Archive | Public utilities

Parliament updated on SOE finances

…..article dated 25 August 2020……

DPE presents bleak picture…. 

As part of a portfolio committee meeting covering the status of the seven SOEs under the umbrella of the Department of Public Enterprises (DPE), new director general,  Khathatso Tlhakudi,  provided a sombre picture of the current financial malaise within the SA public sector.  However. he ended up on a more positive note with regard to Denel and SAA.    On Eskom, he said,  he would make some comment but as they were reporting on a regular basis to Parliament, he said he would not report in great depth.

On Denel, he commented that he had “a good feeling that acting CEO Talib Sadik would hold the situation until a new CEO was appointed”, saying that “we need Denel for strategic reasons”.  He said that Sadik had the necessary enthusiasm and  drive to hold the fort.

As far as SAA was concerned, DPE “had made good progress with a business rescue plan which had now been approved” which fact  he claimed was “a major milestone after what had happened beforehand”. Now it was just a question if support could be found for the plan.

Outside Eskom

Tlhakudi commented that a good deal of the problem at Eskom, other than the specifics of state capture, was that most of the municipalities were not investing adequately in their distribution networks which he said were “falling apart at the nation’s expense”.

On electricity distribution “much of the problem could be put down to bad town planning”, he said.  “As a result of an inability to provide a proper  “pay as you go” service, informal settlements had simply connected themselves to the network, resulting in overloading and continual damage.”

Another issue was that councils should not just collect rates from communities but had to also invest in those communities. Consumer attitudes had to change, Tlhakudi said. Eskom was not in a position to subsidise non-payment in infrastructure, he said. “Responsible management is called for at community level and consumer attitudes have to change”.  He looked to CoGTA to assist in bring such changes about, as well as  the departments of Human Settlements, Water & Sanitation and Public Works to play their roles more purposefully.

Not all bad

DG Tlhakudi said that an infusion of new thinking had started at DPE.  “New ideas are emerging, he said. Great progress had been made with the ports; business was flowing well through the Maputo Corridor with the export of exporting magnetite; and activities around wine and fresh produce were getting some good numbers, ” he listed.  “The story at Transnet is coming right and the Trade and Industry Committee will be impressed, despite the problems of COVID”.

He concluded that DPE was in the process of finding new ways to intervene and assist timeously in SOE and departmental problems and cut short any drift towards malfeasance and corruption with intervention from the top, on an immediate response basis.

Overview of the SOE seven

In an overview of the DPE portfolio, Ms Jacky Molisane of DPE  took MPs through the sorry picture.

In alphabetical order, she recounted that (1) Alexkor, a diamond mining business and which has been attempting to establish a diamond polishing venture down the line, had reported a loss in the 2019/2020 financial year of R63m. This was in part due to low diamond prices, not helped by corruption at management level at its mine. Its cash reserves will be depleted by September and DPE.  Furthermore, its head office is being wound down.

Denel (2), which had been in the newspapers a lot this month with attempts to save the entity for its strategic value, reported a loss of R1.7bn for the 2019/20, its equity being well below the level of R4bn required as a going concern for investors. This, despite a R1.8bn funding in the year under review.  Ms Molisane said that R576m allocated for the 2020/21 has not been passed on by DPE at this stage, since the impact of COVID-19 had resulted in more strain for Denel, the position now being fluid. An acting CEO was currently holding the fort.

Simple facts

As far as Eskom (3) was concerned, Ms Molisane, giving a short picture, saying the simple facts were that any increase in revenue would purely be mainly reflected as due to increases in electricity tariffs.  Although cash from operations might be increasing, Ms Molisane said, earnings before interest, taxes, depreciation, and depreciation were never going to be sufficient to cover increasing costs.  DPE and the taxpayer, as the shareholder, were not receiving a return on investment and the entity was a serious drain on the economy.

South African Forestry Company (4) had reported a loss of R47m for the year under review, mainly as a result of the decline in revenue and high operating expenses. A fair value adjustment saved the company from worse figures and Safcol badly needs re-investment in its equipment and operations.

South African Airways (5) has been under business rescue since December 2019 due to its declining performance and now the inability to pay its debts as they fall due.   A business rescue plan was approved in July 2020 by all creditors. Various options for raising funds were now being carried with the assistance of RMB as transaction advisor, Ms Molisane said. There was every hope that a partner would be found before 17 September.

