Public Enterprises are, by definition, commercial organisations created by the State. They are therefore answerable to the State as the sole or main stakeholder. The mission and policies of Public Enterprises as commercial businesses should be consistent with the overall policies and strategies of Government. The Government will satisfy itself regularly that the Public Enterprises are implementing the prescribed mandate. Transparency, accountability and good management are critical to the success of all the enterprises.

The Ministry for Public Enterprises stands at the apex of an organisational framework which is designed for the effective management and governance of the parastatals resorting under it. The various parastatals are Alexkor, Denel, Eskom, Safcol and Transnet.

One of the tasks of the Ministry is to ensure that the Public Enterprises are managed in such a way that they will enhance their competitiveness, increase their commercial success and improve their viability.

The Public Enterprises can, by and large, be said to be implementing properly the specific mandate of the State when:

• They are commercially successful;
• They are managed in such a way that they will enhance that competitiveness
• The objectives of government affirmative action policies are realised;
• Unnecessary claims on State funds are avoided; and
• When the needs of the clients of the Public Enterprises are satisfied at the lowest cost and at the best prices.

It is also essential that these businesses should help to create productive and sustainable employment opportunities at a living wage for as many South Africans as possible.

In the words of the RDP the first priority of a democratic government must be to attack poverty and deprivation. The role of the Public Enterprises must also be seen within this context.

The policy of democratic participation and development is fundamental to the success of the Public Enterprises. This is all the more so with our history of imbalances in equal opportunity and participation.

When we took over in 1994 we found many challenges facing us;

A failure to have completely dislodged bureaucratic tendencies of the past in favour of good business principles. Thus some parastatals became characterised by a great sense of drift, inertia and lack of direction.

Being starved of capital and other resources, these enterprises began to consume themselves in an effort to survive, some over-borrowed and some chose the path of stagnation as long as the pension schemes of those employed were covered.

Some became locked in the discriminatory policies of the past and found it impossible to adjust to the reality of servicing the entire population.

The management style in others bordered on the authoritarian – the consequence was a work place that was hostile and ultimately not conducive to productivity.

Some of our Public Enterprises abandoned the task of providing training to employees, and ensuring that they remained at the cutting edge of technologies and competencies that they needed in order to survive in the highly competitive world that was emerging. This situation was exacerbated by the flight of skills to the private sector, as salaries and other incentives of the Public Enterprises lagged behind. Consequently our Public Enterprises have some serious problems of management capacity.

The major parastatals operated in monopolistic and sheltered environments and thus were not able to survive on their own without protection.

To meet these challenges, the Ministry for Public Enterprises embarked on a five point programme which can be outlined under the following headings:

• Restructuring;
• Transformation;
• Empowerment;
• Good Governance; and the
• RDP and Social Upliftment

The main objectives of restructuring as defined in the Departmental Guidelines which were compiled in 1995, are as follows:

• Facilitating Economic Growth
• Funding the RDP
• Creating Wider Ownership in the South African Economy
• Mobilising Private Sector Capital
• Reducing State Debt
• Enhancing Competitiveness
• Promoting Fair Competition
• Financing Growth and Requirements for Competitiveness

The success of the restructuring programme must be evaluated, and its success measured against the achievement of the objectives which have been set for it. Cognisance must be taken of the condition in which we found most entities. Restructuring is a key element of the policy framework within which we pursue the objectives of creating a democratic, non-racial, non-sexist and prosperous society.

It must promote:

The provision of affordable, good quality basic services to all South Africans, and The economic empowerment of historically disadvantaged communities.

Our objectives are more ambitious and all embracing than simply selling off State assets. They include creating competitiveness and technically advanced companies, attracting investment, improving service delivery and skills development, and attracting international investors and role players to South Africa from a broad spectrum of activities.

Against this background, I believe that we can all derive great satisfaction from the progress that has been made in laying the foundation for a successful restructuring programme – a programme which ultimately will benefit all South Africans, not just the privileged few. Much of the credit for this must go to the Ministers responsible for overseeing the whole restructuring programme and dedicated officials.

