Chairperson - I think that is probably the last applause I will get for a while - hon Ministers, Deputy Minister, hon members, chairpersons and board members of the state-owned companies, the director-general of the department and members of my department, chief executives and senior managers of state-owned companies, distinguished guests, ladies and gentlemen, the way you get to appreciate the very real way in which this portfolio touches the lives of every citizen is when your phone rings just minutes after the President has named you as the member of his Cabinet responsible for the Public Enterprises portfolio. The first call is to let you know that the lights are off in a street in your old neighbourhood. The second is from an elderly aunt wanting to know if you know that the price of electricity is going to increase again.
While this was initially a source of amusement, on reflection it brought home a fundamental message very clearly. This portfolio is not just about the very impressive mega-initiatives to develop and grow the economy, which I will speak about later, but it is about making it possible for the two people who called me as well as for all the other citizens and businesses to do what they need to do every moment of every day, worry free.
A second light-bulb moment - excuse the pun - was when I first heard myself being referred to as the representative of the sole shareholder - my formal role in relation to most of the eight state-owned companies in the portfolio. I understood that while the state was the formal shareholder, it held these companies in the name of all citizens. So, early in my tenure I understood who I was serving and who my true bosses were.
The department exists to support the representative of the shareholder in playing her role, performing her duties, exercising her responsibilities and discharging her obligations. In doing so, I require it to operate at four levels. The first is to distil government policy and strategy into a shareholder's compact or performance agreement with each of the companies and to provide careful, incisive and detailed scrutiny of the way in which each company performs against the agreed targets.
The second is to assist and support the companies to achieve the targets and help remove blockages in their operating environment. The third is to undertake interventions to harness the combined capacities and capabilities of all the companies and other key players.
The fourth is to unlock inclusive growth, drive industrialisation, create jobs, develop skills and deracialise the economy. This last one is to join me in engaging other relevant players in the policy and regulatory terrain to obtain certainty and secure the most conducive circumstances for the companies within which to operate and succeed.
Naturally, I have expectations of the state-owned companies as well. Given that in introducing Vote No 11 this is the first time that I am speaking as the representative of the sole shareholder, I would like to use the opportunity to reflect briefly on my expectations and how I hope to inhabit this role.
Firstly, state-owned companies must simply get the basics right. Those with a direct interface with citizens and businesses must deliver quality, affordable and accessible services consistently. In old-fashioned parlance, they must ensure that the trains run on time. In our case, of course, these would be freight trains.
Secondly, state-owned companies must continue to serve as effective strategic instruments of industrial policy and economic inclusion. This must be as central to their thinking as performing their core business.
Thirdly, the visionary National Development Plan and its effective five- year implementation plan - the Medium-Term Strategic Framework of the fifth democratic administration - assign very pivotal roles to state-owned companies in achieving the radical socioeconomic transformation of which the President spoke in his recent state of the nation address. These are to contribute substantially to, firstly, accelerating and sustaining inclusive economic growth beyond 5%; secondly, ensuring much higher levels of employment creation and decent work; and, lastly, rapidly reducing inequality, which includes the deracialisation of the economy. This will push back the triple challenge of poverty, inequality and unemployment, which is required by government. Therefore it is required of us to do things differently.
Fourthly, the boards and management of state-owned companies must be paragons of strong, visionary and strategic leadership, cutting-edge business practices, innovation and exemplary governance. There are two obvious questions that arise from such expectations: Will I act in relation to those boards who fiddle while precious public money burns and/or who fail to ensure that the company fulfils its core mandate? My answer is yes. Does this mean I will micromanage the companies or, to put it more bluntly, I will interfere? The answer is no.
I have outlined how the department and I will approach matters. What I will do, like any responsible shareholder representative, is scrutinise quarterly performance very carefully and provide immediate and appropriate feedback.
The department and I are also called on to play roles beyond the immediate oversight and support of the state-owned companies. Let me touch on the most pressing. The fifth democratic administration has placed resolving the electricity supply problem at the centre of its agenda. I want to assure the two people who called me about their problems related to the affordability and reliability of their electricity supply, as well as all other citizens and businesses, that this issue is being addressed very seriously and very urgently. There are critical talks between Ministries, departments and others to address this issue, not as an Eskom problem but as a national priority.
Let me now turn to Vote No 11. Of course, I will be judged forever on the first few things that I have just raised, hon member Marais. The proposed budget for the 2014-15 fiscal year is R259,8 million, with the two outer MTEF years being R279,3 million and R285,6 million respectively. Following tradition, the Deputy Minister and I will cover the portfolio together.
Let me reflect briefly on infrastructure investment. Eskom's build programme and Transnet's capital expenditure programme form the core of government's infrastructure investment strategy. Eskom spent R58,2 billion on capital expenditure in 2013-14. The key achievements of its build programme are, firstly, the completion of the Return to Service project. All three targeted power stations - Camden, Grootvlei and Komati - are fully operational. This added generating capacity of 3,700 MW to the grid since 2005.
Secondly, the refurbishment projects have made progress. All the Kriel units and three of the six Matla units have been refurbished. Delays were experienced at Duvha. The first project under the renewable energy independent power producers procurement programme was connected to the grid in September 2013 and the first independent power producer was commissioned in November 2013. A total of 467 MW is currently available to the system from these producers.
