Date: 28/09/2005
Source: Department of Public Enterprises
Title: Erwin: American Chamber of Commerce luncheon
Keynote address by the Honourable Minister of Public Enterprises, Mr Alec Erwin, at the American Chamber of Commerce (AMCHAM) luncheon
Programme Director
Acting Chief of Staff, US Embassy, Mr Jeff Hartley
Deputy Senior Commercial Officer, US
Commercial Services, Ms Pamela Ward
French Embassy representatives, Mr Patrice Laussucq and Ms Laura Laguierce
Canadian Trade office representative, Mr Israel Noko
South African Netherlands Transport Forum representative, Mr Wesley Smart
Honoured Guests
Ladies and Gentlemen
Introduction
As we enter the second Decade of Freedom the Government has adopted a new and focused economic programme for the state-owned enterprises (SOEs) that report to the Department of Public Enterprises (DPE). It is a very exciting period for our economy and the SOEs as we expand and improve the efficiency of the energy and transportation systems.
Our objective is to raise economic growth and enhance development in order to make decisive progress in the fight against poverty and the provision of a better life for all.
In May 2004, the President indicated in his State of the Nation Address, the intention to enhance the investment plans of the key SOEs, namely Eskom and Transnet. In my Budget speeches in 2004 and 2005 I outlined why the State would retain the ownership of the key SOEs in order to achieve these strategic objectives. However, I laid great stress on the role we saw for partnerships with and direct investment by the private sector.
We have also clarified what it is we expect of the SOEs. Whilst these enterprises have to meet strategic economic goals they have to raise their finance in the capital markets off sound balance sheets and with good ratings. Accordingly we expect high levels of operational efficiency, exemplary corporate governance and sound financial management. In the case of Eskom, its performance has been good over the years. In the case of Transnet, South African Airways (SAA) and Denel we have had to effect significant restructuring and business re-engineering to meet the new challenges – we are making good progress but the process is not yet complete.
For the investment plans to be credible, realistic and realisable, it was necessary for us to finalise certain policy matters, define the appropriate enterprise structures and then ensure that the SOEs’ balance sheets could sustain the planned investment. This has taken up much of 2004 and 2005. However, the emphasis in Eskom and Transnet is now shifting to the actual investment projects.
The CAPEX programmes and financing strategies will certainly increase the investment rate to the economy and bring about necessary efficiencies required in our ports and rail networks and secure sufficient electricity supply.
Significant progress has been made to identify infrastructural projects that would qualitatively enhance and catalyse economic growth.
Eskom
Projected investment requirements to meet national energy needs and lead to investment through energy supply are estimated at R107 billion over the next five years. This requires:
* R76.9 bn in Generation
* R10.4 bn in Transmission; and
* R13.6 bn in Distribution.
The investment plans in the energy sector are in line with the National Resource Plan for increased electricity supply. Based on Eskom delivering 70% of required additional generation capacity, the energy utility will have a Capex plan of approximately R84 billion. The remaining 30% of required capacity will be provided by Independent Power Producers (IPPs). We would see a minimum of 10% broad-based black economic empowerment (BBBEE) involvement in this highly capital-intensive sector. In the overall procurement process we believe we can achieve an even greater impact on BBBEE and small, medium and micro enterprise (SMME) development.
In an attempt to meet the growing demands for energy, Eskom is returning to service three power stations that were mothballed fifteen years ago. The specific location of these projects, which are already underway, is Camden, Grootvlei and Komati. The rehabilitation programme will result in 3612MW in new capacity when it is completed. Direct and indirect employment opportunities would be created and the estimation stands at 36 000.
In terms of new capacity in the near future two peaking plants will be constructed – one by Eskom and the other one by IPPs. These projects are in the region of R15 billion in investment.
Pebble Bed Modular Reactor (PBMR)
Last month South Africa hosted the first international PBMR Suppliers conference. The conference created an opportunity for local and international electricity industries representatives to meet and interact with our Government officials, Eskom and PBMR Management.
The PBMR is one of the most important capital investment and development projects in South Africa. The successful deployment of this leading edge technology is destined to make a significant contribution to the energy requirements in South Africa – initial projections are for between 4 000 and 5 000 MW. This can be used to develop a major new industrial sector in the economy, as this will be a highly marketable form of generation in the global economy.
