Description
Department Of Public Enterprises Strategic Plan
I
dpe 2011 - 2014
DEPARTMENT OF PUBLIC ENTERPRISES STRATEGIC PLAN
CONTENTS
Minister’s Foreword ii
Director-General’s Report iii
Part A: Strategic overview 1
Vision 1
Mission Statement 1
Legislative and Other Mandates 5
Constitutional Mandates 5
Situational Analysis 6
Organisational Structure 7
DPE Budget - Appropriation per Programme 8
DPE Budget - Appropriation per Economic Classifcation 8
DPE Budget Summary of Transfer payments to SOE 8
Part B: Strategic objectives 9
Programme 1 - Administration 9
Programme 2 - Energy and Broadband Enterprises 12
Programme 3 - Legal & Governance 16
Programme 4 - Manufacturing Enterprises 19
Programme 5 - Transport Enterprises 22
Programme 6 - Joint Project Facility 27
State Owned Enterprises 30
Alexkor 30
Broadband Infraco 31
Denel 32
Eskom 33
Pebble Bed Modular Reactor 34
South African Forestry Company 35
South African Airways 36
South African Express Airways 37
Transnet 39
Acronyms 40
II
Minister’s foreword
Malusi Gigaba
Minister’s foreword
Our department is tasked with the vital responsibility
of providing shareholder oversight and leadership
to a number of state owned enterprises (SAA
Transnet, Eskom, Safcol, Alexkor, Denel, PBMR,
Broadband Infraco, Aventura and SAX). Our
mandate of oversight and leadership is defned
and guided by a range of government policies and
strategies including the New Growth Path and the
Industrial Policy Action Plan. We, as a shareholder
department, have the mandate to align the strategies
and operations of SOE with government’s objectives
as defned in these policies.
The two infrastructure SOEs, Transnet and Eskom are
in a powerful position to catalyse growth in that they
either place constraints on, or create opportunities
for, additional investment in both their customer and
supplier communities. These opportunities can
be unlocked through creating additional capacity
either through SOE investment or through effciency
improvements. In addition, given their strategic
position, these infrastructure SOEs can play a
leadership role in both the customer and supplier
community in driving programs that catalyse socio-
economic transformation in these sectors. The role
of the DPE in this context is thus to drive investment,
effciencies and transformation in its portfolio of
SOE, their customers and their suppliers to unlock
growth, create jobs and develop skills.
For the SOEs to unlock growth and transformation,
new sources of funding for the infrastructure
programs will need to be found and developmental
procurement and other business process capabilities
will need to be developed and implemented. The
New Growth Path in particular, challenges us to
think beyond the existing approach to Shareholder
Management. The policy challenges us to develop
compacts with our key stakeholders to enhance
our joint impact on the economy. In order to do
this, we need to develop an investment planning
approach that goes beyond the constraints of SOE
balance sheets with the objective of working with
our customers and other key stakeholders to raise
the funding to drive investment and employment
creation to qualitatively new levels.
An important component of this process will be
to establish an enabling policy and regulatory
environment. This will include the DPE developing
new policies to guide the SOE in the implementation
of the strategy. In addition, the DPE will be engaging
with Treasury, sectoral policy Department and their
regulators to ensure that the regulatory regime
provides both confdence in the future stability of
the SOEs and enables special compacts between
the SOEs, their customers and the broader fnancial
community.
In response to the economic and social challenges
facing South Africa, this plan represents a key step
in moving from a balance sheet to a broader growth
perspective in SOE investment planning, funding,
procurement and operations. This approach
will require active and decisive leadership from
the DPE and I have already started a process of
engaging directly with all SOE Chairs and CEOs.
Such engagements are intended to ensure there
is a defnitive clarity about government’s strategies
to be refected by SOEs and also to provide our
department with a timely grasp of strategic and
operational issues being faced by our SOEs.
In summary, we look forward to the challenges
ahead with enthusiasm and determination, ever
cognisant of the impact our contributions will have
on our economy and the continent at large.
The deputy minister and I are confdent that the
strategies intended are obtainable if our capable
efforts are applied through cogitated action for the
grander benefts of our South African economy. Our
confdence is further reassured by the committed
and competent leadership of the department being
spearheaded by our Director General Tshediso
Matona.
Minister Malusi Gigaba
III
Director-General’s
report
Tshediso Matona
Director-General’s report
We in the Department of Public Enterprises are
actively engaged with the imperatives of forging
a growing and labour-absorbing economy as
envisioned in Government’s key policy statements,
in particular, the New Growth Path and the Industrial
Policy Action Plan. The development of the
country’s economic infrastructure is central to this
vision, and the challenge for the DPE and the state-
owned enterprises (SOE) for which we shareholder
responsibility is clear.
The stage has been set for our country’s intentions
to create an economy that factors larger labour
absorption into its growth, through, among
other things, the development of our economic
infrastructure.
The Department of Public Enterprises is responsible
for guiding SOE in our portfolio to become more
fnancially sustainable entities which contribute
positively towards our national growth and
development objectives. SOE, particularly those
operating in network infrastructure industries, are
key levers to catalyse growth, and therefore higher
labour absorption.
Government has clearly prioritised employment-
creation in the period ahead, during this
Administration and beyond. In his State of the
Nation Address President Jacob Zuma has given
us our marching orders with regard to delivering
on this priority, and the DPE, together with the
SOE in our portfolio, accept this challenge, and
commit ourselves to the achievement of this
central objective. This requires an unambiguous
understanding by our SOEs of government’s
economic policy and strategy. To this end, with the
guidance of the Minister and Deputy Minister, we
have undertaken to be more hands-on with regard
to our oversight and shareholder responsibility over
the SOE, to ensure that they are in alignment with
Government policy and strategy.
The SOE, together with the private sector,
are pivotal in the imperative to reposition the
economy to a New Growth Path, central to
which is the overriding priority of job creation and
poverty alleviation. Our two biggest SOE, Eskom
and Transnet, have embarked on the biggest
infrastructure investment by the public sector,
infrastructure that will be a catalyst for our economy
to grow, and therefore to crowd in the private
sector for higher levels of employment creation. It
is therefore important that the SOE are fnancially
viable and able to fund these investments from
the strength of their balance sheets. In addition to
fnancial viability, the SOE need certainty and clarity
in terms of policy and regulatory direction, a key
factor when investment decisions need to be made.
The role of the State as shareholder, regulator and
policy-maker must be clearly defned, if the SOE are
to have certainty to enable them to execute their
mandate.
In recognition of the powerful role that an SOE
can play in the economy, a Presidential Review
Committee has been established to identify ways
of enhancing the impact of SOE on the objectives
and priorities of Government. We look forward to the
recommendations to be made by the PRC later in
2011, as they will be critical in helping us to further
shape and refne Government’s strategic role as
a Shareholder. The PRC’s recommendations will
provide greater insight into the role that SOE should
play in the context of a Developmental State, and
how Government should improve its Shareholder
oversight capabilities to support and strengthen
this role.
In conclusion, I would like to thank the Minister
for the visionary leadership he is providing to the
Department and the SOE, and the support of the
Deputy Minister in this regard. Lastly, I would like to
urge my colleagues in the Department to continue
to strive for excellence as we work towards the
achievement of our goals as a Department, and as
a country.
Director-General Tshediso Matona
IV
1
Vision
The aim of the Department of Public Enterprises is to
provide effective shareholder management of state
owned enterprises that report to the department,
and support and promote economic effciency and
competitiveness for a better life for all South Africans.
Mission Statement
Revised mission statement and 2011–2014
strategic plan
The state owned enterprises are strategic instruments
of industrial policy and core players in the New
Growth Path. The department aims to provide
decisive strategic direction to the state owned
enterprises so that their businesses are aligned
with the national growth strategies arising out of
the New Growth Path. It will do this by ensuring that
their planning and performance, and investments
and activities, are in line with Government’s medium
term strategic framework and the Minister’s service
delivery agreement.
In relation to Government’s 12 outcomes, the
Department of Public Enterprises is contributing
directly to creating an effcient, competitive and
responsive economic infrastructure network
(outcome 6), which forms the basis of the Minister’s
service delivery agreement, signed in October 2010.
Over the medium term, the department will focus on
achieving the outputs and sub-outputs that are linked
to the Outcome and contained in the Agreement.
These are:
• Improving the delivery and maintenance of
infrastructure and monitoring the rollout of the
Transnet and Eskom build programmes.
• Achieving policy and regulatory clarity in sectors
in which the state owned enterprises operate.
• Improving the operational effciencies of the
state owned enterprises, particularly in relation
to the reliable delivery of rail and ports services
and the reliable generation, distribution and
transmission of electricity.
• And developing operational indicators for each
of the required sub-outputs identifed as part of
the delivery agreement and where necessary
including these shareholder compacts concluded
within the state owned enterprises.
Government Economic Objectives and DPE
Strategy
Three government frameworks provide a context
for the defnition of the key objectives that should
guide the DPE strategy. These frameworks are the
performance evaluation framework, the New Growth
Path and the Industrial Policy Action Plan.
There are 12 outcomes in the performance evaluation
framework. Given the nature of the DPE portfolio of
SOE, the following outcomes, which are focused on
the economic cluster, are of particular signifcance
to the DPE.
Decent employment through inclusive growth:
• Increasing GDP
• Higher rates of labour absorption, meaning that
more of the working-age population has jobs.
Effcient, Competitive and Responsive Economic
Infrastructure Network.
• Globally competitive infrastructure service
delivery.
• Provision of additional capacity to provide for
growth requirements.
The New Growth Path is a strategy to identify
focus areas for greater competitiveness and labour
absorbing growth through the provision of focused
policy and political support for these sectors. The
path has the objective of creating fve million jobs
over ten years. The approach is to fne-tune macro
and micro policies to support more equitable and
employment-intensive growth through:
• Measures to make the economy as a whole more
competitive, including the value of the currency,
enhanced infrastructure services and capacity
and the development of skills.
• Systematically encouraging more labour-
intensive and green activities, including through
African regional integration.
• Developing relatively labour intensive
manufacturing, particularly through leveraging
public procurement, in support of the Industrial
Policy Action Plan
Part A : Strategic overview
2
3
Part A : Strategic overview (cont.)
A core element of the New Growth Path is to promote
social dialogue and solidarity, through the building
of relevant social compacts to achieve targeted
objectives, as central to the change process.
The Industrial Policy Action Plan is extremely
complimentary to the New Growth Path and has
as its objective development of manufacturing
and associated industrial capabilities to facilitate
a diversifcation of the economic base beyond the
present dependence on resources and non-tradable
services. Core to the Industrial Policy Action Plan
is the provision of competitive infrastructure services
and the leveraging of public procurement to promote
investment in manufacturing. This includes a special
“feet procurement” process whereby long term
feet requirements are identifed and procurement
is structured so as to create a frm foundation for
investment and learning in the national supplier
sector. The leveraging of the SOE capital investment
programs, or the Competitive Supplier Development
Program, is a further core strategy of the IPAP.
In summary, the DPE needs to leverage the SOE to
contribute to the following key national objectives:
• The provision of competitive infrastructure
services and associated capacity to lead growth
and stimulate employment creation.
• The development of industrial manufacturing
capabilities as a whole as well niched areas of
advanced capabilities.
• The development of skills.
• The development of new technologies, particularly
those contributing towards employment creation
and a green growth trajectory.
• The development of social and economics
compacts to align stakeholders behind the key
growth objectives.
Strategic focus over the medium term
Providing decisive leadership and ensuring that
the government shareholder management model
is implemented
The department provides support to the Minister in
his interactions with the state owned enterprises.
This involves preparing for structured meetings
between the Minister and the Chairperson of each
board, as well as research and briefngs on issues.
The department’s shareholder management
model measures the state owned enterprises’
performance against delivery targets. The model
aims to achieve consistency in compliance with
corporate governance as well as the synchronisation
of outcomes - based planning and performance
reporting.
The model is being continuously refned.
• Progress on the model to date includes: clarity
on the strategic intent of each state owned
enterprise and performance focused shareholder
compacts.
• The development of a logical planning and
monitoring and evaluation framework; the
development of guidelines on board management
and founding documents.
• And the tracking of trends in fnancial and
operational performance through the
department’s performance measuring
dashboard, the Isibuko dashboard. The
dashboard facilitates the quarterly reporting
required from the state owned enterprises.
Optimising capital investment and operational
effciencies in state owned enterprises
The provision of adequate and effcient infrastructure
services can stimulate investment and increase
the productivity of the customers of state owned
enterprises’. In 1976, public investment in
infrastructure in South Africa peaked at 16 per cent
of GDP. By 1994, it had declined to approximately 4
per cent of GDP where it remained until Eskom and
Transnet announced the major build programmes
in 2004 and government began a fxed asset
investment programme in 2005.
Benchmarking actual public investment in
infrastructure between 1994 and 2009 against a
steady state of investment of at least 10 per cent
of GDP per year over the same period suggests a
shortfall of approximately R1.5 trillion. This illustrates
a gap in infrastructure investment which needs to be
addressed and funded.
A number of state owned enterprises suffer from
operational ineffciencies, which negatively impacts
on the economy. A key challenge for the department
is to play a catalytic role in improving effciencies
through positively infuencing the Boards’ oversight
function and in turn effective management of the
enterprises. This will require a much higher level of
analysis, benchmarking, target setting and remedial
action than in previous years. The department will
also continue to monitor progress on the expansion
of the capacity of state owned enterprises, such as
the capital programmes of Eskom and Transnet,
through better funding and risk management.
4
5
Refning the policy and regulatory environment
The current policy and regulatory environment has
elements that pose key risks to the state owned
enterprises and their ability to play a developmental
role in the economy. In particular, the regulation of
infrastructure tariffs needs to enable both Eskom
and Transnet to recover costs and attract investment
to meet the needs of the economy. In addition,
the department needs to monitor closely what
additional investments will be required of Eskom in
the Integrated Resource Plan for Energy, as this may
require signifcant additional funding. Another key
area relates to the establishment of a Single Buyer
Offce to enable independent power producers’
access to the grid. In relation to Transnet, the
department will be engaging with the establishment
of the rail and port Regulator to ensure that the policy
and regulatory regime provides an appropriate
balance between encouraging additional investment
and promoting competition. The department will
continue to put considerable effort into working
with policy departments, such as the Departments
of Energy and Transport, to create a more enabling
environment for the enterprises to better serve the
public interest.
Integrating key programmes into the broader
industrial policy and economic cluster programme
Another area of strategic focus over the short to
medium term is the systematic integration of key
programmes in state owned enterprises into the New
Growth Path and the Industrial Policy Action Plan 2.
For example, both the Industrial Policy Action Plan and
the New Growth Path have prioritised the leveraging
of public procurement to develop manufacturing.
The department will thus focus on driving the
implementation of feet procurement programmes in
locomotives and renewable generation technologies.
The integration of supplier development policies
that will embed procurement leverage into the state
owned enterprise procurement policy framework
will also be closely monitored. The department is
considering new governance mechanisms to enable
better coordination across government departments
(particularly with respect to the Department of Trade
and Industry) and to provide more effective oversight
of the rollout of these programmes. The South African
Forestry Company can play a powerful catalystic
role in rural development and work is underway on a
strategy in this regard.
Knowledge management
It is critical that the department optimise its internal
learning processes. This involves collating and
recording existing presentations and documents
under relevant themes, developing training
programmes in key areas and initiating processes
that capture the practical experiential learning
around shareholder management.
Legislative and Other Mandates
DPE exercises shareholder management over nine
SOE. All The SOE are incorporated as companies
in accordance with the provisions of the Companies
Act, 1973. Except for Denel, all SOE are established
in terms of their own enabling legislation which sets
out the purpose, mandate and objectives for which
they were founded.
DPE is both the founder and the administrator/
custodian of all legislation relating to the
establishment of SOE.
Constitutional Mandates
In addition to the Companies Act and enabling
legislation, SOE are also governed by other
legislation such as the Public Finance Management
Act of 1999 (PFMA), Competition Act of 1998 and the
Insolvency Act of 1936 amongst others.
Within the DPE portfolio, the SOE enabling
legislations are the following:
• Eskom: Eskom Conversion Act 13 of 2001
• Transnet: Legal Succession to the South African
Transport Services Act 9 of 1989 (as amended)
• Alexkor: Alexkor Limited Act 116 of 1992
(as amended)
• South African Forestry Company (Safcol):
Management of State Forests Act 128 of 1992
• Aventura: Overvaal Resorts Limited Act 127 of
1993
• South African Airways: South African Airways Act
5 of 2007, and
• Broadband Infraco: Broadband Infraco Act 33 of
2007
Part A : Strategic overview (cont.)
6
Situational Analysis
Organizational Environment
The Department of Public Enterprises requires high
calibre on specialized skills to carry out its mandate.
Emphasis has always been placed on ensuring that
the organizational structure is adequately resourced
to deliver on the organizations key focus areas. Over
the years, this has been a constant challenge. The
department is limited in its ability to attract and retain
such expertise when compared to the private sector.
However, it continues to strive towards ensuring that
the structure is aptly capacitated.
In its endeavour to ensure a feeder channel
of applicable skills and talent, the department
embarked on a drive to attract and retain young
graduates though its internship and graduate
development programmes. This has been further
strengthened by a continuous focus on internal skills
development, mentoring and coaching.
The reorganisation of work streams in the department
assisted in ensuring that the sector programmes
received dedicated support in the legal and
governance aspects of their work. To support this
initiative, the Legal and Governance unit was divided
into SOE-specifc matters and cross-cutting legal
support to the department.
The establishment of a Risk Management, Monitoring
and Compliance role in Corporate Services, assisted
in ensuring closer alignment between the planning
function and the monitoring of deliverables in
accordance with the department’s strategic focus
areas. This dedicated resource has allowed for
closer evaluation of performance through continuous
assessment and analysis of quarterly reports.
Internal risks are also captured on the Isibuko
Dashboard, electronic business intelligence system
which ensures stronger accountability across the
organization for risk mitigation through a tightly
managed process.
With the appointment of the Minister, Deputy Minister
and Director-General as well as the launch of the
Presidential Review on State owned enterprises, the
Department of Public Enterprises is fully cognisant
of the possible review of its mandate. A key focus
for the Executive team is to ensure that the internal
environment remains stable and conducive for
sustainable high performance. The department is
geared for the work it has to produce and remains
fexible and agile in its ability to incorporate changes
as they become evident, especially regarding
reorganization of work for improved performance
and effciencies.
Part A : Strategic overview (cont.)
7
Minister
Public Enterprises
Special
Advisor
Special
Advisor
DDG
Chief Investment &
Portfolio Manager
DDG
Transport
Enterprises
Chief
Financial Of?cer
DDG
Energy and Broad-
band Enterprises
DDG
Joint Project
Facility
Head
Communications
DDG
Legal, Governance
OPSCO
Chairperson
Head
Corporate
Services
Chief
Audit
Executive
DDG
Manufacturing
Enterprises
Deputy Minister
Public Enterprises
Director-General
Public Enterprises
dpe
organisational structure
8
DPE Budget - Appropriation per Programme
2010/11 2011/12 2012/13 2013/14
Final
Appropriation
Medium term estimates
MTEF Baseline
R'000 R'000 R'000 R'000
1. Administration 106 835 106 734 112 968 118 820
2. Energy and Broadband Enterprises 174 476 58 652 20 246 21 669
3. Legal and Governance 50 023 12 163 13 455 14 321
4. Manufacturing Enterprises 192 782 13 072 13 408 14 275
5. Transport Enterprises 21 257 26 610 25 701 25 465
6. Joint Project Facility 10 176 13 000 13 873 15 862
TOTAL 555 549 230 231 199 651 210 412
DPE Budget - Appropriation per Economic Classi?cation
2010/11 2011/12 2012/13 2013/14
Final
Appropriation
Medium term estimates
MTEF Baseline R'000 R'000 R'000 R'000
Current payments
Compensation of employees 90 315 96 539 101 017 106 169
Goods and services 87 925 91 539 96 643 102 136
Transfers and subsidies
Public corporations and private enter-
prises
237 296 40 000 - -
Gifts and donations 610 753 791 835
Payments for capital assets
Machinery and equipment 703 1 400 1 200 1 272
Payment for Financial Assets 138 600 - - -
Total 555 549 230 231 199 651 210 412
DPE Budget Summary of Transfer payments and payment for Financial assets to SOE
2010/11 2011/12 2012/13 2013/14
Final
Appropriation
Medium term estimates
R'000 R'000 R'000 R'000
Alexkor 36 000 - - -
Denel 181 296 - - -
Broadband Infraco 138 600
Pebble Bed Modular Reactor 20 000 40 000 - -
Total 375 896 40 000 - -
9
DPE Budget - Appropriation per Economic Classi?cation
2010/11 2011/12 2012/13 2013/14
Final
Appropriation
Medium term estimates
MTEF Baseline R'000 R'000 R'000 R'000
Current payments
Compensation of employees 90 315 96 539 101 017 106 169
Goods and services 87 925 91 539 96 643 102 136
Transfers and subsidies
Public corporations and private enter-
prises
237 296 40 000 - -
Gifts and donations 610 753 791 835
Payments for capital assets
Machinery and equipment 703 1 400 1 200 1 272
Payment for Financial Assets 138 600 - - -
Total 555 549 230 231 199 651 210 412
DPE Budget Summary of Transfer payments and payment for Financial assets to SOE
2010/11 2011/12 2012/13 2013/14
Final
Appropriation
Medium term estimates
R'000 R'000 R'000 R'000
Alexkor 36 000 - - -
Denel 181 296 - - -
Broadband Infraco 138 600
Pebble Bed Modular Reactor 20 000 40 000 - -
Total 375 896 40 000 - -
Part B : Strategic objectives
Programme 1
Administration
Purpose: To achieve the department’s strategic
objectives by providing management, supporting
functions and processes.
The programme is comprised of the following
sub-programmes
• Ministry – Minister and Deputy Minister
• Management – Offce of the Director-General
and Chief Investment Portfolio Manager
• Internal Audit
• Corporate Services – Head: Corporate Services,
Human Resources, Secretariat, Administration
and Facilities, Knowledge Centre and Internal
Risk Management and Performance Monitoring
• Offce of the Chief Financial Offcer – Financial
Administration, Supply Chain Management and
Information Management
• Communications
• Offce Accommodation
Strategic Objectives
• To provide strategic direction and leadership.
• To provide support services to enable the
department to deliver on its organisational
objectives in an environment where the human
capital within DPE is both motivated and
empowered.
• To improve the quality of corporate governance
and performance monitoring systems by
ensuring that appropriate policies, processes
and procedures are reviewed, updated and
implemented within the DPE.
The Offce of the Chief Investment and
Portfolio Manager applies a portfolio approach to the
management and shareholder investment of all state
owned enterprises falling under the purview of the
department, including conducting comprehensive
cross cutting portfolio reviews on a quarterly basis.
The offce serves to enhance portfolio management
through portfolio analysis to determine overall
portfolio structure, highlight shifts in portfolio
composition, determine potential impact to portfolio
performance and identify measures to strengthen
the portfolio.
The offce provides analysis of trends and strategic
portfolio recommendations to the Minister of Public
Enterprises to pro-actively manage any exposure
that may arise.
Objectives and Measures
• Provide strategic leadership and effective
oversight over the departmental activities by:
– Synchronising logical planning, monitoring and
evaluation processes
– Performing performance monitoring and share-
holder risk management to investments in state
owned enterprises
– Developing the department’s capital structure
framework for state owned enterprises
– Managing the equity interest and contingent
liability exposure of the department’s investment
portfolio
– Developing investment policy and identifying
sources for capital funding
– Ensuring economic and regulatory cohesion for
network infrastructure
– Providing specialist transaction input and
advice
– Implementing the Richtersveld deed of
settlement
– Redirecting Alexkor’s commercial focus and
sustainability.
Resource considerations
The spending focus will be on administrative costs
as no transfers to state owned enterprises over the
MTEF period are included in this programme.
Expenditure increased from R68.4 million in 2007/08
to R106.8 million in 2010/11, at an average annual
rate of 16.0 per cent. The growth was driven by
spending in the Corporate Services and Management
subprogrammes as the department centralised
operational expenditure such as IT licences and
services, photocopying equipment, and training and
communication into this programme. Establishing
the Deputy Minister’s offce in 2009/10 and shifting
the risk component in the Legal and Governance
programme to the Chief Investment Portfolio
Manager’s offce to this programme also contributed
to the increase. Spending on compensation of
employees increased from R28.8 million in 2007/08
to R48.9 million in 2010/11, at an average annual
rate of 19.4 per cent. The increase is attributable
to annual salary increments and an increase in the
number of personnel in this programme. Spending
on goods and services increased from R35.6
million in 2007/08 to R56.5 million in 2010/11, at an
average annual rate of 16.6 per cent. This increase
in expenditure on goods and services was to provide
support to the larger personnel establishment.