Old story, old routes

On SAA, DG Khathatso Tlhakudi added the fact said the Department had brought in “some of the best brains, working together linked around the world to help it implement a plan mainly people who understood the airline industry.” Once a strategy was implemented for SAA, he said, DPE would be looking, first for a feeder network to sustain the airline, and then a decision was to be made as to the best way forward to recover routes.    Right now, “effort is being applied to help SAA out of the situation it found itself in”.

SA Express (6) was placed under business rescue in February 2020, Ms Molisane said, but a credible business plan was not found and liquidators called in.   With little likelihood that any expression of interest will be shown, SA Express could be liquidated at the end of September this year.

Ms Molisane then quickly touched on Transnet (7) where revenue had grown marginally by 3% to R75bn for the 2019/20 year under review but decline in demand is expected for the coming year due to COVID-19 and lockdown circumstances. Revenue at an expected figure of R78bn for 2020/21 therefore looked very unlikely. Given that Transnet would eventually get over the COVID setback, Molisane’s figures indicated a possible break-even point in the near future.

Dartboard

For three quarters of an hour, MPs from across party lines criticised DPE for its handling of a situation over the months preceding, a period in which in their view things had been allowed to get totally out of hand.    It was pointed our , however, by the DPE team that it was the system of government that was at fault as the individual boards ran the SOEs and there was a limit to which DPE could interfere.

Point after point was raised, eventually leading to a relatively sensible overview from Ghalib Cachalia (DA) who calculated that the seven SOEs were the major debt trap that had cumulatively led South Africa into its present sad state, whilst also being the home of state capture. Cachalia told DPE that they had to go about things differently, and very soon.

Action now

With a warning that SA was  “falling off the fiscal cliff”, Cachalia remarked that “tinkering around with balance sheets and expenses was getting the country nowhere” and that some new management concepts “were needed and needed urgently”.  The objectives of DPE were “to lead with vision a stable of state entities that led South Africa into new territory and uplifted the poor”. Quite the reverse was happening, he said.

Sibusiso Gumede (ANC) said the quagmire that DPE found itself in was contributed to by the inability state to intervene at any particular point, having to deal with a balance sheet problem well after the event.        He said, “Whilst it is commendable that DPE itself has shown good performance, it had to start running ‘good’ SOEs as well.  He said, “One cannot have an excellent department running ‘bad’ SOEs and we cannot have business as usual any more’.

Eskom starts internal overhaul – ParlyReportSA

Posted in Agriculture, Electricity, Finance, economic, Mining, beneficiation, Public utilities, public works, Trade & Industry, Transport0 Comments

Pravin Gordhan’s plan for ailing SOEs

……article dated 3 September 2020……

New DG explains ‘step in’ powers…..

Khathatso Tlhakudi, appointed recently by Pravin Gordhan as the new Director General, Public Enterprises, recently had the unenviable task of taking on angry MPs to explain the current state of South Africa’s disastrous public utility scenario.  It was his parliamentary initiation as the head of public enterprises, responsible for the seven government SOEs all of which currently are responsible for a drain on the SA economy.

From the start of the meeting, MPs from across party lines expressed their extreme displeasure at the performance of government-run utilities under the tutelage of the Department of Public Enterprises (DPE).     The meeting had been called to establish exactly what progress had been made and to provide an overview of where exactly DPE was headed and to hear a report back.

The state of Denmark

It might be said that in fact MPs got a true picture from the meeting as to how bad the situation was.   In presenting his DPE overview, Tlhakudi said the department had worked on a new platform “for more timeous intervention into the affairs of SOEs in future”.

This plan, he explained, was at an advanced stage and had been developed at the instance of Minister Gordhan to intervene at short notice without overtly challenging the independence of SOE boards.     Whilst obviously contentious, such a system would possibly give DPE some form of “step-in powers into the affairs of a state-owned entities where they were failing to comply according with their own frameworks, or where there were obvious material governance issues involved”.

Consequence management

The concept was demonstrated in the form of allowing for a series of memoranda of incorporation (MOI) with each of the entities, drawn up to allow a public enterprises minister to intervene in cases of  financial distress, maladministration or certain other defined instances with “step in” rights.

Certain powers would be granted to the minister, such as the ability to call for the resignation of the boards which had been appointed by Parliament and for the minister to request Parliament to re-appoint and re-task new boards after an intervention.