Currently work is commencing on key components of the Pilot Plant with Mitsubishi Heavy Industries and a Helium Test Facility (HTF) is nearing completion at Pelindaba.
Transnet
Transnet will now focus on land and sea freight – rail, port and pipeline. We are working on moving SAA off the Transnet balance sheet. SAA will be a stand-alone entity reporting to the Department of Public Enterprises.
The airline will now focus on opening new routes around the globe and forge strong partnerships with other African airlines. Translating the latter into action will contribute towards achieving the goals of New Partnership for Africa’s Development (NEPAD). These partnership initiatives will benefit our Continent.
Transnet investment plans are focused on key operating divisions such as ports, rail and pipelines. The challenge facing Transnet is to expand the capacity of the freight system and to ensure significant improvements in efficiency. The key investments are:
* The expansion and redesign of Pier 1 and the widening of the entrance in Durban Harbour. This will cost R2.9 billion.
* The construction of the container terminal at Ngqura and is going to cost R2.6 billion.
* The expansion of the Cape Town container terminal and this will cost R1.4 billion.
* The construction of the multipurpose pipeline from Durban to Gauteng and is going to cost R3 billion; and
* Spoornet will spend R8 billion on locomotives, wagons and equipment.
Eskom and Transnet Black Economic Empowerment
In the context of developing and growing the economy, SOEs are at the forefront of promoting BEE. Eskom is set to dispose 14 non-core enterprises and assets with a combined asset value of approximately R200 million. Transnet will dispose 13 non-core entities with an estimated combined asset value of R7,7 billion. These transactions will constitute a major boost to BBBEE.
SOEs are now entering a new phase - that of development and economic growth. The main target is to create massive employment opportunities in the economy. Also central to our objectives as Government is to increase skills levels that are needed to carryout the investment plans. We also need to address swiftly the availability of core skills that will be used to carryout the investment plans.
In conclusion
Progress has been made to develop realistic and realisable investment plans. The renewed focus on the future role of the SOEs is anticipated to bring about positive spin-offs in our economy and country as a whole. In the medium term we are also giving attention to the prospect of a number of exciting IPO. This will further strengthen and deepen South African capital markets.
The future looks promising and exciting for all of us.
Issued by: Ministry of Public Enterprises
28 September
Source: Department of Public Enterprises
Title: Erwin: American Chamber of Commerce luncheon
Keynote address by the Honourable Minister of Public Enterprises, Mr Alec Erwin, at the American Chamber of Commerce (AMCHAM) luncheon
Programme Director
Acting Chief of Staff, US Embassy, Mr Jeff Hartley
Deputy Senior Commercial Officer, US
Commercial Services, Ms Pamela Ward
French Embassy representatives, Mr Patrice Laussucq and Ms Laura Laguierce
Canadian Trade office representative, Mr Israel Noko
South African Netherlands Transport Forum representative, Mr Wesley Smart
Honoured Guests
Ladies and Gentlemen
Introduction
As we enter the second Decade of Freedom the Government has adopted a new and focused economic programme for the state-owned enterprises (SOEs) that report to the Department of Public Enterprises (DPE). It is a very exciting period for our economy and the SOEs as we expand and improve the efficiency of the energy and transportation systems.
Our objective is to raise economic growth and enhance development in order to make decisive progress in the fight against poverty and the provision of a better life for all.
In May 2004, the President indicated in his State of the Nation Address, the intention to enhance the investment plans of the key SOEs, namely Eskom and Transnet. In my Budget speeches in 2004 and 2005 I outlined why the State would retain the ownership of the key SOEs in order to achieve these strategic objectives. However, I laid great stress on the role we saw for partnerships with and direct investment by the private sector.
We have also clarified what it is we expect of the SOEs. Whilst these enterprises have to meet strategic economic goals they have to raise their finance in the capital markets off sound balance sheets and with good ratings. Accordingly we expect high levels of operational efficiency, exemplary corporate governance and sound financial management. In the case of Eskom, its performance has been good over the years. In the case of Transnet, South African Airways (SAA) and Denel we have had to effect significant restructuring and business re-engineering to meet the new challenges – we are making good progress but the process is not yet complete.
For the investment plans to be credible, realistic and realisable, it was necessary for us to finalise certain policy matters, define the appropriate enterprise structures and then ensure that the SOEs’ balance sheets could sustain the planned investment. This has taken up much of 2004 and 2005. However, the emphasis in Eskom and Transnet is now shifting to the actual investment projects.
