Tag Archive | DPE

Minister Brown wants utility shareholder management 

Shareholder Management Bill could kill cosy jobs…. 

sent  to clients 20 Dec…..Public Enterprises Minister, Lynne Brown, reports that she is to introduce, as aLynne Browndraft, the Shareholder Management Bill as part of a plan to introduce more leadership ability and some form of continuity for the state owned enterprises (SOCs) under her control. This includes Eskom, Transnet, Denel, SA Express, Alexkor and Safcol.

Maybe start of something big.

Whilst troubled SAA is now an independent, falling under National Treasury for the moment. Providing President Zuma makes no more changes, Minister Pravin Gordhan is set to sort out National Treasury itself and challenge the management style of his old stomping ground, SARS.. How much come out of the Cabinet Lekgotla is critical.

The problem children

PetroSA logoMeanwhile, PetroSA is in real deep water, the entity falling under Central Energy Fund (CEF) and which reports itself to Department and Energy (DOE). But at least the PetroSA problem is now in the open with somebody obviously having to take over the reins and sort the mess out, probably CEF itself.

Oddly enough there are people in CEF who know exactly what the problem is but once again politicians pushed experts in the wrong direction, it appears.

In addition, the Passenger Rail Association (PRASA) is very much on the slippery slope and, together with SANRAL, both present highly contentious transport issues, are now in the hands of to untangle

Public Enterprises comes to the party.

Minister of Public Enterprises, Lynne Brown appears to be getting the senior management of her portfolio undereskom control and whilst there could possibly be power supply problems at Eskom she says, because “machines can break down unexpectedly”, the leadership is there, as is the case with Denel.

Minister Brown recently reported at an AmCham meeting in Cape Town that there are around seven hundred SOCs, an extraordinary fact, but bearing in mind the fact that South Africa is reputed to have the largest head count in public service per population count, this would appear quite probable.

On the road again

With Deputy President Cyril Ramaphosa chairing an Integrated Marketing Committee, which will hopefully designate which entities should remain SOCs and those which should be absorbed back into their relevant departments, there appears some hope with regard to containing the ballooning public service machine which has characterised President Zuma’s presidency.

Hands off appointments

An essential element of Minister Lynne Brown’s plan is to remove the appointment to the boards of the entities under her domain away from Ministers, including herself, to a shareholder management team that creates a leadership operational plan for all SOCs and appoints, through due process, a tightly run appointment system.
A brave proposition indeed but it does indicate that Minister Brown is her own person.

Whilst the proposals might look like state control, in fact it is a clear signal that government may have heard the message that the current system of Ministers appointing board members is not working and is one of the reasons leading to what the auditor general calls “useless and wasteful expenditure”.

On the drawing board

The Shareholder Management Bill, Minister Brown said subsequently in Johannesburg, will first need a concept paper (perhaps she means a White Paper) and such could be released after the Cabinet Lekgotla in February, with an intention of introducing such as system by the end of 2016.

Minister Brown said that she herself as a Minister would therefore be excluded from making appointments in her own SOCs for a start. Perhaps this system can be applied to all forty-seven government departments and agencies, suggested a questioner bu the Minister would not be drawn into matters outside of her brief.

Leadership needed

During the same address, she added that Eskom was “not out of the woods” yet and there was still not sufficientlyne brown 2 electricity to facilitate economic growth but this would change. Minister Brown said none of the entities under her control “would be approaching the National Treasury with begging bowls.”

One small step

No doubt, as far as confirmation of an appointment is concerned, the Minister involved will still have to “approve” any selection decision by the independent team of specialists but it is worth watching the outcome of the debate on the shortly-to-be tabled Broadcasting Bill, if only to see if the appointment of inept senior appointments can be halted or reversed.

What has come out of the Eskom, PRASA and PetroSA issues is that a person who has no right to be in a position of leadership, or worse one who has supplied fraudulent qualifications, leads to frustration and anger by those with genuine skills and high academic qualifications lower down the ladder and at the coalface.

This is in the space of government service where technical skills are located and badly needed and it is hoped that Minister Lynne Brown has more of these “eureka” moments.

Previous articles on category subject
PetroSA on the rocks for R14.5bn – ParlyReportSA
Central Energy Fund slowly gets its house in order – ParlyReport
Shedding light on Eskom – ParlyReportSA

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MPs attack DPE on energy communications

DPE has a tough time on energy issues…

business-communicationsPoor communications with the public on the energy crisis and the limited ability of the ministries involved to communicate with state owned companies (SOCs) were issues raised during a report on SOCs falling under control of the department of public enterprises (DPE) during a meeting of the relevant portfolio committee.

