Public Enterprises Portfolio Committee Budgetary Review & Recommendations Report

Meeting report

The Committee elected Dr G Koornhof (ANC) to stand in as Chairperson.

Consideration of the Budgetary Review and Recommendations Report
The Chairperson asked the Committee Members to consider the Budgetary Review and Recommendations Report (BRRR). He noted that this was not a new document as Members had already seen it the week before when changes were made. He asked the Committee Secretary to read through the report page by page where Members would then be asked to agree/disagree with the content.

1. Introduction
Ms G Borman (ANC) stated that the second paragraph mentioned that the Department of Public Enterprises (DPE) oversaw nine State Owned Companies (SOCs) but only named eight of them.

The Chairperson noted that the paragraph would be amended to include Pebble Bed Modular Reactor (PBMR).

The Chairperson noted that Members agreed with the amendment and approved the first page.

2. Mandate of the Committee
No changes were made and Members approved the content. 

The Department of Public Enterprises: Vision, Entities, Strategic Role, and Performance of Department in Relation to Outcome 6
No changes were made.

3. The Department of Public Enterprises: Programme Structure - Administration, Legal and Good Governance, and Portfolio Management and Strategic Partnerships

Mr A Mokoena (ANC) asked how many Points of Presence (PoPs) there were in the entire country.

Mr Eric Boskati, Parliamentary Researcher, replied that he did not have the answer, but he would check for it in the Annual Report.

The Chairperson asked Members to approve the three programmes – administration, legal and good governance, and portfolio management and strategic partnerships. He stated that the last paragraph regarding expenditure in the Legal and Governance programme should be made clearer.

Mr Marais added that he wanted the phrase “medium term” to be clarified as well in terms of years.

The Chairperson noted that in the Annual Report there were six programmes; however, in the BRRR there were only three. He asked why.

Mr Boskati explained that the DPE had six programmes in their 2010/11 Annual Report, but when they came to Parliament this year to present their strategic plan, they said that after evaluation of the budget, the programmes were trimmed down to three.

The Chairperson noted that the Committee agreed to the amendments.

4. Analysis of Annual Report and Financial Statements
Mr Boskati read through this section.

The Chairperson stated that it should be clarified that the analysis was for the 2011/12 financial year. He also stated that the table depicting the DPE’s budget for 2011/12 was misleading and confusing; however, it was a template and could not be changed.

4.1 Transfer Payments
Mr Mokoena thought that more clarity was needed on the R40 million disbursed to the Pebble Bed Modular Reactor in May 2011 to reimburse the South African Nuclear Energy Cooperation for the dismantling and decommissioning of the fuel development laboratories.

Mr Boskati explained that the R40 million transfer was for the previous financial year. For this financial year there was no transfer to the PBMR. The money could have been used for severance packages for staff.

Ms Borman noted that there did not seem to be any sort of accountability strategy built into the R40 million transfer. She stated that this had to be noted in the BRRR.

Mr Mokoena asked what the Intellectual Property (IP) in the PBMR was worth and where it would not reside.

Mr Boskati answered that Eskom had said that now that PBMR was being wound down, it had become one of their subsidiaries.

The Chairperson added that it was his understanding that the R40 million transfer was for the South African Nuclear Energy Cooperation for expenses already incurred. Secondly, the Annual Report spoke of significant work being done to identify and package the IP to be preserved. It was an ongoing process.

The Committee Secretary added that the R40 million had a lot do to with severance packages that had to be given to staff.

Mr Borman stated that the Committee had to put something in the Report that spoke to where the R40 million was going.

The Chairperson proposed that this would be included in the recommendations section of the report.

The Chairperson noted that the section was approved by Members.

4.2 Successes
Ms September asked why the BRRR did not include any report by the Standing Committee on Public Accounts (SCOPA).

The Committee Secretary explained that for 2011/12, SCOPA had not called any SOCs under DPE.

Ms September recommended that the Committee include this explanation in the BRRR.

The Chairperson agreed saying there should be a footnote that spoke to this matter.

4.3 Challenges
Mr Mokoena stated that South African Airways concealed the fact that they needed approximately R6.4 billion in cash injections to strengthen their balance sheet. They denied that this was what they needed when in fact it was true. SAA made fools of the Committee Members and made it seem as if the Committee did not do anything to help them.

The Chairperson reminded the Committee that they were talking to the BRRR and not to SAA specifically.

Ms N Michael (DA) added that was what worrying about SAA and South African Express (SAX) in particular, was that the Committee did not have access to their financial statements. She wondered how the Committee could assess the situation they were in properly if they did not have those financial statements.

The Chairperson noted that there was a suggestion in the previous meeting that the Committee should be allowed to say that post the reporting period, the Annual Report of SAA is expected at the end of November 2012 and SAX’s Annual Report is to be tabled on 30 March 2013. This could not be part of the report; it had to be included as a footnote. In terms of the R6.4 billion needed by SAA, the Committee had to make a distinction about what was included in the minutes of the Committee meetings, and what could be reported in the BRRR.