The Ministry for Public Enterprises has enhanced the capacity of the Directorate dealing with Restructuring by seconding three officials from parastatals whose sole mandate is privatisation. Officials from other directorates within Public Enterprises are also helping with the process.

The following entities have been and still are in the process of being restructured:

TELKOM

• 30% equity stake was sold to a strategic equity partner (SBC and TELKOM MALAYSIA)
• 10% to be sold to Black Economic Empowerment
• 5% to be sold to NEF
• 5% to be sold to ESOP

SUN AIR

• 85% sold to RETHABILE, CNI, COMAIR
• 10% held by Government on behalf of NEF
• 5% ESOP

AIRPORT COMPANY

• 20% sold to Strategic Equity Partner (Aeroporti De Roma) for R818,6 million option to buy additional 10%
• 10% to be sold to NEF
• 9% to be sold to ESOP
• 4,2% sold to BEE for R172,7 million
• 56,8% held by Government

SAFCOL

• Recently completed a National and International road show
• To sell to Trade Investor, ESOPS, BEE, NEF
• To be completed by mid-year

Currently underway:

• Strategy to acquire a management contractor to turn around the mine and explore the possible reserves
• Sub-committee of Ministers (Sigcau, Erwin & Maduna) to further scrutinise the three short-listed bidders.

To be completed by February 1999

Currently underway

• Strategy to pursue a strategic management partner
• Shortlisted to four bidders (Canada Post, Deutsche Post, New Zealand Post/Royal Main)

To be completed end of March 1999

ABAKOR

• Debt Equity swop (50:50) Meat Board and Government (Department of Agriculture)
• Plans underway to sell various abbattoirs by 1999 – Kimberly, Bloemfontein, Pyramid

OBP

• Cabinet recently approved the OBP strategy framework document
• OBP corporatised
• Plans underway to obtain a management contractor by April 1999

AVENTURA

• Signing of contract has been concluded
• 85% sale to KOPANO
• 10% sold to NEF
• 5% sold to Essop

Currently underway

• Plans to undertake soft marketing underway, 22 Feb – 5 March
• Corporatisation to be completed by March 1999
• Strategy to acquire SEP; with BEE, NEF, ESOP

To be completed by mid-year

Currently underway

• Corporatisation to be completed by 31 March 1999
• Strategy to sell 100% Equity by September 1999

Has been concluded

• Joint venture with a management partner

Process underway

• National road shows completed
• Pre-qualification bids in the process of being received and process to pre-qualify underway

To be completed 1^st quarter 1999

Process underway

• Transaction advisers in the process of being appointed

To be completed by April 1999

Process underway

• Discussions/negotiations with Fedics on-going on their pre-emptive rights
• Confirmation to restructure Protekon: Chemical Services and Production House was given at NFA Transport Sector meeting of the 15^th February 1999.
• Process underway to develop a strategy to fast track their disposal

The restructuring of Denel is also being fast tracked and substantial progress has already been made

• A strategic Review Audit report completed by Booze-Allen and accepted by IMCC
• Process underway to corporatise Denel Aerospace as a stand alone company
• Consolidate with internal partners whose primary business is aerospace and defence
• Strategy to seek an international Equity Partner

To be completed by mid-may 1999

CONSOLIDATION OF INFORMATION TECHNOLIGY IN ESKOM, DATAVIA AND AERIAL TECHNOLOGIES

• IMCC endorsed the initiative undertaken by Public Enterprises to consolidate Eskom IT, Aerial Technologies and Datavia into a single IT Company
• Department of Trade and Industry and Department of Communications to be part of developing a strategic framework for the new IT company
• A study tour has been undertaken by the Steering Committee to the United States and a report is being compiled

IMCC of 21 January 1999 endorsed the initiative undertaken by public enterprises to consolidate Eskom and Transtel with a possiblity of being the second national operator in Telecoms – that further investigation be made on the exercise and detailed proposals be made through a sub-committee of Ministers Sigcau, Erwin and Naidoo.

