Tag Archive | Malusi Gigaba

SAA turnaround plan involves flight changes

A strategy that can be achieved…..

SAAMonwabisi Kalawe, the newly appointed CEO of SAA, told parliamentarians that that the new long term strategy for SAA, four months in the making, “is within the reach of SAA and that a turnaround in the fortunes of the national airline can be achieved.” His subject was the SAA annual report, Minister Gigaba having introduced him and endorsing the turnaround plan.

Noting that the twenty year long-term turnaround strategy (LTTS) had no financial figures attached, a fact questioned by MPs a number of times, Kalawe responded with the reply, “Since we are still deep in discussions with national treasury and matters relating to guarantees and estimates of cost, it would be both ill advised and premature to discuss numbers. We are still in the middle of a bid to recover the balance sheet.”

Public Enterprises “comfortable”

Both the new CEO and the plan itself were introduced by the minister of public enterprises, Malusi Gigaba, together with the chairperson of SAA, Duduzile Myeni, both of whom said they were also “comfortable” with the plan.

The strategy plan, Kalawe said, had been drawn up in time to meet an April 2013 deadline in production and was approved by cabinet in August. MPs noted that in the last few years, no less than nine strategic plans for SAA had been presented to Parliament costing many millions of rands.

The consensus of opinion from MPs was that SAA’s new plan looked hopeful, particularly bearing in mind that no less than seven outside groups had been used in this round of consultations and other international airlines had also been contacted for opinion.

New routes on flight plans

The minister said he had instructed that a “new route network had to be designed and that SAA’s procurement programme had to be re-thought out. An “Africa” strategy had to be evolved, fully cognisant of the facts that the airlines market was characterised by low margins, constantly increasing fuel costs and changing geo-politics.”

“There has to be a turnaround in the fortunes and profitability of SAA and any strategy had to be a holistic document that is both aimed at developmental needs and financial accountability to the shareholders”, the minister concluded.

Kalawe said that on analysis SAA had an “impeccable safety record” and that technical needs of SAA were to be contracted out to Denel and that this would allow that state body to build its services throughout Africa.   He said that an assessment of SAA had indicated at present high cost factors running the airline that were intolerable; “a sub optimal capital structure” and he described the airline as having been run on a “value destructive business model”.

Re-branding on the way

“South Africa”, he continued, “was a long way from market centres and there had been a failure in the past to recognise the geographic situation”.  A new group would be formed to handle the SAA brand and information technology, updated to compete properly in the international market, Kalawe told parliamentarians.

Savings of R100m this year would be effected, he said, and a complete review of all non profitable routes debated with government departments to establish what was necessary in the national interest and what could be discontinued. Emphasis would be on developing cargo carrying in Africa, localised regional sub-Saharan traffic. Mango would open a service to Zanzibar.

Voyager to be tackled

Kalawe noted that the new LTTS would focus on a sustainable economic future for SAA and said, “We have set up a body that will track the implementation of our strategic plan”.  He said the Voyager customer service division was undergoing major changes with various customer improvement, aviation being a key developer in the National Economic Plan, supplying as it did some 35,000 jobs and R6.8m to GDP.

The financial controller of SAA admitted there had been too much “ad-hockery” in the past with regard to decisions on routes, “with an ambassador always somewhere in the globe calling for an SAA service to their area”.

Three in one

From now on, Kalawe promised MPs, there would be on-going focus on cost efficiency and the creation of an integrated group by combining SAA itself; Mango as a low-cost carrier; and SA Express as a regional operator; all into one cohesive unit serving the globe and particularly Africa. “However, it could take us well into next year to sort out both the business, loan and legal implications of such a move”, he concluded.

Minister Gigaba finally noted that a “re-worked route network” would be completed in stages over the next twelve years, having established priorities with government policy but the next stage was to satisfy Treasury with a long term and sustainable budget before any major capital injections would be considered.

Neither party would be drawn into any form of discussion on such costs.

Refer previous articles in this category
http://parlyreportsa.co.za//cabinetpresidential/aim-prc-report-connect-tiers-public-service/
http://parlyreportsa.co.za//cabinetpresidential/public-enterprises-reports-on-a-rocky-and-controversial-year/

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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

Minister Gigaba focuses on new and old Durban harbours

Delivering his budget vote speech to parliamentarians, Malusi Gigaba, minister of public enterprises, said that the Durban “dig out” port on land that was previously the Durban international airport was going ahead and would require at least R100m initially to develop, most of which would be spent on the excavation of millions of tons of earth.