Expenditure is expected to grow from R106.8 million
to R118.8 million over the MTEF period, at an average
annual rate of 3.6 per cent. The growth is mainly due
to infation related adjustments to the baseline as
adjusted to refect savings from the centralisation of
services.
10
Sub
Programme
Output Measure/indicator 2011/2012
Target Milestone
2012/13
Target Milestone
2013/14
Target Milestone
CIPM Synchronised logical
planning, monitoring
& evaluation process
SOE strategic intent
statements issued for
all SOE
SOE Strategic intent
statements issued by end
of September
SOE strategic intent
statement issued by end
of September
SOE strategic intent
statement issued by end
of September
Shareholder compacts SOE Shareholder
Compacts signed annually
SOE Shareholder
Compacts signed annually
SOE Shareholder
Compacts signed annually
SOE Corporate Plans SOE to submit
Corporate Plans annually
by end of February
SOE to submit
Corporate Plans annually
by end of February
SOE to submit Corporate
Plans annually by end of
February
SOE performance
monitoring & Shareholder
Risk Management
Quarterly Shareholder
reports on SOE
performance
Assessment, detection,
mitigation and monitoring
of cross-cutting
shareholder risk
Quarterly Shareholder
reports on SOE
performance
Assessment, detection,
mitigation and monitoring
of cross-cutting
shareholder risk
Quarterly Shareholder
reports on SOE
performance
Assessment, detection,
mitigation and monitoring
of cross-cutting
shareholder risk
Portfolio equity
interest & contingent
liability exposure
management
Report on government
guarantee and shares
SOE Quarterly report on
government guarantee
and shares
SOE Quarterly report on
government guarantee
and shares
SOE Quarterly report on
government guarantee
and shares
Register government
guarantee, shares and
shareholders’ agreement
Register and safe custody
of government guarantee,
shares and shareholders’
agreement
Register and safe custody
of government guarantee,
shares and shareholders’
agreement
Register an safe custody
of government guarantee,
shares and shareholders’
agreement
Benchmarking Guideline for Industry,
sector & national economy
benchmarking
Benchmarking Guideline
for SOE performance
indicator & target setting
SOE performance indica-
tor & target setting
SOE performance indica-
tor & target setting
Shareholder value
enhancement
Methodological framework
for measuring shareholder
value per SOE &
aggregation to portfolio
Annual portfolio value
assessments
Annual portfolio value
assessments
Annual portfolio value
assessments
Economic &
regulatory
cohesion for
network
infrastructure
Research on
economic
regulatory models
Report on economic
regulatory cohesion for
network infrastructure
study
Study on regulatory
frameworks employed for
infrastructure investment
Capital structure
framework
Annual portfolio value
assessments
• Investment policy for
SOE commercial
sustainability
• Financing Instruments
Framework
• SOE capital
restructuring
assessments
SOE capital restructuring
assessments
Measurable objectives
and medium term
output targets
Programme 1
Administration
11
Sub
Programme
Output Measure/indicator 2011/2012
Target Milestone
2012/13
Target Milestone
2013/14
Target Milestone
Alexcor Richtersveld Deed
of Settlement
implementation
• Alexander Bay
Township
infrastructure upgrade
• Formal establishment
of Pooling and
Sharing Joint
Venture between
Alexkor and
Richtersveld Mining
Company
• Completion of
Alexander Bay
township
infrastructure upgrade
• Approval of
Minister of Minerals
& Energy for transfer
of Alexkor and mining
rights to Richtersveld
• Mining Company
• Monitoring formal
establishment of
Pooling and Sharing
Joint Venture
(prospecting plan,
work programme,
mining plan)
Quarterly monitoring and
assessment of Pooling
and Sharing Joint Venture
performance
Alexkor Strategy
Formulation
• New business/
growthplan for Alexkor
• Stakeholder
consultation to
clarify positioning
of Alexkor in relation to
State Mining Company
• Explore synergies
between Alexkor and
State Mining Company
• Alexkor exploring new
mining ventures and
downstream
benefciations
beyond Alexander Bay
Alexkor Monitoring
and Oversight
• Annual Reports,
Corporate Plan,
Strategic Intent
Statement and
Shareholder
Compact with Alexkor
• Analysis and
Assessment of the
Annual Report and
Corporate Plan
• Analysis and
Assessment of the
Annual Report and
Corporate Plan
• Analysis and
Assessment of the
Annual Report and
Corporate Plan
• Negotiation and ap-
proval of shareholder
compact
• Negotiation and ap-
proval of shareholder
compact
• Negotiation and ap-
proval of shareholder
compact
• Shareholder Strategic
Intent statement at the
AGM
• Shareholder Strategic
Intent statement at the
AGM
• Shareholder Strategic
Intent statement at the
AGM
• Alexkor Board Review • Assessment of SOE
Board.
• Assessment of SOE
Board.
• Assessment of SOE
Board.
• Quarterly Reports • Assessment of
quarterly reports
• Assessment of
quarterly reports
• Assessment of
quarterly reports
• Preparation of quarterly
investor briefs
• Preparation of quarterly
investor briefs
• Achievement of MTEF
targets by Alexkor
• Assessment of PFMA
Applications
• Assessment of PFMA
Applications
• Assessment of PFMA
Applications
• Assessment of Alexkor
funding requirements
to support new
business plan
• Explore and facilitate
access to debt and
alternative funding
structures
• Explore and facilitate
access to debt and
alternative funding
structures
• Explore and facilitate
access to debt and
alternative funding
structures
Programme 1
Administration (cont.)
Measurable objectives
and medium term
output targets
12
Energy and Broadband Enterprises
Purpose: Align the corporate strategies and
performance of Eskom, Pebble Bed Modular Reactor
and Broadband Infraco with Government’s strategic
intent and performance targets.
The programme is comprised of the following
sub-programmes
• Management comprises the offce of the Deputy
Director-General. 85.5 percent of the budget is
used for compensation of employees.
• ICT Broadband Sector provides shareholder
oversight of Broadband Infraco. This includes
overseeing agreements between parties,
assessing the business plan, monitoring
the national and international long distance
networks, and providing overarching shareholder
management.
• Energy Sector provides shareholder oversight
of Eskom. This entails: generating, transmitting
and distributing electricity with a particular
emphasis on security of supply and optimising
current operations; and carrying out oversight of
the Pebble Bed Modular Reactor, which includes
monitoring the progress of the implementation
of the care and maintenance programme to
preserve intellectual property and assets as
approved by Cabinet.
• Legal and Risk (Energy and Broadband
Enterprises) deals with all legal, governance
and risk work specifcally related to the above-
mentioned state owned enterprises.
Strategic objectives
• Continuously ensure the alignment of shareholder
strategic intent in relation to state owned
enterprises’ role in achieving Government‘s
objectives in the energy and communication
sectors.
• Evaluate Corporate Plans annually and advise
Boards about material deviations.
• Monitor and benchmark the implementation of
Corporate Plans and Shareholder Compacts.
• Assess shareholder and enterprise risks at
least quarterly, and advise Boards on areas of
concern.
• Support the security of electricity supply by:
– Examining Eskom’s maintenance and operational
practices, distribution effciency and the reserve
margin annually.
– Receiving regular updates from and ongoing
interaction with Eskom, and engaging with
stakeholders in the energy sector.
• Reduce dependence on the fscus by monitoring
cost escalations for the build programme and
developing innovative funding mechanisms.
• Monitor the implementation and evaluate
quarterly reports of the Competitive Supplier
Development Programme to leverage off Eskom’s
capital expenditure in the development of local
supplier industries.
• Maintain state owned assets by monitoring
progress against the implementation of the Care
and Maintenance programme by the Pebble Bed
Modular Reactor.
• Create an enabling policy and regulatory
environment for the state owned enterprises by
engaging with the Department of Energy and the
National Energy Regulator of South Africa on new
policies and regulations affecting Eskom as and
when they arise over the MTEF period.
• Ensure that the West Coast submarine cable
system is ready for service in 2011 by monitoring
Broadband Infraco’s participation in the West
Coast submarine cable system consortium on a
quarterly basis.
• Support increased access to broadband by:
– monitoring Broadband Infraco’s price reports
annually
– increasing the number of access points to
broadband in major cities and under serviced
areas through rolling out the national long
distance infrastructure.
Part B : Strategic objectives (cont.)
Programme 2
13
Sub
Programme
Output Measure/indicator 2011/2012
Target Milestone
2012/13
Target Milestone
2013/14
Target Milestone
Energy Eskom Monitoring
and Oversight
Annual Reports,
Corporate Plan, Strategic
Intent Statement and
Shareholder Compact
with Eskom
• Assessment of the
Annual Report and
Corporate Plan
• Assessment of the
Annual Report and
Corporate Plan
• Assessment of the
Annual Report and
Corporate Plan
• Negotiation and
approval of
Shareholder Compact
• Negotiation and
approval of
Shareholder Compact
• Negotiation and
approval of
Shareholder Compact
• Shareholder Strategic
Intent Communique
in preparation for the
Eskom AGM
• Shareholder Strategic
Intent Communique
in preparation for the
Eskom AGM
• Shareholder Strategic
Intent Communique
in preparation for the
Eskom AGM
• Assessment of SOE
Board.
• Assessment of SOE
Board.
• Assessment of SOE
Board.
Quarterly Reports
• Assessment of
quarterly reports
• Assessment of
quarterly reports
• Assessment of
quarterly reports
• Preparation of quarterly
investor briefs
• Preparation of quarterly
investor briefs
• Preparation of quarterly
investor briefs
Achievement of MTEF
targets by Eskom
• Assessment of PFMA
Applications
• Assessment of PFMA
Applications
• Assessment of PFMA
Applications
• Explore and facilitate
access to debt and
alternative funding
structures
• Explore and facilitate
access to debt and
alternative funding
structures
• Explore and facilitate
access to debt and
alternative funding
structures
Monitoring Eskom’s
capacity expansion
programme
Timeous delivery of new
generation capacity and
transmission networks
• Capacity delivery as
per plan (Shareholder
compact and IRP )
• Capacity delivery as
per plan (Shareholder
compact and IRP )
• Capacity delivery as
per plan (Shareholder
compact and IRP )
Mitigation strategy for
the declining network
performance
Quarterly reports
• Monitoring and
analysis of network
performance reports
• Monitoring and
analysis of network
performance reports
• Monitoring and
analysis of network
performance reports
Implementation of the
Coal Haulage Road
to Rail Migration Plan
Quarterly reports of road
to rail migration progress
(tons) and road improve-
ments (kms)
• Rehabilitation of coal
haulage roads
• Rehabilitation of coal
haulage roads
• Rehabilitation of coal
haulage roads
• Migrate Eskom coal
from road to rail
• Migrate Eskom coal
from road to rail
• Migrate Eskom coal
from road to rail
Progress reports on
Eskom’s role in MTRMP
(DSMEE, ECS implemen-
tation, REFIT, etc)
• Report on the imple-
mentation of Eskom’s
responsibilities with
respect to the MTRMP
• Report on the
implementation of
Eskom’s
responsibilities with
respect to the MTRMP
• Report on the
implementation of
Eskom’s
responsibilities with
respect to the MTRMP
• Report on the System
Adequacy
• Report on the System
Adequacy
• Report on the System
Adequacy
Programme 2
Energy and Broadband Enterprises
Measurable objectives
and medium term
output targets
14
Sub
Programme
Output Measure/indicator 2011/2012
Target Milestone
2012/13
Target Milestone
2013/14
Target Milestone
Ring-fenced
purchasing function
to procure the IPP
REFIT allocation as
per IRP1
Ring-fenced purchasing
function with approved
governance arrangements
• Ring-fencing directive
through Eskom
shareholder compact
MYPD3 application
and the migration to
tariff cost refectivity
Approval/support for the
Eskom application such
that Eskom is sustainable
and the economy is not
compromised
• Assessment and
decision on the Eskom
application for MYPD3
Re-negotiation of
Special Pricing
Agreements
(Aluminium South
Africa)
Support/approve minimiz-
ing of impact of ASA
agreements to Eskom/
economy
• Elimination of risks
associated with Special
Pricing Agreements
PBMR
Care and Main-
tenance Strategy
implemented
• Monitor and facilitate
the implementation of
the care and
maintenance strategy
• Quarterly progress
report
• Regular (monthly and
quarterly ) progress
reports
• Regular (monthly and
quarterly ) progress
reports
ICT
Broadband
Sector
Infraco monitoring
and Oversight
Strategic Intent Statement
and Shareholder Compact
with Infraco
• Analysis and Assess-
ment of the Annual
Report and Corporate
Plan.
• Analysis and Assess-
ment of the Annual
Report and Corporate
Plan.
• Analysis and Assess-
ment of the Annual
Report and Corporate
Plan.
• Negotiation and
approval of share-
holder compact
• Negotiation and
approval of share-
holder compact
• Negotiation and
approval of share-
holder compact
• Shareholder Strategic
Intent Communiqué
in preparation for the
AGM
• Shareholder Strategic
Intent Communiqué
in preparation for the
AGM
• Shareholder Strategic
Intent Communiqué
in preparation for the
AGM
• Assessment of SOE
Board.
• Assessment of SOE
Board.
• Assessment of SOE
Board.
Quarterly and Annual
Reports, Corporate Plan
• Assessment of
quarterly reports
• Assessment of
quarterly reports
• Assessment of
quarterly reports
• Preparation of quarterly
investor briefs
• Preparation of quarterly
investor briefs
• Preparation of quarterly
investor briefs
Achievement of MTEF
targets by Infraco
• Assessment of PFMA
Applications
• Assessment of PFMA
Applications
• Assessment of PFMA
Applications
• Explore and facilitate
access to debt and
alternative funding
structures
• Explore and facilitate
access to debt and
alternative funding
structures
• Explore and facilitate
access to debt and
alternative funding
structures
A drop in wholesale
prices to the levels
that are affordable
and sustainable
Wholesale price reduction Benchmarking and
Monitoring of Infraco’s
pricing in relation to the
local and international
market prices.
Benchmarking and
Monitoring of Infraco’s
pricing in relation to the
local and international
market price
Benchmarking and
Monitoring of Infraco’s
pricing in relation to the
local and international
market price
Programme 2
Energy and Broadband Enterprises (cont.)
Measurable objectives
and medium term
output targets
15
Sub
Programme
Output Measure/indicator 2011/2012
Target Milestone
2012/13
Target Milestone
2013/14
Target Milestone
Increased national
broadband
penetration
Percentage increase in
broadband penetration
per annum
Monitoring the rollout of
the national and interna-
tional network according
to the National Broadband
targets.
Monitoring the rollout of
the national and interna-
tional network according
to the National Broadband
targets.
Monitoring the rollout of
the national and interna-
tional network according
to the National Broadband
targets.
Business sustain-
ability for Infraco
Diversifcation of Revenue
Stream
Monitoring the contracts
on a quarterly basis
Monitoring the contracts
on a quarterly basis
Monitoring the contracts
on a quarterly basis
Sentech JV to enable
retail service provision
access
Formulate a collaboration/
synergy between Infraco
and Sentech in order to
assist Government to
achieve its ICT objectives.
Manage and monitor the
relationship on a quarterly
basis
Manage and monitor the
relationship on a quarterly
basis
Network reliability
and performance
Quarterly reports
indicating progress with
reliability and performance
improvement
Monitor implementation
plans that are in place
to improve reliability and
performance.
Monitor implementation
plans that are in place
to improve reliability and
performance.
Monitor implementation
plans that are in place
to improve reliability and
performance.
International
connectivity
Commissioning of the
West African Cable
System (WACS) Project
Support Infraco during
the roll-out phase (ends
in 2011).
Monitor the performance
and maintenance of
Infraco’s capacity on
quarterly basis.
Monitor the performance
and maintenance of
Infraco’s capacity on
quarterly basis.
Legal and
Governance
• To provide
effective and
sound legal advice
to ensure that
potential legal
risks are
highlighted and
accounted for.
• Monitoring and
oversight of
Eskom, PBMR
and Infraco
Ensuring effective
shareholder oversight
in Eskom, PBMR and
Infraco
Assisting in assessing
applications for approval
of signifcant and
materiality framework
Assisting in assessing
applications for approval
of signifcant and
materiality framework
Assisting in assessing
applications for approval
of signifcant and
materiality framework
Legal and
litigation
Monitoring the
Department’s legislative
compliance
Monitoring the
Department’s legislative
compliance
Monitoring the
Department’s legislative
compliance
Governance Oversight Providing assistance
on developing and
negotiating shareholder
compacts, corporate
plans, signifcance and
materiality framework,
Board appointments and
shareholder preparations
for AGMs
• Developing a
methodology on Board
appointments and
reappointment
• Continuously updating
database on Board
appointments
• Continuously updating
database on Board
appointments
• Continuously updating
database on Board
appointments
• Monitor and oversee
SOE remuneration
• Monitor and oversee
SOE remuneration
• Monitor and oversee
SOE remuneration
• High level audit of
PBMR winding up
Resource considerations
Spending in this programme over the medium term will
focus on making transfer payments to: the Pebble Bed
Modular Reactor Company for the decommissioning
and dismantling costs in 2010/11 and 2011/12, and
Broadband Infraco for the fnal capitalisation transfer in
2010/11.
Expenditure decreased from R2.5 billion in 2007/08 to
R174.5 million in 2010/11, at an average annual rate of
58.9 per cent. Over the medium term, expenditure is
expected to decrease to R21.7 million, at an average
annual rate of 50.1 per cent. The decrease in both
periods is due to a reduction of transfer payments to
state owned enterprises, particularly the Pebble Bed
Modular Reactor project, as it has been placed into care
and maintenance, and Broadband Infraco, as the entity
will not be receiving further funding from the fscus.
Programme 2
Energy and Broadband Enterprises (cont.)
Measurable objectives
and medium term
output targets
16
Legal & Governance
Purpose: Provide systems that align state owned
enterprises with legal and corporate governance
best practice and with Government’s strategic intent.
The programme comprises the following sub-
programmes
• Management - Offce of the Deputy Director-
General.
• Legal provides effective and sound legal advice
to the department to ensure that potential legal
risks to the department are highlighted and
accounted for. The subprogramme has a staff
complement of 4 and 55.3 per cent of the budget
is used on goods and services, including expert
legal advice and normal operational expenditure.
• Governance develops frameworks to promote
transparency and good corporate governance
within state owned enterprises. The
subprogramme has a staff complement of 2 and
69.6 per cent of the budget is used on goods
and services, including expert legal advice and
normal operational expenditure.
Strategic objectives
• Ensure effective shareholder oversight of all the
state owned enterprises by:
– addressing constraints on state owned enterprise
contract negotiation and management to improve
commercial competence and contribute to
economic growth and development.
– providing assistance on developing and
negotiating shareholder compacts, signifcance
and materiality frameworks annually, and as and
when necessary, borrowing power delegations.
– assisting in assessing applications for the
approval of signifcant and material transactions.
– assisting in board appointments and shareholder
preparations for annual general meetings.
– continuously updating the database on board
appointments on the department’s dashboard.
– annually reviewing the ownership policy,
governance toolkit and guidelines, as well
as appointments to, and remuneration and
performance of the boards of the state owned
enterprises.
• Ensure that state owned enterprises and the
department comply with legal requirements by:
– monitoring, quarterly, state owned enterprises’
corporate governance indicators through the
dashboard.
– monitoring and assessing legislative impacts
on state owned enterprises and alerting the
enterprises to changes and possible risks.
Part B : Strategic objectives (cont.)
Programme 3
17
Sub
Programme
Output Measure/indicator 2011/2012
Target Milestone
2012/13
Target Milestone
2013/14
Target Milestone
LEGAL Legal Advice The department’s
Legislative Compliance
Monitoring department’s
Legislative Compliance
Monitoring department’s
Legislative Compliance
Monitoring department’s
Legislative Compliance
Presidential Public
Liaison Unit.
Respond to queries from
the Presidential Public
Liaison Unit.
Respond to queries from
the Presidential Public
Liaison Unit.
Respond to queries from
the Presidential Public
Liaison Unit.
Respond to queries from
the Presidential Public
Liaison Unit.
Drafting of legal
documents
Drafting of SLAs and
Legal opinions;
Drafting SLAs and Legal
opinions timeously;
Drafting SLAs and Legal
opinions timeously;
Drafting SLAs and Legal
opinions timeously;
Winding down of
Aventura
Implementing and
monitoring of the winding
up process
Approval and transfer of
the remaining resorts
n/a n/a
Lodge relevant
documentation with the
Registrar of Companies
Closure of the matter
Winding down of
Diabo Trust
Trace and payout to
benefciaries
Monitor the winding up
process and distribution
to benefciaries
n/a n/a
Closure of the matter
Finalisation and
closure of the
litigation : Londoloza/
Paharpur
• Pre – trial proceedings Successful resolution of
Government’s case and
Court order in favor of the
Department
• Pre – trial proceedings
LEGAL Nabera: Finalisation
and closure of the
litigation
Conclude litigation Review alternative
measures to conclude the
litigation
Approval from Parliament Promulgation and
implementation of the Act
Governance Develop the
Government
Shareholder
Management Model
DPE Legislative Mandate Approval from the
shareholder
Cabinet approval
Development of the
Green/ White paper
• Consultation with State
Law Advisers
• Enactment and
President’s Minute
• Shareholder
Management
Practices
Effective shareholder
management through
legislative compliance and
corporate governance
tools
• Implementing
Companies Act
corporate governance
tools (e.g. standard
Memorandum of
incorporation) for all
SOE
• SOE Performance
monitoring and
evaluation framework
SOE Performance
monitoring and evalua-
tion framework
• Enhance relation-
ship between
Strategic state
Shareholdings,
capital markets
and the private
sector
• Provide support to
the Inter Ministerial
Oversight Committee
• Advise on specifc
company law and
corporate governance
questions
• Develop SOE
legislative and
regulatory frameworks
to provide for the
legislative environment
within which the SOE
operate.
Programme 3
Legal & Governance
18
Sub
Programme
Output Measure/indicator 2011/2012
Target Milestone
2012/13
Target Milestone
2013/14
Target Milestone
Governance Toolbox
and Audit
Monitor SOE adherence
to corporate governance
principles
• Develop an Owner’s
expectation manual
• Implement manual
• Monitor SOE
adherence to corporate
governance principles
Monitor SOE adherence
to corporate governance
principles
• Finalise manual with
SOEs and obtain
Minister’s and Cabinet
SOE Board and
Executive remunera-
tion
Monitor compliance to
SOE Remuneration
guidelines
• Roll out to the SOE
Monitor compliance to
SOE Remuneration
guidelines
Monitor compliance to
SOE Remuneration
guidelines
• Implementation by
SOE
• Monitor compliance to
SOE Remuneration
guidelines
SOE Subsidiary Lists Monitor acquisition and
disposal of subsidiaries
by SOE through the
dashboard
Monitor acquisition and
disposal of subsidiaries
by SOE through the
dashboard
Monitor acquisition and
disposal of subsidiaries
by SOE through the
dashboard
Monitor acquisition and
disposal of subsidiaries
by SOE through the
dashboard
Developing a Board
Database
Database for potential
SOE Board members
• Recruit and select
potential candidates for
the SOE Boards
Maintain and update
Board database
Maintain and update
Board database
• Develop a Board
database
Develop a Board
appointment
Framework
Uniform application by
SOE sector teams to
enhance effciency in
board appointment
process.
• Approval by DPE
Leadership
• Implementation by
Boards
• Monitoring and
evaluation
Monitoring and evaluation
• Roll out to SOE
sector teams.
• Stakeholder
Engagements
Promote effective
stakeholder relations
Formalise and implement
Forum
Structured engagement
with key stakeholders
Structured engagement
with key stakeholders
• Presidential
Review Commit-
tee on SOE
• Governance
Forum
• Structured
engagement with
Labour
Resource considerations
Expenditure decreased from R93.7 million in 2007/08
to R50.0 million in 2010/11, at an average annual rate
of 18.9 per cent. Over the medium term, expenditure is
expected to decrease to R14.3 million, at an average
annual rate of 34.1 per cent. The decrease in both
periods is driven by the reduction in transfers to Alexkor
due to the fnalisation of the Richtersveld community’s
land claim, which formed part of the court case
settlement, and the fnal establishment of the township.
Programme 3
Legal & Governance (cont.)
19
Programme 4
Manufacturing Enterprises
Manufacturing Enterprises
Purpose: Align the corporate strategies and
performance of Denel and the South African Forestry
Company Limited with Government’s strategic intent
and performance targets. Develop proposals in terms
of the state owned enterprises’ role in developing an
advanced manufacturing cluster.