DENEL’S LIGHT AND HEAVY ORDINANCE RESTRUCTURING

Process underway

• Task Team investigating the restructuring options to report by end of February 1999

SITA (STATE INFORMATION TECHNOLOGY AGENCY)

• Infoplan and other Government IT facilities consolidated to create SITA
• Bill approved by Parliament November 1998
• Process underway to incorporate all the assets under SITA

To be completed by April 1999

SABC (RADIO STATIONS)

Process completed

• Proceeds of R510,4 million from sale of six radio stations received and paid into the Exchequer

SASRIA

• The conversion of Sasria Act (Act No. 134 of 1998) has been promulgated
• In terms of this Act, Sasria will be converted into a Public company, the total shareholding of which will be held by Government
• The Act provides for the restructuring of Sasria and the sale of the converted and restructured Sasria

The cornerstone of the Transformation process has been based on the democratisation of the work place and the broader empowerment of people through training and skilling increased worker participation.

DENEL

The implementation of participative structures to deal with the restructuring and transformation of Denel is beginning to bear fruit. The objectives were to align business strategies with core competencies, to cultivate a culture of shared values to enhance the transformation process and to position Denel as a respected employer at both national and the intended international level.

The progress made with the commercialisation of Denel Aviation Transport Aircraft Maintenance (DATAM), Ariel Technoligies and Irenco are typical examples of the achievements to date.

Progress made to position Denel as well as other local defence companies as international players in the Aerospace and Ordinance fields has the makings a major strategic achievement. This, together with the maximisation of the value to be added by the Defence Packages, opens up opportunities for technology transfer and job creation.

The development of human resources mainly focused on the acquisition and enhancement of technical skills and management competencies is considered a major achievement. Specific actions were taken to introduce leadership development programmes at junior as well as senior management levels in conjunction with institutions at tertiary level. These initiatives considerably enhanced career development and succession planning within the Group and provided an opportunity for cross cultural re-inforcement and personal growth.

A few prominent actions that contributed to these achievements are:

• Denel’s Bridging School for students from previously disadvantaged communities produced excellent results with over 90% pass rate and prepared numerous students for the demands of tertiary education.
• Denel’s bursary scheme provided the vehicle for continuous introduction of young competent and qualified employees to the organisation and is regarded as an important investment in the future of Denel, the industry and South Africa.

Affirmative action was aggressively pursued and good progress was made in appointing black employees and females in top positions, both at the corporate office and at divisions. The key being that people should also get international exposure.

Like all the parastatals resorting under the Ministry, Denel implemented empowerment programmes ranging from the employment of black auditing companies to the improvement of services provided to formerly deprived and disadvantaged communities.

ESKOM

Eskom has adopted a policy framework in respect of black economic empowerment. This framework provides the parameters by which the organisation contributes to capacity building, training, procurement and empowerment. During 1998 Eskom spent approximately R700 million with small, medium and micro enterprises (SMMEs). Eskom is also making good progress in sourcing future coal supplies from small black owned coal mining companies. It is anticipated that, in the future, coal supplies from these sources will grow.

During 1998, approximately R435 million (1997_ R389 million estimated) was spent on the tarining and education of employees.

The Adult Basic Development initiative has been realigned to become the Adult Basic Education, Development and Training (ABET) programme. During 1998, 143 000 (1997: 146 759) learner days were provided to 2 853 ABET learners against a target of 2 800 at a cost of R39 million (1997: R37 million) and with an overall pass rate of 66% (1997: 56%) across all levels.

During 1998 Eskom supported 2 779 (1997: 2 377) bursars and trainees of which 88% (1997: 79%) were black and 13% were women. A concerted effort has been made to increase the number of female bursars and trainees with the aim of increasing the number of women in the managerial and professional positions. Of the bursary intake for 1998, 21% (1997:17%) were female. During the year, 493 (1997: 422) black bursars and trainees completed their training against the RDP target of 370 at an estimated cost of R85 million (1997: R70 million).

The Restructuring and Transformation Committee (RTC) comprises representatives from labour, management and government. Discussions between Eskom and the trade unions continued in 1998. A number of significant issues have been dealt with in the RTC and due to the nature and significance of some of these issues, the process has been slow at times.