Before the horse bolts

If such a move was to eventually come forward from Minister Gordhan this would probably be in the form of a draft Bill, it was stated by Orcilla Ruthnam, Chief Director: Governance Unit at DPE.   Ruthnam has also undertaken an extensive study of how all CEOs and CFOs came to be appointed by SOEs in recent years and what process each board such appointments had gone through based on their qualifications.

This had been a revealing exercise, she told MPs, and was sufficient to show that the current system had to change before a “runaway” took place.

Agreed upfront

In the light of MPs questions, Orcilla Ruthnam gave detail on the proposed basis of an MOI for the DPE portfolio.  Such would, she said, empower the minister to intervene when a board was seriously under-performing to dissolving the board and appointing a “quasi” administrator to turn around the company…..

  • where the SOC was in financial distress, or there were allegations of maladministration and mismanagement
  • when the SOC had material governance challenges;
  • when the SOC failed to perform its functions effectively or efficiently; and
  • where the SOC had acted unfairly or in a discriminatory or inequitable way towards a person to whom it owed a duty under the legislative or policy framework of the SOC; or had failed to comply with any law or any policy envisaged in the legislative or policy framework relevant to the SOC.

 Powers

The principle of providing the minister with temporary intervention powers in law and which would have to trump long standing legislation enacted to ensure SOE independence was clearly to a river to cross,  Ruthnam explained.  It had to be acknowledged that interference by members if the Cabinet in the affairs of an SOE is specifically disallowed by the Companies Act, the Public Finance Management Act and the founding documents of each SOE, said DPE.

The whole principle behind an SOE’s independence from political interference has been in the past to ensure that their boards and management continue to operate in their own areas of expertise without influence from the body politic, Ruthnam continued, but the MOI was worded in such manner to allow for specific instances under specific circumstances as already outlined to MPs.

There were no questions from MPs on this particular subject, bearing in mind this was a virtual meeting.

 

 

Posted in Energy, Finance, economic, Public utilities0 Comments

PetroSA part of new energy plan

…..article dated 2 September 2020…..

CEF to restructure both PetroSA and NECSA…..

In what appears to be the first serious attempt to organise and restructure the struggling state entity Central Energy Fund (CEF) and rescue what will now be branded as South Africa’s ‘national petroleum company’ in the form of PetroSA, Minister of Energy, Gwede Mantashe and the relatively new CEO of CEF, Dr Ishmael Poolo, faced a barrage of questions during their scheduled update to Parliament on the fortunes of the troubled group.  CEF appears to be handling two intensive recovery programme at the same time, including at last replacing a swathe of acting posts.

The  first, smaller programme will be the merger of the Nuclear Energy Corporation of South Africa (NECSA) with subsidiaries Pelchem and NTP Radioisotopes, for which a common board has now been established.   The programme includes a drive to return to profit recovering from the massive losses sustained by NECSA providing for a nuclear programme under the tenure-ship of Jacob Zuma’s presidency and which never materialised.

Project Inkwezi, remember?

The second recovery exercise is to sort out and re-build CEF’s entity, PetroSA, after its long-running saga of failure over the Mossel Bay gas-to-liquid venture.   Having had no CEO for 5 years and left to drift without any co-ordinated approach to the industry it was supposed to serve, PetroSA has been in the wilderness without a technical plan to re-establish its presence called for by Parliament for even longer.   Paralysis and ignorance on the part of successive ministers has also been to blame.

Involving billions of rands, the second issue is, by a long chalk, the most damaging to the national fiscus and although both matters are an acknowledged disgrace in terms of financial management, nobody in government, in this case both the Department of Mineral Resources and Energy (DMRE) and CEF, has come with a proper financial plan on the way forward or have been called to account for the mess.

CEF has also suffered SIU investigations into the illegal sale of oil stocks held by the national Strategic Fuel Fund (SFF), another of its entities, a numerous enquiries instigated by the Auditor General.

Top down

In inheriting the problems, Minister Gwede Mantashe has insisted that new management teams be found to head up not only CEF at the top but also for both NECSA and PetroSA in an attempt to bring fresh perspectives to the whole group.  This means, of course, that the Minister has also decided that both entities, NECSA and PetroSA, are to be saved  and this despite the enormous cumulative losses on the balance sheet of CEF.

