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(1) Praises to a mighty warrior and king that echo down through the
ages, and which today stir our thoughts towards a warrior of humble
birth: Chris Thembisile Hani. Cde Chris' lifelong commitment to the
ANC and SACP's epic struggle to eradicate poverty and place
Africa's poor at the centre of our attention informs even today the
policy and programmes of the African National Congress. Let us
recall his cruel assassination, but let us continue to give flesh
and blood to our political democracy by building a living monument
to his memory enshrined in economic and social justice for our
people.
Allow me, Madam Speaker, to welcome economics students from Cape
tertiary institutions. I hope that they will be so motivated by
today's debate to join our state owned enterprises in the near
future.
A very special welcome, though, to a comrade and compatriot of
African liberation: Cde Slava Tetekin. His activism for our
liberation stretches back to the USSR's Afro-Asian Solidarity
Committee, and who today is the Parliamentary Secretary to the
Leader of the Russian Communist Party, Cde Gennady Zyuganov, in
Moscow.
Budget votes provide single snapshots on the role of film that is
Government's total programme and activity. The contribution,
performance, and restructuring of public enterprises, is but one
link in the chain of Government's development policy.
Because SOEs are major instruments of the developmental state to
combat poverty, we have defined and implemented the restructuring
of state owned enterprises in a non-ideological fashion, seeking
the best results by analysing the balance of evidence on a
case-by-case basis, selecting an appropriate method to achieve our
goals.
My report to Parliament today takes a thematic approach that
reflects on the impact of restructuring in its broadest sense. The
evidence reveals a direct link between restructuring and the
stronger contribution SOEs are making to the development of our
country and continent.
SOEs are important strategic financial actors in South Africa,
whose restructuring has released financial resources for social and
economic programmes throughout the country.
The major state-owned enterprises play a significant financial role
in our economy. For example, although South Africa's external debt
was just over R32 billion at the end of June 2002, the share of SOE
borrowings dropped to 14.9%, compared to 46% in 1990. Public
corporations contribute about 5.5% of GDP. The total surplus of
non-financial public corporations represented 2.4% of GDP in 2002.
They also contributed 10.8% of gross domestic fixed capital
formation. Their credit ratings remain stable. The financial
well-being of SOEs is an obvious priority and, assisted by
compliance with the PFMA, must continue.
Last year Government carried out 11 transactions to bring to 27 the
number since 1997. These included outright disposals, equity sales,
participation of BEE groups, dividend payments, proceeds from the
rationalisation of interests across SOEs, and the Telkom IPO. To
date, and these are the most recent figures we have, total proceeds
were R35, 5 billion, with the National Revenue fund absorbing just
under R22, 5 billion.
Income for 2002 was R8,126 billion, and was affected by the
cancellation of the Komatiland transaction, and slippage in the
disposal of Rosherville Vehicles, Properties and Construction;
finalisation of the Amatola and Alexkor through legal action;
complex negotiations around BAE Systems and Denel; and liability
problems at the remaining Aventura resorts. We expect finalisation
of these during the nest few months.
Vigorous restructuring activity during 2003 include the 100%
disposal of the loan books of Eskom Finance Company and Transnet
housing that, taken together, are worth about R6 billion. The
partial sale of Freightdynamics and Autopax to BEE interests, the
selection of an SEP for Viamax, the concession of Luxrail and the
disposal of Transmed's pharmacies will proceed this year, as will
the disposal of government's remaining interest in MTN. Transnet's
end-state will be finalised, and we continue to pursue options for
SAA.
Two major transactions will dominate 2003. First is the preparation
to dispose of 30% of Eskom generation, including a 10% BEE
disposal, subject as always to the general market conditions we
would be foolish to ignore. A more detailed outline of the plans
for Eskom is contained in the parliamentary reply I provided
yesterday and distributed to members earlier today.
The second is the concession of Durban Container Terminal.
Government is moving decisively on this front and RFQs will be
issued in June 2003, once the preparatory work is complete. There
is a high level of interest from the business community in the
opportunities that this programme presents, including improved
performance in the transport sector to support South African
trade.
The reworked National Ports Bill provides for the incorporation of
the National Ports Authority as a Transnet subsidiary before
becoming a stand alone SOE in the longer term, and for an interim
regulator to manage the relationship between the Authority and the
Transnet Group. This reworked Bill will be returned to Parliament
very soon.
A comprehensive concession strategy covering all aspects of the
cargo handling terminals operated by the Ports Operations division
of Transnet is nearly complete. Together with agreed concession
architecture principles, the strategy document will provide the
policy and regulatory certainty necessary for a smooth
restructuring process and are prerequisites for the start of the
intended restructuring transactions. These will of course be made
public once they are complete.
We are ever mindful of the strategic value of our ports. Their
efficient operation is central to the development of our continent.
Port rehabilitation, modernisation and infrastructure expansion
including landlocked container terminals, and so on, is becoming
the norm across Africa to deal with the growing containerisation
and increasing container traffic in Africa.