A meeting between labour, management and the Minister held late in the year, resulted in certain agreements on internal restructuring that are expected to bring new life into the RTC and to focus its efforts on the principles for internal restructuring. In the main, Eskom’s structure will contain the regulated businesses as well as the supporting groups. A wholly owned subsidiary will be formed which will focus on non-regulated business activities both international and local. Existing subsidiaries and joint ventures holding commercial non-regulated activities will fall under this structure. The implementation details are being finalised.

This refers not only to addressing the numbers side of affirmative action, but also to addressing the mental attitudes of many employees derived from generations of not being in any kind of control of their own destiny.

Eskom is committed to enabling all employees to have access to accommodation. Eskom has a housing policy in place, providing all employees with access to funding for accommodation. The number of employees making use of Eskom Finance Company (Pty) Ltd home loans as at 31 December 1998 was 23 285 out of 37 311 employees.

Eskom has made available R50 million per year until 1999 to be spent on the electrification of schools and other community development activities. An amount of R10 million was allocated to Small Business Development but the expenditure could not be attested to as the necessary recording systems were not in place.

During 1998 Eskom donated surplus land at its Kaalfontein property to the Gauteng Provincial Government for the development of low cost housing as part of Eskom’s contribution in support of the RDP. In addition a surplus property in central Johannesburg was also donated to the Gauteng Provincial Government. The legal aspects will be finalised in 1999.

During the year the directors approved a R50 million contribution to the Business Initiative for Job Creation and Human Capacity Development. In addition, the directors approved the creation of the Eskom Development Foundation, with an initial contribution from Eskom in 1998 of R150 million. The Eskom Development Foundation has been formed to manage all of Eskom’s community development and educational programmes.

GOOD GOVERNANCE

With the adoption of the Protocol on Corporate Governance sound principles have been established for the conduct of relations between the parastatals and the Government as the sole shareholder. As an example, with the passage of the 1998 Eskom Amendment Bill, Eskom has been corporatised and the state has been confirmed as the sole shareholder. Eskom is also liable to taxation as a result of this legislation.

Eskom has developed a distinguished performance track record as evident in the following points.

Eskom has had an excellent year in terms of continuing improvement in business performance, particularly in the financial, technical and human resource areas.

Eskom’s 1998 net profit amounted to R2 750 million compared with the 1997 figure of R3 083 million.

The growth in sales for 1998 of –0.6 % reflecting the general downturn in economic conditions globally and within SA during 1998.

Eskom’s 1998 price increase was approximately 1,9 percentage points below the average consumer price inflation rate (CPI) and this real price reduction provides a welcome boost to our electricity customers.

The generation group continued to maintain exceptional plant performance by achieving a unit capability factor of 92,7% during 1998 against a target of 90,7%.

In 1990, the South African Transport Services were corporatised to form Transnet Limited. Since corporatisation the firm has constantly been introducing improvements to its system of corporate governance. This evolution has not proven to be an easy one, but today the firm boasts a new culture that is characterised by improved efficiency levels, an entreneurial spirit displayed by its employees and value creation for all stakeholders.

For the first five years the operations of the company were organised into semi-autonomous divisions and business units each operating in niche markets within the broader transport sector.

During 1996 the evolution gained pace when the composition of the Board was restructured in line with the tenets of good governance expounded in the King Report on Corporate Governance. The Articles of Association of the company were amended to reflect a Board comprising seven executive directors and eight non-executive.

The Transnet Board comprises persons from diverse racial, gender, business, professional, financial and cultural backgrounds, which is vital to the successful direction of corporations in present day SA.

All directors are equally accountable for the proper stewardship of the company’s affairs. The executive directors have specific responsibility for the various businesses and functions of the Group. The non-executive directors have a particular responsibility to ensure that the proposals and strategies sought to be implemented by the executive directors are fully discussed and critically examined against the best long-term interests of the shareholder and all other stakeholders of Transnet.

In 1997 the company introduced divisonal boards for the operational divisions of the company. The purpose behind these divisional boards was to introduce a vehicle that would drive corporate strategy at the divisional level whilst appreciative of the imperatives that face Transnet as a group.