Not only this, but he insists that the group moved into the black as a whole in the shortest time, but this is only made possible by the fact that it’s entities will have continue functionally bankrupt in the meanwhile.

In the case of NECSA, new appointments are about to be made, MPs were told.   In the case of PetroSA, CEF chairperson Dr Monde Mnyande announced earlier this year that Pragasen Naidoo had been appointed as CEO of what is now branded as the “new national oil company.”   Dr Mnyande said at the time that this move was the first step in “breathing new life in CEF”.    He said that more appointments would follow.

This month

In his first appearance before Parliament, the new CEO of CEF, Dr Ishmael Poolo and appointed by Dr Mnyande in May, told the Committee that a consortium of the three consultancies Mazars, Bayajula Services and US consultancy AT Kearney, are now contracted to assist CEF in the process of merging the entities of SFF and i-Gas into PetroSA.

On a second separate exercise of absorbing Pelchem and NTP Radioisotopes into NECSA, an announcement on the names of consultants to be used in this case would shortly occur, he said.

New Bill

A major refurbishing process was now being hastened in the case of PetroSA, Dr Pollo said, because of the advent of the Upstream Petroleum Resources Development Bill, the crux of which Bill was to allow for PetroSA to receive the benefits of “free carry” gas and petroleum exploration rights granted by the state, thereby fulfilling its mandate as the state’s contractual agent.

“Such a merger of interests, led by a strong PetroSA, would unlock the upstream petroleum economy”, Dr Pollo told MPs, “whilst also maximising the socio-economic benefits flowing from such arrangements and assisting the Minister in realising the state’s Integrated Resource Plan (IRP).”

Bare facts

In an earlier report back to MPs this year, CEF had confirmed that PetroSA had incurred losses totalling R20bn since 2014, mostly in its attempts to stave off shutting down Mossel Bay as a community in a downhill battle for additional gas for its gas-to-liquids refinery, which itself has also had a chequered production life.

Dr Pollo said that now PetroSA was currently producing at a rate of only 6,000 barrels per day, primarily due to shortages of gas from drilling and well operations in nearby coastal waters.    MPs were told by him that PetroSA’s headcount remained at the same level as it had been when producing at an earlier daily rate of 18,000 barrels. He drew attention to the fact that PetroSA was a relatively large company and it accounted for a large portion of CEF’s 1 800 employees.

Rescue plan

It was important for PetroSA to refurbish the refinery and upgrade its ability to take on more gas supplied as part of the overall plan for liquid fuels, Dr Poolo said, and the restructuring processes in respect of merging  SSF and i-Gas into one group was to start Sept. 1.   He said that CEF was exploring its options for either selling or finding a partner to assist with “the commercialisation” of the gas-to-liquid unit.

Dr Poolo concluded by telling MPs that he would return to Parliament in October and account to them on progress of the PetroSA stabilization programme.    During questions, labour issues immediately arose immediately because retrenchments would follow

Cold facts

The Minister said that PetroSA had three union movements involved and negotiations were underway regarding retrenchments which could not be avoided.  Only one of the three plants at Mossel Bay was operating and lay-offs were being limited to the smallest number possible, the unions “having acknowledged that over-staffing existed”. He had told unions that success with PetroSA would result in further employment at a future date.

Questions from both the EFF and DA concerned consultancy fees being paid.  Dr Poolo replied that on retrenchments, the internal teams had stated they were unable to be objective.  “Obviously they could not ‘self-amputate’ and consequently, for many other reasons as well, third party consultants were preferable” Dr Poolo confirmed that both SFF and i-Gas were viable units but that PetroSA was reporting a loss of R200m for 2019/2020.

Asset acquisitions

As to the future, MPs were told that both CEF and Sasol had indicated that talks on the sale of a stake in the Romco gas pipeline from Mozambique to South Africa were possible and discussions were well advanced.   Other assets of Sasol for sale were being considered as Sasol was offloading to raise cash.

Refurbishing the Mossel Bay refinery in order to be able to use liquid feedstock was also part of the restructuring considerations, Dr Poolo said, and CEF was further exploring its options to find a partner to assist with the commercialisation of the PetroSA gas-to-liquid unit.