The programme comprises the following
sub-programmes
• Management – Offce of the Deputy Director-
General.
• Defence Sector oversees Denel’s fnancial and
strategy implementation.
• Forestry Sector monitors the activities of the South
African Forestry Company.
• Legal and Risk (Manufacturing) deals with all legal,
governance and risk work specifcally related to
above mentioned state owned enterprises.
Strategic objectives
• Ensure alignment in shareholder strategic intent
in relation to state owned enterprises’ role in
achieving objectives in the defence manufacturing
and the forestry sectors by reviewing enterprise
strategies and mandates in the context of political
and sectoral policy shifts.
• Ensure that the corporate strategies and plans
of state owned enterprises are aligned with
government’s strategic intent by reviewing and
evaluating these strategies and plans annually,
and alerting the boards and enterprises to material
deviations.
• Facilitate the fnancial and operational sustainability
of Denel by reviewing the Denel Board to bring it to a
full complement of members with the requisite skills,
experience and expertise, as well as developing
a turnaround plan that clearly indicates how the
company will achieve commercial sustainability
and reduce its dependence on the fscus.
• Monitor Denel’s turnaround by:
– measuring ongoing performance against the
turnaround plan
– setting working capital management targets and
conducting monthly performance reviews.
– providing support to ensure the effective
restructuring of Denel Saab Aerostructures and
Denel Dynamics to return to commercial viability.
– ensuring optimal alignment between Denel’s
restructuring plan and the strategic requirements of
the Department of Defence and Military Veterans,
particularly the alignment with the Department of
Defence and Military Veterans’ military strategy,
once the Department of Defence has fnalised their
revision of the defence strategy.
• Facilitate the process of defning Denel’s future
role in the economy by regular interaction and
discussions with various stakeholders.
• Facilitate fnancial sustainability to ensure
commercial viability by assessing and monitoring
the implementation of the South African Forestry
Company turnaround plan, measured by improved
fnancial performance on an ongoing basis.
• Provide clarity on the future role of the South African
Forestry Company by:
– developing an internal position paper for broader
consultation between the South African Forestry
Company Limited and the Departments of
Agriculture, Forestry and Fisheries and Rural
Development and Land Reform
– ensuring that the mandate of the South African
Forestry Company is aligned with Government’s
strategic objectives both domestically and
internationally by assessing the company’s
quarterly reports.
• Facilitate the disposal of minority shares
by engaging with the Department of Rural
Development and Land Reform on its position
on the optimal institutional vehicle to ensure the
transfer of shares and developmental benefts to
community benefciaries.
• Monitor progress on resolving land claims over the
61 per cent of land owned by the South African
Forestry Company.
20
Sub
Programme
Output Measure/indicator 2011/2012
Target Milestone
2012/13
Target Milestone
2013/14
Target Milestone
DENEL Denel Board Review Appointment of Nine (9)
new Board members
(incl. Chairman) to bring
the Board to its full
complement
• Nine new Board
members appointed
Enabling Denel’s
Strategic Role in
provision of Defence
Capabilities
Alignment between Denel
strategy and SANDF
requirements (Retention
of strategic and sovereign
capabilities in areas
agreed to with DoD)
• Optimal alignment
between Denel’s
business model and
the strategic
requirements of the
Department of Defence
and Military Veterans’
defence strategy
• Ongoing monitoring
of alignment
• Ongoing monitoring of
alignment
Denel Turnaround
Plan
New business/growth
strategy for Denel
• Development of
turnaround plan that
pursues fnancial
recovery and stability
through improvements
in its operational and
fnancial performance
to secure its long term
viability and reduces
dependence on the
fscus
• Quarterly monitoring
of Implementation of
turnaround plan
• Quarterly monitoring
of Implementation of
turnaround plan
Resolution of
Government’s
position on the
future of Denel Saab
Aerostructures
Managed exit from DSA
Airbus A400M contract
Renegotiation and exit
of DSA Airbus A400M
contract
Review of Denel’s
company and group
structure
New group structure
with optimal governance
structure that creates
value, achieves greater
business effciency,
stronger functionality
whilst minimizing cost and
duplication
Denel’s future role in
the economy defned by
regular interaction and
discussions with various
stakeholders
Developmental
Contribution
• Training and skills
development and
succession planning
• Improved performance
in terms of BBBEE
targets
• Agreement with Denel
on increased usage
of Denel’s training
facilities
• Quarterly Report on
skills development
strategy and
succession planning
• Agreement with Denel
on BBBEE targets
included in the 2011/12
shareholder compact
for attainment of Level
4 BEE contribution by
March 2012
• Quarterly Report on
skills development
strategy and
succession planning
• Quarterly Report on
skills development
strategy and
succession planning
Programme 4
Manufacturing Enterprises
21
Sub
Programme
Output Measure/indicator 2011/2012
Target Milestone
2012/13
Target Milestone
2013/14
Target Milestone
SAFCOL Provide shareholder
oversight
Strategic Intent
Statement, Shareholder
Compact, Corporate Plan
and Annual Report
• Assess the Corporate
Plan.
• Assess the Corporate
Plan.
• Assess the Corporate
Plan.
• Negotiate Shareholder
Compact and its
approval
• Negotiate Shareholder
Compact and its
approval
• Negotiate Shareholder
Compact and its
approval
• Update Strategic Intent
Statement and Com-
muniqué in preparation
for the AGM
• Update Strategic Intent
Statement and Com-
muniqué in preparation
for the AGM
• Update Strategic Intent
Statement and Com-
muniqué in preparation
for the AGM
• Board assessment. • Board assessment. • Board assessment.
• Assess Turnaround
Plan
• Monitor Turnaround
Plan.
• Monitor Turnaround
Plan.
• Assess Section 54(2)
PFMA applications as
required
• Assess Section 54(2)
PFMA applications as
required
• Assess Section 54(2)
PFMA applications as
required
Quarterly
• Assess quarterly
reports and provide
investor briefs
• Assess quarterly
reports and provide
investor briefs
• Assess quarterly
reports and provide
investor briefs
Position paper on
SAFCOL’s future role
• Inter-governmental
consultation and
consensus on
SAFCOL’s future role.
• Implementation • Implementation
• Cabinet memorandum.
Facilitate share transfer
to minority shareholders
pending inter-departmen-
tal resolution on optimal
model
• Implementation • Implementation • Implementation
Facilitate land claims
process
• Ensure SAFCOL’s
participation in land
claims process
• Ensure SAFCOL’s
participation in land
claims process
• Ensure SAFCOL’s
participation in land
claims process
Resource considerations
The spending focus of the programme will be primarily
on administrative costs as no transfers will be made to
state owned enterprises over the MTEF period.
Expenditure decreased from R1.2 billion in 2007/08 to
R192.8 million in 2010/11, at an average annual rate
of 45 per cent. This is primarily due to the decrease
in transfers to Denel. Denel received R1.2 billion in
2007/08, including R221 million to pay a claim for an
indemnity granted to Denel and R933 million as a fnal
capital investment.
Additional transfers of R257.6 million in 2008/09, R191.9
million in 2009/10 and R181.3 million in 2010/11 were
made as further payments for indemnity claims.
Expenditure is expected to decrease from R192.8 million
in 2010/11 to R14.3 million in 2013/14, at an average
annual rate of 58 per cent. The decrease is due to
the cessation of transfer payments to the state owned
enterprises
Programme 4
Manufacturing Enterprises (cont.)
22
Transport Enterprises
Purpose: Align the corporate strategies and
performance of Transnet, South African Airways and
South African Express Airways with Government’s
strategic intent and performance targets.
The programme comprises of the following
sub-programmes
• Management – The Offce of the Deputy Director-
General. Transport Sector provides shareholder
oversight of Transnet. Aviation Sector provides
shareholder oversight of South African Airways
and South African Express Airways.
• Legal and Risk (Transport) deals with all legal,
governance and risk work specifcally related
to Transnet, South African Airways and South
African Express.
Strategic objectives
• Promote the alignment of corporate strategies
of state owned enterprises with Government’s
objectives in relation to the transport and aviation
sectors by undertaking a comprehensive review
of corporate strategies, business plans, and
annual and quarterly performance.
• Provide the Boards of Transnet, South African
Airways and South African Express Airways with
strategic intent statements at their annual general
meetings to highlight shareholder priority areas
and guide the policy direction of the enterprises.
• Implement a long term strategy for improving the
effciency and performance of investments by
state owned enterprises by annually monitoring
the key performance indicators and concluding
shareholder compacts with the Boards of
Transnet, South African Airways and South
African Airways Express.
• Create an enabling environment for transport
enterprises and ensure an appropriate balance
between the enterprise interest and the consumer
interest by:
• engaging with the policy Departments and
relevant regulators on a regular basis as and
when required
• ensuring the compliance of transport
enterprises with the Public Finance
Management Act (1999) and other legislative
prescripts.
• Ensure the contribution of Transnet to
achieving an effcient, competitive and
responsive infrastructure (output 3 of
outcome 6) by:
• increasing the market share of total freight
to rail to an annualised 250 mt from the
current 177 mt by 2014 by undertaking a
detailed diagnosis of challenges facing
Transnet Freight Rail and developing
an integrated government response to
growing rail market share
• facilitating the introduction of private
sector investment in rail through public
private partnerships to assist with the
provision of requisite infrastructure where
such investments are unaffordable on the
Transnet balance sheet
• overseeing the introduction of multiple
private operators on the branch line
network to revitalise the network as a
feeder to the core network and to realise
socioeconomic benefts
• facilitating the introduction of competition
for the management of container terminals
through the establishment of the Ngqura
container terminal as a transhipment
terminal
• pursuing incremental improvements in
ports productivity and rail operational
effciencies by creating performance
incentives via the Transnet shareholder
compact.
• Ensure the global competitiveness of the South
African freight logistics industry by implementing
national corridor performance measurement tools
and indicators over the MTEF period to quantify
the operational effciency of freight corridors.
• Improve investment in rail infrastructure by
monitoring the rollout of Transnet’s capital
expenditure programme by annually assessing
its impact for any signifcant deviations from
corporate plans, including tracking cost overruns
and time delays on major capital projects and
taking the necessary action.
• Monitor the implementation of the Competitive
Supplier Development Programme to leverage
Transnet’s capital expenditure for the
development of local supplier industries by
evaluating the quarterly Transnet reports.
• Provide support to South African Airways to
achieve sustainable levels of proftability by:
– overseeing the implementation of the initiatives
relating to the R1.6 billion guarantee to South
African Airways
– encouraging consistent generation of bottom
line profts in order to strengthen South African
Airways’ balance sheet.
• Monitor the alignment, strategy and mandate of
South African Airways and South African Express
Airways with the African aviation strategy by
evaluating quarterly, corporate plans and
performance against targets.
Part B : Strategic objectives
Programme 5
23
Sub
Programme
Output Measure/indicator 2011/2012
Target Milestone
2012/13
Target Milestone
2013/14
Target Milestone
Transnet Shareholder
Oversight
Annual reports, Corporate
Plan, Shareholder
Compact
• Assessment of the
Annual Report and
Corporate Plan
• Assessment of the
Annual Report and
Corporate Plan
• Assessment of the
Annual Report and
Corporate Plan
• Negotiation and
approval of Share-
holder Compact
• Negotiation and
approval of Share-
holder Compact
• Negotiation and
approval of Share-
holder Compact
• Preparation of the
Quarterly Investor Brief
• Preparation of the
Quarterly Investor Brief
• Preparation of the
Quarterly Investor Brief
• Appropriately skilled
and representative
Boards
• Appropriately skilled
and representative
Boards
Achievement of MTEF
targets
• Quarterly and annual
monitoring
• Quarterly and annual
monitoring
• Quarterly and annual
monitoring
• Assessment of PFMA
Applications
• Assessment of PFMA
Applications
• Assessment of PFMA
Applications
Annual General Meetings
– Advice to Minister on
exercise of shareholder
right
• AGM agenda and
shareholder response
• Appropriately skilled
and representative
board
• AGM agenda and
shareholder response
• Appropriately skilled
and representative
board
• AGM agenda and
shareholder response
• Appropriately skilled
and representative
board
SOE fve year perfor-
mance review
• Analysis of 5 year
performance
• Input to DPE SOE fve
year review publication
• Analysis of 5 year
performance
• Input to DPE SOE fve
year review publication
• Analysis of 5 year
performance
• Input to DPE SOE fve
year review publication
Develop and
implement a rail
freight improvement
programme to
increase market
share
Increased rail market
share to total freight
• Diagnostic workshop
with Transnet and
report on key initiatives
to address modal shift
• Facilitate increase
and improvements to
Transnet rolling stock
feet
• Lead the development
of an integrated
government response
to growing market
share (by identifying
relevant legislation
to be amended and
approved by Cabinet to
support modal shift to
rail)
• Monitor and ensure
incremental targets
for rail market share in
shareholder compact
• Facilitate implementa-
tion of identifed
measures to achieve
increase in Transnet
rail market share
(arising from the
diagnostic workshop
report and legislative
amendments)
• Monitor and ensure
incremental targets
for rail market share in
shareholder compact
Monitor rail market share
in shareholder compact
Create scope for
multi-operator
involvement in
under-utilized branch
lines
Multiple private operators
on the branch lines
network
• Concession and
rollout of frst wave of
concessions
• Facilitate at least 3
branch lines conces-
sions
Rollout of second and
third wave concessions
Continued rollout and
introduction of new
operators
Programme 5
Transport Enterprises
24
Sub
Programme
Output Measure/indicator 2011/2012
Target Milestone
2012/13
Target Milestone
2013/14
Target Milestone
Introduction of private
sector investment
in rail
Public Private Partner-
ships (PPPs) in rail
infrastructure
• Facilitate approval of
the Transnet private
sector participation
framework by Cabinet
• Oversee market
testing of private sector
appetite to invest
• Monitor frameworks/
agreements negotiated
and entered into with
private sector
• Facilitate four PPPs in
rail by Transnet
Achievement of ten PPPs
in rail
Oversee private
sector participation
in Ngqura container
terminal
Licensed operator for
Ngqura container terminal
• Framework for private
sector involvement
in Ngqura container
terminal developed
and approved
• Oversee appointment
of transaction advisor
by Transnet
• Request for proposal
(RFP) for advertised by
Transnet
• Agreement signed with
new operator
• Ngqura container
operator licensed by
Ports Regulator
• Operator in place
• Monitor performance of
Ngqura as a transship-
ment terminal
Develop National
Corridor Performance
Measurement
(NCPM) tools and
indicators
• IT system in place
• Agreed indicators
• Population and
monitoring of system
data
• Business intelligence
outputs
• Gauteng – Durban
(Natcor)
• Gauteng – Cape Town
(Capecor)
• Gauteng – Port
Elizabeth
• Gauteng – Maputo
• IT system operational
• Full NCPM system in
place
• Feedback of NCPM
inputs to policy in DoT,
DTI and Transnet
shareholder compact
Monitoring of corridor
performance via NCPM
system
Monitor roll out of
Transnet’s capex
programme
• Monitor compliance to
budget
• Assess impact of
changes in plan
• Quarterly and Annual
assessment
• Monitor delivery of the
Transnet NMPP main
trunk line
• Quarterly and Annual
assessment
• Monitor delivery of
coastal terminal and
completion of Transnet
NMPP
Quarterly and Annual
assessment
Complete a long
term National Freight
Network Plan (Rail
and ports)
• National Freight
Network Design
• Inputs to Transnet NIP
• Initiate study on
National Freight
Network Design (rail
and ports)
• Input to DOT’s
NATMAP process
• Completed study,
including funding op-
tions for infrastructure
development.
Implementation of
Competitive
Supplier Develop-
ment Programme
Leverage of Transnet
capex in the development
of local supplier industries
• Oversee development
of Transnet supplier
development plan
• Monitor delivery of
new jobs in supplier
industries
• Monitor implementation
• Monitor delivery of
new jobs in supplier
industries
• Monitor implementation
• Monitor delivery of
new jobs in supplier
industries
Consideration of
Transnet corporate
structure options
Defned role for in a
developmental economy
Develop corporate
structure options for
Transnet
Aviation Oversight SAA and
SAX
• Annual reports,
Corporate Plan,
Shareholder Compact
• Assessment of the
Annual Report and
Corporate Plan
• Negotiation and
approval of Share-
holder Compact
• Assessment of the
Annual Report and
Corporate Plan
• Negotiation and
approval of Share-
holder Compact
• Assessment of the
Annual Report and
Corporate Plan
• Negotiation and
approval of Share-
holder Compact
Programme 5
Transport Enterprises (cont.)
25
Sub
Programme
Output Measure/indicator 2011/2012
Target Milestone
2012/13
Target Milestone
2013/14
Target Milestone
• Preparation of the
Quarterly Investor Brief
• Preparation of the
Quarterly Investor Brief
• Preparation of the
Quarterly Investor Brief
• Shareholder Strategic
Intent Communique
in preparation for the
SAA and SAX AGM
• Shareholder Strategic
Intent Communique
in preparation for the
SAA and SAX AGM
• Shareholder Strategic
Intent Communique in
preparation for the SAA
and SAX AGM
• Assessment of SOE
Board
• Assessment of SOE
Board
• Assessment of SOE
Board
• Achievement of MTEF
targets
• Quarterly and annual
monitoring
• Quarterly and annual
monitoring
• Quarterly and annual
monitoring
• Assessment of PFMA
Applications
• Assessment of PFMA
Applications
• Assessment of PFMA
Applications
• Annual General
Meetings – Advice to
Minister on exercise of
shareholder rights
• AGM agenda and
shareholder response
• AGM agenda and
shareholder response
• AGM agenda and
shareholder response
• SOE fve year
performance review
• Analysis of 5 year
performance
• Analysis of 5 year
performance
• Analysis of 5 year
performance
• Input to DPE SOE 5
year review publication
• Input to DPE SOE 5
year review publication
• Input to DPE SOE 5
year review publication
Develop a strategic
scenario planning
model for SAA
• Assessment of
strategic options
• Financial model devel-
oped and scenarios
assessed
• Scenario planning and
forecasting
• Scenario planning and
forecasting
• Scenario planning and
forecasting
Ring-fencing of se-
lected SAA business
units and strategic
equity investments
(Voyager, Air Chefs,
Galileo and Cargo)
• Development of an
independent business
focus and new
strategic alignment
• Review and implement
business plans
• Implement business
plans
• Monitoring of
implementation of
business plan
Assess options for
establishing South
African Airways
Technical as a
multi-airline focused
African maintenance
hub
• Feasibility study • Proposal to Cabinet
and draft enabling Act
• Implement decisions • Monitoring of
implementation of
business plan
Resource considerations
The spending focus of the programme will be primarily
on administrative costs as no transfers will be made to
state owned enterprises over the MTEF period.
Expenditure decreased from R752.1 million in 2007/08
to R21.3 million in 2010/11, at an average annual rate of
69.5 per cent. The decrease was due to the cessation of
transfers to state owned enterprises. Over the medium
term, expenditure is expected to increase to R25.5
million, at an average annual rate of 6.2 per cent, mainly
to provide adequate support to the entities managed in
this programme.
Programme 5
Transport Enterprises (cont.)
26
27
Part B : Strategic objectives
Programme 6
Joint Project Facility
Purpose: Align the department and its portfolio of state
owned enterprises to national economic strategies,
such as the New Growth Path and associated
objectives, through focused policy research and the
development of catalytic projects.
The programme comprises the following sub-
programmes
• Management- The Offce of the Deputy Director-
General.
• Joint Project Facility provides programme
management support for a number of catalytic
projects that align the department and its portfolio
of state owned enterprises to national economic
strategies. 79.1 per cent of the subprogramme’s
budget over the MTEF period will be used for
goods and services.
Strategic objectives
The Joint Project Facility’s (JPF) new mandate aims
to align the DPE and its portfolio of SOE to national
economic strategies and associated objectives
through focused policy research and the development
of catalytic projects.
Achievements of Joint Project Facility projects
• The procurement leverage/competitive supplier
development programme leverages off state owned
enterprises’ capital and operational procurements
associated with Eskom and Transnet’s build
programmes to promote investments in plant,
technologies and skills in state owned enterprises’
suppliers. This supports the Industrial Policy
Action Plan 2 and the New Growth Path. It includes
both Transactional and Programmatic (feet
procurement) The South African Renewables
Initiative aims to reduce the cost of capital for
renewables and provide additional funding for
the renewable energy feed-in tariff. In future,
the procurement leverage programme aims to
establish a Centre of Excellence. The Infrastructure
Supplier Benchmarking Programme, which builds
the competitiveness of the local supplier base and
is focused on supplier profling, benchmarking,
capacity building and matchmaking, will be
relocated to the Department of Trade and Industry.
• Policy programmes aim at establishing the role
of state owned enterprises and the shareholder
executive in the Developmental State. They will
also focus on the role of state owned enterprises
in Government’s New Growth Path and develop a
departmental position on macroeconomic policy.
• The innovative infrastructure investment dialogue
programme aims at interrogating existing
investment plans’ assumptions around unlocking
growth and developing policies and funding
strategies to increase the rate of investment in
Eskom and Transnet. Better dialogue with key
stakeholders is being contemplated to improve the
performance of state owned enterprises.
• The framework for Africa programme aims at defning
focus areas with acceptable risk parameters and
clear developmental impacts for the involvement of
South Africa’s state owned enterprises in Africa and
will also develop implementation policy for state
owned enterprises.
• The human resource, capacity building
and transformation programme has several
subprogrammes:
– The skills development programme leverages
the skills development capacity of state owned
enterprises and their core suppliers to ensure
the optimum provision of scarce and critical skills
(artisans, technicians and engineers) in support
of the build programme. This includes: overseeing
skills planning and implementation in state
owned enterprises and their suppliers; facilitating
partnerships between state owned enterprises,
further education and training institutions and
industry, in support of artisan development;
ensuring that state owned enterprises support
the national skills agenda; and monitoring scarce
and critical skills in state owned enterprises and
ensuring skills performance indicators are included
in Shareholder Compacts.
– The management learning programme develops
a cadre of management leadership capability in
state owned enterprises, agencies and regulators
in South Africa and Africa. The University of Cape
Town’s Graduate School of Business launched this
programme in May 2010.
– The parliamentary learning programme (Autumn
School) is an annual event to provide the
Parliamentary Portfolio Committee on Public
Enterprises and National Council of Provinces
Select Committees on Labour and public
enterprises with an opportunity to engage in
dialogue with industry experts around key
issues facing government and the state owned
enterprises.
• The environmental issues project balances
environmental conservation with the need to develop
infrastructure rapidly. The environmental impact
assessment process for strategically important
developments has been streamlined for the state
owned enterprises’ build programmes and a fund
has been established to assist the process. The
environmental impact assessments for strategically
important developments are monitored, and
where necessary ministerial intervention can be
sought. The project also participates in broader
engagements around air quality, water provision
and climate change.
• The property project leverages off the non-core
property portfolios of state owned enterprises to
contribute to state priorities, such as land release for
human settlement, property sector transformation,
urban renewal and socioeconomic development.
28
Sub
Programme
Output Measure/indicator 2011/2012 Target
Milestone
2012/13
Target Milestone
2013/14
Target Milestone
HR, Capacity
Building and
Transfor-
mation
Programme:
SOE and
Supplier Skills
Development
Provision of scarce
and critical skills in
SOE
• Establish partnerships
between SOE, FET
and industry in support
of artisan development
Implementation and
Monitoring
Implementation and
Monitoring
Implementation and
Monitoring
• Monitor skills
dashboard.
• Skills development
KPIs to be included in
Compacts
SOE
Transforma-
tion Oversight
Implementation of
SOE transformation
agenda
Monitor B-BBEE,
employment equity and
management transforma-
tion (including succession
planning).
Dashboard to include
transformation indicators
Implementation and
Monitoring
Implementation and
Monitoring
Specialised
Skills
Development
Programmes
Management
Learning Programme
at UCT GSB to
facilitate improved
SOE performance
and management
MLP review Annual Review of
Programme
Annual Review of
Programme
Annual Review of
Programme
Parliamentary
Learning Programme
(PLP)
Hosting of annual PLP for
Portfolio Committee on
Public Enterprises
and National Council
of Provinces Select
Committee for Labour and
Public Enterprises
Annual PLP Annual PLP Annual PLP
Procurement
Leverage
Programme
Leverage SOE capi-
tal and operational
procurements to
promote investments
in plant, technologies
and skills in SOE
supplier communities
• Ensure SOE demand
planning and procure-
ment implementation
process to enable
supplier development
Implementation and
monitoring
Implementation and
monitoring
Implementation and
monitoring
• Institutionalise govern-
ance and accountability
Establish governance and
accounting mechanism
Monitoring Monitoring
Transactional based
leverage to ensure
procurements have
optimal development
impact
• Ensure SOE design
and implement next
generation supplier
development plans.
