This afternoon I will deliver my Budget Vote speech in the National Assembly. I will be speaking as Shareholder Representative of six State-Owned Companies that has an asset base of R755-billion.
My speech will focus on governance, the performances of State-Owned Companies. What we expect in the year ahead and the role of the department in supporting the Minister. At the Cabinet Lekgotla in February, the department and I were tasked with championing the development of an overarching shareholder policy, defining criteria for State Ownership. I can say that we are on track to deliver a comprehensive report to the Cabinet Lekgotla in July.
I want to refer briefly to the performance of State-Owned Companies in my portfolio. Let me start with Eskom and be clear about load shedding. It will be with us for the next three years. Some Eskom achievements seemed to have been lost in the avalanche of publicity about other matters.
Today, I am very pleased to announce that the ramp-up towards full output at Medupi has passed the 700MW milestone. When fully operational by the end of June 2015 as promised, it will deliver the equivalent of more than 40 percent of the output of the Koeberg Nuclear Power Plant. Let me add that scheduled maintenance of Koeberg’s Unit One is well on track and is expected to bring more than 900MW back to service by the end of this month.
Looking ahead I have tasked the leadership of Eskom to accelerate the completion of the build programme, with improved project management, contracting and increase the generation capacity of the existing fleet.
Transnet remains consistent in its performance and I would like to touch on the forecasts of their performance over the 2014/15 fiscal year. On the freight rail side, Transnet has moved approximately 225 million tonnes, a 7 percent year-on-year volume growth, while Transnet Pipelines is expected to achieve the 2014/15 volume target of 16.7 billion litres.
Some of its major achievements include the successful completion of the expansion of the City Deep inland terminal from 400 000 Twenty-foot Equivalent Units capacity to 800 000 a year. Further work is underway to upgrade the Kascon terminal to create additional capacity of 300 000 Twenty-foot Equivalent Units.
During this fiscal year the department and I expect the General Freight Business volumes to increase by 18 percent given that about half of Transnet’s Market-Driven Strategy capital investments has been allocated to this area.
The department and Transnet will also be working closely to ensure that the key Operation Phakisa projects, for which the department and the Company are responsible, materialise on time. These are the Saldanha Bay rig repair facility, the Mossgas quay and the Richards Bay floating dock installation.
In turning to Denel, I must congratulate this company as it continues to show a pleasing improvement in financial performance. Over 50 percent of Denel’s revenues were derived from its international business, while the order book stands at over R33-billion. Revenue is expected to exceed R5.5-billion and preliminary numbers suggest more than R200-million in net profit after tax.
The department and I have certain matters clearly in our sights in the next five years for Denel. These include developing more partnerships with other global Original Equipment Manufacturers, like its joint venture with the UAE’s Tawuzan and addressing the linked issues of the aging workforce and the pace of transformation.
On the aviation side, it is clear the South African Express still requires high care. SAX has put the support provided by the department and the National Treasury over the past year to good use and we are seeing the first green shoots. In terms of certain standard aviation performance measures the airline looks likely to exceed the revenue target significantly and is performing above expectations in respect of cost containment.
During the current year, the department and I will focus on the implementation of the 20:20 Vision strategy and performance against prescribed austerity measures which will lay the foundation for a return to financial sustainability.
In addition, the department, the National Treasury and an aviation expert will examine the imminent commercial agreement between the airline and South African Airways very closely. I am looking for equitability and a feeder model which works well for all players.
In the forestry space, SAFCOL has been progressively proceeding without any reliance on the national fiscus. The company was able to invest R5.1 million on social economic development while R1.5 million was directed towards enterprise development.
In line with the commitment to develop communities within which it operates, the company is directed to ensure the increase in the development of skills in research and development.
In the mining sector Alexkor continues to make pleasing progress to sustainability. In the past financial year, the company realised growth in the operations of the mine and saw an increase in diamond production from 46.000 carats to 79.000 carats in the 2014/15 financial year. Revenue from the sale of diamonds increased from R277 million (2014/15) to R414.2 million (2014/15).
The refurbishment of the deep sea vessel is currently being undertaken. Production is envisaged for the 3rd quarter of this financial year. It is expected that this operation will result in the production of 180 000 carats per year at full production.
The State-Owned Companies operate in a landscape where they have combined annual revenues of over R200-billion and they also contribute the lion’s share of the State’s investment in infrastructure of more than R330-million a day every day over the next three years.
In conclusion, I want to say that over the next five years the highest priority goals which the department and I are required to drive are set out in the NDP-rooted Medium-Term Strategic Framework. Foremost among these are critical initiatives to lower the cost of doing business to stimulate job-creating growth and to increase the efficiency of the economy:
- First, ramp up the electricity generation reserve margin from its current levels to 19 percent by 2019;
- Second, increase the tonnage moved on rail from the current 207 million tonnes to 330 million tonnes by 2019;
- Third improve the operational performance of sea ports and inland terminals by increasing the average gross crane movements per hour by 25 percent by 2019; and
- Fourth, use the Eskom and Transnet infrastructure development and replacement investment spend to drive the overall national investment rate to 25 percent in a way that crowds in private sector investment and creates opportunity for new suppliers and sectors.
I thank you
Enquiries:
Colin Cruywagen
Cell: 082 377 9916
