Jeff Radebe, Minister of Public Enterprises
Cape Town, 14 September 2000
Ladies and gentlemen of the media
Thank you for your attendance at this briefing. During the parliamentary recess we have had occasion to interact with most of you, so today I just want to outline very briefly developments since the last session of Parliament, and then give you some idea o f the overall progress of the restructuring process and what we can expect over the next few months.
In August government launched the Policy Framework on the Accelerated Agenda for the Restructuring of State Assets. This document was also formally tabled in Parliament on Tuesday, 12 September 2000. It has already been widely distributed to the media, an d has been widely reported. We have also unveiled the Department's Business Plan that outlines how we will carry out the restructuring mandate given to us by Cabinet. Furthermore, the Director-General, Sivi Gounden, and I have signed his Performance Agreem ent as required by our Public Sector transformation.
My Department and I will be briefing the Portfolio and Select Committees on Public Enterprises on key elements of our work during this session and I would request that you keep your eye on the Order Paper announcements in due course.
As far as legislation is concerned, a major step forward will be the passage through Parliament of the Transnet Pension Fund Amendment Bill, that has emerged from the Portfolio Committee with minor amendments and which enjoys all-party support. I cannot overemphasise the critical importance of this Bill and the opportunities it will present in the restructuring of Transnet, but I will reserve further comment until it is debated in the National Assembly.
We had also hoped to process the Eskom Conversion Bill during this session of Parliament, but due to delays in the drafting process, we will now present the Bill to Parliament in February 2001. The Bill aims to convert Eskom from its existing form into a c ompany in terms of the Companies Act.
Over the last few months a great deal of attention has been placed on our relations with labour as they are a critical stakeholder in the restructuring process. I am pleased to inform you that labour (i.e. the three labour federations) and government have agreed to retain the National Framework Agreement in its current form until the end of 2004. The spirit and the letter of the agreement shall be honoured, and we also agree that it does not need codification in legislation.
We agree, furthermore, that there will not be any moratorium on the restructuring programme. Instead, whenever the restructuring process and/or management appear not to meet agreed objectives in a particular enterprise, labour will be able to use existing mechanisms to raise their concerns directly with Government. On our part, we have already issued directives to all SOEs indicating that they should honour and observe the spirit and letter of the NFA. There are clauses in the relevant Shareholders Agreemen ts that we have negotiated between government and the SOEs to this effect.
Let me also just make clear that the restructuring programme driven by my department covers state-owned enterprises only at the national level, and does not involve assets at the local and provincial level. There is, for instance, a clear Framework Agreeme nt between Government, Labour and Local Government on how to deal with and manage municipal services restructuring. The national SOE Restructuring Programme is clearly not aimed at replacing any of these processes at the provincial and local level, and is distinct from them. The question of retrenchment and job creation looms large. The Department currently is examing the pattern of employment and retrenchment since 1994 within SOEs under our control in order to get an accurate picture so that we can ensure that our commitmen t to creating better and sustainable jobs, together with current efforts to put in place a framework for a Social Plan as a cushion against possible job losses, remains viable. I could just remind people that, in cases where such fears around jobs have be en raised with us, for example in Spoornet, government has intervened decisively and made sure that the relevant stakeholders sit down and work out a comprehensive and implementable strategy that will minimise job losses.
The Department is putting the finishing touches to Shareholder Compacts with Denel, Eskom and Transnet. The SOEs have also adopted the Protocol on Corporate Governance. Our Chief Director responsible for Corporate Governance in Department, Mr Mac Gantsho, has been invited to participate in the King Committee on Corporate Governance. Through this forum, the Department will contribute to improved Corporate Governance in South Africa as a whole, and ensure that the SOEs are kept in line with any new developme nts.
The Department is also finalizing the elements of a public education programme in conjunction with the JSE to ensure that the general public is able to participate fully in the IPO listings that we will be launching. We view this type of participation as an important aspect of empowerment but are aware of the pitfalls that such a process could present and so need to make sure that the general ideas become well known. Beyond this, the Department is working closely with the BEE Com in its endeavours to iden tify workable programmes for black economic empowerment. Our Policy Framework has gone some way along this path already.
Just in terms of our communication strategy, you can note for information purposes that the Department's website will soon be revamped and upgraded and will rapidly become a source of detailed information on the SOEs from our data base that now covers 308 entities, the work of the department as a whole, including information about IPO listings, and will continue to provide all our policy documents, business plans and statements.
Let me turn now to some specific items from the restructuring programme.
Telkom IPO
Work on the proposed IPO for Telkom has gained significant momentum. The IPO Office is now in place in my department to pioneer and manage the Telkom IPO as the landmark equity transaction. We will soon appoint the IPO Project Manager, who will have the ov erall responsibility of the IPO Office and work closely with secondees from the Departments of Finance (the National Treasury), Communications, and Government Communication Information Service.