The meeting was called to respond to the AG’s report on the performance targets of the DPE.

One opposition member complained that all bonuses paid to Eskom executives should be keyed to whether the lights stayed on or not. Despite there being six state utilities being reported on, it was questions on Eskom that occupied most of question time.

AG report about targets only

AGSA logoWaleed Omar, audit manager, auditor general’s office (AGSA), indicated to Parliament that no significant findings representing failings on issue targets were identified in their review of the DPE annual performance plan for the 2015/16 financial year.

It was explained by Sybrand Struwig, manager of AGSA, that any annual audit of actual performance period was prepared against pre-determined objectives, coupled with indicators and targets as contained in the annual performance report of a department.  Such confirmed compliance with laws and regulations.

The usefulness of this performance information against targets and the reliability of performance reporting enabled AGSA to compile an audit of a department or SOC to reflect an opinion or conclusion on performance against predetermined objectives and how risk had been managed.

DPE met standards set

Ms Matsietsi Mokholo, DPE acting DG, expanded on this by saying what in fact AGSA was saying to parliamentarians was that the exercise had been to assess DPE’s compliance according to AGSA’s matrix; how it aligned with the National Development Plan (NDP); and how issues were dealt with in terms of the medium strategic frameworks report (MTFs) made regularly to Parliament over the given period 2014 -2019.

She said the auditor general had confirmed that DPE was on track with regards to this alignment.  Indeed, she said, DPE had identified its key challenges and the risks which “could materialize” if measures within state owned entities under their control were not taken.

Eskom the only real SOE problem

In answer to MPs questions on Eskom, Ms Mokholo said that DPE has identified that the tense situation of load shedding needed to be carefully managed and monitored in order to avoid a blackout.   Currently the country has moved towards stage three of load shedding in order to avoid a blackout.

The issue was the only matter in the DPE portfolio of state owned companies (SOCs) that had major problems; otherwise DPE had a good record. However, she said, there were questions still being asked about how Eskom would prevent stage four which would apply in the case of a total blackout. This issue was now being addressed in its strategy plan and, consequently, the AG was satisfied that issues had been addressed not ignored. That was what the report was all about.

Medupi on or off

Other issues addressed were the unrest at the partly constructed Medupi power plant, which was difficult because the workers involved were not public servants, but the matter had been addressed and a resolution hoped for.   Another issue covered was a strategy to how further avert any downgrading of Eskom from a shareholder perspective, again most difficult because much was outside of DPE’s control.

DPE’s control over SOEs limited

Other matters being discussed were the whole issue of the reliance of SOCs on government guarantees and the reliance SOCs on road transportation.   It emerged during the discussion how little DPE could intervene in SOC management and parliamentarians said that thought should be given to this as the success of an SOC was imbedded in a minister’s performance agreement.

Ms Mokholo concluded that DPE currently was responsible for six SOCs. She said, “The challenges currently faced by Eskom should not be seen as a reflection on the performance of the entire portfolio. Eskom was the only SOC which was facing serious challenges”.

She repeated the fact that the others were doing well. AGSA confirmed that the corporate plan of any SOC was audited consistently throughout the portfolio of DPE’s SOCs and, as was reported in October 2014, the current portfolio at that time, with the exclusion of SA Express, did not have any material findings that worried AGSA.

Financials to come at end of year

Waleed Omar, audit manager, explained that AGSA did not wait until the end of a financial year to audit a department or entity’s financial plans. Financial audits were a completely separate issue. AGSA would provide input before the end of the financial year.

In this case, internal auditors of each SOC looked at the reliability of the information reported and whether the quarterly results were supported by the matching documents. AGSA would then rely on the work of internal audits. He said there have not been any instances at this stage within DPE at this stage showed any material differences between the findings of internal audits and those of AGSA.

Mr Omar explained that AGSA has considered the work of internal audits for the first two quarters of the financial year for 2014/15. AGSA followed a process according to international standards but this particular meeting showed that DPE’s operational plans were compliant.

DPE admits private sectors skills needed

When the committee started to discuss the gradual development of DPE into commercial sectors, Mr Ratha Ramatlhape, DPE director, added that many of the new strategies being triggered in the core entities of energy, manufacturing and transport would require bringing in technical experts from the outside to deal with the challenges being faced within the DPE portfolio.

