstly, government is becoming increasingly clear about the nature and role of the SOEs in a developmental economy. Secondly, while different SOEs have different challenges and are in different states of readiness, there is a general movement away from clarifying visions, strategies and plans to implementation. Thirdly, the portfolio of the Department seems to constantly increase, with expanded programmes and new projects, but there has not been a commensurate increase in personnel and resources. In short, the Department has, with modest resources, come quite some way in 12 short months.

And we convey this in our Report on the Budget published in the ATC of 31 May. Essentially, I will provide an overview of the report, and other members will focus on specific aspects of the report and develop them further.

Our overall view of DPE, as set out in our report, is that given the scope and complexities of the Department’s portfolio, we feel DPE has made significant strides since the last budget briefings, is much clearer about its role and current programmes, and has budgeted appropriately for the achievements of its targeted outputs in this financial year. The new Strategic Plan for 2006-09 is commendable, and there is a much better fit between the Plan and the budget than in previous years. We will be able to assess better after we have considered DPE’s Annual Report for the last financial year when we consider it later this year, but, at this stage, we feel that DPE has made effective and productive use of last year’s budget.

Of course major challenges persist, but the Committee feels, at this stage, that the Department certainly has the potential to meet most of these challenges. The Department’s senior managers are new, young and enthusiastic – and hold a lot of promise. The skills level of DPE has improved since the last budget sittings, although challenges remain. It was a more confident Department we engaged with this year.

Minister Erwin and new DG Portia Molefe must be commended for putting together such a potentially good team. The challenge, of course, is to create a productive harmony of this new team and most effectively deploy their skills and passion – and here too the signs are promising. Of course, given the nature of the interaction between departments and parliamentary committees, and for a variety of other reasons, there are aspects of the a department’s role and functioning, usually negative, that we are unable to see, but with this qualification, we are very clear: DPE is doing well, and is poised to do better. Of course, time will tell!

So, you can see, we are very positive, but also cautious. A lot has been done this past 12 months – we hope it is sustainable. There is a lot of promise – we hope it will be fulfilled. On both counts, at this stage at least, the signs are that our expectations will be realized.

We feel that there is a fairly high level of synergy between Minister and DG’s approach to their portfolio and this is also reflected in the approach of the senior managers – and this too suggests the clarity being forged in attending to this portfolio.

The Committee feels that the new Strategic Plan is much clearer about the role of the Department and its programmes, measurable objectives and structures. The Plan also provides greater clarity on the nature and role of the SOEs and what is required of each SOE. The Committee was interested to hear that the DG feels that the Department’s mandate, vision and mission should be further refined and made clearer and more concrete, even though there have been improvements since last year. The DG wants these functions to be more concise and in simpler language.

This is surprising, coming from a senior manager in a government department! MPs have often complained about the bureaucratic-speak and unnecessarily technocratic language used by Department officials, which often tends to hide or, to use a more precise but big word, obfuscate issues – and we have had to really struggle to get anywhere with department officials on this. So the DG’s attitude is a breath of fresh air. Of course, this is not to deny that the complex technical work of some departments sometimes requires technical language which is not easy to simplify – but in general there is certainly room to be more precise, concise and simpler. This too should be a measure of a department’s progress.

As the SOEs stabilize and their new role becomes clearer, DPE is increasingly focusing on the long-term economic and developmental needs and goals of the country – and this is to be welcomed. For example, the DG pointed out that if we are to achieve a target of 10% clean energy, we need to know where we are going to get our gas supplies 20 years from now.

To the Committee there seems to be increasing co-ordination between DPE and the policy, regulatory and other relevant departments. Of course, this co-ordination can be challenging – but the Committee notes the progress, and hopes to see more. To ensure that there is effective co-ordination within DPE and across government and that messages given to the SOEs by different parties are consistent, DPE is working on a governance workflow model.

The Committee welcomes this.

Now that greater clarity is emerging about the nature and role of SOEs in our developmental state and economy, the stage is set for legislation on the new shareholder management model. The Committee looks forward to the tabling of this legislation.

To ensure a more focused and integrated role in transactions, DPE has merged two previous programmes to form the new Legal, Governance and Transactions programme. A new programme 5 will now deal with special projects such as Aventura and Alexkor. We also heard that the Joint Projects Facility, reporting to the Minister and the SOEs Chief Executive Officers Forum, has been established. This re-organisation, it seems to the Committee, will make for more effective implementation of the Department’s mandate.

The Joint Project Facility seems interesting, exciting and laudable. To the Committee, the challenges seem more formidable than are made out, and the Department’s willingness to take them on is impressive. The Committee is not sure though whether there are adequate staff and resources to carry the project through.

The Committee welcomes the Department’s commitment to speedily addressing outstanding litigation issues.

There was much else in the Department’s programmes that titillated us:

  • A new procurement guide that encourages local content in procurement through the SOEs capital expenditure programme
  • The Department’s focus on the role of the SOEs Capex programme in revitalizing certain dormant industries
  • The role of SOEs in establishing call centres.

The Committee agrees that some of the administrative requirements of the EIAs may be too cumbersome, but the changes effected should not serve to dilute the need for and goals of EIAs. The Committee needs to better understand EIAs and will interact with the other relevant parliamentary committees in this regard.