The CAPEX programmes and financing strategies will certainly increase the investment rate to the economy and bring about necessary efficiencies required in our ports and rail networks and secure sufficient electricity supply.
Significant progress has been made to identify infrastructural projects that would qualitatively enhance and catalyse economic growth.
Eskom
Projected investment requirements to meet national energy needs and lead to investment through energy supply are estimated at R107 billion over the next five years. This requires:
* R76.9 bn in Generation
* R10.4 bn in Transmission; and
* R13.6 bn in Distribution.
The investment plans in the energy sector are in line with the National Resource Plan for increased electricity supply. Based on Eskom delivering 70% of required additional generation capacity, the energy utility will have a Capex plan of approximately R84 billion. The remaining 30% of required capacity will be provided by Independent Power Producers (IPPs). We would see a minimum of 10% broad-based black economic empowerment (BBBEE) involvement in this highly capital-intensive sector. In the overall procurement process we believe we can achieve an even greater impact on BBBEE and small, medium and micro enterprise (SMME) development.
In an attempt to meet the growing demands for energy, Eskom is returning to service three power stations that were mothballed fifteen years ago. The specific location of these projects, which are already underway, is Camden, Grootvlei and Komati. The rehabilitation programme will result in 3612MW in new capacity when it is completed. Direct and indirect employment opportunities would be created and the estimation stands at 36 000.
In terms of new capacity in the near future two peaking plants will be constructed – one by Eskom and the other one by IPPs. These projects are in the region of R15 billion in investment.
Pebble Bed Modular Reactor (PBMR)
Last month South Africa hosted the first international PBMR Suppliers conference. The conference created an opportunity for local and international electricity industries representatives to meet and interact with our Government officials, Eskom and PBMR Management.
The PBMR is one of the most important capital investment and development projects in South Africa. The successful deployment of this leading edge technology is destined to make a significant contribution to the energy requirements in South Africa – initial projections are for between 4 000 and 5 000 MW. This can be used to develop a major new industrial sector in the economy, as this will be a highly marketable form of generation in the global economy.
Currently work is commencing on key components of the Pilot Plant with Mitsubishi Heavy Industries and a Helium Test Facility (HTF) is nearing completion at Pelindaba.
Transnet
Transnet will now focus on land and sea freight – rail, port and pipeline. We are working on moving SAA off the Transnet balance sheet. SAA will be a stand-alone entity reporting to the Department of Public Enterprises.
The airline will now focus on opening new routes around the globe and forge strong partnerships with other African airlines. Translating the latter into action will contribute towards achieving the goals of New Partnership for Africa’s Development (NEPAD). These partnership initiatives will benefit our Continent.
Transnet investment plans are focused on key operating divisions such as ports, rail and pipelines. The challenge facing Transnet is to expand the capacity of the freight system and to ensure significant improvements in efficiency. The key investments are:
* The expansion and redesign of Pier 1 and the widening of the entrance in Durban Harbour. This will cost R2.9 billion.
* The construction of the container terminal at Ngqura and is going to cost R2.6 billion.
* The expansion of the Cape Town container terminal and this will cost R1.4 billion.
* The construction of the multipurpose pipeline from Durban to Gauteng and is going to cost R3 billion; and
* Spoornet will spend R8 billion on locomotives, wagons and equipment.
Eskom and Transnet Black Economic Empowerment
In the context of developing and growing the economy, SOEs are at the forefront of promoting BEE. Eskom is set to dispose 14 non-core enterprises and assets with a combined asset value of approximately R200 million. Transnet will dispose 13 non-core entities with an estimated combined asset value of R7,7 billion. These transactions will constitute a major boost to BBBEE.
SOEs are now entering a new phase - that of development and economic growth. The main target is to create massive employment opportunities in the economy. Also central to our objectives as Government is to increase skills levels that are needed to carryout the investment plans. We also need to address swiftly the availability of core skills that will be used to carryout the investment plans.
In conclusion
Progress has been made to develop realistic and realisable investment plans. The renewed focus on the future role of the SOEs is anticipated to bring about positive spin-offs in our economy and country as a whole. In the medium term we are also giving attention to the prospect of a number of exciting IPO. This will further strengthen and deepen South African capital markets.
The future looks promising and exciting for all of us.
Issued by: Ministry of Public Enterprises
28 September
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