Oversight of implementa-
tion and monitoring
Oversight of implementa-
tion and monitoring
Oversight of implementa-
tion and monitoring
• Integration of supplier
development with SOE
procurement policy.
DPE procurement policy
for supplier development
Monitoring Monitoring
Programmatic/feet
based leverage
• Design and facilitate
the implementation of
long term
procurements.
Monitor industrial
capabilities
Monitoring Monitoring
• Locomotive feet
procurement for
Transnet.
Establish formal oversight
committee and task team
Monitoring Monitoring
• Facilitate renewable
procurements for
the South African
Renewables Initiative
(SARi).
Leverage international
climate fnancing com-
mitments and align with
DOE.
Implementation Monitoring
Programme 6
Joint Project Facility
29
Sub
Programme
Output Measure/indicator 2011/2012 Target
Milestone
2012/13
Target Milestone
2013/14
Target Milestone
• Nuclear feet
procurement based on
IRP2 allocations.
Align roles and
responsibilities with DOE.
Implementation Realignment with IRP3
and implementation
Establish SOE
Centre of Excellence
for Complex Capital
Projects
Institutional design Implementation Implementation Implementation
Develop Buyer
requirement database.
Implementation Implementation Implementation
SOE procurement
capability certifcation
project
Implementation Implementation Implementation
Complex procurement
skills development.
Implementation Implementation and
monitoring
Implementation and
monitoring
Policy
Programmes
Role of SOE and
Shareholder in the
developmental State
Further development of
shareholder management
model.
Implementation Monitoring Monitoring
Role of SOE in the
New Growth Path.
Analysis of New
Growth Path and SOE
contribution
Implementation and
monitoring
Implementation and
monitoring
Implementation and
monitoring
Develop a DPE
position on Macro-
Economic Policy.
Analysis of macro-
economic policy and its
impact on SOE viability.
Research alternative
policies.
Implementation Implementation
Strategic
Programmes
Innovative Infra-
structure Investment
Dialogue
Develop funding
strategies.
Develop relevant policies. Implementation Implementation
Framework for Africa. Develop policy and focus
areas in Africa for SOE
involvement.
Develop implementation
policy.
Implementation Implementation
Property
Project
SOE non-core
property portfolios
contribute to state
priorities, property
sector transforma-
tion, urban renewal
and socio-economic
development.
Property disposals and
facilitation of Key
Integrated Developments.
Facilitation and monitoring Facilitation and monitoring Facilitation and monitoring
Environmental
Issues
Government policy
balances environ-
mental conservation
with the need
to develop SOE
infrastructure rapidly
Monitor Environmental
Impact Assessments for
Strategically Important
Developments
Analysis and Monitoring Analysis and Monitoring Analysis and Monitoring
Implement DPE-DEA-
Eskom MOU.
Implementation Implementation Implementation
Resource considerations
As a result of the realignment of the department’s
functions, the Joint Project Facility subprogramme
was moved to this programme from the Manufacturing
Enterprises programme in 2007/08. Historical
expenditure has been adjusted accordingly.
Expenditure decreased from R15.5 million in 2007/08 to
R10.2 million in 2010/11, at an average annual rate of
13.1 per cent. This was due to the completion of some
of the research projects. In 2010/11, the programme’s
projects increased from four to fve as a result of the South
African Renewables Initiative project being launched.
Over the MTEF period, expenditure is expected to
increase from R10.2 million to R15.9 million, at an
average annual rate of 15.9 per cent. This is mainly due
to the expansion over the MTEF period of some of the
projects and programmes, and two new projects to be
launched from 2011/12.
Programme 6
Joint Project Facility (cont.)
30
Alexkor
Since November 1992, Alexkor has been run as a
public company with the State as sole shareholder.
Alexkor mines diamonds in the Alexander Bay area,
including marine mining and land mining.
In 2003, the Constitutional Court ruled that the
Richtersveld community had a legitimate claim
to its ancestral land from which it was forcibly
removed after diamonds were discovered there in
the early 1920s. The court found that the community
had been evicted under discriminatory apartheid
laws and was entitled to have both the land and
mineral rights returned. Alexkor has been subject to
a number of business constraints, including the land
claim. These constraints have resulted in decreasing
diamond recoveries over the years. The deed of
settlement for the land claim was signed in April
2007, and the Department of Public Enterprises has
mandated Alexkor to explore options to reposition
the company as a state owned mining and minerals
company. This new strategy will enable Alexkor to
respond to new mining and mineral opportunities
and ensure the company’s long term viability,
enabling it to effectively address its environmental
rehabilitation and other liabilities while contributing
to the socioeconomic development of the region.
While continuing with mining activities in the current
constrained economic context, Alexkor is focused on
implementing the Richtersveld land restitution order
imposed on it by the land claims court. The court
order obliges it to transfer land and mineral rights
to the Richtersveld community, establish Alexander
Bay as a formal township, undertake environmental
rehabilitation, and establish a pool and share joint
venture with the Richtersveld Mining Company for
future mining activities.
Signifcant progress has been made in the
implementation of the settlement signed with the
Richtersveld community. All Alexkor, State and
Northern Cape provincial land has been transferred,
except for the township erven. The subdivision and
zoning of the township has been conducted and
the general plan has been approved. Transfer of
the township will be made soon. The upgrade of the
township civil and electrical engineering services
to municipal standards has begun and is expected
to be completed in July 2011. Alexkor’s agricultural
and maricultural assets have been transferred to the
community. Transfer of the land mining rights to the
community is also imminent, and this paves the way
for the development of a more viable mining venture
and a redirection of Alexkor’s strategy.
This will entail, among other things, seeking
opportunities to procure new mining ventures to
secure new revenue streams and ensure its future
growth. It will also involve exploring opportunities for
downstream benefciation to contribute to the creation
of new jobs, the development of the requisite skills,
investment in research and development, economic
growth, sustainable development and cost effective
support for the broader policies of government.
The company showed some improvements in
its fnancial performance in 2009/10, driven by
improvements in carat production and the carat price,
coupled with reductions in expenses and provisions
for the post-retirement medical aid. Alexkor achieved
revenue of R163.9 million in 2009/10, a 28.5 per cent
increase from the R127.5 million achieved in the
previous year. It recorded a net operating proft of
R27 million (2008/09: R77.6 million loss) and R36.1
million proft for the year (2008/09: R65.7 million
loss). Comprehensive income for the year was R48.8
million, after taking into account the revaluation
reserve of R12.7 million. As a result of the proft of
R36.1 million coupled with the revaluation of R12.7
million, Alexkor’s capital and reserves improved,
albeit remaining in a net negative R67.3 million
equity position (2008/09: negative R103.4 million
equity position).
State Owned Enterprises
31
Broadband Infraco
South Africa lags behind its international
counterparts in terms of ICT penetration and the rate
at which new technology is adopted. Broadband
services in South Africa are more expensive and
the penetration is much lower than international
benchmarks. Broadband Infraco was established in
2007 in terms of the Broadband Infraco Act (2007)
as a State led intervention to introduce competition in
the telecommunications market and to contribute to
increasing access to broadband services including
underserviced areas. It has invested in a national long
distance fbre optic network based on the fbre optic
assets deployed by Eskom on power transmission
lines and Transtel on railway lines, which will form
the backbone of the second national operator. By
March 2010, Broadband Infraco had deployed and
commissioned 12 250 km of the network. Broadband
Infraco launched its services to the market in October
2010 after obtaining an electronic communications
networks services licence in October 2009.
In addition to national connectivity, international
connectivity is also a major cost component. Since
its inception, Broadband Infraco’s strategy has
focused on reducing the cost of this key element.
The construction and maintenance agreement was
signed in April 2009. Once completed and fully
commissioned, the system will reduce broadband
costs and increase bandwidth capacity for all South
Africans.
The West Coast Submarine Cable System is
expected to be ready for service by the last quarter
of 2011/12. All targets set in the previous MTEF
cycle such as the marine environmental survey, the
manufacturing of the marine cable, the deployment
of the optical line terminal equipment have been
completed. It is anticipated that the marine cable
installation will be completed in March 2011.
Since 2006/07, Broadband Infraco was capitalised
with R1.3 billion for establishment and operational
costs, which comprised: R627 million in 2006/07,
R377 million in 2008/09, R208.5 million in 2009/10,
and a fnal transfer of R138.6 million in 2010/11.
State Owned Enterprises (cont.)
32
State Owned Enterprises (cont.)
Denel
Denel was incorporated as a private company in
April 1992, when it separated from the Armaments
Corporation of South Africa. At the time, the industrial
and manufacturing activities of the corporation were
integrated into Denel. Denel’s mandate is to supply
South Africa’s armed forces with strategic and
sovereign capabilities. Denel also plays a major role
in contributing to the development of South Africa’s
advanced manufacturing capability. The Denel
group of companies currently delivers products
ranging from ammunition to missiles, and also
carries out systems design and integration for land
and air capabilities for the Department of Defence
and Military Veterans.
In 2005, a turnaround strategy for Denel was
initiated, which provided for a shift from major
systems development towards the manufacture of
sub-systems and components for local and global
markets. The strategy was driven by the need for
Denel to be commercially viable and reduce its
dependence on the fscus. A key part of the strategy
was for Denel to enter into equity partnerships that
could provide it with access to international markets,
technical expertise and capital. Equity partnerships
have thus far been secured in four of Denel’s
businesses: engine manufacturing, munitions,
optronics and aero structures.
Although Denel has made some progress since
2005, its solvency position continues to pose serious
challenges. While the trading losses in all the trading
entities (apart from the aerostructures business) have
been brought down and net equity is in the black,
Denel is overloaded with debt and is not generating
enough gross proft to secure its survival.
The business has largely been relying on debt
fnancing with the help of government guarantees,
but this is not sustainable. More sustainable support
mechanisms are currently being assessed, and they
will be developed, based on a robust turnaround
plan. The plan is aiming for fnancial recovery and
stability through improvements in its operational and
fnancial performance to secure its long term viability.
A key focus is the restructuring of Denel Saab
Aerostructures and ensuring optimal alignment
between Denel’s business with the strategic
requirements of the Department of Defence and
Military Veterans, particularly in relation to its military
strategy. Coupled with this will be the need to
defne Denel’s future role in the economy to ensure
the strengthening of advanced manufacturing
technologies in support of government’s industrial
policy objectives.
Denel recorded a net loss of R246 million, which is
an improvement of R287 million compared to the
net loss of R533 million incurred in 2008/09. This
improvement is due to lower operating costs, the
closing of certain legacy contracts, cost cutting
and better fnancial performance by associated
companies.
The net loss for the year is mainly ascribed to:
Denel Saab Aerostructures (which posted a net loss
of R328 million before interest and taxes); Denel
Dynamics Missiles (which posted a net loss of R51
million after impairment charges, before interest and
taxes); and interest expenses of R139 million on
external loans. Revenue has also been negatively
impacted by the delays in the A400M programme.
Revenue decreased by 8 per cent from R3.9 billion
to R3.6 billion in 2009/10.
33
Eskom
Eskom generates 95 per cent of the electricity used
in South Africa and 45 per cent of the electricity used
in Africa. Eskom’s reserve margin has been steadily
declining since 1999 as a result of increasing
demand and not enough additional capacity being
commissioned. This was particularly acute in
January 2008, when the reserve margin dropped
to alarmingly low levels (3.6 per cent commercially
available), resulting in extensive load shedding.
Low coal stockpile levels (12 days compared to the
20 days which is acceptable in the industry) also
contributed to the low reserve margin in 2007/08.
Eskom has since introduced a recovery plan, which
has seen the average stockpile level increase to 37
days as at the end of March 2010. However, this is
still less than the company target of 42 days.
Since 2004, Eskom has been undertaking a capacity
expansion (build) programme to increase capacity
and ensure the secure supply of electricity.
Completed projects between 2005/06 and 2008/09
include the return to service and construction of
three power stations. As a result, Eskom delivered
4 9064MW of additional generating capacity into the
system between 2005/06 and 2009/10. The focus
for 2010/11 includes fnalising the funding model
to ensure the completion of the capital expansion
programme and improving operational performance
to ensure security of supply.
Over the fve-year period from 2008/09 to 2012/13,
Eskom’s revised build programme is estimated at
R385 billion. Major projects still to be completed
include the construction of three new power stations.
Other major projects include the return to service of
two power stations and the construction of three new
power stations and transmission projects. Eskom
plans to deliver another 625MW of capacity into
the system in 2010/11, and additional generating
capacity of 2 025MW between 2010/11 and 2012/13.
State Owned Enterprises (cont.)
34
State Owned Enterprises (cont.)
Pebble Bed Modular Reactor
The Pebble Bed Modular Reactor was initially set
up as a nuclear architect engineering company
that was focused on the design and licensing of
a standardised nuclear heat supply system and
pebble fuel. It was established in 1999 to develop
and market small scale, high temperature reactors
locally and internationally. The company has not been
able to acquire additional investment for the Pebble
Bed Modular Reactor project, nor has it been able
to acquire a customer despite revising its business
model in 2008/9, since Government’s last funding
allocation in 2007, of which the last transfer was
effected in 2009/10. The company’s business model
has subsequently been revised in May 2009 and the
company’s main focus will be the preservation and
maintenance of intellectual property and assets.
In light of the participation in the United States
Department of Energy’s next generation nuclear
programme in which the Pebble Bed Modular
Reactor Company was part of a consortium, not
materialising, Cabinet approved that the company
be placed into care and maintenance to protect
its intellectual property and assets while ensuring
that no additional funding will be required from
Government. The Department of Public Enterprises
will therefore be monitoring the implementation of
this transition.
No further funds have been committed by
Government, except for R20 million, which was
provided in the adjustments budget and which will
be disbursed in 2010/11, and a further R40 million
for disbursement in 2011/12. These funds have been
allocated to ensure that the necessary provision for
the statutory requirement for decommissioning and
dismantling the fuel development laboratory is met
by the company.
35
South African Forestry Company
The South African Forestry Company manages
and develops commercial forests. The company’s
activities include forestry management and timber
harvesting and processing. The company’s
main subsidiary, Komatiland Forests, operates
in Mpumalanga, Limpopo, KwaZulu-Natal and
Mozambique. Softwood saw timber is sold in South
Africa and soft and hardwood saw timber and pulp
wood in Mozambique. Komatiland Forests has an 80
per cent shareholding in the Mozambican forestry
company, Indùstrias Florestais de Manica, while the
remaining 20 per cent is held by the Mozambican
government through its Instituto de Gestão das
Participações do Estado. The company plays an
important role in rural development and various
enterprise development projects have been initiated
in order to contribute to poverty alleviation in the rural
areas in which it operates.
Government is currently re-examining the privatisation
of Komatiland Forests and the future role of the
South African Forestry Company, in the context of
the developmental State. While the Department of
Public Enterprises is carrying out its own review, the
Presidency is conducting a broader review of state
owned enterprises across all spheres of government.
The department will be engaging closely with the
Presidential Review Committee on the implications
for the company as well as other key stakeholders
such as the Department of Agriculture, Forestry and
Fisheries and the Department of Rural Development
and Land Reform. Thereafter, a joint proposal will be
submitted to Cabinet for consideration.
In 2007, the Minister of Public Enterprises extended
the disposal of the company by fve years to 2011/12
to allow for the resolution of the land claims lodged
with the department of Rural Development and
Land Reform since 61 percent of the South African
Forestry Company Limited land under operation is
subject to land claims, with the understanding that
shareholder value would be preserved in the interim.
However, the economic downturn has had a severe
impact on the company’s operations and revenue.
The company reported a net loss of R468.9 million
in 2009/10.
State Owned Enterprises (cont.)
36
State Owned Enterprises (cont.)
South African Airways
South African Airways is South Africa’s national air
carrier. Owned by government, it is a full service
network operating international, regional and
domestic scheduled services, from its head offce
at OR Tambo International Airport. Its main business
units include passenger and mail air services, cargo,
South African Airways Technical and a Voyager
loyalty programme.
The airline’s governance structure has recently been
strengthened with the appointment of a new Board
of Directors and a new Chief Executive Offcer,
which continue to build on the successes achieved.
Chief among these is the continued rollout of the
cost saving measures that were implemented as
part of the restructuring plan that was implemented
in 2007. These measures achieved savings of
R2.5 billion over an 18-month period until March
2009. The department and National Treasury are
jointly monitoring what the airline is doing to meet
the conditions for approval of a R1.6 billion going
concern guarantee provided in 2008. The company
did not make use of this guarantee in 2009/10,
although R615 million was used to provide for
consumer protection guarantees to the domestic
and international licensing councils in 2010/11.
In 2009/10, the legacy agreement for the purchase
of Airbus A320 aircraft was satisfactorily resolved by
rescheduling the delivery dates of the aircraft from
2010 to 2013 and reducing unit pricing by increasing
the number of aircraft contractually committed from
15 to 20. This provided South African Airways with
a temporary reprieve to allow it to strengthen its
balance sheet.
The stringent focus on operational effciency
following the successful restructuring programme
has enabled the airline to record profts over the past
three years. These include a proft of R123 million
before restructuring costs in 2007/08, a bottom line
proft of R11 million in 2008/09, and a bottom line
proft of R323 million in 2009/10. The major drawback
in the past has been huge hedging losses, of which
R1.6 billion was recorded in 2008/09 but reduced to
R601 million in 2009/10. The reduction in hedging
losses was achieved through the implementation of
a new fnancial risk management policy.
The focus over the MTEF period will be to ensure
the implementation of the initiatives relating to the
R1.6 billion guarantee and to encourage consistent
generation of bottom line profts to strengthen the
airline’s balance sheet. This is necessary for ensuring
that the airline is able to fund the aircraft replacement
transaction without government support.
37
South African Express Airways
South African Express Airways operates regional and
domestic fights from OR Tambo International Airport
in Johannesburg, serving secondary routes in South
Africa and Africa. The airline was established in 1994.
The airline’s African operation includes services to
Botswana, Namibia, the Democratic Republic of the
Congo and Mozambique. It also provides a feeder
air service that connects with the South African
Airways network. The company was transferred from
Transnet to the Department of Public Enterprises in
2008/09.
The airline’s joint venture with a local partner
in the Democratic Republic of Congo, Congo
Express, began in February 2010 as part of the
implementation of the African hub strategy. However,
these operations have not performed as anticipated,
although the board and management are addressing
the fnancial and operational aspects to improve the
joint venture’s prospects.
The load factors of the airline reduced from 71 per
cent in 2008/09 to 63 per cent in 2009/10 due to
the slowdown in both the domestic economy and
regional markets. This affected other key performance
indicators, which were mostly below the target.
Passenger numbers at 1.56 million in 2009/10 were
below the previous year’s passenger numbers of
1.61 million, as well as the target of 1.65 million for
2009/10..
Daily fight hours increased from 6 hours per day
in 2008/09 to 7 hours per day in 2009/10, but were
below the target of 8 hours per day. It is anticipated
that conditions for most regions’ air travel will
improve in 2010/11. The slowdown in domestic and
regional air travel experienced during the 2010 FIFA
World Cup is expected to reverse. In addition, the
recent appointment of a new Chief Executive Offcer
is expected to bring stability to the airline.
The airline continues to generate profts, a trend
which has been maintained over the last six years.
The net proft for 2009/10 was R251 million, a 6 per
cent growth compared to 2008/09. This was slightly
above the corporate plan target for the year. Net
proft increased by 10 per cent from R228 million
to R251 million compared to last year. The revenue
declined by 10 per cent to R1.7 million compared to
the previous year, and was 21 per cent below target.
This was due to falling passenger numbers as a
result of the global economic downturn.
Total capital and reserves in 2009/10 amounted to
R1.2 billion, 27 per cent above the equity of R943
million in 2008/09.
State Owned Enterprises (cont.)
38
39
Transnet
Transnet has been transformed into a focused
freight transport company whose mission is to lower
the cost of doing business through providing port,
rail, and pipeline infrastructure and cost effective,
effcient operations within acceptable benchmark
standards. Transnet’s key role is to assist in lowering
the cost of doing business in South Africa and to
enable economic growth.
The company made good progress in signifcant
areas of the business for the frst six months of
2010/11. The key drivers of the business that
refected improvement were volume growth and
productivity, which, together with cost reduction
initiatives, contributed to improved proftability. The
capital expenditure programme continued despite
the global economic downturn, resulting in the
creation of capacity ahead of demand.
Capacity on the iron export line increased from 47Mt
to 61Mt. Specifc interventions to create capacity
on the coal line through improved operational
procedures and effciencies are currently in place.
This will support the planned R15.4 billion investment
on the coal line to create the targeted capacity of
81Mt by 2014, subject to the coal industry entering
into long term take or pay contracts which are still
being negotiated. Transnet Freight Rail’s quantum
leap focuses on customer service delivery and
operational effciencies. In the frst six months of
2010/11, containers on rail increased by 9 per cent
in line with quantum leap targets. Other interventions
include investment in rolling stock to address ageing
infrastructure, and branch line revitalisation, aimed
at contributing to modal shift.
Gross crane moves per hour at the Durban container
terminal and pier 1 continue to be below benchmark
levels, reported at 21 and 22 gross crane moves
per hour for the frst half of 2010/11. But substantial
improvements were realised in the frst few weeks
of September 2010, where 24 gross crane hours at
the Durban container terminal and 30 in pier 1 were
reported. Iron ore loading rates for the same period
were above the set target despite the derailments on
the line, assisted by dual and staggered loading at
the Saldanha bulk terminal.
The new multi-product pipeline is a strategic
investment to secure the supply of petroleum
products to the inland market over the long term.
This line will replace the old Durban-Johannesburg
pipeline, which is running at full capacity and nearing
the end of its design life. Some of the benefts of
the new multi-product pipeline include (when fully
operational) the reduction in the number of tankers
on the road by at least 60 per cent, a reduction in
congestion on the roads and a reduction in carbon
emissions from road transportation of petroleum
products.
In terms of the revised schedule, the 24-inch new
multi-product pipeline trunk line is to be completed
by December 2011. However, the remaining
construction activities to supporting infrastructure
are now scheduled to be complete and ready for
operation by December 2013. Some delays were
experienced following the decision to relocate the
construction of the coastal terminal from the old
Durban International Airport to Island View in the port
of Durban, as well as delays in obtaining the required
statutory approvals. The move to Island View
resulted in an 11km increase in the length of the
pipeline affecting the hydraulics and the need
for a change of design. These changes and other
matters will have an impact on the new multi-
product pipeline’s total costs. Transnet will make
an announcement once the cost review exercise is
completed.
Net proft from continuing operations for the period
ending 30 September 2010 was R1.7 billion an
increase of 34.7 per cent compared to R1.3 billion
up to 30 September 2009. Revenue increased by 76
per cent to R18.7 billion (30 September 2009: R17.3
billion) despite the impact of the organised labour
strike that negatively impacted on operations for 17
days. The growth in revenue refects the increase in
volumes of all commodities transported compared to
the previous period, except for iron ore, which was
negatively impacted by derailments.
Cash generated from operations increased by 13.5
per cent to R8.7 billion, which shows the company’s
ability to generate stable and strong cash fows.
The cash interest cover ratio has decreased to 3.7
times from 4.2 times compared to the same period
in 2008/09, due to an increase in net fnance costs,
which is a consequence of the capital expenditure
programme. This ratio, however, remains signifcantly
above the target of a minimum of three times.
Transnet is planning to borrow approximately R35
billion over the next three years to partly fund the
execution of the capital expenditure programme.
Funding raised by the 30 September 2010 was R7.6
billion, with an estimated funding requirement for the
remainder of the year of approximately R9.6 billion.
Despite the recent economic downturn, Transnet’s
investment in infrastructure is still on track. The
capital expenditure for the six months ended 30
September 2010 (excluding capitalised borrowing
costs) was R10.2 billion, compared to R8.7 billion
spent in the previous six-month period.
State Owned Enterprises (cont.)