Government considers the strategic employment of SOE procurement
budgets as an instrument of black economic empowerment that
complements their ongoing transformation. During 2002, Eskom,
Transnet, and Denel had a combined discretionary procurement budget
of just under R34 billion, of which just over R9 billion was BEE
centred. Transnet committed 54.6% of its procurement spend to BEE,
followed by Eskom at 21.2% and Denel with 15%.
Eskom and Transnet spread their BEE procurement across
manufacturing, production, resource and professional services.
Eskom's BEE spend also includes a significant 33.7% of coal
purchases. Denel plans to increase the supply of local content
products and services from black suppliers to 40% of manufacturing,
and including marine freight services, engineering services,
electrical components and raw materials. We will continue to
monitor BEE spending closely to ensure that it s consistent with
our goals.
Government believes that Telkom's IPO is a flagship of black
economic empowerment. A short time ago on the JSE the share stood
at R31.11, representing a 39% rise in value since listing. R500 and
R5000 of Khulisa shares are now worth R684 and R6938 respectively!
In New York, the ADR is trading at 13% above the listing price.
Telkom's ordinary share has outperformed both the FTSE/JSE Top 40
and the European benchmark index. In New York, it has performed
stronger than its sector and made gains in line with the US
market.
Over 100 000 South Africans took up the retail offer, representing
nearly 9% of the total deal. 58% came through the Khulisa offer and
represents nearly 50% of the total retail money. Women represent
55% of the Khulisa offer, and 54% of all retail shareholders are
women. 62% of shareholders come from outside Gauteng: almost 18%
came from KZN, 11% from the Western Cape 7.7% in Limpopo, and 6%
each from Eastern Cape, Mpumalanga, Free State and North West. The
Northern Cape was just under 2%. Over 50% of applicants fall in the
31 - 50 year age groups. 439 stokvels, representing over 23 000
members, participate.
Progress continues with employment equity. It is extremely
encouraging to note SOEs contribution towards education, training
and skill development, aimed at scholars and students. Safcol,
Eskom, Transnet and Denel are very active in this exemplary work.
Special mention must be made about the extra efforts to bring women
into engineering and related areas.
Improved financial performance and management, including the
reorganisation of pension funds, permitted an expanding commitment
to capital expenditure and investment in infrastructure during
2002. Transnet, Eskom and Denel spent R9 billion, R5.6 billion and
R234 million respectively in 2002, and have budgeted R12.6 billion,
R9.5 billion and R246 million respectively for 2003. Improved
longer-term infrastructure investment planning now stretches in
some instances over the next 20 years.
Transnet plans to spend over R37.6 billion in capital expenditure
over the next three years. Metrorail is set to spend some R15
billion over the next 10 years, including expenditure to improve
safety. Spoornet's long-term projects include a R42 billion
investment in rolling stock, refurbishment and fixed infrastructure
upgrades between 2002 and 2018. Platinum and ferrochrome plant
expansion necessitates sizable investment in Eskom's distribution
system upgrades. Denel's investment relates mainly to the
replacement and purchase of new equipment required for new
contracts.
Too often, interesting detail of specific projects hides behind
financial data so let me touch some of the more interesting
projects that these three SOEs will engage in during 2003 and
beyond.
Spoornet's locomotive and wagon fleet is very old, driving up
operating costs, reducing reliability and leading to poor
performance. The fixed infrastructure is also dilapidated and
raises the urgent concern about safety as well as efficiency.
Spoornet seeks to employ more efficient diesel locos in rural areas
to revitalise the branch line network and boost economic
development in rural areas. The carrying capacity of rail will
improve, the shift from road to rail of heavy freight will
accelerate, and the real pricing of rail services will drop.
Furthermore, 90% of the wagon renewal budget, or R9 billion, and
more than 50%, or about R10 billion, of the locomotive budget will
be spent in South Africa. Overseas suppliers will transfer skills
over the period and will embed their technology in Spoornet and
develop local support networks.
I am pleased to see that Government's decision to prevent the
closure of low-density lines in 1999 has begun to bear fruit. A
number of lines have been identified for rehabilitation and
continued use, in consultation with Provinces, in the Eastern and
Northern Cape, the North West and Gauteng, and will operate as
infrastructure corridors to support industrial, mining and
agricultural development, or to boost tourism activities. The GFB
lines of KwaZulu-Natal, the Northern Cape, and the Western Cape are
earmarked for substantial upgrading. The upgrade of the
Kroonstad-Ladybrand line, linked with work on the Maseru Container
Terminal, will provide the Vaal Triangle industrial complex and
Free State agriculture and Lesotho with greater access to Durban
Harbour. Both the Orex and Coallink lines will be upgraded to
facilitate export growth of R1, 6 and R3 billion per annum
respectively over these lines. New line construction at Brits will
see a R30 million line carry ferro-chrome exports of some R2.7
billion per annum through Richards Bay. The R500 million Coega
extension line will link Coega with the Port Elizabeth rail
network.