Like all the parastatals, Transnet have contributed substantially to the realisation of the RDP through their social upliftment and development programmes over the past four years. (See annexure 1)

A total investment in human capital of approximately R60 million was made during the period under review. Well co-ordinated projects were introduced in community development, education and training, primary health care and entrepreneurial development. This not only contributed to a better life for many, but also enhanced Denel’s image as a caring company and employer.

The success of the various projects can be attributed to the involvement of people at grassroots level and the decentralised involvement of social investment committee structures. Denel is proud of its achievements.

• Community centre projects at Ethembeni in Kwazulu-Natal
• Basic Needs Project at Siyazama Scheme in Kwazulu-Natal, providing clean water to the rural community
• Eye care Clinic in the Western Cape, providing eye care services to disadvantaged communities
• Medical Clinics in Saulspoort in the Northern Province
• Primary Health Care Service, providing primary medical services to the communities in Pretoria and surrounding areas
• Secondary school for the Lusikisiki community in the Eastern Cape

Denel has a proud record of ensuring the well-being of its employees in a potentially hazardous operation environment.

Denel’s high standards of occupational health and safety enabled the organisation to operate well within the norms of excellence laid down by NOSA (National Occupational Safety Organisation).

Sound progress is being made to implement ISO 14001 Standard on Environmental management.

In 1994 Eskom spent R855 578 on capital building skills development and job creation. By 1998 this figure had grown to a cummulative figure of R23 million.

Safcol, has since 1994, been involved in its neighbouring communities, conducting full community empowerment programmes across the spectrum. All such programmes are accepted as the key Corporate Social investment in the achievement of self-reliant and economically sustainable communities. Safcol has already spent R10,8 million on all its CSI projects.

1. Job creation

These are described as useful sustainable economic projects capable of generating revenue and creating employment so that the unemployed community members could find employment.

2. Education

2.1 Educare

These are community projects in which both human and monetary resources were committed to create and maintain basic primary and nursery education at early childhood stage.

2.2 Adult Basic Education

These are literacy education projects aimed at the community to improve their reading and writing abilities.

3. Health Care

These are projects designed to assist the community to access primary health care education facilities.

4. Community Infrastructure

These are capital projects designed specifically to create community infrastructures that would enable social and economic improvement.

5. Environmental Awareness Programmes

These programmes create and cultivate environmental awareness and education among members of the local communities, particularly youths from the previously disadvantaged communities.

In the case of Alexkor, there are a number of communities in Namaqualand which are contemplating deeply rooted poverty related challenges. There is thus a serious need for social development programmes for short term relief. The Alexkor Foundation has, inter alia, made the following contribution during the past three years:

• Purchase of essential equipment for the Steinkopf old age Home
• Providing wheel chairs
• Providing emergency relief to the Sizimile creche in Port Nolloth
• Ongoing milk supply throughout Namaqualand
• Support for Aids Awareness Programmes; and
• Support for the Participatory Rural Appraisal Development Project

Infrastructural Development in the region is generally at a very low level and well below normal standards. The following projects have been funded:

• The Goodhouse Fresh water Project
• The Planning Costs of the Lekkersing and Eksteensfontein Electrifcation Project
• Springbok Municipality Electricity Provision, and
• The Buffelsrivier Electrification Project.

The economic basis of Namaqualand is closely interwoven with the mining industry. The downscaling of mining activities and the concomitant shrinkage of the economic base is leading to widespread unemployment.

In order to support the drive for job creation, the Foundation has supported the Namaqualand RDP Forum and the Small Miners Association. It is envisaged that the support to entrepreneurs in general would be extended following the successful application for accreditation as a Local Business Service Centre.

For the privatisation process to succeed, capacity in the Restructuring Sector etc, will have to be enhanced and specific amounts will have to be budgeted for.

Solutions must be found well ahead of time in contending with any land or pension related issues – for it is such issues which created bottle-necks in the process.

We have come a long way, but there is still much to be accomplished. As the President said in his State of the Nation address this year, "The foundation has been laid – the building is in progress.