40
Acronyms
GDP Gross Domestic Product
MTEF Medium-Term Expenditure Framework
PFMA Public Finance Management Act
IRP Integrated Resources Plan
MTRMP Medium-Term Expenditure Framework
DSMEE Demand Side Management and Energy Effciency
ECS Energy Conservation Scheme
REFIT Renewable Energy Feed in Tariff
IPP Independent Power producers
MYPD Multi-Year price Determination
SLA Service Level Agreement
NCPM National Corridor Performance Management
NMPP National Multi Product Pipeline
NATMAP National Transport Master Plan
NIP National Infrastructure Plan
FET Further Education and Trainng
UCT GSB University of Cape Town Graduate School of Business
DPE-DEA-Eskom MOU Department of Public Enterprises-Department of Environmental
Affairs-Eskom Memorandum of Understanding
doc_352016850.pdf
Department Of Public Enterprises Strategic Plan
I
dpe 2011 - 2014
DEPARTMENT OF PUBLIC ENTERPRISES STRATEGIC PLAN
CONTENTS
Minister’s Foreword ii
Director-General’s Report iii
Part A: Strategic overview 1
Vision 1
Mission Statement 1
Legislative and Other Mandates 5
Constitutional Mandates 5
Situational Analysis 6
Organisational Structure 7
DPE Budget - Appropriation per Programme 8
DPE Budget - Appropriation per Economic Classifcation 8
DPE Budget Summary of Transfer payments to SOE 8
Part B: Strategic objectives 9
Programme 1 - Administration 9
Programme 2 - Energy and Broadband Enterprises 12
Programme 3 - Legal & Governance 16
Programme 4 - Manufacturing Enterprises 19
Programme 5 - Transport Enterprises 22
Programme 6 - Joint Project Facility 27
State Owned Enterprises 30
Alexkor 30
Broadband Infraco 31
Denel 32
Eskom 33
Pebble Bed Modular Reactor 34
South African Forestry Company 35
South African Airways 36
South African Express Airways 37
Transnet 39
Acronyms 40
II
Minister’s foreword
Malusi Gigaba
Minister’s foreword
Our department is tasked with the vital responsibility
of providing shareholder oversight and leadership
to a number of state owned enterprises (SAA
Transnet, Eskom, Safcol, Alexkor, Denel, PBMR,
Broadband Infraco, Aventura and SAX). Our
mandate of oversight and leadership is defned
and guided by a range of government policies and
strategies including the New Growth Path and the
Industrial Policy Action Plan. We, as a shareholder
department, have the mandate to align the strategies
and operations of SOE with government’s objectives
as defned in these policies.
The two infrastructure SOEs, Transnet and Eskom are
in a powerful position to catalyse growth in that they
either place constraints on, or create opportunities
for, additional investment in both their customer and
supplier communities. These opportunities can
be unlocked through creating additional capacity
either through SOE investment or through effciency
improvements. In addition, given their strategic
position, these infrastructure SOEs can play a
leadership role in both the customer and supplier
community in driving programs that catalyse socio-
economic transformation in these sectors. The role
of the DPE in this context is thus to drive investment,
effciencies and transformation in its portfolio of
SOE, their customers and their suppliers to unlock
growth, create jobs and develop skills.
For the SOEs to unlock growth and transformation,
new sources of funding for the infrastructure
programs will need to be found and developmental
procurement and other business process capabilities
will need to be developed and implemented. The
New Growth Path in particular, challenges us to
think beyond the existing approach to Shareholder
Management. The policy challenges us to develop
compacts with our key stakeholders to enhance
our joint impact on the economy. In order to do
this, we need to develop an investment planning
approach that goes beyond the constraints of SOE
balance sheets with the objective of working with
our customers and other key stakeholders to raise
the funding to drive investment and employment
creation to qualitatively new levels.
An important component of this process will be
to establish an enabling policy and regulatory
environment. This will include the DPE developing
new policies to guide the SOE in the implementation
of the strategy. In addition, the DPE will be engaging
with Treasury, sectoral policy Department and their
regulators to ensure that the regulatory regime
provides both confdence in the future stability of
the SOEs and enables special compacts between
the SOEs, their customers and the broader fnancial
community.
In response to the economic and social challenges
facing South Africa, this plan represents a key step
in moving from a balance sheet to a broader growth
perspective in SOE investment planning, funding,
procurement and operations. This approach
will require active and decisive leadership from
the DPE and I have already started a process of
engaging directly with all SOE Chairs and CEOs.
Such engagements are intended to ensure there
is a defnitive clarity about government’s strategies
to be refected by SOEs and also to provide our
department with a timely grasp of strategic and
operational issues being faced by our SOEs.
In summary, we look forward to the challenges
ahead with enthusiasm and determination, ever
cognisant of the impact our contributions will have
on our economy and the continent at large.
The deputy minister and I are confdent that the
strategies intended are obtainable if our capable
efforts are applied through cogitated action for the
grander benefts of our South African economy. Our
confdence is further reassured by the committed
and competent leadership of the department being
spearheaded by our Director General Tshediso
Matona.
Minister Malusi Gigaba
III
Director-General’s
report
Tshediso Matona
Director-General’s report
We in the Department of Public Enterprises are
actively engaged with the imperatives of forging
a growing and labour-absorbing economy as
envisioned in Government’s key policy statements,
in particular, the New Growth Path and the Industrial
Policy Action Plan. The development of the
country’s economic infrastructure is central to this
vision, and the challenge for the DPE and the state-
owned enterprises (SOE) for which we shareholder
responsibility is clear.
The stage has been set for our country’s intentions
to create an economy that factors larger labour
absorption into its growth, through, among
other things, the development of our economic
infrastructure.
The Department of Public Enterprises is responsible
for guiding SOE in our portfolio to become more
fnancially sustainable entities which contribute
positively towards our national growth and
development objectives. SOE, particularly those
operating in network infrastructure industries, are
key levers to catalyse growth, and therefore higher
labour absorption.
Government has clearly prioritised employment-
creation in the period ahead, during this
Administration and beyond. In his State of the
Nation Address President Jacob Zuma has given
us our marching orders with regard to delivering
on this priority, and the DPE, together with the
SOE in our portfolio, accept this challenge, and
commit ourselves to the achievement of this
central objective. This requires an unambiguous
understanding by our SOEs of government’s
economic policy and strategy. To this end, with the
guidance of the Minister and Deputy Minister, we
have undertaken to be more hands-on with regard
to our oversight and shareholder responsibility over
the SOE, to ensure that they are in alignment with
Government policy and strategy.
The SOE, together with the private sector,
are pivotal in the imperative to reposition the
economy to a New Growth Path, central to
which is the overriding priority of job creation and
poverty alleviation. Our two biggest SOE, Eskom
and Transnet, have embarked on the biggest
infrastructure investment by the public sector,
infrastructure that will be a catalyst for our economy
to grow, and therefore to crowd in the private
sector for higher levels of employment creation. It
is therefore important that the SOE are fnancially
viable and able to fund these investments from
the strength of their balance sheets. In addition to
fnancial viability, the SOE need certainty and clarity
in terms of policy and regulatory direction, a key
factor when investment decisions need to be made.
The role of the State as shareholder, regulator and
policy-maker must be clearly defned, if the SOE are
to have certainty to enable them to execute their
mandate.
In recognition of the powerful role that an SOE
can play in the economy, a Presidential Review
Committee has been established to identify ways
of enhancing the impact of SOE on the objectives
and priorities of Government. We look forward to the
recommendations to be made by the PRC later in
2011, as they will be critical in helping us to further
shape and refne Government’s strategic role as
a Shareholder. The PRC’s recommendations will
provide greater insight into the role that SOE should
play in the context of a Developmental State, and
how Government should improve its Shareholder
oversight capabilities to support and strengthen
this role.
In conclusion, I would like to thank the Minister
for the visionary leadership he is providing to the
Department and the SOE, and the support of the
Deputy Minister in this regard. Lastly, I would like to
urge my colleagues in the Department to continue
to strive for excellence as we work towards the
achievement of our goals as a Department, and as
a country.
Director-General Tshediso Matona
IV
1
Vision
The aim of the Department of Public Enterprises is to
provide effective shareholder management of state
owned enterprises that report to the department,
and support and promote economic effciency and
competitiveness for a better life for all South Africans.
Mission Statement
Revised mission statement and 2011–2014
strategic plan
The state owned enterprises are strategic instruments
of industrial policy and core players in the New
Growth Path. The department aims to provide
decisive strategic direction to the state owned
enterprises so that their businesses are aligned
with the national growth strategies arising out of
the New Growth Path. It will do this by ensuring that
their planning and performance, and investments
and activities, are in line with Government’s medium
term strategic framework and the Minister’s service
delivery agreement.
In relation to Government’s 12 outcomes, the
Department of Public Enterprises is contributing
directly to creating an effcient, competitive and
responsive economic infrastructure network
(outcome 6), which forms the basis of the Minister’s
service delivery agreement, signed in October 2010.
Over the medium term, the department will focus on
achieving the outputs and sub-outputs that are linked
to the Outcome and contained in the Agreement.
These are:
• Improving the delivery and maintenance of
infrastructure and monitoring the rollout of the
Transnet and Eskom build programmes.
• Achieving policy and regulatory clarity in sectors
in which the state owned enterprises operate.
• Improving the operational effciencies of the
state owned enterprises, particularly in relation
to the reliable delivery of rail and ports services
and the reliable generation, distribution and
transmission of electricity.
• And developing operational indicators for each
of the required sub-outputs identifed as part of
the delivery agreement and where necessary
including these shareholder compacts concluded
within the state owned enterprises.
Government Economic Objectives and DPE
Strategy
Three government frameworks provide a context
for the defnition of the key objectives that should
guide the DPE strategy. These frameworks are the
performance evaluation framework, the New Growth
Path and the Industrial Policy Action Plan.
There are 12 outcomes in the performance evaluation
framework. Given the nature of the DPE portfolio of
SOE, the following outcomes, which are focused on
the economic cluster, are of particular signifcance
to the DPE.
Decent employment through inclusive growth:
• Increasing GDP
• Higher rates of labour absorption, meaning that
more of the working-age population has jobs.
Effcient, Competitive and Responsive Economic
Infrastructure Network.
• Globally competitive infrastructure service
delivery.
• Provision of additional capacity to provide for
growth requirements.
The New Growth Path is a strategy to identify
focus areas for greater competitiveness and labour
absorbing growth through the provision of focused
policy and political support for these sectors. The
path has the objective of creating fve million jobs
over ten years. The approach is to fne-tune macro
and micro policies to support more equitable and
employment-intensive growth through:
• Measures to make the economy as a whole more
competitive, including the value of the currency,
enhanced infrastructure services and capacity
and the development of skills.
• Systematically encouraging more labour-
intensive and green activities, including through
African regional integration.
• Developing relatively labour intensive
manufacturing, particularly through leveraging
public procurement, in support of the Industrial
Policy Action Plan
Part A : Strategic overview
2
3
Part A : Strategic overview (cont.)
A core element of the New Growth Path is to promote
social dialogue and solidarity, through the building
of relevant social compacts to achieve targeted
objectives, as central to the change process.
The Industrial Policy Action Plan is extremely
complimentary to the New Growth Path and has
as its objective development of manufacturing
and associated industrial capabilities to facilitate
a diversifcation of the economic base beyond the
present dependence on resources and non-tradable
services. Core to the Industrial Policy Action Plan
is the provision of competitive infrastructure services
and the leveraging of public procurement to promote
investment in manufacturing. This includes a special
“feet procurement” process whereby long term
feet requirements are identifed and procurement
is structured so as to create a frm foundation for
investment and learning in the national supplier
sector. The leveraging of the SOE capital investment
programs, or the Competitive Supplier Development
Program, is a further core strategy of the IPAP.
In summary, the DPE needs to leverage the SOE to
contribute to the following key national objectives:
• The provision of competitive infrastructure
services and associated capacity to lead growth
and stimulate employment creation.
• The development of industrial manufacturing
capabilities as a whole as well niched areas of
advanced capabilities.
• The development of skills.
• The development of new technologies, particularly
those contributing towards employment creation
and a green growth trajectory.
• The development of social and economics
compacts to align stakeholders behind the key
growth objectives.
Strategic focus over the medium term
Providing decisive leadership and ensuring that
the government shareholder management model
is implemented
The department provides support to the Minister in
his interactions with the state owned enterprises.
This involves preparing for structured meetings
between the Minister and the Chairperson of each
board, as well as research and briefngs on issues.
The department’s shareholder management
model measures the state owned enterprises’
performance against delivery targets. The model
aims to achieve consistency in compliance with
corporate governance as well as the synchronisation
of outcomes - based planning and performance
reporting.
The model is being continuously refned.
• Progress on the model to date includes: clarity
on the strategic intent of each state owned
enterprise and performance focused shareholder
compacts.
• The development of a logical planning and
monitoring and evaluation framework; the
development of guidelines on board management
and founding documents.
• And the tracking of trends in fnancial and
operational performance through the
department’s performance measuring
dashboard, the Isibuko dashboard. The
dashboard facilitates the quarterly reporting
required from the state owned enterprises.
Optimising capital investment and operational
effciencies in state owned enterprises
The provision of adequate and effcient infrastructure
services can stimulate investment and increase
the productivity of the customers of state owned
enterprises’. In 1976, public investment in
infrastructure in South Africa peaked at 16 per cent
of GDP. By 1994, it had declined to approximately 4
per cent of GDP where it remained until Eskom and
Transnet announced the major build programmes
in 2004 and government began a fxed asset
investment programme in 2005.
Benchmarking actual public investment in
infrastructure between 1994 and 2009 against a
steady state of investment of at least 10 per cent
of GDP per year over the same period suggests a
shortfall of approximately R1.5 trillion. This illustrates
a gap in infrastructure investment which needs to be
addressed and funded.
A number of state owned enterprises suffer from
operational ineffciencies, which negatively impacts
on the economy. A key challenge for the department
is to play a catalytic role in improving effciencies
through positively infuencing the Boards’ oversight
function and in turn effective management of the
enterprises. This will require a much higher level of
analysis, benchmarking, target setting and remedial
action than in previous years. The department will
also continue to monitor progress on the expansion
of the capacity of state owned enterprises, such as
the capital programmes of Eskom and Transnet,
through better funding and risk management.
4
5
Refning the policy and regulatory environment
The current policy and regulatory environment has
elements that pose key risks to the state owned
enterprises and their ability to play a developmental
role in the economy. In particular, the regulation of
infrastructure tariffs needs to enable both Eskom
and Transnet to recover costs and attract investment
to meet the needs of the economy. In addition,
the department needs to monitor closely what
additional investments will be required of Eskom in
the Integrated Resource Plan for Energy, as this may
require signifcant additional funding. Another key
area relates to the establishment of a Single Buyer
Offce to enable independent power producers’
access to the grid. In relation to Transnet, the
department will be engaging with the establishment
of the rail and port Regulator to ensure that the policy
and regulatory regime provides an appropriate
balance between encouraging additional investment
and promoting competition. The department will
continue to put considerable effort into working
with policy departments, such as the Departments
of Energy and Transport, to create a more enabling
environment for the enterprises to better serve the
public interest.
Integrating key programmes into the broader
industrial policy and economic cluster programme
Another area of strategic focus over the short to
medium term is the systematic integration of key
programmes in state owned enterprises into the New
Growth Path and the Industrial Policy Action Plan 2.
For example, both the Industrial Policy Action Plan and
the New Growth Path have prioritised the leveraging
of public procurement to develop manufacturing.
The department will thus focus on driving the
implementation of feet procurement programmes in
locomotives and renewable generation technologies.
The integration of supplier development policies
that will embed procurement leverage into the state
owned enterprise procurement policy framework
will also be closely monitored. The department is
considering new governance mechanisms to enable
better coordination across government departments
(particularly with respect to the Department of Trade
and Industry) and to provide more effective oversight
of the rollout of these programmes. The South African
Forestry Company can play a powerful catalystic
role in rural development and work is underway on a
strategy in this regard.
Knowledge management
It is critical that the department optimise its internal
learning processes. This involves collating and
recording existing presentations and documents
under relevant themes, developing training
programmes in key areas and initiating processes
that capture the practical experiential learning
around shareholder management.
Legislative and Other Mandates
DPE exercises shareholder management over nine
SOE. All The SOE are incorporated as companies
in accordance with the provisions of the Companies
Act, 1973. Except for Denel, all SOE are established
in terms of their own enabling legislation which sets
out the purpose, mandate and objectives for which
they were founded.
DPE is both the founder and the administrator/
custodian of all legislation relating to the
establishment of SOE.
Constitutional Mandates
In addition to the Companies Act and enabling
legislation, SOE are also governed by other
legislation such as the Public Finance Management
Act of 1999 (PFMA), Competition Act of 1998 and the
Insolvency Act of 1936 amongst others.
Within the DPE portfolio, the SOE enabling
legislations are the following:
• Eskom: Eskom Conversion Act 13 of 2001
• Transnet: Legal Succession to the South African
Transport Services Act 9 of 1989 (as amended)
• Alexkor: Alexkor Limited Act 116 of 1992
(as amended)
• South African Forestry Company (Safcol):
Management of State Forests Act 128 of 1992
• Aventura: Overvaal Resorts Limited Act 127 of
1993
• South African Airways: South African Airways Act
5 of 2007, and
• Broadband Infraco: Broadband Infraco Act 33 of
2007
Part A : Strategic overview (cont.)
6
Situational Analysis
Organizational Environment
The Department of Public Enterprises requires high
calibre on specialized skills to carry out its mandate.
Emphasis has always been placed on ensuring that
the organizational structure is adequately resourced
to deliver on the organizations key focus areas. Over
the years, this has been a constant challenge. The
department is limited in its ability to attract and retain
such expertise when compared to the private sector.
However, it continues to strive towards ensuring that
the structure is aptly capacitated.
In its endeavour to ensure a feeder channel
of applicable skills and talent, the department
embarked on a drive to attract and retain young
graduates though its internship and graduate
development programmes. This has been further
strengthened by a continuous focus on internal skills
development, mentoring and coaching.
The reorganisation of work streams in the department
assisted in ensuring that the sector programmes
received dedicated support in the legal and
governance aspects of their work. To support this
initiative, the Legal and Governance unit was divided
into SOE-specifc matters and cross-cutting legal
support to the department.
The establishment of a Risk Management, Monitoring
and Compliance role in Corporate Services, assisted
in ensuring closer alignment between the planning
function and the monitoring of deliverables in
accordance with the department’s strategic focus
areas. This dedicated resource has allowed for
closer evaluation of performance through continuous
assessment and analysis of quarterly reports.
Internal risks are also captured on the Isibuko
Dashboard, electronic business intelligence system
which ensures stronger accountability across the
organization for risk mitigation through a tightly
managed process.
With the appointment of the Minister, Deputy Minister
and Director-General as well as the launch of the
Presidential Review on State owned enterprises, the
Department of Public Enterprises is fully cognisant
of the possible review of its mandate. A key focus
for the Executive team is to ensure that the internal
environment remains stable and conducive for
sustainable high performance. The department is
geared for the work it has to produce and remains
fexible and agile in its ability to incorporate changes
as they become evident, especially regarding
reorganization of work for improved performance
and effciencies.
Part A : Strategic overview (cont.)
7
Minister
Public Enterprises
Special
Advisor
Special
Advisor
DDG
Chief Investment &
Portfolio Manager
DDG
Transport
Enterprises
Chief
Financial Of?cer
DDG
Energy and Broad-
band Enterprises
DDG
Joint Project
Facility
Head
Communications
DDG
Legal, Governance
OPSCO
Chairperson
Head
Corporate
Services
Chief
Audit
Executive
DDG
Manufacturing
Enterprises
Deputy Minister
Public Enterprises
Director-General
Public Enterprises
dpe
organisational structure
8
DPE Budget - Appropriation per Programme
2010/11 2011/12 2012/13 2013/14
Final
Appropriation
Medium term estimates
MTEF Baseline
R'000 R'000 R'000 R'000
1. Administration 106 835 106 734 112 968 118 820
2. Energy and Broadband Enterprises 174 476 58 652 20 246 21 669
3. Legal and Governance 50 023 12 163 13 455 14 321
4. Manufacturing Enterprises 192 782 13 072 13 408 14 275
5. Transport Enterprises 21 257 26 610 25 701 25 465
6. Joint Project Facility 10 176 13 000 13 873 15 862
TOTAL 555 549 230 231 199 651 210 412
DPE Budget - Appropriation per Economic Classi?cation
2010/11 2011/12 2012/13 2013/14
Final
Appropriation
Medium term estimates
MTEF Baseline R'000 R'000 R'000 R'000
Current payments
Compensation of employees 90 315 96 539 101 017 106 169
Goods and services 87 925 91 539 96 643 102 136
Transfers and subsidies
Public corporations and private enter-
prises
237 296 40 000 - -
Gifts and donations 610 753 791 835
Payments for capital assets
Machinery and equipment 703 1 400 1 200 1 272
Payment for Financial Assets 138 600 - - -
Total 555 549 230 231 199 651 210 412
DPE Budget Summary of Transfer payments and payment for Financial assets to SOE
2010/11 2011/12 2012/13 2013/14
Final
Appropriation
Medium term estimates
R'000 R'000 R'000 R'000
Alexkor 36 000 - - -
Denel 181 296 - - -
Broadband Infraco 138 600
Pebble Bed Modular Reactor 20 000 40 000 - -
Total 375 896 40 000 - -
9
DPE Budget - Appropriation per Economic Classi?cation
2010/11 2011/12 2012/13 2013/14
Final
Appropriation
Medium term estimates
MTEF Baseline R'000 R'000 R'000 R'000
Current payments
Compensation of employees 90 315 96 539 101 017 106 169
Goods and services 87 925 91 539 96 643 102 136
Transfers and subsidies
Public corporations and private enter-
prises
237 296 40 000 - -
Gifts and donations 610 753 791 835
Payments for capital assets
Machinery and equipment 703 1 400 1 200 1 272
Payment for Financial Assets 138 600 - - -
Total 555 549 230 231 199 651 210 412
DPE Budget Summary of Transfer payments and payment for Financial assets to SOE
2010/11 2011/12 2012/13 2013/14
Final
Appropriation
Medium term estimates
R'000 R'000 R'000 R'000
Alexkor 36 000 - - -
Denel 181 296 - - -
Broadband Infraco 138 600
Pebble Bed Modular Reactor 20 000 40 000 - -
Total 375 896 40 000 - -
Part B : Strategic objectives
Programme 1
Administration
Purpose: To achieve the department’s strategic
objectives by providing management, supporting
functions and processes.
The programme is comprised of the following
sub-programmes
• Ministry – Minister and Deputy Minister
• Management – Offce of the Director-General
and Chief Investment Portfolio Manager
• Internal Audit
• Corporate Services – Head: Corporate Services,
Human Resources, Secretariat, Administration
and Facilities, Knowledge Centre and Internal
Risk Management and Performance Monitoring
• Offce of the Chief Financial Offcer – Financial
Administration, Supply Chain Management and
Information Management
• Communications
• Offce Accommodation
Strategic Objectives
• To provide strategic direction and leadership.
• To provide support services to enable the
department to deliver on its organisational
objectives in an environment where the human
capital within DPE is both motivated and
empowered.
• To improve the quality of corporate governance
and performance monitoring systems by
ensuring that appropriate policies, processes
and procedures are reviewed, updated and
implemented within the DPE.
The Offce of the Chief Investment and
Portfolio Manager applies a portfolio approach to the
management and shareholder investment of all state
owned enterprises falling under the purview of the
department, including conducting comprehensive
cross cutting portfolio reviews on a quarterly basis.
The offce serves to enhance portfolio management
through portfolio analysis to determine overall
portfolio structure, highlight shifts in portfolio
composition, determine potential impact to portfolio
performance and identify measures to strengthen
the portfolio.
The offce provides analysis of trends and strategic
portfolio recommendations to the Minister of Public
Enterprises to pro-actively manage any exposure
that may arise.
Objectives and Measures
• Provide strategic leadership and effective
oversight over the departmental activities by:
– Synchronising logical planning, monitoring and
evaluation processes
– Performing performance monitoring and share-
holder risk management to investments in state
owned enterprises
– Developing the department’s capital structure
framework for state owned enterprises
– Managing the equity interest and contingent
liability exposure of the department’s investment
portfolio
– Developing investment policy and identifying
sources for capital funding
– Ensuring economic and regulatory cohesion for
network infrastructure
– Providing specialist transaction input and
advice
– Implementing the Richtersveld deed of
settlement
– Redirecting Alexkor’s commercial focus and
sustainability.
Resource considerations
The spending focus will be on administrative costs
as no transfers to state owned enterprises over the
MTEF period are included in this programme.
Expenditure increased from R68.4 million in 2007/08
to R106.8 million in 2010/11, at an average annual
rate of 16.0 per cent. The growth was driven by
spending in the Corporate Services and Management
subprogrammes as the department centralised
operational expenditure such as IT licences and
services, photocopying equipment, and training and
communication into this programme. Establishing
the Deputy Minister’s offce in 2009/10 and shifting
the risk component in the Legal and Governance
programme to the Chief Investment Portfolio
Manager’s offce to this programme also contributed
to the increase. Spending on compensation of
employees increased from R28.8 million in 2007/08
to R48.9 million in 2010/11, at an average annual
rate of 19.4 per cent. The increase is attributable
to annual salary increments and an increase in the
number of personnel in this programme. Spending
on goods and services increased from R35.6
million in 2007/08 to R56.5 million in 2010/11, at an
average annual rate of 16.6 per cent. This increase
in expenditure on goods and services was to provide
support to the larger personnel establishment.
