Public Enterprises BRRR; Koeberg oversight visit prep

Meeting report

The Committee secretary presented the Committee BRRR on the Public Enterprises portfolio.

Mr S Gumede (ANC) acknowledged the clarity of the report. His main concern was the previous BRRR recommendations made by the Committee that were not achieved. He requested that the previous recommendations that were not achieved be classified as work in progress and not ignored. A critical point was the need for the Department and SOEs to strengthen their leadership. The current status was the result of the poor performance of the incumbents in leadership positions. Another critical point was if all efforts fail how does the Department plan to get funding for the SOEs. The Minister has spoken about rationalisation but it looks like it may go the route of involving an equity partner. There is a need for a guiding document on engagement with strategic equity partners (SEPs) in case the Department takes the route of involving an equity partner.

Mr Cachalia (DA) commented that the state of the state-owned enterprises cannot be separated from the BRRR recommendations because year after year, things gets worse. The Department's financial statements are sound and it has an unqualified audit but the SOEs are in a very sorry state. It was a concern that the Department "achieved" its intended activities but without any effect as the objectives are not achieved. The Committee oversight must take responsibility for the government's failure to achieve its objectives. R40 billion has been transferred to entities, yet South Africa Airways (SAA) has no partner, and Eskom is in a dire state consumes the lion share of that money without any prospect of real improvement, and Transnet has posted losses and will soon enter the bailout sphere. Denel is bankrupt despite bailout; Alexkor is bankrupt despite bailout; South African Express – there are no takers to buy it. The Auditor General's comments are very measured so one needs to ramp up that language what they are saying: the absence of financial records, poor compliance with legislation and inadequate oversight of financial reporting. Those are damning items which the Committee needs to take cognisance of. He emphasised that the recommendations in the current BRRR are no different from previous ones which means we are doing the same thing, in the same manner but expecting a different result.

Ms Kompane and Ms Phiri were experiencing load shedding.

Mr E Buthelezi (IFP) said he had nothing to say

Mr N Dlamini (ANC) said the focus of the Department was on the fact that the funds were spent, yet there was no return on the money spent. There is a need to emphasise that SOEs are failing to submit reports due to so-called auditing delays. This reflects as people not executing their duties. It also speaks directly to the Committee's oversight over the Department and the Department 's oversight over SOEs. There is a need for an explanation about the strategic equity partner considering that government is still fully funding SAA. Where is the strategic equity partner?

Mr F Essack (DA) remarked that the condition of the state-owned companies is frightening with serious exposure and risk. Annual financial statements (AFS) are not being presented. There is a need to learn from the previous experience of state-owned companies such as SAA, where annual reports were not submitted for more than five years. He noted the deterioration of Denel and the frightening state of contingent liabilities. The government bailed out Denel with R3.9 billion, yet the company is bankrupt. How can a company with such huge potential find itself in such a state? The financial statements of Alexkor were late due to 'audit processes'. Eskom is non-performing despite receiving the lion's share. The Auditor General recommended that the SOE reform plans require decisive action; therefore, what is the Committee doing seriously about oversight given the tragic state of affairs? The Department says the targets are 'achieved', yet the SOEs are non-performing.

Ms V Malinga (ANC) was concerned that the Minister and the entities had not signed the shareholder compact – the BRRR refers only to two entities that have signed. On aviation, she asked why the report does not include anything about aircraft assets. Most flights are grounded. Where are the Mango, SAA and South African Express aircraft. She questioned the whereabouts of these. She noted how expensive flights have become in South Africa. The turnaround plan by the Department in changing SOE boards would not have any effect on the output needed by SOEs in delivering their mandate and becoming sustainable. She implored the Department to question if people in leadership positions are executing their duties in Eskom, Denel and Transnet. She asked if there is a sound relationship between the institutions and their employees in light of employees' critical role which they depend on in these institutions.

Ms J Nemadzinga-Tshabalala (ANC) acknowledged the work done on the BRRR. Her main concern was that the recommendations in the previous report were not achieved and were also included in the report in question. She said the Committee needed to acknowledge Transnet's three-year wage agreement achieved with the majority union. She emphasised the need to have a Transnet that is self sustainable and self-sufficient. On the Department 's financial performance, the main concern was its underspending. This is something that must be included in the recommendations. She noted that several entities require capital funding, yet the Department is underspending its funds. There are unemployed young people, yet there are vacancies that are not filled. She suggested that there must be time frames.

Ms Tshabalala's second point wanted to amend the SAA recommendation. The Committee had asked that the SEP process must be open so the public and all relevant stakeholders can participate. No one listened to the Committee recommendations. If there is no intervention from the Department or the SEP, SAA must return to its majority shareholder, the government. SAA has created numerous problems in the airline industry, particularly the exorbitant prices charged by airlines because of the demand. The new Alexkor board is full of retired, older people and the board must express the country's demographics. Young people are capable and energetic but they are not given an opportunity. The Department was given three months to resolve these issues, particularly compensation and vacancies. She questioned who was to be held accountable for such matters. Who are the CEOs, COOs and CFOs that get so much money and at what point are people in leadership positions accountable for their incompetence and failure to provide the Committee with a clean audit? She approved the BRRR.

Ms R Komane (EFF) was concerned about the underspending by the Department while some SOEs are struggling. The main problem was the previous recommendations were not achieved. How does the Committee continue to recommend if there is no implementation?

Ms Tshabalala wanted a recommendation that National Treasury needs to come through and assist, particularly on the affairs of Denel. The Department underspending was emphasised.

Ms J Mkhwananzi (ANC) pointed out the need for timeframes for finishing projects. She also wanted noted the shortfall of 4000 megawatts at Eskom. She requested that the progress on the BRRR recommendations be included. Consequence management must be included as a recommendation. She also supported the Treasury recommendation raised by Ms Tshabalala.

The Chairperson echoed a comment made that the Department was responsible for the direct oversight of the SOEs and the Committee's role of oversight is to make findings and recommendations where necessary to the Department.

The Committee adopted the BRRR.

Koeberg nuclear power station oversight visit
The Committee support staff presented the proposed framework for the oversight visit to the Koeberg nuclear power station on 21 October 2022. This was part of the Speaker's instruction to prioritise the energy crisis. Five focus areas had been identified in the framework for Members' questions during the oversight visit.

Ms Tshabalala raised concern about the Committee taking more than an hour to get into Koeberg in the previous visit due to key point security measures. She requested that Members be allowed to discuss over items beyond the framework's five focus areas during the visit. She emphasised the importance of discussing the way forward on the country's nuclear programme. She said that there is still an oversight visit to Eskom head office in response to the Speaker's instruction. It is a serious matter and the Committee cannot wait until Eskom tabled its Annual Report.

The Committee agreed that the National Union of Mineworkers (NUM) be present but not the suspended Steam Generator Replacement (SGR) staff.

Meeting adjourned.