The Committee was impressed to hear that 63 % of DPE’s staff comprises women. Of these 47% are at senior management level. However, there are no people with disabilities employed at DPE. The Department aims to employ 15 people with disabilities over a two-year period. That not a single person with disabilities is employed at DPE is surely not acceptable? The Committee will monitor progress in this regard.

The Minister explained that the Department had a relatively small budget, but was changing somewhat from being an administrative department to having a budget that reflects transfer payments for capitalization of SOEs. The R2 billion allocated to Denel in the last financial year is an example.

Of the Department’s budget of R683,4 million for this financial year R580 million comprises transfer payments, the largest being to the PBMR. In effect, the DPE’s budget is R102,3 million, which includes R10 million for the Joint Project Facility, previously funded by SOEs.

In the past financial year, the Department underspent by 0,2%. This rises to 4,77% if the transfer to Denel is excluded. The reason for this is that the R3, 1 million due to Diabo Share Trust was not transferred because its audited financial statements were not available. The Committee feels that the underspending is understandable.

Other Committee members will deal with the state of each SOE and the Department’s programmes in respect of each. Here a very brief overview will be offered.

Obviously, the challenges in electricity delivery especially in the Western Cape, have to be met more effectively. Of course, we accept that the higher than anticipated economic growth and the massive roll-out of electricity to the poor explain the current challenges. But the underinvestment in infrastructure these past 10 years is also responsible for the current challenges.

The Committee welcomes the Minister’s statement that the power outages have highlighted the underinvestment in infrastructure. We feel that there should be greater acknowledgement of the consequences of this. We feel too that the executive must take its fair share of responsibility for this underinvestment and draw the necessary lessons. But parliament too cannot escape its responsibility for this – and our and other parliamentary committees need to also draw lessons and become more effective in fulfilling our oversight responsibilities.

But in respect of the new generation of electricity programme, Eskom seems very much on track, and we welcome this. The Pebble Bed Modular Reactor is very new for the Committee, and we are to work with the other relevant parliamentary committees to come to terms with this challenging project.

Transnet is making constant progress, and the Committee commends this. The Committee congratulates the Transnet management and trade unions on their amicable settlement of the strike. Of course, the Committee does not understand the full complexities of the dispute, and hopes that both sides have drawn useful lessons from it. There may well be some lessons for other SOEs in the Transnet strike. Of course, SAA is to be separated from Transnet within this financial year. DPE will have to play a more direct monitoring role and will have develop expertise to do this.

The Committee feels that as Denel has been allocated R2 billion from the national fiscus and is likely to be allocated more money to meet its R5,1 billion recapitalization target, we should be more rigorous in monitoring progress in the implementation of Denel’s turnaround strategy and its financial recovery. Since the budget briefings, the Committee received a briefing from Denel, and was impressed with Denel’s greater clarity of vision, strategy, programmes and structures, and the progress it has made in the past six months, the considerable challenges notwithstanding.

The Committee feels that Safcol should, for now, remain in state hands.

As a Committee we need to be more rigorous in our oversight role. This report has focused more on plans, strategies and programmes, and not enough on the concrete details of the budget. We need to address this in the way we manage future budget briefings and report on them. We also need to further develop our skills in dealing with budget and financial issues.

For the Committee to get a better sense of DPE’s Strategic Plan, programmes and budget, we need to be able to evaluate how effectively the Department fulfilled its programmes and used its budget for the previous financial year. Yet such an evaluation cannot be properly done until we consider DPE’s Annual Report for the 2005-6 financial year – but this report will be tabled in parliament at the end of September.

Of course, there are National Treasury and DPE documents, including DPE’s Quarterly Reports that provide information on progress on programmes and use of budgets. In the consistency and manner we play our oversight role, and the way we make use of a variety of documents, including Quarterly Reports, we need to more effectively link assessments of a Strategic Plan, proposed programmes and budgets during a budget briefing with progress achieved on Strategic Plans, programmes and budgets of the previous financial year. Our decision to have quarterly reports presented to the Committee will go some way towards that. These reports will also give us a more constant sense of progress on the SOEs massive Capex programme.

We also need to need to visit more SOE sites as part of our study tour programme to better understand several aspects of DPE’s programmes and assess progress.

So there is much too that we need to do – and the more rigorous we become in exercising our oversight role, the more seriously will be taken by the Ministry, Department, SOEs and stakeholders in civil society.

By way of conclusion I would like to thank Minister Erwin, DG Portia Molefe and all the senior managers in the Ministry and Department for their co-operation. I know that this has been a particularly positive picture of the Ministry and Department…and this is not, let me assure you, because Portia Molefe is my “home girl” or because the Minister, DG and I were at the then University of Natal, or because we are all “Zulus” – but it’s because this is the picture we see now…It may fade, of course, or it may become more beautiful. Let’s see!…But oversight certainly does not mean just criticizing for the sake of doing so…and where Departments do well, we must acknowledge this…Anyway, our thanks go also to Ms Reneva Fourie and Ms Dudu Mhlongo of the Ministry’s Parliamentary Liasion Office, and to Ms Gaynor Kast, the Minister’s Media Spokesperson, especially for, and I know I shouldn’t say this, checking every statement of the Minister’s with me before releasing it…so you can see why we’re so positive…of course, I’m teasing, but our thanks to her for sending the statements ON their release…My comrades and colleagues, especially also the constructive opposition of MS & KM…​

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