Expenditure is expected to grow from R106.8 million
to R118.8 million over the MTEF period, at an average
annual rate of 3.6 per cent. The growth is mainly due
to infation related adjustments to the baseline as
adjusted to refect savings from the centralisation of
services.
10
Sub
Programme
Output Measure/indicator 2011/2012
Target Milestone
2012/13
Target Milestone
2013/14
Target Milestone
CIPM Synchronised logical
planning, monitoring
& evaluation process
SOE strategic intent
statements issued for
all SOE
SOE Strategic intent
statements issued by end
of September
SOE strategic intent
statement issued by end
of September
SOE strategic intent
statement issued by end
of September
Shareholder compacts SOE Shareholder
Compacts signed annually
SOE Shareholder
Compacts signed annually
SOE Shareholder
Compacts signed annually
SOE Corporate Plans SOE to submit
Corporate Plans annually
by end of February
SOE to submit
Corporate Plans annually
by end of February
SOE to submit Corporate
Plans annually by end of
February
SOE performance
monitoring & Shareholder
Risk Management
Quarterly Shareholder
reports on SOE
performance
Assessment, detection,
mitigation and monitoring
of cross-cutting
shareholder risk
Quarterly Shareholder
reports on SOE
performance
Assessment, detection,
mitigation and monitoring
of cross-cutting
shareholder risk
Quarterly Shareholder
reports on SOE
performance
Assessment, detection,
mitigation and monitoring
of cross-cutting
shareholder risk
Portfolio equity
interest & contingent
liability exposure
management
Report on government
guarantee and shares
SOE Quarterly report on
government guarantee
and shares
SOE Quarterly report on
government guarantee
and shares
SOE Quarterly report on
government guarantee
and shares
Register government
guarantee, shares and
shareholders’ agreement
Register and safe custody
of government guarantee,
shares and shareholders’
agreement
Register and safe custody
of government guarantee,
shares and shareholders’
agreement
Register an safe custody
of government guarantee,
shares and shareholders’
agreement
Benchmarking Guideline for Industry,
sector & national economy
benchmarking
Benchmarking Guideline
for SOE performance
indicator & target setting
SOE performance indica-
tor & target setting
SOE performance indica-
tor & target setting
Shareholder value
enhancement
Methodological framework
for measuring shareholder
value per SOE &
aggregation to portfolio
Annual portfolio value
assessments
Annual portfolio value
assessments
Annual portfolio value
assessments
Economic &
regulatory
cohesion for
network
infrastructure
Research on
economic
regulatory models
Report on economic
regulatory cohesion for
network infrastructure
study
Study on regulatory
frameworks employed for
infrastructure investment
Capital structure
framework
Annual portfolio value
assessments
• Investment policy for
SOE commercial
sustainability
• Financing Instruments
Framework
• SOE capital
restructuring
assessments
SOE capital restructuring
assessments
Measurable objectives
and medium term
output targets
Programme 1
Administration
11
Sub
Programme
Output Measure/indicator 2011/2012
Target Milestone
2012/13
Target Milestone
2013/14
Target Milestone
Alexcor Richtersveld Deed
of Settlement
implementation
• Alexander Bay
Township
infrastructure upgrade
• Formal establishment
of Pooling and
Sharing Joint
Venture between
Alexkor and
Richtersveld Mining
Company
• Completion of
Alexander Bay
township
infrastructure upgrade
• Approval of
Minister of Minerals
& Energy for transfer
of Alexkor and mining
rights to Richtersveld
• Mining Company
• Monitoring formal
establishment of
Pooling and Sharing
Joint Venture
(prospecting plan,
work programme,
mining plan)
Quarterly monitoring and
assessment of Pooling
and Sharing Joint Venture
performance
Alexkor Strategy
Formulation
• New business/
growthplan for Alexkor
• Stakeholder
consultation to
clarify positioning
of Alexkor in relation to
State Mining Company
• Explore synergies
between Alexkor and
State Mining Company
• Alexkor exploring new
mining ventures and
downstream
benefciations
beyond Alexander Bay
Alexkor Monitoring
and Oversight
• Annual Reports,
Corporate Plan,
Strategic Intent
Statement and
Shareholder
Compact with Alexkor
• Analysis and
Assessment of the
Annual Report and
Corporate Plan
• Analysis and
Assessment of the
Annual Report and
Corporate Plan
• Analysis and
Assessment of the
Annual Report and
Corporate Plan
• Negotiation and ap-
proval of shareholder
compact
• Negotiation and ap-
proval of shareholder
compact
• Negotiation and ap-
proval of shareholder
compact
• Shareholder Strategic
Intent statement at the
AGM
• Shareholder Strategic
Intent statement at the
AGM
• Shareholder Strategic
Intent statement at the
AGM
• Alexkor Board Review • Assessment of SOE
Board.
• Assessment of SOE
Board.
• Assessment of SOE
Board.
• Quarterly Reports • Assessment of
quarterly reports
• Assessment of
quarterly reports
• Assessment of
quarterly reports
• Preparation of quarterly
investor briefs
• Preparation of quarterly
investor briefs
• Achievement of MTEF
targets by Alexkor
• Assessment of PFMA
Applications
• Assessment of PFMA
Applications
• Assessment of PFMA
Applications
• Assessment of Alexkor
funding requirements
to support new
business plan
• Explore and facilitate
access to debt and
alternative funding
structures
• Explore and facilitate
access to debt and
alternative funding
structures
• Explore and facilitate
access to debt and
alternative funding
structures
Programme 1
Administration (cont.)
Measurable objectives
and medium term
output targets
12
Energy and Broadband Enterprises
Purpose: Align the corporate strategies and
performance of Eskom, Pebble Bed Modular Reactor
and Broadband Infraco with Government’s strategic
intent and performance targets.
The programme is comprised of the following
sub-programmes
• Management comprises the offce of the Deputy
Director-General. 85.5 percent of the budget is
used for compensation of employees.
• ICT Broadband Sector provides shareholder
oversight of Broadband Infraco. This includes
overseeing agreements between parties,
assessing the business plan, monitoring
the national and international long distance
networks, and providing overarching shareholder
management.
• Energy Sector provides shareholder oversight
of Eskom. This entails: generating, transmitting
and distributing electricity with a particular
emphasis on security of supply and optimising
current operations; and carrying out oversight of
the Pebble Bed Modular Reactor, which includes
monitoring the progress of the implementation
of the care and maintenance programme to
preserve intellectual property and assets as
approved by Cabinet.
• Legal and Risk (Energy and Broadband
Enterprises) deals with all legal, governance
and risk work specifcally related to the above-
mentioned state owned enterprises.
Strategic objectives
• Continuously ensure the alignment of shareholder
strategic intent in relation to state owned
enterprises’ role in achieving Government‘s
objectives in the energy and communication
sectors.
• Evaluate Corporate Plans annually and advise
Boards about material deviations.
• Monitor and benchmark the implementation of
Corporate Plans and Shareholder Compacts.
• Assess shareholder and enterprise risks at
least quarterly, and advise Boards on areas of
concern.
• Support the security of electricity supply by:
– Examining Eskom’s maintenance and operational
practices, distribution effciency and the reserve
margin annually.
– Receiving regular updates from and ongoing
interaction with Eskom, and engaging with
stakeholders in the energy sector.
• Reduce dependence on the fscus by monitoring
cost escalations for the build programme and
developing innovative funding mechanisms.
• Monitor the implementation and evaluate
quarterly reports of the Competitive Supplier
Development Programme to leverage off Eskom’s
capital expenditure in the development of local
supplier industries.
• Maintain state owned assets by monitoring
progress against the implementation of the Care
and Maintenance programme by the Pebble Bed
Modular Reactor.
• Create an enabling policy and regulatory
environment for the state owned enterprises by
engaging with the Department of Energy and the
National Energy Regulator of South Africa on new
policies and regulations affecting Eskom as and
when they arise over the MTEF period.
• Ensure that the West Coast submarine cable
system is ready for service in 2011 by monitoring
Broadband Infraco’s participation in the West
Coast submarine cable system consortium on a
quarterly basis.
• Support increased access to broadband by:
– monitoring Broadband Infraco’s price reports
annually
– increasing the number of access points to
broadband in major cities and under serviced
areas through rolling out the national long
distance infrastructure.
Part B : Strategic objectives (cont.)
Programme 2
13
Sub
Programme
Output Measure/indicator 2011/2012
Target Milestone
2012/13
Target Milestone
2013/14
Target Milestone
Energy Eskom Monitoring
and Oversight
Annual Reports,
Corporate Plan, Strategic
Intent Statement and
Shareholder Compact
with Eskom
• Assessment of the
Annual Report and
Corporate Plan
• Assessment of the
Annual Report and
Corporate Plan
• Assessment of the
Annual Report and
Corporate Plan
• Negotiation and
approval of
Shareholder Compact
• Negotiation and
approval of
Shareholder Compact
• Negotiation and
approval of
Shareholder Compact
• Shareholder Strategic
Intent Communique
in preparation for the
Eskom AGM
• Shareholder Strategic
Intent Communique
in preparation for the
Eskom AGM
• Shareholder Strategic
Intent Communique
in preparation for the
Eskom AGM
• Assessment of SOE
Board.
• Assessment of SOE
Board.
• Assessment of SOE
Board.
Quarterly Reports
• Assessment of
quarterly reports
• Assessment of
quarterly reports
• Assessment of
quarterly reports
• Preparation of quarterly
investor briefs
• Preparation of quarterly
investor briefs
• Preparation of quarterly
investor briefs
Achievement of MTEF
targets by Eskom
• Assessment of PFMA
Applications
• Assessment of PFMA
Applications
• Assessment of PFMA
Applications
• Explore and facilitate
access to debt and
alternative funding
structures
• Explore and facilitate
access to debt and
alternative funding
structures
• Explore and facilitate
access to debt and
alternative funding
structures
Monitoring Eskom’s
capacity expansion
programme
Timeous delivery of new
generation capacity and
transmission networks
• Capacity delivery as
per plan (Shareholder
compact and IRP )
• Capacity delivery as
per plan (Shareholder
compact and IRP )
• Capacity delivery as
per plan (Shareholder
compact and IRP )
Mitigation strategy for
the declining network
performance
Quarterly reports
• Monitoring and
analysis of network
performance reports
• Monitoring and
analysis of network
performance reports
• Monitoring and
analysis of network
performance reports
Implementation of the
Coal Haulage Road
to Rail Migration Plan
Quarterly reports of road
to rail migration progress
(tons) and road improve-
ments (kms)
• Rehabilitation of coal
haulage roads
• Rehabilitation of coal
haulage roads
• Rehabilitation of coal
haulage roads
• Migrate Eskom coal
from road to rail
• Migrate Eskom coal
from road to rail
• Migrate Eskom coal
from road to rail
Progress reports on
Eskom’s role in MTRMP
(DSMEE, ECS implemen-
tation, REFIT, etc)
• Report on the imple-
mentation of Eskom’s
responsibilities with
respect to the MTRMP
• Report on the
implementation of
Eskom’s
responsibilities with
respect to the MTRMP
• Report on the
implementation of
Eskom’s
responsibilities with
respect to the MTRMP
• Report on the System
Adequacy
• Report on the System
Adequacy
• Report on the System
Adequacy
Programme 2
Energy and Broadband Enterprises
Measurable objectives
and medium term
output targets
14
Sub
Programme
Output Measure/indicator 2011/2012
Target Milestone
2012/13
Target Milestone
2013/14
Target Milestone
Ring-fenced
purchasing function
to procure the IPP
REFIT allocation as
per IRP1
Ring-fenced purchasing
function with approved
governance arrangements
• Ring-fencing directive
through Eskom
shareholder compact
MYPD3 application
and the migration to
tariff cost refectivity
Approval/support for the
Eskom application such
that Eskom is sustainable
and the economy is not
compromised
• Assessment and
decision on the Eskom
application for MYPD3
Re-negotiation of
Special Pricing
Agreements
(Aluminium South
Africa)
Support/approve minimiz-
ing of impact of ASA
agreements to Eskom/
economy
• Elimination of risks
associated with Special
Pricing Agreements
PBMR
Care and Main-
tenance Strategy
implemented
• Monitor and facilitate
the implementation of
the care and
maintenance strategy
• Quarterly progress
report
• Regular (monthly and
quarterly ) progress
reports
• Regular (monthly and
quarterly ) progress
reports
ICT
Broadband
Sector
Infraco monitoring
and Oversight
Strategic Intent Statement
and Shareholder Compact
with Infraco
• Analysis and Assess-
ment of the Annual
Report and Corporate
Plan.
• Analysis and Assess-
ment of the Annual
Report and Corporate
Plan.
• Analysis and Assess-
ment of the Annual
Report and Corporate
Plan.
• Negotiation and
approval of share-
holder compact
• Negotiation and
approval of share-
holder compact
• Negotiation and
approval of share-
holder compact
• Shareholder Strategic
Intent Communiqué
in preparation for the
AGM
• Shareholder Strategic
Intent Communiqué
in preparation for the
AGM
• Shareholder Strategic
Intent Communiqué
in preparation for the
AGM
• Assessment of SOE
Board.
• Assessment of SOE
Board.
• Assessment of SOE
Board.
Quarterly and Annual
Reports, Corporate Plan
• Assessment of
quarterly reports
• Assessment of
quarterly reports
• Assessment of
quarterly reports
• Preparation of quarterly
investor briefs
• Preparation of quarterly
investor briefs
• Preparation of quarterly
investor briefs
Achievement of MTEF
targets by Infraco
• Assessment of PFMA
Applications
• Assessment of PFMA
Applications
• Assessment of PFMA
Applications
• Explore and facilitate
access to debt and
alternative funding
structures
• Explore and facilitate
access to debt and
alternative funding
structures
• Explore and facilitate
access to debt and
alternative funding
structures
A drop in wholesale
prices to the levels
that are affordable
and sustainable
Wholesale price reduction Benchmarking and
Monitoring of Infraco’s
pricing in relation to the
local and international
market prices.
Benchmarking and
Monitoring of Infraco’s
pricing in relation to the
local and international
market price
Benchmarking and
Monitoring of Infraco’s
pricing in relation to the
local and international
market price
Programme 2
Energy and Broadband Enterprises (cont.)
Measurable objectives
and medium term
output targets
15
Sub
Programme
Output Measure/indicator 2011/2012
Target Milestone
2012/13
Target Milestone
2013/14
Target Milestone
Increased national
broadband
penetration
Percentage increase in
broadband penetration
per annum
Monitoring the rollout of
the national and interna-
tional network according
to the National Broadband
targets.
Monitoring the rollout of
the national and interna-
tional network according
to the National Broadband
targets.
Monitoring the rollout of
the national and interna-
tional network according
to the National Broadband
targets.
Business sustain-
ability for Infraco
Diversifcation of Revenue
Stream
Monitoring the contracts
on a quarterly basis
Monitoring the contracts
on a quarterly basis
Monitoring the contracts
on a quarterly basis
Sentech JV to enable
retail service provision
access
Formulate a collaboration/
synergy between Infraco
and Sentech in order to
assist Government to
achieve its ICT objectives.
Manage and monitor the
relationship on a quarterly
basis
Manage and monitor the
relationship on a quarterly
basis
Network reliability
and performance
Quarterly reports
indicating progress with
reliability and performance
improvement
Monitor implementation
plans that are in place
to improve reliability and
performance.
Monitor implementation
plans that are in place
to improve reliability and
performance.
Monitor implementation
plans that are in place
to improve reliability and
performance.
International
connectivity
Commissioning of the
West African Cable
System (WACS) Project
Support Infraco during
the roll-out phase (ends
in 2011).
Monitor the performance
and maintenance of
Infraco’s capacity on
quarterly basis.
Monitor the performance
and maintenance of
Infraco’s capacity on
quarterly basis.
Legal and
Governance
• To provide
effective and
sound legal advice
to ensure that
potential legal
risks are
highlighted and
accounted for.
• Monitoring and
oversight of
Eskom, PBMR
and Infraco
Ensuring effective
shareholder oversight
in Eskom, PBMR and
Infraco
Assisting in assessing
applications for approval
of signifcant and
materiality framework
Assisting in assessing
applications for approval
of signifcant and
materiality framework
Assisting in assessing
applications for approval
of signifcant and
materiality framework
Legal and
litigation
Monitoring the
Department’s legislative
compliance
Monitoring the
Department’s legislative
compliance
Monitoring the
Department’s legislative
compliance
Governance Oversight Providing assistance
on developing and
negotiating shareholder
compacts, corporate
plans, signifcance and
materiality framework,
Board appointments and
shareholder preparations
for AGMs
• Developing a
methodology on Board
appointments and
reappointment
• Continuously updating
database on Board
appointments
• Continuously updating
database on Board
appointments
• Continuously updating
database on Board
appointments
• Monitor and oversee
SOE remuneration
• Monitor and oversee
SOE remuneration
• Monitor and oversee
SOE remuneration
• High level audit of
PBMR winding up
Resource considerations
Spending in this programme over the medium term will
focus on making transfer payments to: the Pebble Bed
Modular Reactor Company for the decommissioning
and dismantling costs in 2010/11 and 2011/12, and
Broadband Infraco for the fnal capitalisation transfer in
2010/11.
Expenditure decreased from R2.5 billion in 2007/08 to
R174.5 million in 2010/11, at an average annual rate of
58.9 per cent. Over the medium term, expenditure is
expected to decrease to R21.7 million, at an average
annual rate of 50.1 per cent. The decrease in both
periods is due to a reduction of transfer payments to
state owned enterprises, particularly the Pebble Bed
Modular Reactor project, as it has been placed into care
and maintenance, and Broadband Infraco, as the entity
will not be receiving further funding from the fscus.
Programme 2
Energy and Broadband Enterprises (cont.)
Measurable objectives
and medium term
output targets
16
Legal & Governance
Purpose: Provide systems that align state owned
enterprises with legal and corporate governance
best practice and with Government’s strategic intent.
The programme comprises the following sub-
programmes
• Management - Offce of the Deputy Director-
General.
• Legal provides effective and sound legal advice
to the department to ensure that potential legal
risks to the department are highlighted and
accounted for. The subprogramme has a staff
complement of 4 and 55.3 per cent of the budget
is used on goods and services, including expert
legal advice and normal operational expenditure.
• Governance develops frameworks to promote
transparency and good corporate governance
within state owned enterprises. The
subprogramme has a staff complement of 2 and
69.6 per cent of the budget is used on goods
and services, including expert legal advice and
normal operational expenditure.
Strategic objectives
• Ensure effective shareholder oversight of all the
state owned enterprises by:
– addressing constraints on state owned enterprise
contract negotiation and management to improve
commercial competence and contribute to
economic growth and development.
– providing assistance on developing and
negotiating shareholder compacts, signifcance
and materiality frameworks annually, and as and
when necessary, borrowing power delegations.
– assisting in assessing applications for the
approval of signifcant and material transactions.
– assisting in board appointments and shareholder
preparations for annual general meetings.
– continuously updating the database on board
appointments on the department’s dashboard.
– annually reviewing the ownership policy,
governance toolkit and guidelines, as well
as appointments to, and remuneration and
performance of the boards of the state owned
enterprises.
• Ensure that state owned enterprises and the
department comply with legal requirements by:
– monitoring, quarterly, state owned enterprises’
corporate governance indicators through the
dashboard.
– monitoring and assessing legislative impacts
on state owned enterprises and alerting the
enterprises to changes and possible risks.
Part B : Strategic objectives (cont.)
Programme 3
17
Sub
Programme
Output Measure/indicator 2011/2012
Target Milestone
2012/13
Target Milestone
2013/14
Target Milestone
LEGAL Legal Advice The department’s
Legislative Compliance
Monitoring department’s
Legislative Compliance
Monitoring department’s
Legislative Compliance
Monitoring department’s
Legislative Compliance
Presidential Public
Liaison Unit.
Respond to queries from
the Presidential Public
Liaison Unit.
Respond to queries from
the Presidential Public
Liaison Unit.
Respond to queries from
the Presidential Public
Liaison Unit.
Respond to queries from
the Presidential Public
Liaison Unit.
Drafting of legal
documents
Drafting of SLAs and
Legal opinions;
Drafting SLAs and Legal
opinions timeously;
Drafting SLAs and Legal
opinions timeously;
Drafting SLAs and Legal
opinions timeously;
Winding down of
Aventura
Implementing and
monitoring of the winding
up process
Approval and transfer of
the remaining resorts
n/a n/a
Lodge relevant
documentation with the
Registrar of Companies
Closure of the matter
Winding down of
Diabo Trust
Trace and payout to
benefciaries
Monitor the winding up
process and distribution
to benefciaries
n/a n/a
Closure of the matter
Finalisation and
closure of the
litigation : Londoloza/
Paharpur
• Pre – trial proceedings Successful resolution of
Government’s case and
Court order in favor of the
Department
• Pre – trial proceedings
LEGAL Nabera: Finalisation
and closure of the
litigation
Conclude litigation Review alternative
measures to conclude the
litigation
Approval from Parliament Promulgation and
implementation of the Act
Governance Develop the
Government
Shareholder
Management Model
DPE Legislative Mandate Approval from the
shareholder
Cabinet approval
Development of the
Green/ White paper
• Consultation with State
Law Advisers
• Enactment and
President’s Minute
• Shareholder
Management
Practices
Effective shareholder
management through
legislative compliance and
corporate governance
tools
• Implementing
Companies Act
corporate governance
tools (e.g. standard
Memorandum of
incorporation) for all
SOE
• SOE Performance
monitoring and
evaluation framework
SOE Performance
monitoring and evalua-
tion framework
• Enhance relation-
ship between
Strategic state
Shareholdings,
capital markets
and the private
sector
• Provide support to
the Inter Ministerial
Oversight Committee
• Advise on specifc
company law and
corporate governance
questions
• Develop SOE
legislative and
regulatory frameworks
to provide for the
legislative environment
within which the SOE
operate.
Programme 3
Legal & Governance
18
Sub
Programme
Output Measure/indicator 2011/2012
Target Milestone
2012/13
Target Milestone
2013/14
Target Milestone
Governance Toolbox
and Audit
Monitor SOE adherence
to corporate governance
principles
• Develop an Owner’s
expectation manual
• Implement manual
• Monitor SOE
adherence to corporate
governance principles
Monitor SOE adherence
to corporate governance
principles
• Finalise manual with
SOEs and obtain
Minister’s and Cabinet
SOE Board and
Executive remunera-
tion
Monitor compliance to
SOE Remuneration
guidelines
• Roll out to the SOE
Monitor compliance to
SOE Remuneration
guidelines
Monitor compliance to
SOE Remuneration
guidelines
• Implementation by
SOE
• Monitor compliance to
SOE Remuneration
guidelines
SOE Subsidiary Lists Monitor acquisition and
disposal of subsidiaries
by SOE through the
dashboard
Monitor acquisition and
disposal of subsidiaries
by SOE through the
dashboard
Monitor acquisition and
disposal of subsidiaries
by SOE through the
dashboard
Monitor acquisition and
disposal of subsidiaries
by SOE through the
dashboard
Developing a Board
Database
Database for potential
SOE Board members
• Recruit and select
potential candidates for
the SOE Boards
Maintain and update
Board database
Maintain and update
Board database
• Develop a Board
database
Develop a Board
appointment
Framework
Uniform application by
SOE sector teams to
enhance effciency in
board appointment
process.
• Approval by DPE
Leadership
• Implementation by
Boards
• Monitoring and
evaluation
Monitoring and evaluation
• Roll out to SOE
sector teams.
• Stakeholder
Engagements
Promote effective
stakeholder relations
Formalise and implement
Forum
Structured engagement
with key stakeholders
Structured engagement
with key stakeholders
• Presidential
Review Commit-
tee on SOE
• Governance
Forum
• Structured
engagement with
Labour
Resource considerations
Expenditure decreased from R93.7 million in 2007/08
to R50.0 million in 2010/11, at an average annual rate
of 18.9 per cent. Over the medium term, expenditure is
expected to decrease to R14.3 million, at an average
annual rate of 34.1 per cent. The decrease in both
periods is driven by the reduction in transfers to Alexkor
due to the fnalisation of the Richtersveld community’s
land claim, which formed part of the court case
settlement, and the fnal establishment of the township.
Programme 3
Legal & Governance (cont.)
19
Programme 4
Manufacturing Enterprises
Manufacturing Enterprises
Purpose: Align the corporate strategies and
performance of Denel and the South African Forestry
Company Limited with Government’s strategic intent
and performance targets. Develop proposals in terms
of the state owned enterprises’ role in developing an
advanced manufacturing cluster.