Ms September noted that it was the first year that Denel recorded a positive cash return. This was included in the entity’s Annual Report. She thought that this should be included in the BRRR. In fact, some of the positive things that the Committee identified for all the SOCs had to be included in the report.

The Committee Secretary responded that they would take note of the Committee’s comments.  

Mr Boskati agreed.

The Chairperson noted that Members agreed to the changes.

5. Analysis of Expenditure Trends
This was presented by Mr Boskati (see document).

Ms September suggested that the under-expenditure by the DPE had to be reflected for each programme as the Committee had to recommend that the National Treasury look towards filling vacancies with in the DPE where skills were lacking. Also, the DPE could not be allowed to get away with the fact that their debts to local government were increasing. This had to be reflected in the Report.

The Chairperson made minor amendments to sub-headings and numbering in this section.

Mr Boskati stated that these mistakes would be corrected.

6. Analysis of Auditor-General’s Report
This was presented by Mr Boskati (see document).

The Chairperson noted that the Report stated that the DPE has received clean audits for the past three years. This was incorrect; the DPE has received a clean audit opinion for seven or eight consecutive years. He asked Mr Boskati to correct this.

7. Liaison with Entities
8. Oversight Visits
No changes were made.

9. Outstanding Issues to be Considered by the Committee
Ms September asked that the words “For some reason” had to be excluded from the beginning of the first sentence of the paragraph. It was unnecessary.

The Chairperson noted the Committee’s agreement.

10. Committee’s Observations
Ms September noted that the second bullet point that spoke to the need to expand the human resource capacity of the DPE had to reflect the Committee’s oversight over more than just infrastructure projects.

The Chairperson agreed, saying that the report should reflect the more general oversight other than just infrastructure projects.

The Chairperson asked that “among other terms of reference” should be removed from the sixth bullet, which spoke to interdepartmental coordination, because it was unnecessary. 

Ms Borman addressed the eighth and last bullet asking that the phrase: “the Committee hopes that National Treasury will fund the 12 remaining vacancies”, be changed to, “the Committee observed that National Treasury should fund …”.

The Chairperson noted that the Committee agreed with these amendments.

Ms Borman said she did not know where it would fit in, but she felt that the Committee should include something about the situation with Kusile and Medupi in the BRRR.

The Committee Secretary clarified that this matter fell under the Department of Energy as there was policy decisions that had to be made with regard to the power stations. 

The Chairperson stated that the Committee should go through the recommendations and then come back to this issue.

Ms September said that there was nothing wrong with the Committee saying something about the matter.

The Chairperson asked Ms Borman to draft something about this while the Committee looked through the recommendations. It would be included under observations.

11. Recommendations
The Chairperson noted there were two recommendations, one for the Minister of Public Enterprises and one for the Minister of Finance.

Mr Mokoena suggested that the different proposals stemming from the Committee’s oversight should be emphasised in the report. He did not hear much in the report about feedback on those oversight visits. The Committee also had to say something about filling vacancies. On that point, the DPE has not quantified how much they need to fill their vacancies.

Mr M Nhanha (COPE) remembered that the DPE Director-General lamented the fact that they could not fulfil their mandate because of lack of financial support from National Treasury. Therefore, it was good that recommendations were made specifically regarding the National Treasury.

The Chairperson noted that both Members wanted to revisit the vacancy issue in the DPE, and they also wanted the DPE to determine how much it would need to fill those critical vacancies.

Ms Borman agreed with the need to quantify the filling of vacancies, especially those critical posts that were still vacant. She suggested that this request be taken to the DPE.

The Committee Secretary stated that he would follow up on this issue with the DPE.

The Chairperson noted that there were other SOCs that the Minister had to pay particular attention to such as SAA, SAX and Denel. The recommendations had to say that the Minister should ensure stability in all of the SOCs that need his assistance. The Minister also had to take note of the critical posts that had to be filled in the DPE. There was nothing wrong with quantifying this if they could.

12. Conclusion
The Chairperson stated that there was a pronouncement on Aventura and the final decision taken on the entity. He wanted the researcher and Committee Secretary to find a slot in the Report to talk to what the DPE’s decision was regarding Aventura.

Adoption of BRRR
The Chairperson stated that it was time for the Committee to adopt the BRRR.

Ms Michael (DA) informed the Committee that since she still had to caucus with her party regarding the BRRR, her party would have to abstain from voting.

Mr Nhanha (COPE) added that although his party did not have a problem with the BRRR as it stood, it was still protocol to discuss the Report with them before he could vote on it. 

Ms September moved for the adoption of the BRRR.

Mr Mokoena seconded the move.

The Chairperson noted the formal adoption of the BRRR, with abstentions from the DA and COPE.

The meeting was adjourned.