I am pleased to announce that we received 10 bids by the required date for the role of Global Coordinator in the Telkom IPO. Let me set this morning's Financial Mail straight by indicating that Bids were received from the following: Barnard Jacobs Mellett Securities (Pty) Ltd, Merrill Lynch International, Credit Suisse First Boston, JP Morgan Securities, Deutsche Bank Securities, HSBC Investment Services (Africa) (Pty) Ltd, Goldman Sachs International, NM Rothschilds & Sons, Cazenove (SA) (Pty) Ltd, and UBS Warburg. The bids will be opened in the presence of an international accounting firm to ensure that the process is free from impropriety. The evaluation process will also be fair and efficient. We aim to complete the selection of the Global Coordinator by the end of October 2000.
Telecommunication Sector
Government is currently looking at consolidating the telecommunications capability of the state housed in Eskom, Transtel and Sentech with the possibility that this merged entity could form the infrastructural basis for the Second National Operator (SNO). A business case for this merger has been established and we are now looking at how best to package these entities in the light of the evolving telecommunication policy trajectory.
IT Consolidation
Cabinet has approved the process of consolidating Transnet's Datavia, Denel's Ariel Technologies, and the Information Technology Division of Eskom. Cabinet approved the implementation of phase two (2) in the IT Consolidation project. This entails the desig ning and defining of the Business Model for the envisaged new IT Company.
The Business Model will address all questions in relation to the shareholding, empowerment, the capital outlay, financing and how private capital will be mobilised. We are working together with all the entities and Consultants in designing this Business Mo del.
For instance, we have established a Project Office at Ariel Technologies. The entities have seconded both full-time and part-time managers to work with consultants. The restructuring branch, through our project managers, is co-ordinating the overall projec t. We expect to finalise the Business Model by the end of October 2000 that will be submitted to Cabinet for approval during November. The latest date for the new Company to start operations is 1 January 2001.
In the meantime, we have agreed with the senior management of these entities that the entities will continue to work together and explore business opportunities where possible. We have also agreed that all efforts will be made to ensure that ongoing intern al restructuring and filling of senior posts do not adversely affect the consolidation project and that any substantial moves will be communicated to the Department of Enterprises and other relevant players.
Denel
A number of restructuring initiatives that affect Denel are already in the Cabinet's committee system. These include proposals for the future location of Mechem, the status of Swartklip, and the critically important consideration of proposals for the restr ucturing of Denel Aerospace and Ordnance and decisions on which company or companies we shall invite to participate in negotiations for strategic equity partnerships with these latter two divisions. I am not going to provide further details on these Denel questions today and will do so only once the Cabinet processes are complete.
Let me just indicate that the preparatory work has been extremely thorough, and we have been able to engage all possible stakeholders in an open manner. We have had the opportunity to engage these potential partners as recently as last week. With the evid ent turnaround in Denel's business and marketing activities already we believe that there are exciting years ahead for the company. In this regard Denel plans to release its financial results for 1999/2000 shortly and a media alert will be released in due course.
Transport
I have already referred to the importance of the Transnet Pension Fund Amendmend Bill and my intention to reserve comments until the debate in parliament.
Spoornet's restructuring continues to steam ahead! I reflected on the financial turnaround of this entity at the release of Transnet's financial results and would refer you to those comments. Government's initiative to introduce a package solution that i ncluded enhancing Spoornet's managerial capacity, bringing in a turnaround specialist, and making strategic appointments, has paid handsome dividends. From an almost lost cause, Spoornet's future now looks assured. We have rolled back the completion of t he due-diligence for Spoornet to December 2000 as the comprehensive report on the turnaround strategy, amongst other things, will only be completed by the end of October. The complexities of Spoornet's operations require some time to ensure thorough examination.
Government is currently considering which model of restructuring should be followed in the further restructuring of ACSA. The Department of Transport is working with us.
The Departments of Public Enterprises, Transport, Trade and Industry, and Finance, in conjunction with Transnet / Portnet have initiated discussions on the steps that need to be taken in the transformation of Portnet, before any restructuring can commence. Alongside this process is the completion of a Ports Policy document that will outline the need for globally competitive ports to support trade and economic development, the separation of port authority and port operations functions, regulatory issues, an d so on. We expect to release the document for public and stakeholder discussions by November 2000.
Eskom Enterprises
Government is in a process of finalising the transfer of assets from Eskom to Eskom Enterprises. Models for the further capitalization of Eskom Enterprises are still being investigated. Further details will be made available shortly. During the recess I a lso released statements about developments around the Power Grid concept for Southern Africa.
Forestry
I am delighted that my colleague, the Minister of Water Affairs and Forestry, Ronnie Kasrils, has joined me this morning so that we can report together on what can only be described as very exciting Safcol developments.
Of critical importance in the new agreements are essentially three items: community involvement and development benefit, agreements on a fixed period of labour retention, and decisions directly suited to environmental protection. You will recall that Gove rnment was roundly criticized for its earlier decision to stall the processes around Safcol and this was held up as one of the so-called "failures" of restructuring. We believe that that decision was correct. The details of today's announcement show quit e clearly the value of not engaging in firesales, and the silliness of those who urge us to engage in a mad rush to privatize everything without any consideration for the benefits to workers, communities or the environment.
The Safcol details are contained in a separate, joint statement.
For further info contact: Dr Ian Phillips
082 469 1553
Mr Andile Nkuhlu
082 675 8277
Fax: (021) 465 2381