The programme comprises the following
sub-programmes
• Management – Offce of the Deputy Director-
General.
• Defence Sector oversees Denel’s fnancial and
strategy implementation.
• Forestry Sector monitors the activities of the South
African Forestry Company.
• Legal and Risk (Manufacturing) deals with all legal,
governance and risk work specifcally related to
above mentioned state owned enterprises.
Strategic objectives
• Ensure alignment in shareholder strategic intent
in relation to state owned enterprises’ role in
achieving objectives in the defence manufacturing
and the forestry sectors by reviewing enterprise
strategies and mandates in the context of political
and sectoral policy shifts.
• Ensure that the corporate strategies and plans
of state owned enterprises are aligned with
government’s strategic intent by reviewing and
evaluating these strategies and plans annually,
and alerting the boards and enterprises to material
deviations.
• Facilitate the fnancial and operational sustainability
of Denel by reviewing the Denel Board to bring it to a
full complement of members with the requisite skills,
experience and expertise, as well as developing
a turnaround plan that clearly indicates how the
company will achieve commercial sustainability
and reduce its dependence on the fscus.
• Monitor Denel’s turnaround by:
– measuring ongoing performance against the
turnaround plan
– setting working capital management targets and
conducting monthly performance reviews.
– providing support to ensure the effective
restructuring of Denel Saab Aerostructures and
Denel Dynamics to return to commercial viability.
– ensuring optimal alignment between Denel’s
restructuring plan and the strategic requirements of
the Department of Defence and Military Veterans,
particularly the alignment with the Department of
Defence and Military Veterans’ military strategy,
once the Department of Defence has fnalised their
revision of the defence strategy.
• Facilitate the process of defning Denel’s future
role in the economy by regular interaction and
discussions with various stakeholders.
• Facilitate fnancial sustainability to ensure
commercial viability by assessing and monitoring
the implementation of the South African Forestry
Company turnaround plan, measured by improved
fnancial performance on an ongoing basis.
• Provide clarity on the future role of the South African
Forestry Company by:
– developing an internal position paper for broader
consultation between the South African Forestry
Company Limited and the Departments of
Agriculture, Forestry and Fisheries and Rural
Development and Land Reform
– ensuring that the mandate of the South African
Forestry Company is aligned with Government’s
strategic objectives both domestically and
internationally by assessing the company’s
quarterly reports.
• Facilitate the disposal of minority shares
by engaging with the Department of Rural
Development and Land Reform on its position
on the optimal institutional vehicle to ensure the
transfer of shares and developmental benefts to
community benefciaries.
• Monitor progress on resolving land claims over the
61 per cent of land owned by the South African
Forestry Company.
20
Sub
Programme
Output Measure/indicator 2011/2012
Target Milestone
2012/13
Target Milestone
2013/14
Target Milestone
DENEL Denel Board Review Appointment of Nine (9)
new Board members
(incl. Chairman) to bring
the Board to its full
complement
• Nine new Board
members appointed
Enabling Denel’s
Strategic Role in
provision of Defence
Capabilities
Alignment between Denel
strategy and SANDF
requirements (Retention
of strategic and sovereign
capabilities in areas
agreed to with DoD)
• Optimal alignment
between Denel’s
business model and
the strategic
requirements of the
Department of Defence
and Military Veterans’
defence strategy
• Ongoing monitoring
of alignment
• Ongoing monitoring of
alignment
Denel Turnaround
Plan
New business/growth
strategy for Denel
• Development of
turnaround plan that
pursues fnancial
recovery and stability
through improvements
in its operational and
fnancial performance
to secure its long term
viability and reduces
dependence on the
fscus
• Quarterly monitoring
of Implementation of
turnaround plan
• Quarterly monitoring
of Implementation of
turnaround plan
Resolution of
Government’s
position on the
future of Denel Saab
Aerostructures
Managed exit from DSA
Airbus A400M contract
Renegotiation and exit
of DSA Airbus A400M
contract
Review of Denel’s
company and group
structure
New group structure
with optimal governance
structure that creates
value, achieves greater
business effciency,
stronger functionality
whilst minimizing cost and
duplication
Denel’s future role in
the economy defned by
regular interaction and
discussions with various
stakeholders
Developmental
Contribution
• Training and skills
development and
succession planning
• Improved performance
in terms of BBBEE
targets
• Agreement with Denel
on increased usage
of Denel’s training
facilities
• Quarterly Report on
skills development
strategy and
succession planning
• Agreement with Denel
on BBBEE targets
included in the 2011/12
shareholder compact
for attainment of Level
4 BEE contribution by
March 2012
• Quarterly Report on
skills development
strategy and
succession planning
• Quarterly Report on
skills development
strategy and
succession planning
Programme 4
Manufacturing Enterprises
21
Sub
Programme
Output Measure/indicator 2011/2012
Target Milestone
2012/13
Target Milestone
2013/14
Target Milestone
SAFCOL Provide shareholder
oversight
Strategic Intent
Statement, Shareholder
Compact, Corporate Plan
and Annual Report
• Assess the Corporate
Plan.
• Assess the Corporate
Plan.
• Assess the Corporate
Plan.
• Negotiate Shareholder
Compact and its
approval
• Negotiate Shareholder
Compact and its
approval
• Negotiate Shareholder
Compact and its
approval
• Update Strategic Intent
Statement and Com-
muniqué in preparation
for the AGM
• Update Strategic Intent
Statement and Com-
muniqué in preparation
for the AGM
• Update Strategic Intent
Statement and Com-
muniqué in preparation
for the AGM
• Board assessment. • Board assessment. • Board assessment.
• Assess Turnaround
Plan
• Monitor Turnaround
Plan.
• Monitor Turnaround
Plan.
• Assess Section 54(2)
PFMA applications as
required
• Assess Section 54(2)
PFMA applications as
required
• Assess Section 54(2)
PFMA applications as
required
Quarterly
• Assess quarterly
reports and provide
investor briefs
• Assess quarterly
reports and provide
investor briefs
• Assess quarterly
reports and provide
investor briefs
Position paper on
SAFCOL’s future role
• Inter-governmental
consultation and
consensus on
SAFCOL’s future role.
• Implementation • Implementation
• Cabinet memorandum.
Facilitate share transfer
to minority shareholders
pending inter-departmen-
tal resolution on optimal
model
• Implementation • Implementation • Implementation
Facilitate land claims
process
• Ensure SAFCOL’s
participation in land
claims process
• Ensure SAFCOL’s
participation in land
claims process
• Ensure SAFCOL’s
participation in land
claims process
Resource considerations
The spending focus of the programme will be primarily
on administrative costs as no transfers will be made to
state owned enterprises over the MTEF period.
Expenditure decreased from R1.2 billion in 2007/08 to
R192.8 million in 2010/11, at an average annual rate
of 45 per cent. This is primarily due to the decrease
in transfers to Denel. Denel received R1.2 billion in
2007/08, including R221 million to pay a claim for an
indemnity granted to Denel and R933 million as a fnal
capital investment.
Additional transfers of R257.6 million in 2008/09, R191.9
million in 2009/10 and R181.3 million in 2010/11 were
made as further payments for indemnity claims.
Expenditure is expected to decrease from R192.8 million
in 2010/11 to R14.3 million in 2013/14, at an average
annual rate of 58 per cent. The decrease is due to
the cessation of transfer payments to the state owned
enterprises
Programme 4
Manufacturing Enterprises (cont.)
22
Transport Enterprises
Purpose: Align the corporate strategies and
performance of Transnet, South African Airways and
South African Express Airways with Government’s
strategic intent and performance targets.
The programme comprises of the following
sub-programmes
• Management – The Offce of the Deputy Director-
General. Transport Sector provides shareholder
oversight of Transnet. Aviation Sector provides
shareholder oversight of South African Airways
and South African Express Airways.
• Legal and Risk (Transport) deals with all legal,
governance and risk work specifcally related
to Transnet, South African Airways and South
African Express.
Strategic objectives
• Promote the alignment of corporate strategies
of state owned enterprises with Government’s
objectives in relation to the transport and aviation
sectors by undertaking a comprehensive review
of corporate strategies, business plans, and
annual and quarterly performance.
• Provide the Boards of Transnet, South African
Airways and South African Express Airways with
strategic intent statements at their annual general
meetings to highlight shareholder priority areas
and guide the policy direction of the enterprises.
• Implement a long term strategy for improving the
effciency and performance of investments by
state owned enterprises by annually monitoring
the key performance indicators and concluding
shareholder compacts with the Boards of
Transnet, South African Airways and South
African Airways Express.
• Create an enabling environment for transport
enterprises and ensure an appropriate balance
between the enterprise interest and the consumer
interest by:
• engaging with the policy Departments and
relevant regulators on a regular basis as and
when required
• ensuring the compliance of transport
enterprises with the Public Finance
Management Act (1999) and other legislative
prescripts.
• Ensure the contribution of Transnet to
achieving an effcient, competitive and
responsive infrastructure (output 3 of
outcome 6) by:
• increasing the market share of total freight
to rail to an annualised 250 mt from the
current 177 mt by 2014 by undertaking a
detailed diagnosis of challenges facing
Transnet Freight Rail and developing
an integrated government response to
growing rail market share
• facilitating the introduction of private
sector investment in rail through public
private partnerships to assist with the
provision of requisite infrastructure where
such investments are unaffordable on the
Transnet balance sheet
• overseeing the introduction of multiple
private operators on the branch line
network to revitalise the network as a
feeder to the core network and to realise
socioeconomic benefts
• facilitating the introduction of competition
for the management of container terminals
through the establishment of the Ngqura
container terminal as a transhipment
terminal
• pursuing incremental improvements in
ports productivity and rail operational
effciencies by creating performance
incentives via the Transnet shareholder
compact.
• Ensure the global competitiveness of the South
African freight logistics industry by implementing
national corridor performance measurement tools
and indicators over the MTEF period to quantify
the operational effciency of freight corridors.
• Improve investment in rail infrastructure by
monitoring the rollout of Transnet’s capital
expenditure programme by annually assessing
its impact for any signifcant deviations from
corporate plans, including tracking cost overruns
and time delays on major capital projects and
taking the necessary action.
• Monitor the implementation of the Competitive
Supplier Development Programme to leverage
Transnet’s capital expenditure for the
development of local supplier industries by
evaluating the quarterly Transnet reports.
• Provide support to South African Airways to
achieve sustainable levels of proftability by:
– overseeing the implementation of the initiatives
relating to the R1.6 billion guarantee to South
African Airways
– encouraging consistent generation of bottom
line profts in order to strengthen South African
Airways’ balance sheet.
• Monitor the alignment, strategy and mandate of
South African Airways and South African Express
Airways with the African aviation strategy by
evaluating quarterly, corporate plans and
performance against targets.
Part B : Strategic objectives
Programme 5
23
Sub
Programme
Output Measure/indicator 2011/2012
Target Milestone
2012/13
Target Milestone
2013/14
Target Milestone
Transnet Shareholder
Oversight
Annual reports, Corporate
Plan, Shareholder
Compact
• Assessment of the
Annual Report and
Corporate Plan
• Assessment of the
Annual Report and
Corporate Plan
• Assessment of the
Annual Report and
Corporate Plan
• Negotiation and
approval of Share-
holder Compact
• Negotiation and
approval of Share-
holder Compact
• Negotiation and
approval of Share-
holder Compact
• Preparation of the
Quarterly Investor Brief
• Preparation of the
Quarterly Investor Brief
• Preparation of the
Quarterly Investor Brief
• Appropriately skilled
and representative
Boards
• Appropriately skilled
and representative
Boards
Achievement of MTEF
targets
• Quarterly and annual
monitoring
• Quarterly and annual
monitoring
• Quarterly and annual
monitoring
• Assessment of PFMA
Applications
• Assessment of PFMA
Applications
• Assessment of PFMA
Applications
Annual General Meetings
– Advice to Minister on
exercise of shareholder
right
• AGM agenda and
shareholder response
• Appropriately skilled
and representative
board
• AGM agenda and
shareholder response
• Appropriately skilled
and representative
board
• AGM agenda and
shareholder response
• Appropriately skilled
and representative
board
SOE fve year perfor-
mance review
• Analysis of 5 year
performance
• Input to DPE SOE fve
year review publication
• Analysis of 5 year
performance
• Input to DPE SOE fve
year review publication
• Analysis of 5 year
performance
• Input to DPE SOE fve
year review publication
Develop and
implement a rail
freight improvement
programme to
increase market
share
Increased rail market
share to total freight
• Diagnostic workshop
with Transnet and
report on key initiatives
to address modal shift
• Facilitate increase
and improvements to
Transnet rolling stock
feet
• Lead the development
of an integrated
government response
to growing market
share (by identifying
relevant legislation
to be amended and
approved by Cabinet to
support modal shift to
rail)
• Monitor and ensure
incremental targets
for rail market share in
shareholder compact
• Facilitate implementa-
tion of identifed
measures to achieve
increase in Transnet
rail market share
(arising from the
diagnostic workshop
report and legislative
amendments)
• Monitor and ensure
incremental targets
for rail market share in
shareholder compact
Monitor rail market share
in shareholder compact
Create scope for
multi-operator
involvement in
under-utilized branch
lines
Multiple private operators
on the branch lines
network
• Concession and
rollout of frst wave of
concessions
• Facilitate at least 3
branch lines conces-
sions
Rollout of second and
third wave concessions
Continued rollout and
introduction of new
operators
Programme 5
Transport Enterprises
24
Sub
Programme
Output Measure/indicator 2011/2012
Target Milestone
2012/13
Target Milestone
2013/14
Target Milestone
Introduction of private
sector investment
in rail
Public Private Partner-
ships (PPPs) in rail
infrastructure
• Facilitate approval of
the Transnet private
sector participation
framework by Cabinet
• Oversee market
testing of private sector
appetite to invest
• Monitor frameworks/
agreements negotiated
and entered into with
private sector
• Facilitate four PPPs in
rail by Transnet
Achievement of ten PPPs
in rail
Oversee private
sector participation
in Ngqura container
terminal
Licensed operator for
Ngqura container terminal
• Framework for private
sector involvement
in Ngqura container
terminal developed
and approved
• Oversee appointment
of transaction advisor
by Transnet
• Request for proposal
(RFP) for advertised by
Transnet
• Agreement signed with
new operator
• Ngqura container
operator licensed by
Ports Regulator
• Operator in place
• Monitor performance of
Ngqura as a transship-
ment terminal
Develop National
Corridor Performance
Measurement
(NCPM) tools and
indicators
• IT system in place
• Agreed indicators
• Population and
monitoring of system
data
• Business intelligence
outputs
• Gauteng – Durban
(Natcor)
• Gauteng – Cape Town
(Capecor)
• Gauteng – Port
Elizabeth
• Gauteng – Maputo
• IT system operational
• Full NCPM system in
place
• Feedback of NCPM
inputs to policy in DoT,
DTI and Transnet
shareholder compact
Monitoring of corridor
performance via NCPM
system
Monitor roll out of
Transnet’s capex
programme
• Monitor compliance to
budget
• Assess impact of
changes in plan
• Quarterly and Annual
assessment
• Monitor delivery of the
Transnet NMPP main
trunk line
• Quarterly and Annual
assessment
• Monitor delivery of
coastal terminal and
completion of Transnet
NMPP
Quarterly and Annual
assessment
Complete a long
term National Freight
Network Plan (Rail
and ports)
• National Freight
Network Design
• Inputs to Transnet NIP
• Initiate study on
National Freight
Network Design (rail
and ports)
• Input to DOT’s
NATMAP process
• Completed study,
including funding op-
tions for infrastructure
development.
Implementation of
Competitive
Supplier Develop-
ment Programme
Leverage of Transnet
capex in the development
of local supplier industries
• Oversee development
of Transnet supplier
development plan
• Monitor delivery of
new jobs in supplier
industries
• Monitor implementation
• Monitor delivery of
new jobs in supplier
industries
• Monitor implementation
• Monitor delivery of
new jobs in supplier
industries
Consideration of
Transnet corporate
structure options
Defned role for in a
developmental economy
Develop corporate
structure options for
Transnet
Aviation Oversight SAA and
SAX
• Annual reports,
Corporate Plan,
Shareholder Compact
• Assessment of the
Annual Report and
Corporate Plan
• Negotiation and
approval of Share-
holder Compact
• Assessment of the
Annual Report and
Corporate Plan
• Negotiation and
approval of Share-
holder Compact
• Assessment of the
Annual Report and
Corporate Plan
• Negotiation and
approval of Share-
holder Compact
Programme 5
Transport Enterprises (cont.)
25
Sub
Programme
Output Measure/indicator 2011/2012
Target Milestone
2012/13
Target Milestone
2013/14
Target Milestone
• Preparation of the
Quarterly Investor Brief
• Preparation of the
Quarterly Investor Brief
• Preparation of the
Quarterly Investor Brief
• Shareholder Strategic
Intent Communique
in preparation for the
SAA and SAX AGM
• Shareholder Strategic
Intent Communique
in preparation for the
SAA and SAX AGM
• Shareholder Strategic
Intent Communique in
preparation for the SAA
and SAX AGM
• Assessment of SOE
Board
• Assessment of SOE
Board
• Assessment of SOE
Board
• Achievement of MTEF
targets
• Quarterly and annual
monitoring
• Quarterly and annual
monitoring
• Quarterly and annual
monitoring
• Assessment of PFMA
Applications
• Assessment of PFMA
Applications
• Assessment of PFMA
Applications
• Annual General
Meetings – Advice to
Minister on exercise of
shareholder rights
• AGM agenda and
shareholder response
• AGM agenda and
shareholder response
• AGM agenda and
shareholder response
• SOE fve year
performance review
• Analysis of 5 year
performance
• Analysis of 5 year
performance
• Analysis of 5 year
performance
• Input to DPE SOE 5
year review publication
• Input to DPE SOE 5
year review publication
• Input to DPE SOE 5
year review publication
Develop a strategic
scenario planning
model for SAA
• Assessment of
strategic options
• Financial model devel-
oped and scenarios
assessed
• Scenario planning and
forecasting
• Scenario planning and
forecasting
• Scenario planning and
forecasting
Ring-fencing of se-
lected SAA business
units and strategic
equity investments
(Voyager, Air Chefs,
Galileo and Cargo)
• Development of an
independent business
focus and new
strategic alignment
• Review and implement
business plans
• Implement business
plans
• Monitoring of
implementation of
business plan
Assess options for
establishing South
African Airways
Technical as a
multi-airline focused
African maintenance
hub
• Feasibility study • Proposal to Cabinet
and draft enabling Act
• Implement decisions • Monitoring of
implementation of
business plan
Resource considerations
The spending focus of the programme will be primarily
on administrative costs as no transfers will be made to
state owned enterprises over the MTEF period.
Expenditure decreased from R752.1 million in 2007/08
to R21.3 million in 2010/11, at an average annual rate of
69.5 per cent. The decrease was due to the cessation of
transfers to state owned enterprises. Over the medium
term, expenditure is expected to increase to R25.5
million, at an average annual rate of 6.2 per cent, mainly
to provide adequate support to the entities managed in
this programme.
Programme 5
Transport Enterprises (cont.)
26
27
Part B : Strategic objectives
Programme 6
Joint Project Facility
Purpose: Align the department and its portfolio of state
owned enterprises to national economic strategies,
such as the New Growth Path and associated
objectives, through focused policy research and the
development of catalytic projects.
The programme comprises the following sub-
programmes
• Management- The Offce of the Deputy Director-
General.
• Joint Project Facility provides programme
management support for a number of catalytic
projects that align the department and its portfolio
of state owned enterprises to national economic
strategies. 79.1 per cent of the subprogramme’s
budget over the MTEF period will be used for
goods and services.
Strategic objectives
The Joint Project Facility’s (JPF) new mandate aims
to align the DPE and its portfolio of SOE to national
economic strategies and associated objectives
through focused policy research and the development
of catalytic projects.
Achievements of Joint Project Facility projects
• The procurement leverage/competitive supplier
development programme leverages off state owned
enterprises’ capital and operational procurements
associated with Eskom and Transnet’s build
programmes to promote investments in plant,
technologies and skills in state owned enterprises’
suppliers. This supports the Industrial Policy
Action Plan 2 and the New Growth Path. It includes
both Transactional and Programmatic (feet
procurement) The South African Renewables
Initiative aims to reduce the cost of capital for
renewables and provide additional funding for
the renewable energy feed-in tariff. In future,
the procurement leverage programme aims to
establish a Centre of Excellence. The Infrastructure
Supplier Benchmarking Programme, which builds
the competitiveness of the local supplier base and
is focused on supplier profling, benchmarking,
capacity building and matchmaking, will be
relocated to the Department of Trade and Industry.
• Policy programmes aim at establishing the role
of state owned enterprises and the shareholder
executive in the Developmental State. They will
also focus on the role of state owned enterprises
in Government’s New Growth Path and develop a
departmental position on macroeconomic policy.
• The innovative infrastructure investment dialogue
programme aims at interrogating existing
investment plans’ assumptions around unlocking
growth and developing policies and funding
strategies to increase the rate of investment in
Eskom and Transnet. Better dialogue with key
stakeholders is being contemplated to improve the
performance of state owned enterprises.
• The framework for Africa programme aims at defning
focus areas with acceptable risk parameters and
clear developmental impacts for the involvement of
South Africa’s state owned enterprises in Africa and
will also develop implementation policy for state
owned enterprises.
• The human resource, capacity building
and transformation programme has several
subprogrammes:
– The skills development programme leverages
the skills development capacity of state owned
enterprises and their core suppliers to ensure
the optimum provision of scarce and critical skills
(artisans, technicians and engineers) in support
of the build programme. This includes: overseeing
skills planning and implementation in state
owned enterprises and their suppliers; facilitating
partnerships between state owned enterprises,
further education and training institutions and
industry, in support of artisan development;
ensuring that state owned enterprises support
the national skills agenda; and monitoring scarce
and critical skills in state owned enterprises and
ensuring skills performance indicators are included
in Shareholder Compacts.
– The management learning programme develops
a cadre of management leadership capability in
state owned enterprises, agencies and regulators
in South Africa and Africa. The University of Cape
Town’s Graduate School of Business launched this
programme in May 2010.
– The parliamentary learning programme (Autumn
School) is an annual event to provide the
Parliamentary Portfolio Committee on Public
Enterprises and National Council of Provinces
Select Committees on Labour and public
enterprises with an opportunity to engage in
dialogue with industry experts around key
issues facing government and the state owned
enterprises.
• The environmental issues project balances
environmental conservation with the need to develop
infrastructure rapidly. The environmental impact
assessment process for strategically important
developments has been streamlined for the state
owned enterprises’ build programmes and a fund
has been established to assist the process. The
environmental impact assessments for strategically
important developments are monitored, and
where necessary ministerial intervention can be
sought. The project also participates in broader
engagements around air quality, water provision
and climate change.
• The property project leverages off the non-core
property portfolios of state owned enterprises to
contribute to state priorities, such as land release for
human settlement, property sector transformation,
urban renewal and socioeconomic development.
28
Sub
Programme
Output Measure/indicator 2011/2012 Target
Milestone
2012/13
Target Milestone
2013/14
Target Milestone
HR, Capacity
Building and
Transfor-
mation
Programme:
SOE and
Supplier Skills
Development
Provision of scarce
and critical skills in
SOE
• Establish partnerships
between SOE, FET
and industry in support
of artisan development
Implementation and
Monitoring
Implementation and
Monitoring
Implementation and
Monitoring
• Monitor skills
dashboard.
• Skills development
KPIs to be included in
Compacts
SOE
Transforma-
tion Oversight
Implementation of
SOE transformation
agenda
Monitor B-BBEE,
employment equity and
management transforma-
tion (including succession
planning).
Dashboard to include
transformation indicators
Implementation and
Monitoring
Implementation and
Monitoring
Specialised
Skills
Development
Programmes
Management
Learning Programme
at UCT GSB to
facilitate improved
SOE performance
and management
MLP review Annual Review of
Programme
Annual Review of
Programme
Annual Review of
Programme
Parliamentary
Learning Programme
(PLP)
Hosting of annual PLP for
Portfolio Committee on
Public Enterprises
and National Council
of Provinces Select
Committee for Labour and
Public Enterprises
Annual PLP Annual PLP Annual PLP
Procurement
Leverage
Programme
Leverage SOE capi-
tal and operational
procurements to
promote investments
in plant, technologies
and skills in SOE
supplier communities
• Ensure SOE demand
planning and procure-
ment implementation
process to enable
supplier development
Implementation and
monitoring
Implementation and
monitoring
Implementation and
monitoring
• Institutionalise govern-
ance and accountability
Establish governance and
accounting mechanism
Monitoring Monitoring
Transactional based
leverage to ensure
procurements have
optimal development
impact
• Ensure SOE design
and implement next
generation supplier
development plans.