Ms N Mazonne (DA) raised the fact that Eskom had paid bonuses to executives, none of which had achieved 100% of their key performance indicators (KPIs) which were therefore far too easy to reach.  DPE needed to tell Eskom, she demanded, that executive KPIs had to be aligned to whether the lights were kept on or not.

This indicated, the DA said, what the minister of public enterprises had been telling Parliament for some time to the effect that the level to which the DPE could intervene with SOCs was far too limited.   DPE could only play an advisory role it seemed, Mazonne said, and there needed to be legislation in place urgently to resolve this.

Legislation expected on minister’s powers

Ms Mokholo responded that DPE has already started working on giving ministers the power to intervene based on the Companies Act.  For example, she said, the DPE had a meeting with the Eskom board to deal with interventions which were not necessarily based on legal prescripts, an example being the co-generation contracts. She confirmed legislation was being looked at.

Opposition members were of one voice that although it was unfair to blame DPE for the electricity crisis, nevertheless, with the country at stage three of load shedding, there was no way DPE could deny that the economy and people’s lives were being badly affected. Current communication with Eskom was very poor, they said, and a national broadcast was needed to allay the air of panic that existed in some quarters of the economy.

The DPE responded that it had advised the Minister and the war room to release such a statement or the President to make a statement in his budget vote speech.

Other articles in this category or as background

Public enterprises reports on controversial year – ParlyReport

South Africa remains without rail plan – ParlyReport

SA Energy gets war room status – ParlyReportSA

Posted in Electricity, Energy, Facebook and Twitter, Finance, economic, LinkedIn, Public utilities, Special Recent Posts, Trade & Industry0 Comments

Minister Gigaba to line up Eskom for carbon tax

SOE’s in for carbon tax on climate response….

Public enterprises minister Malusi Gigaba, without mentioning carbon tax specifically, has launched a climate change policy framework for state-owned enterprises (SOEs) that seeks to align their climate response with the United Nations Global Compact (UNGC) on carbon emissions.   South Africa is a signatory to the UNGC and to the ten  UNGC principles which include human rights, labour, climate response and anti-corruption.

Principle seven states that business should support a precautionary approach to environmental challenges; principle eight says the signatory will undertake initiatives to promote greater environmental responsibility; and principle nine encourages the development and diffusion of environmentally friendly technologies. Minister Gigaba enumerated these.

The UN’s ten principles we are to follow

The minister said, “The UNGC calls companies everywhere to voluntarily align their operations and strategies with the ten universally accepted principles in areas  which include greenhouse gas emissions”.

The minister’s statement is featured  on SA government’s news site, and quotes the minister as stating , amongst other things, that it was “strategic” for South African business corporations to align their operations with  UNGC and their principles.

In aligning the newly launched policy framework for  state owned enterprises along similar lines, he says government will develop a detailed strategic plan in relation to climate change that includes “green economy considerations in operational decisions”.

The minister referred to four key design principles informing the policy framework, including the need for SOEs to focus on the overlap between commercial, economic, developmental and environmental objectives whilst carefully managing areas where these objectives conflict.

SOEs include…….

It emerged during the debate that certain state-owned enterprises (SOEs) have already endorsed the global compact, which, according to SAnews were, Denel, Transnet, Eskom, SAA, Broadband Infraco, Safcol and SA Express.

This agreement with UNGC appears to be one of the “global agreements which finance minister Pravin Gordhan referred to in his parliamentary budget vote speech when he gave his reasons for proposing a carbon tax, one of these and the main reason being to “change behaviour towards emissions”.     This  is also the keynote point of the recent treasury updated Carbon Tax Policy Paper out for public comment and which follows the much earlier discussion paper of 2010, “Reducing Greenhouse Gas Emissions: The Carbon Tax Option”.

“Recycling” of carbon tax rather

Minister Pravin Gordhan told parliamentarians recently that the “full earmarking” (or ring fencing) of specific tax revenue streams are not in line with sound fiscal management practices.     However, the efficient recycling of revenue, his deputy Cecil Morden said, was if mechanisms for structural adjustment revising greenhouse gas mitigation (GHG) is to be possible.   Morden said, ” A carbon tax will be introduced as part of a package of interventions to ensure that the primary objective of GHG mitigation is achieved”.

Public enterprises minister Malusi Gigaba’s recent speech therefore presumably means that he has every intention of following the minister of finance’s speech in making Eskom pay carbon tax, or as Cecil Morden said, “mechanisms for structural adjustment revising greenhouse gas mitigation”.

