The Department of Public Enterprises has the responsibility for shareholder oversight over eight key State-Owned Enterprises (SOEs). Our mandate is to leverage the SOEs as strategic instruments of the developmental state – that is, to guide the SOEs to become catalysts in creating jobs and growing the economy so that their impact is optimised for the rest of society.
In this regard, the SOEs must be viewed in relation to the broader impact they have on the economy and society as a whole.
Through the SOEs, the Department seeks to facilitate participation and push for an increased stake in the economy by the majority of citizens- either through access to labour markets or productive activities.
SOEs should correct market failures – because capital markets have an inherent bias to short term gains in spite of their often-repeated claims that they prefer long-term planning.
Our vision is to continue to provide Economic Governance (policy co-ordination) tied to SOE-multiple goals which include: attracting and driving investments, enhancing efficiencies and transformation programme of all State-Owned Enterprises, their customers and suppliers, creating jobs, building the industrial capacity of the economy, linking small and medium businesses to markets either through communication platforms or transport and developing responsive skills to economic or supplier demands.
In order to implement this vision, we have had to make five key changes to the way the SOEs are managed:
- Firstly, develop an investment planning framework that is linked to long term strategic economic priorities of the country that are not determined by balance sheet constraints;
- Secondly, expand and diversify our sources of funding for the investment plan beyond the balance sheet and the fiscus to include our development finance institutions and the private sector;
- Thirdly, boldly support localisation in the procurement programmes in order to support local suppliers and hence promote investments in national industrial capabilities through entering into longer term sustainable contracts for backward linkages purpose to reduce dependency on imports for intermediate goods and building of stable relationships; and
- Finally, enhance coordination between SOE programmes and all levels of government to ensure that SOE capabilities are fully leveraged, that implementation is accelerated and the impact of the programmes is optimised. Among others, we are visiting all provincial governments to facilitate this process.
In order to implement this vision and the associated enabling initiatives, the Department has had to build a range of institutional capabilities to play a number of roles.
Let me briefly describe these roles to you:
- Firstly, the Department is a shareholder manager that has to ensure the financial sustainability and the governance integrity of the enterprises that report to us;
- Secondly, the Department is a stakeholder manager that builds partnerships between the SOEs and key stakeholders and oversees the impact of the SOEs on the economy as a whole;
- Thirdly, the Department needs to play the role of change manager to provide direction and support the SOEs in building new organisational capabilities to drive economic growth and transformation; and
- Finally the shareholder manager needs to play the role of a nation builder providing decisive economic leadership to align stakeholders behind SOE strategies so that effective developmental coalitions can be built. Intrinsic to this process is developing the SOE strategies to ensure that the overlaps between commercial, developmental and political objectives are optimised.
State-Owned Enterprises are the government's specialist intervention instruments in the economy and extended arm of government for delivery of critical services. These companies further the country's domestic and foreign policy agenda within the SADC region in particular and Africa in general, in pursuit of both infrastructure rollout and other commercial plans.
Eskom must ensure the security of supply of electricity in our country and support energy infrastructure rollout on the continent. Currently Eskom has marshalled the complex process of our new builds and in ushering renewable energy generation and investing in new technologies to optimise our country’s plans to reduce carbon emissions from its coal-fired power stations.
In this regard, it is the main repository of specialist skills and expertise necessary to execute the mammoth build programme.
In respect of transport and logistics, Transnet has assured us that it is well on its way in improving capacity and efficiencies on rail and ports. Significantly, this year we witnessed the upgrading of some of our ports as well as improvements of efficiencies on rail through scheduled trains.
We intend further to expand our rail and port capacity which will create even more jobs. Together with this, Transnet shall soon announce a new capital expenditure plan and a revised capex timeline. This will help, for example, to implement critical projects such as the road-to-rail migration, develop the Waterberg rail link and the rail link between Swaziland and South Africa which will ease the rail congestion in Ermelo and facilitate more coal transportation to Richards Bay.
However, South Africa needs urgently to improve its infrastructure optimisation in order to support local content and industrialisation.
We are also improving our locomotives and updating the fleet with more powerful and environmentally-friendly locomotives. In the long run, we aim to move from mere replacement of the aging fleet to adding capacity. In this regard, we are finalising our fleet procurement strategy which shall take into account the economic demand and the resultant economies of scale in purchasing locomotives over a longer term.
Together with SAA and SAX, we are exploring strategies to expand our African footprints in order to position our airlines as the main carriers in the continent. We would like them to increase their share of the African market, be significant players in the transportation of people between various African countries and between Africa and the world and facilitate and promote trade within the continent and between the continent and the globe.
Our arms manufacturer, Denel is showing signs of recovery. Key to Denel's success will be its ability to increase its order book from the Department of Defence and win more international contracts and thus optimise our manufacturing capabilities and skills.
Our plans for Alexkor, the state diamond mining company, is to reposition it to play a significant role in the mining of legitimate diamonds in the continent and to provide the skills expertise that are dearly required by our neighbours, whilst contributing to the country’s beneficiation strategy.
I am informed that the West Africa Cable, in which Broadband Infraco owns 11%, is about to be lit. This will allow Infraco to provide its customers with capacity both on the national long distance and internationally. We have worked persistently on sorting out Infraco’s internal capacity and reassessing its business case and the government's role in this sector.
Given SAFCOL’s critical role in community development and optimising government’s participation in the forestry industry, we are paying attention to turning the company around and ensuring that it invests in innovation to support our airlines’ turn towards bio-fuels.
Of course, the above projects can only succeed if we have a consensus on the nature of the partnership that the economy requires from the government, business and labour. We need practically and pragmatically to identify projects which can assist us to define this partnership as we work to develop our society.
We know we still have some way to go to implement our approach in its entirety. However, we are resolute that we should spare neither strength nor effort in positioning our State-Owned Enterprises as critical agents for development.
I thank you.