Oversight of implementa-
tion and monitoring
Oversight of implementa-
tion and monitoring
Oversight of implementa-
tion and monitoring
• Integration of supplier
development with SOE
procurement policy.
DPE procurement policy
for supplier development
Monitoring Monitoring
Programmatic/feet
based leverage
• Design and facilitate
the implementation of
long term
procurements.
Monitor industrial
capabilities
Monitoring Monitoring
• Locomotive feet
procurement for
Transnet.
Establish formal oversight
committee and task team
Monitoring Monitoring
• Facilitate renewable
procurements for
the South African
Renewables Initiative
(SARi).
Leverage international
climate fnancing com-
mitments and align with
DOE.
Implementation Monitoring
Programme 6
Joint Project Facility
29
Sub
Programme
Output Measure/indicator 2011/2012 Target
Milestone
2012/13
Target Milestone
2013/14
Target Milestone
• Nuclear feet
procurement based on
IRP2 allocations.
Align roles and
responsibilities with DOE.
Implementation Realignment with IRP3
and implementation
Establish SOE
Centre of Excellence
for Complex Capital
Projects
Institutional design Implementation Implementation Implementation
Develop Buyer
requirement database.
Implementation Implementation Implementation
SOE procurement
capability certifcation
project
Implementation Implementation Implementation
Complex procurement
skills development.
Implementation Implementation and
monitoring
Implementation and
monitoring
Policy
Programmes
Role of SOE and
Shareholder in the
developmental State
Further development of
shareholder management
model.
Implementation Monitoring Monitoring
Role of SOE in the
New Growth Path.
Analysis of New
Growth Path and SOE
contribution
Implementation and
monitoring
Implementation and
monitoring
Implementation and
monitoring
Develop a DPE
position on Macro-
Economic Policy.
Analysis of macro-
economic policy and its
impact on SOE viability.
Research alternative
policies.
Implementation Implementation
Strategic
Programmes
Innovative Infra-
structure Investment
Dialogue
Develop funding
strategies.
Develop relevant policies. Implementation Implementation
Framework for Africa. Develop policy and focus
areas in Africa for SOE
involvement.
Develop implementation
policy.
Implementation Implementation
Property
Project
SOE non-core
property portfolios
contribute to state
priorities, property
sector transforma-
tion, urban renewal
and socio-economic
development.
Property disposals and
facilitation of Key
Integrated Developments.
Facilitation and monitoring Facilitation and monitoring Facilitation and monitoring
Environmental
Issues
Government policy
balances environ-
mental conservation
with the need
to develop SOE
infrastructure rapidly
Monitor Environmental
Impact Assessments for
Strategically Important
Developments
Analysis and Monitoring Analysis and Monitoring Analysis and Monitoring
Implement DPE-DEA-
Eskom MOU.
Implementation Implementation Implementation
Resource considerations
As a result of the realignment of the department’s
functions, the Joint Project Facility subprogramme
was moved to this programme from the Manufacturing
Enterprises programme in 2007/08. Historical
expenditure has been adjusted accordingly.
Expenditure decreased from R15.5 million in 2007/08 to
R10.2 million in 2010/11, at an average annual rate of
13.1 per cent. This was due to the completion of some
of the research projects. In 2010/11, the programme’s
projects increased from four to fve as a result of the South
African Renewables Initiative project being launched.
Over the MTEF period, expenditure is expected to
increase from R10.2 million to R15.9 million, at an
average annual rate of 15.9 per cent. This is mainly due
to the expansion over the MTEF period of some of the
projects and programmes, and two new projects to be
launched from 2011/12.
Programme 6
Joint Project Facility (cont.)
30
Alexkor
Since November 1992, Alexkor has been run as a
public company with the State as sole shareholder.
Alexkor mines diamonds in the Alexander Bay area,
including marine mining and land mining.
In 2003, the Constitutional Court ruled that the
Richtersveld community had a legitimate claim
to its ancestral land from which it was forcibly
removed after diamonds were discovered there in
the early 1920s. The court found that the community
had been evicted under discriminatory apartheid
laws and was entitled to have both the land and
mineral rights returned. Alexkor has been subject to
a number of business constraints, including the land
claim. These constraints have resulted in decreasing
diamond recoveries over the years. The deed of
settlement for the land claim was signed in April
2007, and the Department of Public Enterprises has
mandated Alexkor to explore options to reposition
the company as a state owned mining and minerals
company. This new strategy will enable Alexkor to
respond to new mining and mineral opportunities
and ensure the company’s long term viability,
enabling it to effectively address its environmental
rehabilitation and other liabilities while contributing
to the socioeconomic development of the region.
While continuing with mining activities in the current
constrained economic context, Alexkor is focused on
implementing the Richtersveld land restitution order
imposed on it by the land claims court. The court
order obliges it to transfer land and mineral rights
to the Richtersveld community, establish Alexander
Bay as a formal township, undertake environmental
rehabilitation, and establish a pool and share joint
venture with the Richtersveld Mining Company for
future mining activities.
Signifcant progress has been made in the
implementation of the settlement signed with the
Richtersveld community. All Alexkor, State and
Northern Cape provincial land has been transferred,
except for the township erven. The subdivision and
zoning of the township has been conducted and
the general plan has been approved. Transfer of
the township will be made soon. The upgrade of the
township civil and electrical engineering services
to municipal standards has begun and is expected
to be completed in July 2011. Alexkor’s agricultural
and maricultural assets have been transferred to the
community. Transfer of the land mining rights to the
community is also imminent, and this paves the way
for the development of a more viable mining venture
and a redirection of Alexkor’s strategy.
This will entail, among other things, seeking
opportunities to procure new mining ventures to
secure new revenue streams and ensure its future
growth. It will also involve exploring opportunities for
downstream benefciation to contribute to the creation
of new jobs, the development of the requisite skills,
investment in research and development, economic
growth, sustainable development and cost effective
support for the broader policies of government.
The company showed some improvements in
its fnancial performance in 2009/10, driven by
improvements in carat production and the carat price,
coupled with reductions in expenses and provisions
for the post-retirement medical aid. Alexkor achieved
revenue of R163.9 million in 2009/10, a 28.5 per cent
increase from the R127.5 million achieved in the
previous year. It recorded a net operating proft of
R27 million (2008/09: R77.6 million loss) and R36.1
million proft for the year (2008/09: R65.7 million
loss). Comprehensive income for the year was R48.8
million, after taking into account the revaluation
reserve of R12.7 million. As a result of the proft of
R36.1 million coupled with the revaluation of R12.7
million, Alexkor’s capital and reserves improved,
albeit remaining in a net negative R67.3 million
equity position (2008/09: negative R103.4 million
equity position).
State Owned Enterprises
31
Broadband Infraco
South Africa lags behind its international
counterparts in terms of ICT penetration and the rate
at which new technology is adopted. Broadband
services in South Africa are more expensive and
the penetration is much lower than international
benchmarks. Broadband Infraco was established in
2007 in terms of the Broadband Infraco Act (2007)
as a State led intervention to introduce competition in
the telecommunications market and to contribute to
increasing access to broadband services including
underserviced areas. It has invested in a national long
distance fbre optic network based on the fbre optic
assets deployed by Eskom on power transmission
lines and Transtel on railway lines, which will form
the backbone of the second national operator. By
March 2010, Broadband Infraco had deployed and
commissioned 12 250 km of the network. Broadband
Infraco launched its services to the market in October
2010 after obtaining an electronic communications
networks services licence in October 2009.
In addition to national connectivity, international
connectivity is also a major cost component. Since
its inception, Broadband Infraco’s strategy has
focused on reducing the cost of this key element.
The construction and maintenance agreement was
signed in April 2009. Once completed and fully
commissioned, the system will reduce broadband
costs and increase bandwidth capacity for all South
Africans.
The West Coast Submarine Cable System is
expected to be ready for service by the last quarter
of 2011/12. All targets set in the previous MTEF
cycle such as the marine environmental survey, the
manufacturing of the marine cable, the deployment
of the optical line terminal equipment have been
completed. It is anticipated that the marine cable
installation will be completed in March 2011.
Since 2006/07, Broadband Infraco was capitalised
with R1.3 billion for establishment and operational
costs, which comprised: R627 million in 2006/07,
R377 million in 2008/09, R208.5 million in 2009/10,
and a fnal transfer of R138.6 million in 2010/11.
State Owned Enterprises (cont.)
32
State Owned Enterprises (cont.)
Denel
Denel was incorporated as a private company in
April 1992, when it separated from the Armaments
Corporation of South Africa. At the time, the industrial
and manufacturing activities of the corporation were
integrated into Denel. Denel’s mandate is to supply
South Africa’s armed forces with strategic and
sovereign capabilities. Denel also plays a major role
in contributing to the development of South Africa’s
advanced manufacturing capability. The Denel
group of companies currently delivers products
ranging from ammunition to missiles, and also
carries out systems design and integration for land
and air capabilities for the Department of Defence
and Military Veterans.
In 2005, a turnaround strategy for Denel was
initiated, which provided for a shift from major
systems development towards the manufacture of
sub-systems and components for local and global
markets. The strategy was driven by the need for
Denel to be commercially viable and reduce its
dependence on the fscus. A key part of the strategy
was for Denel to enter into equity partnerships that
could provide it with access to international markets,
technical expertise and capital. Equity partnerships
have thus far been secured in four of Denel’s
businesses: engine manufacturing, munitions,
optronics and aero structures.
Although Denel has made some progress since
2005, its solvency position continues to pose serious
challenges. While the trading losses in all the trading
entities (apart from the aerostructures business) have
been brought down and net equity is in the black,
Denel is overloaded with debt and is not generating
enough gross proft to secure its survival.
The business has largely been relying on debt
fnancing with the help of government guarantees,
but this is not sustainable. More sustainable support
mechanisms are currently being assessed, and they
will be developed, based on a robust turnaround
plan. The plan is aiming for fnancial recovery and
stability through improvements in its operational and
fnancial performance to secure its long term viability.
A key focus is the restructuring of Denel Saab
Aerostructures and ensuring optimal alignment
between Denel’s business with the strategic
requirements of the Department of Defence and
Military Veterans, particularly in relation to its military
strategy. Coupled with this will be the need to
defne Denel’s future role in the economy to ensure
the strengthening of advanced manufacturing
technologies in support of government’s industrial
policy objectives.
Denel recorded a net loss of R246 million, which is
an improvement of R287 million compared to the
net loss of R533 million incurred in 2008/09. This
improvement is due to lower operating costs, the
closing of certain legacy contracts, cost cutting
and better fnancial performance by associated
companies.
The net loss for the year is mainly ascribed to:
Denel Saab Aerostructures (which posted a net loss
of R328 million before interest and taxes); Denel
Dynamics Missiles (which posted a net loss of R51
million after impairment charges, before interest and
taxes); and interest expenses of R139 million on
external loans. Revenue has also been negatively
impacted by the delays in the A400M programme.
Revenue decreased by 8 per cent from R3.9 billion
to R3.6 billion in 2009/10.
33
Eskom
Eskom generates 95 per cent of the electricity used
in South Africa and 45 per cent of the electricity used
in Africa. Eskom’s reserve margin has been steadily
declining since 1999 as a result of increasing
demand and not enough additional capacity being
commissioned. This was particularly acute in
January 2008, when the reserve margin dropped
to alarmingly low levels (3.6 per cent commercially
available), resulting in extensive load shedding.
Low coal stockpile levels (12 days compared to the
20 days which is acceptable in the industry) also
contributed to the low reserve margin in 2007/08.
Eskom has since introduced a recovery plan, which
has seen the average stockpile level increase to 37
days as at the end of March 2010. However, this is
still less than the company target of 42 days.
Since 2004, Eskom has been undertaking a capacity
expansion (build) programme to increase capacity
and ensure the secure supply of electricity.
Completed projects between 2005/06 and 2008/09
include the return to service and construction of
three power stations. As a result, Eskom delivered
4 9064MW of additional generating capacity into the
system between 2005/06 and 2009/10. The focus
for 2010/11 includes fnalising the funding model
to ensure the completion of the capital expansion
programme and improving operational performance
to ensure security of supply.
Over the fve-year period from 2008/09 to 2012/13,
Eskom’s revised build programme is estimated at
R385 billion. Major projects still to be completed
include the construction of three new power stations.
Other major projects include the return to service of
two power stations and the construction of three new
power stations and transmission projects. Eskom
plans to deliver another 625MW of capacity into
the system in 2010/11, and additional generating
capacity of 2 025MW between 2010/11 and 2012/13.
State Owned Enterprises (cont.)
34
State Owned Enterprises (cont.)
Pebble Bed Modular Reactor
The Pebble Bed Modular Reactor was initially set
up as a nuclear architect engineering company
that was focused on the design and licensing of
a standardised nuclear heat supply system and
pebble fuel. It was established in 1999 to develop
and market small scale, high temperature reactors
locally and internationally. The company has not been
able to acquire additional investment for the Pebble
Bed Modular Reactor project, nor has it been able
to acquire a customer despite revising its business
model in 2008/9, since Government’s last funding
allocation in 2007, of which the last transfer was
effected in 2009/10. The company’s business model
has subsequently been revised in May 2009 and the
company’s main focus will be the preservation and
maintenance of intellectual property and assets.
In light of the participation in the United States
Department of Energy’s next generation nuclear
programme in which the Pebble Bed Modular
Reactor Company was part of a consortium, not
materialising, Cabinet approved that the company
be placed into care and maintenance to protect
its intellectual property and assets while ensuring
that no additional funding will be required from
Government. The Department of Public Enterprises
will therefore be monitoring the implementation of
this transition.
No further funds have been committed by
Government, except for R20 million, which was
provided in the adjustments budget and which will
be disbursed in 2010/11, and a further R40 million
for disbursement in 2011/12. These funds have been
allocated to ensure that the necessary provision for
the statutory requirement for decommissioning and
dismantling the fuel development laboratory is met
by the company.
35
South African Forestry Company
The South African Forestry Company manages
and develops commercial forests. The company’s
activities include forestry management and timber
harvesting and processing. The company’s
main subsidiary, Komatiland Forests, operates
in Mpumalanga, Limpopo, KwaZulu-Natal and
Mozambique. Softwood saw timber is sold in South
Africa and soft and hardwood saw timber and pulp
wood in Mozambique. Komatiland Forests has an 80
per cent shareholding in the Mozambican forestry
company, Indùstrias Florestais de Manica, while the
remaining 20 per cent is held by the Mozambican
government through its Instituto de Gestão das
Participações do Estado. The company plays an
important role in rural development and various
enterprise development projects have been initiated
in order to contribute to poverty alleviation in the rural
areas in which it operates.
Government is currently re-examining the privatisation
of Komatiland Forests and the future role of the
South African Forestry Company, in the context of
the developmental State. While the Department of
Public Enterprises is carrying out its own review, the
Presidency is conducting a broader review of state
owned enterprises across all spheres of government.
The department will be engaging closely with the
Presidential Review Committee on the implications
for the company as well as other key stakeholders
such as the Department of Agriculture, Forestry and
Fisheries and the Department of Rural Development
and Land Reform. Thereafter, a joint proposal will be
submitted to Cabinet for consideration.
In 2007, the Minister of Public Enterprises extended
the disposal of the company by fve years to 2011/12
to allow for the resolution of the land claims lodged
with the department of Rural Development and
Land Reform since 61 percent of the South African
Forestry Company Limited land under operation is
subject to land claims, with the understanding that
shareholder value would be preserved in the interim.
However, the economic downturn has had a severe
impact on the company’s operations and revenue.
The company reported a net loss of R468.9 million
in 2009/10.
State Owned Enterprises (cont.)
36
State Owned Enterprises (cont.)
South African Airways
South African Airways is South Africa’s national air
carrier. Owned by government, it is a full service
network operating international, regional and
domestic scheduled services, from its head offce
at OR Tambo International Airport. Its main business
units include passenger and mail air services, cargo,
South African Airways Technical and a Voyager
loyalty programme.
The airline’s governance structure has recently been
strengthened with the appointment of a new Board
of Directors and a new Chief Executive Offcer,
which continue to build on the successes achieved.
Chief among these is the continued rollout of the
cost saving measures that were implemented as
part of the restructuring plan that was implemented
in 2007. These measures achieved savings of
R2.5 billion over an 18-month period until March
2009. The department and National Treasury are
jointly monitoring what the airline is doing to meet
the conditions for approval of a R1.6 billion going
concern guarantee provided in 2008. The company
did not make use of this guarantee in 2009/10,
although R615 million was used to provide for
consumer protection guarantees to the domestic
and international licensing councils in 2010/11.
In 2009/10, the legacy agreement for the purchase
of Airbus A320 aircraft was satisfactorily resolved by
rescheduling the delivery dates of the aircraft from
2010 to 2013 and reducing unit pricing by increasing
the number of aircraft contractually committed from
15 to 20. This provided South African Airways with
a temporary reprieve to allow it to strengthen its
balance sheet.
The stringent focus on operational effciency
following the successful restructuring programme
has enabled the airline to record profts over the past
three years. These include a proft of R123 million
before restructuring costs in 2007/08, a bottom line
proft of R11 million in 2008/09, and a bottom line
proft of R323 million in 2009/10. The major drawback
in the past has been huge hedging losses, of which
R1.6 billion was recorded in 2008/09 but reduced to
R601 million in 2009/10. The reduction in hedging
losses was achieved through the implementation of
a new fnancial risk management policy.
The focus over the MTEF period will be to ensure
the implementation of the initiatives relating to the
R1.6 billion guarantee and to encourage consistent
generation of bottom line profts to strengthen the
airline’s balance sheet. This is necessary for ensuring
that the airline is able to fund the aircraft replacement
transaction without government support.
37
South African Express Airways
South African Express Airways operates regional and
domestic fights from OR Tambo International Airport
in Johannesburg, serving secondary routes in South
Africa and Africa. The airline was established in 1994.
The airline’s African operation includes services to
Botswana, Namibia, the Democratic Republic of the
Congo and Mozambique. It also provides a feeder
air service that connects with the South African
Airways network. The company was transferred from
Transnet to the Department of Public Enterprises in
2008/09.
The airline’s joint venture with a local partner
in the Democratic Republic of Congo, Congo
Express, began in February 2010 as part of the
implementation of the African hub strategy. However,
these operations have not performed as anticipated,
although the board and management are addressing
the fnancial and operational aspects to improve the
joint venture’s prospects.
The load factors of the airline reduced from 71 per
cent in 2008/09 to 63 per cent in 2009/10 due to
the slowdown in both the domestic economy and
regional markets. This affected other key performance
indicators, which were mostly below the target.
Passenger numbers at 1.56 million in 2009/10 were
below the previous year’s passenger numbers of
1.61 million, as well as the target of 1.65 million for
2009/10..
Daily fight hours increased from 6 hours per day
in 2008/09 to 7 hours per day in 2009/10, but were
below the target of 8 hours per day. It is anticipated
that conditions for most regions’ air travel will
improve in 2010/11. The slowdown in domestic and
regional air travel experienced during the 2010 FIFA
World Cup is expected to reverse. In addition, the
recent appointment of a new Chief Executive Offcer
is expected to bring stability to the airline.
The airline continues to generate profts, a trend
which has been maintained over the last six years.
The net proft for 2009/10 was R251 million, a 6 per
cent growth compared to 2008/09. This was slightly
above the corporate plan target for the year. Net
proft increased by 10 per cent from R228 million
to R251 million compared to last year. The revenue
declined by 10 per cent to R1.7 million compared to
the previous year, and was 21 per cent below target.
This was due to falling passenger numbers as a
result of the global economic downturn.
Total capital and reserves in 2009/10 amounted to
R1.2 billion, 27 per cent above the equity of R943
million in 2008/09.
State Owned Enterprises (cont.)
38
39
Transnet
Transnet has been transformed into a focused
freight transport company whose mission is to lower
the cost of doing business through providing port,
rail, and pipeline infrastructure and cost effective,
effcient operations within acceptable benchmark
standards. Transnet’s key role is to assist in lowering
the cost of doing business in South Africa and to
enable economic growth.
The company made good progress in signifcant
areas of the business for the frst six months of
2010/11. The key drivers of the business that
refected improvement were volume growth and
productivity, which, together with cost reduction
initiatives, contributed to improved proftability. The
capital expenditure programme continued despite
the global economic downturn, resulting in the
creation of capacity ahead of demand.
Capacity on the iron export line increased from 47Mt
to 61Mt. Specifc interventions to create capacity
on the coal line through improved operational
procedures and effciencies are currently in place.
This will support the planned R15.4 billion investment
on the coal line to create the targeted capacity of
81Mt by 2014, subject to the coal industry entering
into long term take or pay contracts which are still
being negotiated. Transnet Freight Rail’s quantum
leap focuses on customer service delivery and
operational effciencies. In the frst six months of
2010/11, containers on rail increased by 9 per cent
in line with quantum leap targets. Other interventions
include investment in rolling stock to address ageing
infrastructure, and branch line revitalisation, aimed
at contributing to modal shift.
Gross crane moves per hour at the Durban container
terminal and pier 1 continue to be below benchmark
levels, reported at 21 and 22 gross crane moves
per hour for the frst half of 2010/11. But substantial
improvements were realised in the frst few weeks
of September 2010, where 24 gross crane hours at
the Durban container terminal and 30 in pier 1 were
reported. Iron ore loading rates for the same period
were above the set target despite the derailments on
the line, assisted by dual and staggered loading at
the Saldanha bulk terminal.
The new multi-product pipeline is a strategic
investment to secure the supply of petroleum
products to the inland market over the long term.
This line will replace the old Durban-Johannesburg
pipeline, which is running at full capacity and nearing
the end of its design life. Some of the benefts of
the new multi-product pipeline include (when fully
operational) the reduction in the number of tankers
on the road by at least 60 per cent, a reduction in
congestion on the roads and a reduction in carbon
emissions from road transportation of petroleum
products.
In terms of the revised schedule, the 24-inch new
multi-product pipeline trunk line is to be completed
by December 2011. However, the remaining
construction activities to supporting infrastructure
are now scheduled to be complete and ready for
operation by December 2013. Some delays were
experienced following the decision to relocate the
construction of the coastal terminal from the old
Durban International Airport to Island View in the port
of Durban, as well as delays in obtaining the required
statutory approvals. The move to Island View
resulted in an 11km increase in the length of the
pipeline affecting the hydraulics and the need
for a change of design. These changes and other
matters will have an impact on the new multi-
product pipeline’s total costs. Transnet will make
an announcement once the cost review exercise is
completed.
Net proft from continuing operations for the period
ending 30 September 2010 was R1.7 billion an
increase of 34.7 per cent compared to R1.3 billion
up to 30 September 2009. Revenue increased by 76
per cent to R18.7 billion (30 September 2009: R17.3
billion) despite the impact of the organised labour
strike that negatively impacted on operations for 17
days. The growth in revenue refects the increase in
volumes of all commodities transported compared to
the previous period, except for iron ore, which was
negatively impacted by derailments.
Cash generated from operations increased by 13.5
per cent to R8.7 billion, which shows the company’s
ability to generate stable and strong cash fows.
The cash interest cover ratio has decreased to 3.7
times from 4.2 times compared to the same period
in 2008/09, due to an increase in net fnance costs,
which is a consequence of the capital expenditure
programme. This ratio, however, remains signifcantly
above the target of a minimum of three times.
Transnet is planning to borrow approximately R35
billion over the next three years to partly fund the
execution of the capital expenditure programme.
Funding raised by the 30 September 2010 was R7.6
billion, with an estimated funding requirement for the
remainder of the year of approximately R9.6 billion.
Despite the recent economic downturn, Transnet’s
investment in infrastructure is still on track. The
capital expenditure for the six months ended 30
September 2010 (excluding capitalised borrowing
costs) was R10.2 billion, compared to R8.7 billion
spent in the previous six-month period.
State Owned Enterprises (cont.)
40
Acronyms
GDP Gross Domestic Product
MTEF Medium-Term Expenditure Framework
PFMA Public Finance Management Act
IRP Integrated Resources Plan
MTRMP Medium-Term Expenditure Framework
DSMEE Demand Side Management and Energy Effciency
ECS Energy Conservation Scheme
REFIT Renewable Energy Feed in Tariff
IPP Independent Power producers
MYPD Multi-Year price Determination
SLA Service Level Agreement
NCPM National Corridor Performance Management
NMPP National Multi Product Pipeline
NATMAP National Transport Master Plan
NIP National Infrastructure Plan
FET Further Education and Trainng
UCT GSB University of Cape Town Graduate School of Business
DPE-DEA-Eskom MOU Department of Public Enterprises-Department of Environmental
Affairs-Eskom Memorandum of Understanding
doc_352016850.pdf