 

Posted in Electricity, Energy, Enviro,Water, Finance, economic, Mining, beneficiation, Public utilities, Trade & Industry0 Comments

Public Enterprises reports on rocky and controversial year

Minister  Malusi Gigaba, introducing the debate on the department of public enterprises (DPE) 2011/12 annual report, said. “We have a dual role as government departments and utilities because we have to build an understanding of why our state public enterprise components do certain things operationally and why they do certain things as a result of government policy.”

He thus indicated that at times the two may be at variance and underlined DPE’s role in harmonising the two.

He said that one of the biggest issues currently was to monitor the oil and gas companies in order to bring together a common strategic picture and obtain a better picture with data of the situation. This was the last time oil and associated products and gas were mentioned in the entire presentation, matters relating to Eskom and SOEs being of main focus.

Minister Gigaba said “Another issue is that we have had to ask certain utilities to go beyond their own plans in order to meet certain national obligations, especially bearing in mind the infrastructure programmes being embarked upon throughout South Africa.”

Minister Gigaba said that human resources issues have been at the forefront especially bearing in mind the lack of skills acknowledged generally as a national issue and in many cases obstructing SOEs from reaching the objectives set.

On objectives and targets, he was referring the measurement processes set out in the DPE annual report now assessed by the department of performance, monitoring and evaluation (DPME).

He commented that the environment on which SOEs are now operating had changed completely and were continuing to evolve almost daily. He also referred to the challenge of cost increases and marketing conditions that accompanied this.

“DPE has worked closely with all SOE’s to ensure accountability and oversight meetings are held at least twice a month”, he assured parliamentarians. “This is a robust programme in terms of meeting DPME requirements and is geared to see how all SOEs are responding to current conditions”.

But he asked that treasury in future consider an enlarged budget for DPE due to its expanded mandate as “change managers”. The total staff complement of DPE is 189 persons.

DG Tshediso Matona placed each of the DPE portfolios activity in the context of the current economic picture, which he said was important to reflect upon before one considered both the delivery service picture, an internal issue, and also matters of concern which were national issues.

Real fixed capital expenditure by the public corporations gathered great momentum during the period under review as Eskom and Transnet accelerated their spending, he said, and which was “further crowding-in private sector investment”.  He was not asked to explain this by MPs.

Capital investment went up to 560bn; most of the increase of 9% over the previous year of R520bn occurring in the fourth quarter.

During the last year DPE focused on oversight practices;  the business of stabilising the SOEs in terms of the changing economic picture;  and looking at funding options – all the time constantly reminding the SOEs that by driving fixed investment they were unlocking economic growth.

Joint project facilities between all SOEs, particularly in the area of common procurement, had been a focus of DPE during the year, and also the issues of skills training and development. Transnet provided some 3,500 engineering-related learners and enrolled 854 new artisan learners. Eskom trained some 5,400 learners, of which 4,200 had an engineering leaning and 1,066 new artisans. SAA enrolled 254 learners, Denel 229 learners, and Infraco, Safcol and SAX had together added 191 learners.

In terms of delivery service agreements and targets, Tshediso Matona said that DPE had “largely delivered on all shareholder management functions, including signing of shareholder compacts, delivery of strategic intents and quarterly reviews as called for under the PMFA.”

Exceptions where delivery did not take place were that a shareholder contract for Infraco was not signed, since the new board stated it required more time to assess the situation and this was agreed to, and a review of South African Express was not completed on time because of a necessary restatement of financials.

In the area of energy and broadband enterprises, Matona said that achievements were the approval of Eskom’s medium term maintenance plan and implementation of the “keep the lights on” programme.  An R350bn government guarantee was confirmed for Eskom and 76% of the funding for the New Build programme is now in hand. At this stage Eskom had added 535Mw of generation capacity for 2011/12 and 631km of transmission lines.

Transnet for 2011/2012 had upped iron ore transits to 1.22m tons and coal to 1.6m.  Overall efficiency was claimed by DG Matona as being up 17% on the previous year. Procurement of rolling stock had started and a consignment of 95 locomotives.

SAA, which came under considerable questioning by MPs, had worsened insofar as the financial position, although five additional African routes to Ndola, Kigali, Bujumbura, Pointe Noire and Cotonou had been launched and SAA saw such Africa routes as a future area of expansion. Additional African services to Zambia, Zimbabwe and the DRC were working out of King Shaka.

Major problems in an overall sense mainly boiled down to rising fuel costs, increased international airport docking facilities and strong competition, parliamentarians were told.

