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Brown hints to major changes in shareholder management of State companies

Public Enterprises Minister Lynne Brown
Photo by Duane Daws
Public Enterprises Minister Lynne Brown

1st December 2015

By: Terence Creamer
Creamer Media Editor

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Public Enterprises Minister Lynne Brown reported on Tuesday that far-reaching interMinisterial committee (IMC) discussions were advancing on how best to reform South Africa’s State-owned companies (SoCs), many of which were currently underperforming.

There are around 700 SoCs, with Brown having shareholder responsibility for Eskom, Transnet, Denel, SA Express, Alexkor and Safcol – the six entities collectively had assets worth more than R900-billion. She no longer oversaw South African Airways, which had the National Treasury as its shareholder department, while entities such as the Passenger Rail Agency of South Africa and the South African National Roads Agency fell under the Department of Transport.

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Deputy President Cyril Ramaphosa was chairing the IMC, which would determine which entities should remain SoCs and which should be either absorbed into departments, or amalgamated into other entities.

Speaking to members of the Johannesburg Chamber of Commerce and Industry, Brown said her department was finalising a concept paper on the proposed Shareholder Management Bill.

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“We are in the early stages of discussing it – very soon I will release a concept paper for public discussion to strengthen it,” Brown said.

She indicated separately to Engineering News Online that the paper would be released after the February Cabinet Lekgotla with the intention of having the legislation finalised by year-end.

“I have a feeling that what we need to do is place the Schedule 2 (or large) SoCs together and work towards the Shareholder Management Bill that creates a leadership operational plan for those SoCs.”

The framework should determine how boards and executives are appointed, “because it can’t be the sole responsibility of the Minister, including myself”. It should also ensure improved governance and operational efficiency.

“I’m an advocate for trying to keep the SoCs together – whether under a holding company, whether it is the department as it stands, whether it goes into The Presidency. I really believe that it needs an almost different approach to how we deal with our general departments.”

In the interim Brown would be drawing on lessons from Eskom’s recent leadership stabilisation in dealing with problems at other SoCs. Eskom was “not out of the woods” and there was still not sufficient electricity to facilitate economic growth, but Brown was nevertheless “very pleased” with the current leadership at the State-owned utility and recent stabilisation efforts.

Earlier in the year, she oversaw a turbulent leadership transition at Eskom, which resulted in the departure of three executives, including CEO Tshediso Matona, and the board chairperson Zola Tsotsi.

Two senior Transnet executives – Brian Molefe and Anoj Singh – had since been appointed CEO and CFO respectively and had been partially credited with helping to stabilise the company and reduce incidents of load-shedding.

Brown said she had learnt to place firm timeframes for dealing with leadership problems and had, therefore, given the Denel board a tight time horizon for completing its investigation into the executives currently on suspension.

In September, the board placed CEO Riaz Saloojee, CFO Fikile Mhlontlo and company secretary Elizabeth Africa on special leave, raising concerns that the defence group’s balance sheet was insufficient to support recent, as well as planned acquisitions.

The Minister expected a report by December 10 and said she would make a determination as to what action she would take early in the new year. She stressed, though, that Denel was not under liquidity stress and was able to meet its financial obligations.

The Eskom stabilisation had also shown what could be achieved with “focus and concentrated energy” and by having the “right people in the right jobs”.

Nevertheless, Eskom’s balance sheet was “still not strong enough” and a number of decisions were still required about the “end state” of the electricity sector to determine the utility’s future role.

Critical among the outstanding issues was the need to update the Integrated Resources Plan (IRP), as the current IRP 2010 was out of date. “It has to be updated in terms of the IRP 2015 by the Department of Energy,” Brown said, adding that the mix outlined would help determine Eskom’s future role.

“Should it be privatised? Should parts of it be privatised . . . that decision is not a decision we are ready to take right now,” she said, adding that given Eskom’s current financial stresses she was “not sure that anybody would want to buy Eskom”.

Brown also reiterated her earlier position that entities under her authority should not be approaching the National Treasury “with begging bowls”; highlighting that, besides Eskom R23-billion injection, none of the other five entities had sought further bail-outs.

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