Interviewed later, he would go no further on the subject but to say, “A project of this scale will only be possible in partnership with the private sector and we have already started developing an implementation plan.”

Meanwhile the deepening of berths at the existing Durban container terminal continues, creating an additional 400 000 TEUs of capacity for the expected larger vessels. All this means additional port handling equipment and five ship-to-shore cranes and 40 straddle carriers and the extension of Pier Number One into Salisbury Island continues, which will give another 1,1 million TEUs per annum.

Transnet is acquiring another 8,6 hectares of Salisbury Island and will construct a new quay wall on the eastern side.

As far as the container terminal is concerned, nine ship-to-shore cranes and 36 rubber tyred gantry cranes are to come into operation. The minister made no reference to the single buoy mooring system used to offload crude oil at Durban, nor did he mention the then scheduled shutdown at the SAPREF refinery.

Posted in Cabinet,Presidential, Finance, economic, Public utilities, Trade & Industry, Transport, Uncategorized0 Comments

Eskom woes on unpaid debt and copper theft a problem

In written responses to two Parliamentary questions, minister of public enterprises, Malusi Gigaba, clarified what appeared to be an extraordinary debt load being carried by Eskom in the form of unpaid electricity accounts.

He, secondly, clarified newspapers reports on copper theft which seems to be adding to the woes of Eskom, whose credit rating appears under pressure as it considers its funding options for the IRP.

Eskom is a major factor in the Integrated Resource Plan (IRP) formulated by the department of energy in terms of energy needs of South Africa for the next decade. Minister Gigaba told parliamentarians that insofar as the question raised on outstanding unpaid accounts, municipalities and government departments were reported to him as being 30-day arrears with Eskom to the tune of R543.4m.

He further said that 161 government institutions owed Eskom money, with municipalities accounting for the bulk this but the total had been R533m as at January 30. Of this, local, provincial and national government departments then owed R10.3m.

As was to be expected, the minister pointed out that the divulging of Eskom customer information could not go much further than this but added that generally municipalities accounted for 40.8% of Eskom’s electricity sales.

On the second question posed by parliamentarians on copper theft problems, Minister Malusi Gigaba was careful to point out that the cost was not just the value of the copper stolen but the security measures to improve the situation as well and these costs had escalated from R9.8m in 2006 to R35.3m in 2010/2011 for Eskom.

This has all followed a previous media statement by Transnet of a jump in 2010/2011 to R96.5m for copper cable theft and a significant jump also in Transnet’s spend of over R80m on increased security measures to combat this. So far in the current year on a month by month basis, figures were still increasing.

Posted in Communications, Electricity, Energy, Finance, economic, Fuel,oil,renewables, Mining, beneficiation, Security,police,defence, Trade & Industry0 Comments

Power from Medupi not until late 2013, says minister

coal miningIn answer to a parliamentary question put to him at an energy portfolio committee  meeting before Parliament closed for the Easter recess on Friday, Public Enterprises Minister Malusi Gigaba confirmed that Eskom’s new Medupi coal-fired plant will start supplying power the second half of next year.

In the original plan, the Medupi plant was supposed to come on line late last year but strikes were experienced at the Limpopo plant and certain  “geo-technical, design and construction issues were experienced” , he subsequently said in a written reply.

SAPA has reported that the minister also said, “The design delays were as a result of certain critical civil design factors, which were not concluded timeously enough for construction. The construction delays experienced in the boiler area were attributable to structural steelwork design, manufacturing, logistics and construction.”

Gigaba added that in terms of the contract, “Eskom had relief against the contractor” in terms of delay damages and performance guarantees, among others, but SAPA in its release added that the minister had added that “liability was limited”. This does not seem to have altered the fact that added power supplies are late on schedule.

“Based on the current programme, it is expected that Medupi will begin producing electricity from its first unit in the second half of 2013,” the minister said.

Industry investors are reported as stating that greenfields projects will be delayed unless considerably more guaranteed are supplied on continuous supplies without blackouts in the meanwhile.

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


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