During the 2013-14 financial year, Transnet awarded a R50 billion contract for the acquisition of 1 064 locomotives. Not only will this acquisition of locomotives enable Transnet to increase its rail volume capacity, but the procurement process has been structured in such a way as to allow for the maximisation of localisation benefits. Broadband Infraco will be transferred to the Department of Telecommunications and Postal Services as soon as the necessary processes allow.
Denel is doing well. It has returned to sustainable operating profit. The majority of its revenues are now derived from export orders. The business order book has grown from R21 billion to R30 billion in the past financial year. Revenues will double to over R8 billion by 2018-19. In the 2013-14 financial year, Denel secured a R10 billion contract from the South African Department of Defence to produce 238 Hoefyster infantry fighting vehicles. Importantly, 70% of the components of these vehicles will be developed and manufactured in South Africa, creating 2 000 jobs at Denel and in South African defence-related industries. [Applause.]
Let me touch briefly on localisation and transformation. A total of 547 contracts, worth R5,6 billion, were awarded during the financial year as part of Eskom's capital expansion programme, of which the local content committed amounted to R3,1 billion.
In the 2013-14 financial year, Transnet achieved 92% local content procurement as a percentage of total spend against an actual target of 70%. Transnet also exceeded the supplier development target. Transnet's BBBEE spend amounted to 94% of the total measurable procurement spend against the target of 70%. In the 2013-14 financial year, in line with the National Skills Accord, the companies collectively committed to enrol 2 764 new artisan trainees.
Over the next 12 months, increased focus will be given to the delivery of the current build programme. The synchronisation to the system of Medupi's first unit will be concluded by December 2014 and subsequent units are scheduled to come on stream at nine-monthly intervals thereafter. All three units of the Ingula pumped-storage plant are scheduled to be available by the end of 2015. Eskom has committed to contract at least 3 725 MW of renewables in the year ahead.
Transnet has substantially increased its targeted infrastructure expenditure over the seven-year period beginning in the 2011-12 financial year, from R110 billion to just over R312 billion. This will address the current capacity constraints and inefficiencies of our national logistics system. Over the current MTEF period, Transnet will spend R107 billion on its capacity expansion programme. It is projected that the jobs supported by Transnet in the economy will increase from 368 000 in 2011-12 to 570 000 in 2018-19.
In the 2013-14 financial year, the department developed the Africa strategy, which is intended to co-ordinate the investment activities of our companies and reposition them to be able to capture the opportunities that exist on the African continent.
The current economic environment presents a major challenge to the financing of the build and capacity expansion programmes of government. It is clear that a sustainable funding framework that is independent of the fiscus is required. This framework must attract private-sector funding and guarantee a reasonable return on assets on the one hand, while on the other it must allow space for government to leverage the build programme for better developmental outcomes.
Let me briefly touch on the airlines. The environment in which SAA and SAX operate domestically and globally has become ever more challenging, with intensified competition, narrow margins and cost pressures due to fuel prices and currency volatility. In this context, their undercapitalised balance sheets severely constrain the airlines, leading to continued losses and affecting the going-concern status of the companies.
It has become clear to me - and if you ask that question, I will tell you why not in my response - that simply extending state guarantees to the airlines is an inadequate response to the challenge and that an extraordinary intervention is required to put them on a sustainable footing and to support their turnaround efforts. The department will continue to focus on increasing localisation in the build programme through the competitive supplier development programme. It is also working with the airlines to ensure that the fleet acquisition programmes deliver better industrial development outcomes.
Government has invested substantially to enhance the capabilities to manufacture high-value components for the aerospace industry through Denel Saab Aerostructures and other initiatives that involve the private sector. Preserving and enhancing these capabilities is fundamental to the development of advanced manufacturing in South Africa and is in line with the Industrial Policy Action Plan.
For the period between 2014-15 and 2018-19, the state-owned companies in the Public Enterprises stable will collectively enrol more than 30 000 new learners in various scarce and critical occupations. The department will conclude the consultations on the remuneration standards for boards of directors and executive directors to ensure that their remuneration packages are linked to the achievement of targets contained in the shareholder compacts. It will also embark on the finalisation of the Shareholder Management Bill, which will embed the shareholder management practices that have been developed by the department over time.
In conclusion, may I make a special appeal to all the hon members of the House on the subject of the burning issue in this portfolio. I am sure that all present agree that resolving the challenge of shifting this country to a situation in which we have ample reserves of affordable and reliable electricity is a very high priority. As we have witnessed, both domestic and international investors and rating agencies are looking for signals that we, as a country, are serious about resolving this problem soon and in everyone's interest. My appeal is that we do not treat this as a partisan issue. It is just too important to our future to get it wrong as a result of placing narrower interests first.
If the committee concurs, I will engage you on how to make such an approach mutually meaningful. Even though we have worked together for less than two months, I have been overwhelmed by the extraordinary support I have received from the chairperson, Deputy Minister Bulelani Magwanishe, Director-General Matona, the staff of the department and the Ministry. For that I want to say thank you very much. [Applause.]
I have a relationship with the opposition and that is for them to oppose me. You are very important, because if I do not hear what you have to say I will not know how to address it. Thank you. [Applause.] [Time expired.]