The Honourable Minister Mdladlana,
Programme director,
Ladies and gentlemen.
Thank you for the invitation to address you today. I would like, at the outset, to congratulate the SA Chamber of Commerce and Industry (SACCI) on the launch of the “South Africa First” initiative. The values and objectives of the initiative are indeed commendable. It is the hard work and innovation of organisations like yourselves, which will help to propel us forward as a country, economically and socially.
As a department, we are also busy with the task of ensuring that the state owned enterprises catalyse the growth and development of our economy.
The primary objective of the Department of Public Enterprises is to ensure that the State’s shareholdings in these enterprises are financially sustainable and deliver on government’s strategic objectives. The State Owned Enterprises (SOEs) within the DPE portfolio are: Alexkor, Broadband Infraco, Denel, Eskom, the Pebble Bed Modular Reactor project, South African Airways, South African Express Airways, South African Forestry Company Limited and Transnet.
State owned enterprises are very specific and powerful instruments for achieving developmental goals because they are commercial entities with the task of achieving strategic national economic objectives. They play strategic roles in the South African economy through driving investment in economic infrastructure and in intermediate and advanced manufacturing capabilities.
For the purpose of today’s discussions, I would like to restrict myself to discussing only two of these enterprises, Eskom and Transnet. Not only are they two of our largest enterprises, but they have also embarked on unprecedented infrastructure investment programmes in the past few years, which have some tangible spillover effects for other industries, business sectors and communities in our economy.
Between 1976 and 1994, investment by the public sector in infrastructure decreased from 16% to 5% of Gross Domestic Product (GDP). It remained the same until 2004 when Eskom and Transnet announced the first large investment programmes.
The under investment in infrastructure resulted in both a constraint on growth by users of the infrastructure as well as the decline in investment and output by the supplier sectors to the infrastructure build programme. Consequently, the department is engaging with the challenge of funding a build programme that can rehabilitate key infrastructure and overcome the backlog as well as revitalise the supplier industries necessary to support the build programme, through the establishment of the Competitive Supplier Development Programme (CSDP). Therefore, aligning skills for the infrastructure investment programmes will certainly create employment for economic growth and alleviation of poverty.
Both Eskom and Transnet have established and maintained credible institutions to address their own skills needs and also leverage training of required skills within the supplier network participating in the infrastructure investment programmes.
Training of the unemployed youth in relevant technical skills offered would make them to be economically viable and be placed in fulltime employment within SOE or relevant suppliers once learning is completed.
Despite funding as well as skills challenges faced by these SOEs, the investment programmes are well under way, and we have begun to see some tangible progress, which I will elaborate on.
Eskom’s strategic mandate is focused on the provision of electricity through the generation, transmission and distribution thereof. This includes ensuring the reliability of electricity supply to all South Africans, ensuring its contribution to adequate future electricity supply and supporting the country’s developmental objectives.
Eskom has spent over R150 billion in capital investment in the past five years. The utility is projected to spend well over R350 billion between 2010/11 and 2014/15.
Eskom has also established a procurement process that effectively enables government’s localisation, empowerment, skills, employment and industry development policies. Each Eskom programme measurably impacts the local towns and the country through local spending and investment. In its procurement practices, Eskom targets to have at least 50% of local content in new-build contracts. Across all major builds, localisation content in most cases exceeds this figure. Medupi, Kusile and Ingula power stations which form a large bulk of Eskom investment spend are projected to create approximately 40 000 direct and indirect jobs, which will impact at least 160 000 people.
New local supply chains for parts have already been created, benefitting local businesses and addressing South Africa’s industrialisation agenda. Over a billion rand of investment in plant has been leveraged by Eskom in their manufacturing supply chain.
In the case of Transnet, its capital expenditure for the 2009/10 financial year amounted to R18.4 billion, excluding capitalised borrowing costs, a decrease of 4.7% compared to the previous year. The decrease in capital expenditure is mainly attributed to the reprioritisation of capital projects due to the impact of the recession on volumes and capacity requirements. Transnet’s mandate is to assist in lowering the cost of doing business in South Africa, enabling economic growth and security of supply through the provision of appropriate ports, rail and pipeline infrastructure as well as operations, in a manner that is cost effective and efficient, and within acceptable benchmark standards.
Transnet plans to invest over R90 billion in capital assets over the next five years. In the five years to 2009/10, approximately R72 billion was spent on capex. Despite the economic downturn, Transnet remains committed to investing in infrastructure, in order to provide capacity ahead of demand.An economic impact study undertaken by the department, shows that Transnet’s investment programme will have a significant impact on some of our provinces, particularly the Northern Cape, through which the iron ore line runs, Kwazulu-Natal, which has the busiest port in the country, Mpumalanga, through which a major portion of the coal line runs, as well as the Eastern Cape. According to the study, in 2018, Transnet will have created about 586 000 jobs in skilled, semi-skilled and unskilled sectors.
Since notifying the department of its intention to participate in the CSDP, Transnet has engaged in several programmes:
An Integrated South African Procurement Academy has been established to build the procurement capability to both achieve value for money and developmental objectives through the build program. Three successful boot camps have been performed to train procurement staff nationally in strategic sourcing and supplier development methodologies. Transnet has implemented a supplier development program in its locomotive supply chain involving the comprehensive upgrading of manufacturing and maintenance processes and capabilities to global original equipment manufacturers standards. Transnet is also working on a “School of Excellence” to address technical skills requirements. This is targeted at unemployed youth who have exited the school system.
The number of Transnet’s technically qualified staff will be increased, with the number of technicians moving from 950 to 1 350, and engineers increasing from 188 to 450.
In conclusion, I would like to thank SACCI for its commitment to South Africa, through its initiatives to continue to improve the conditions for doing business in our country. I would like to encourage you to continue engaging with us as government, as we work to speed up the pace of our economy’s growth and development. I wish you all the best in the campaign as you collectively strive to improve the socio economic conditions of our communities.
I thank you.
Address by the Minister of Public Enterprises, Barbara Hogan, to the South African Chamber of Commerce and Industry (SACCI), at the launch of the “South Africa First” Campaign
