Tag Archive | Presidential Review Committee

PRC report out on SA’s public service..

Lack of liaison throughout….

The presidential review committee’s (PRC) report on state-owned enterprises (SOEs) is now in the public domain.

The report clearly lays out in writing what has suspected by many for a long time; that in the opinion of the PRC there is major disconnect between government departments in form of liaison over national objectives; a total lack of common  data to work with and that there is a similar disconnect between SOEs and the different tiers of government service – national, provincial and local.

The recommendations precede a Bill which to be tabled by the minster for performance monitoring and evaluation, Collins Chabane, called the State Owned Entities Bill, which will relate to all SOEs, their planning and decision-making processes, as well as their relationships with government departments in general.

All this is to be in an effort to overcome the problems enumerated in the report.

Governance issues

In a statement issued at the time, the minister stated that cabinet had approved the final report at the end of April 2013, the original committee to make such a report, having set this up in 2010 with the objective of auditing all SOE’s to “review the current governance arrangements”.

It was also expected of the process to review government’s development objectives, particularly in so far as the New Growth Plan was concerned and comment on possible improvements in SOE contributions.

Auditing 700 units

The committee was given 21 terms of reference covered in the general topics of development and transformation; governance and ownership; their business viability and their strategic management and operational effectiveness. A total of 715 SOE units were listed for audit.

“Crucial weaknesses within SOEs were that whilst SOEs have an indispensable role to play in service delivery and also have crucial performance and transformation potential, there are grave impediments to their optimum contribution”, the minister said.  It is now proposed to set a SOE inter-ministerial committee to guide implementation of the recommendations.

One of the crucial issues to emerge from the report was whether SOEs were responding to the South Africa’s developmental agenda and assisting in a meaningful way towards the need for government departments to deliver. The report also recommends, aside from the fact that government should enact a single overarching law (State Owned Entities Act), it should also establish a central remuneration authority (CRA).

Mixed objectives

It was clearly established that there are “no commonly agreed strategic sectors and priorities across the three spheres of government as well as a common database on the SOEs.”  “There are also challenges”, the report says, “and an endemic tension with balancing the trade-offs between commercial and non-commercial objectives of SOEs including the funding those mandates and as well capitalisation model for the SOEs.”

After enunciating on eight pages of reforms needed, the PRC report concludes that “government must ensure the requisite capacities to implement these SOEs reforms are in place, including visioning and strategy-setting, appropriate human capital and structures, as well as an effective electronic oversight systems to enabling monitoring and evaluation of SOEs.”

It calls for the establishment of an SOE Council of Ministers to drive implementation of the recommendations of the PRC to achieve effective state oversight  by cluster grouping but specifically states that any “commercial” SOE should be overseen by two distinct cluster authorities.

Thirty one specific issues that need immediate attention are identified and certain “critical challenges” isolated, which included “an endemic tension with balancing the trade-offs between commercial and non-commercial objectives of SOEs including the funding those mandates and as well capitalisation model for the SOEs.”

Tiers disconnected

It also noted that there were “no commonly agreed strategic sectors and priorities across the three spheres of government.”

The authors had studied similar structures in New Zealand, Canada and Sweden “where SOE reforms have proved to be reasonably successful. They were amongst the first to focus on formulating a clear overarching legislative framework for SOEs and setting out objective for the management of SOEs”, the PRC reports says.

“In many SOEs”, the report concludes, “there is a current need for massive injection of capital and the finance policies of many SOEs require close re-examination. Ownership policy and funding models for social and economic development mandates of SOEs are in some instances are blurred and bewildering, at times leading to undercapitalisation; a factor which completely impedes the SOE’s ability to meeting national challenges it has been set.”

Refer previous articles in this category

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Presidential Review Committee calls for overhaul of SOEs

State needs review: Presidential Review Committee…

A key recommendation of the Presidential Review Committee (PRC) presented to the portfolio committee on public enterprises in Parliament said one of the thirty one recommendations emanating from the report is that a single over-arching law, proposed as the “State-Owned Entities Act” which would govern every state owned entity (SOE) through an “SOE Council of Ministers” should be enacted.

Such a council, the PRC suggests, should be drawn from the departments of public enterprises, trade and industry, economic development, national treasury, national planning and other relevant stakeholders. This should be established to oversee implementation of the proposed Act and to enable the mandate of continued collaboration between SOEs and government departments at all levels.

Split between those with commercial interests

The PRC report recommended that the proposed council be structured so that commercial entities which were SOEs were placed under one umbrella, and non-commercial and development finance institutions under another.

The report was commissioned by President Zuma following the Polokwane conference resolution, which was to strengthen the role of state-owned enterprises. The report covers four main areas — development and transformation, ownership and governance, the viability and funding of businesses, and their strategic and operational effectiveness.

Seven models looked at

Seven models of developmental states and their relationships with state owned bodies were considered by the PRC, the report concludes that a change in South Africa in the management and coordination of SOEs was clearly required.

This would involve vision, an enabling framework, performance monitoring and evaluation, with competence and the right capacity, all to be put in place effectively, otherwise there would be failure, the report said. The result is the proposal of a State-Owned Entities Act, governing every SOE and a controlling SOE Council, with such a mandate.

Salaries and wages recommendations separated

The PRC report also recommends a totally independent Central Remuneration Authority (CRA) to provide guidelines and parameters on remuneration of state employees with a common performance management system and to consider the mandate of each SOE and conclude on its right to exist, subject to critical reviews every five years.

The independence of the CRA from the SOEs was critical, the report adds.

Getting out of the kitchen

The report gets tough on its call for “rationalization”, suggesting the state “exits from those sectors” where market failure exists “and/or could be adequately provided for by the private sector”, focusing only on those SOEs that provided public goods or which were considered “strategic.”

The report clearly makes the suggestion that the state should “either divest, either fully or partially, from those SOEs that were seen to be under-performing or competing unsuccessfully against private operators, and to absorb those entities by incorporating them into line function department programmes.”

Not prescribing their call

Throughout its deliberations, the PRC says in its report, it had considered its role to be about informing, rather than prescribing, so that the policy decisions would be made in Parliament.

Most members, both the majority party members and opposition, welcomed the report with the caveat being expressed in some circles that it was unclear which SOEs should be considered as ripe for “rationalisation”.     Some members expressed the fear that unless things were carefully controlled, a massive “state ministerial empire might be built”.

MPs not to be on Council

It was suggested by one ANC MP that members of parliament might be allowed to join the SOE Council, but it became clear from debate that this was expressly precluded in the PRC report itself and should this happen, it would be totally contrary to Parliament’s role of oversight and therefore could not be allowed under any circumstances.

The Presidential Review Committee was chaired by Ms Victoria Phiyega


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