Ports are also investing. The R25 million dredging and deepening of
East London's harbour will enable larger car carriers to call at
East London, on an average of 2 per month to meet the growing
demand for the service. The Richards Bay coal terminal will undergo
a R2, 4 billion expansions, and work is progressing well on the R3,
2 billion Ngura Port. The Coega project took a giant leap forward
yesterday with an agreement between the NPA and French investment
and industrial giant, Pechiney.
In some instances, though, project proposals not mentioned may not
yet be aligned with some of the restructuring initiatives. New
challenges have emerged as well, such as radical requirements for
port and container security planning and infrastructure. I have
therefore instructed the DG to coordinate a detailed report from
SOEs on how their infrastructure investment plans are aligned with
restructuring initiatives and government's development priorities,
and how they intend dealing with any new challenges.
Over the past ten years Eskom has brought electricity to nearly 3
million homes in South Africa. Backlogs continue, particularly in
rural areas and special challenges face us with the growth of
informal settlements in urban areas. In addition to improving the
quality of life of millions of South Africans, the electrification
programme has resulted in the creation of small, medium and micro
enterprises within disadvantaged communities.
It must be said, however, that Government is deeply disturbed by
the practice of not keeping price increases within inflation
limits. Pricing policy is complex, and Eskom's case is no
exception, but we must be sensitive to the fact that prices higher
than the inflation rate undermine Government's macroeconomic
objectives. The costs to the economy are great, but the negative
impact on the poorest of the poor is simply not acceptable.
SOEs also promote development programmes beyond our borders. Eskom
Enterprises operates in over 30 African countries, covering
generation, transmission and distribution sectors across the
continent. Transnet divisions are spreading their activities into
Africa as well. Denel has also built a platform for improved
capacity with defence and security establishments for greater
potential participation in peacekeeping activity. SA will continue
to promote a policy of commonality and interoperability of
equipment.
South Africa is a proud member of the African community of states.
We are blessed with natural resources, human skills, strength of
industry and solid defence and security capabilities. We are a
burgeoning democracy. When we consider South Africa's contribution
to NEPAD, and particularly that of our SOEs, we understand that
there are no borders between our RDP programmes and how we should
operate on the continent. Just as we emphasise SMME and BEE in
South Africa for historical reasons, so we encourage our SOEs, when
they operate in African countries, to apply similar principles of
empowerment and local support.
In the welter of reports around the invasion of Iraq, little note
has been taken of Denel's mine clearance activity in Northern Iraq
under a UN mandate. Mechem's team consisted of 27 South Africans,
689 local Iraqis and Kurds, and 180 mine detection trained dogs.
They have cleared nearly 10 million sq metres of landmines and
unexploded ordnance in Mosul, Dohuk, Ebril and Sulaimaniya.
Thankfully, the South Africans have left Iraq and are safe, but I
must express concern about the safety of the Iraqi and Kurdish
members of the team who remain in Iraq, along with the dogs. The
current US-led invasion has turned back the clock considerably,
with the prospect of even greater horror for the local population
as landmines, cluster munitions, and other unexploded bombs litter
the Iraqi countryside once more. Mechem's team remains on standby,
to return to Iraq at short notice when called upon by the United
Nations to do so. I commend their excellent if extremely dangerous
work. We wish them god-speed, and hope and pray for their safety.
The tragedy really is that the situation was avoidable, and indeed
should have been avoided.
Madam Speaker, I have sketched the achievements of our SOEs and our
restructuring programme in bold strokes and identified ongoing
challenges. Most important of all, the evidence of our collective
endeavour tells me that we have truly turned the corner. No longer
are the SOEs financial albatrosses around Government's neck. No
longer do they wastefully absorb precious human and other
resources. They are engaged in the transformation of personnel and
purpose to become truly efficient contributors to the economic
development of Africa, let alone South Africa. Although problems
still arise, as is natural, I would suggest that these are isolated
incidents whose impact should not deviate them from their important
tasks. We therefore commend the work of all who make these entities
a success, from the shop-floor to the Boardroom.
Chris Hani belongs with other African leaders who were cut down by
colonial and reactionary oppressors: Bambata, Johannes Nkosi, Omar
Mukhta, Eduardo Mondlane, Patrice Lumumba, Dedan Kimathi. He was
never shy to confront challenges and always demanded clarity of
purpose, commitment to cooperation and consultation. His example is
a valuable lesson for us all. May we all continue to learn from
him.
It is customary to thank a range of people at the conclusion of my
speech, but I shall reserve my appreciation and thanks till my
reply, so that I may reflect first on what participants in this
debate may say about their performance!
I thank you.
(1) He who listens to no gossip/He who beats, but is not beaten/
the axe that surpasses all other axes in sharpness/ the South wind
that keeps blowing in/ Which keeps blowing in through the door/ He
who while devouring some, devoured others/ While devouring some, he
devoured others!
Issued by Ministry of Public Enterprises
10 April 2003
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