Both Minister Gigaba and DG Matona responded to a barrage of questions on staffing issues at SAA and loss of market share to other airline competitors but such questions were continued out of parliamentary time and are adequately covered in the media. The minister admitted to MPs that he had been caught short by all the resignations on the SAA board and was “flabbergasted” to hear of some of the reasons.

He said the guarantee which was being obtained for SAA for future funding should, in his opinion, come attached with a requirement for a new strategic plan and a plan for a complete overhaul of the airline. A diagnostic overview of SAA is now being obtained, he said. “A consultant’s report, given to us in September, is being incorporated.”

Minister Gigaba added on the subject of SAA,”We need to work around the clock to achieve a better situation and we are addressing the staff to allay their fears. The long term vision and strategy to be produced must include a procurement plan and a network design incorporating more of Africa.

An experienced task team has to be assembled to facilitate a strategy, not try to do it themselves”, he told parliamentarians in conclusion.  He admitted that there had to be a clearer distinction between the SAA board and its management team.

On general DPE issues, key areas where targets were not achieved by the department, said DG Matona, mainly lay in the area of Denel where the defence plan had not been finalised therefore stultifying any progress; Safcol, although the balance sheet had improved; and Transnet where its branch line roll out programme (on freight issues) had been held back.

The Ngqura container terminal position had not developed, neither had a national freight network plan been concluded.  Also, a major issue was the future of Eskom and the IRP2 plan.

Posted in Cabinet,Presidential, Electricity, Energy, Finance, economic, Fuel,oil,renewables, Land,Agriculture, Mining, beneficiation, Public utilities, Trade & Industry, Transport0 Comments

RE producers will take financial pressure off Eskom

The department of energy (DOE) has introduced to Parliament the concept of establishing a licensing entity for independent power producers (IPPs). This would be set aside from Eskom operations but would act as a much needed resource to shore up Eskom’s inability to provide, in terms of its credit rating, sufficient power for all of South Africa.

The ability of licensed IPPs to raise funds separately, particularly for renewable energy resources, will take the pressure away from  Eskom in terms of fund raising, says DOE.

A new Bill, numbered B9 of 2012, allowing independent system and market operators (ISMOs) and setting up an entity, which appears somewhat separated from Eskom to regulate such operators and purchase power, has been tabled in Parliament. Known as the Independent Systems Market Operators (ISMO) Bill, other necessary amendments to anchor legislation such as the current Electricity Regulation Act (ERA) will follow in due course.

Introduced by director general of DOE, Ompi Aphane, the new Bill will assist in providing, through an ISMO board, independent dispatch of power from all ISMO generating facilities to the sole purchaser, Eskom, “in an efficient manner in order to minimize costs’.  Muzi Mkhize, director general, hydrocarbons, described the new Bill “as establishing an autonomous state owned company, mandated to buy power from generation.”

He said that co generation projects will not require government guarantees and thus electricity from such projects “may come at a lower tariff when compared to costs generated by the Eskom build programme”.

The ISMO board, Mkhize told parliamentarians, will assist DOE in planning for “a new generation capacity”. On the basis that the ISMO board does not become involved in power generation itself, the licensing of electricity to distribution and large customers will be enabled independently of Eskom, such licencees being given equal access to the wholesale price.

According to the presentation made, only Eskom will sell electricity to the public. The presentation was made in the form of “electricity wiring diagrams” when describing the electricity generation regime in South Africa, rather than diagrams giving structured industrial relationships. MPs were at a loss to understand this.

In response, Mkhize said, “some of the functions to be performed by IPPs were not licensable activities at present” and therefore the Act would have to be amended at the earliest. However, he told parliamentarians that ISMO, as a body and licensing entity, would have to enter into a contractual arrangement with Eskom for the “execution of functions and contracts to be finalised within three months of the ISMO incorporation date”, i.e. a total staff transfer from Eskom Holdings in order for it to be in operation at the soonest.

The minister of energy, it is proposed, must ensure that ISMO board appointees are representative of the industry and all Eskom Holdings staff employed currently “in the fulfillment of functions contemplated by the establishment of ISMO, including support staff will be transferred to ISMO in terms of the new Bill”.

Mkhize said he believed that such generation licences to be granted and the allocation of MW in terms of government’s renewable energy plans would be addressed under the Electricity Regulation Act amendments. Future electricity tariffs created by the new structuring would require approval from the existing regulator.

The need for independent transmission lines as well was noted, Mkhize said, and this was to be addressed in due course.

Posted in Electricity, Energy, Finance, economic, Fuel,oil,renewables, Land,Agriculture, Mining, beneficiation, Public utilities, Trade & Industry0 Comments


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