New nucleus

On matters regarding the re-structuring at NECSA, David Nicholls, board chairperson, told MPs that an “appointment of an external service provider was imminent” in order to act as consultant in the process of merging Pelchem and NTP Radioisotopes into its parent body.  By eliminating the need for three boards and re-sizing, profitability would be seen sooner, he said

Nicholls added that in the short-term, losses of R239m in 2020-21 were projected bearing in mind that COVID-19 had cost an estimated R400m as a result of having on-board highly paid scientific experts but, nevertheless, the new NECSA was estimated to return to profitability in 2021-22, he felt.

He noted that in the meantime Pelchem was producing sanitisers in response to COVID-19 and that the Fund’s Ketlaphela Pharmaceuticals unit “was working hard toward the production of anti-retroviral medication at the soonest”.

DMRE tunes in

As the meeting progressed , a department of energy presence became evident as more members joined the meeting.  In a discussion on general energy matters, Tseliso Maqubela, Deputy DG, Petroleum and Petroleum Products Regulation, DMRE, was called upon to answer the question from MPs as to why the country had very recently “run short of diesel in such critical times”.

He told MPs that the reason was theft direct from the pipeline by “ a highly organised group”  in the Pretoria area, coupled with fuel unloading problems at the East London terminal due to a COVID-19 outbreak which had occurred.

In conclusion, Minister Mantashe, in answer to questions from Kevin Mileham (DA), committed DMRE to publishing an Integrated Energy Plan (IEP) before the end of the current parliamentary year. Mileham had pointed out that in terms of the Energy Act, a IEP was required from the ministry on an annual basis. Seven years had passed since the last energy plan and investors needed this.

Posted in Energy, Finance, economic, Fuel,oil,renewables, Public utilities, Trade & Industry, Transport0 Comments

Warning shot fired over PPE stocks

….article July 20…..

Parliament slaps Treasury on PPE procurement……

Last week a corruption weary public learnt that Parliament’s Finance Standing Committee were as outraged as them on the subject of state PPE purchasing arrangements. The complaints started as case after case of cronyism was aired by the media picked up when the additional Supplementary Budget was being processed through Parliament at committee stage.

This furore was heightened by the appearance of  somewhat arrogant Zulu clansman found by the media who had allegedly  included himself in the R500m COVID 19 emergency relief allocation. It was subsequently reported that after finding out that his apparent initiative was unacceptable, he may have then sold his successful tender bid to another party for R80m.

King rat

The fact that the royal person told everybody that he was attempting to benefit his tribal responsibilities did not wash with anybody, according to press reports and interviews.   The case for his innocence was not helped after a TV interview with the smiling gentleman who seemed not to understand that his problem was that his daughter was spokesperson for the President.  When it came to tendering, he said he thought all persons were equal.

Thank goodness this was all exposed in time  but the whole affair struck the same chord with MPs that has being plaguing South Africa for years.  This same problem was illustrated again by ANC secretary general Ace Magashule who reasoned, when discovered dipping into the same PPE pot with the state, that his sons who had been named as part of a Free State PPE tender process, “had the right to participate in the economy as do any other persons and small businesses”.

As a result of these cases, MPs across party lines in Parliament have called upon Finance Minister, Tito Mboweni, and his Treasury officials to come back to Parliament and give the background on all COVID 19 disbursements and some idea of who is responsible for what and Treasury understands as the parameters for state tendering.  This will final stand off presumably will take place sometime after the short recess in September.

Accounting issue

Not that the President did anything wrong, nor National Treasury either, but it just seems that  month after month Treasury signs off money but has no idea of, or even responsibility for, what happens once the allocations are made.  MPs have complained that Treasury merely seems to call upon the Auditor General, one year later, in order to reconcile with an annual report, opposition parties complained.

In the first case, instead of landing up as part of the small business developmental process,  the award nearly went to a chief exercising grace upon his fiefdom which it appears to consist of some forty or fifty persons, it was reported.   On such subjects, Parliament got specifically involved again when the Finance Minister came to the point where he had to answer questions during the closing debate on the Special Adjustment Appropriation Budget Bill, which had allowed for all the COVID 19 funding in the first place.

Serious implications  

Whilst all of this has been rather  a slap in the face of Minister of Health Mkhize personally, it must also have been a shock for the Department  of Health as well, bearing in mind that the NHI scheme is supposed to have a centralised “transversal” procurement system in place in a few years’ time where such things cannot be allowed to happen.

Furthermore, the Ministry of Finance has been for years planning a Procurement Bill allowing for centralised purchasing  when the budget for a centralised computer system can be afforded, so Minister Mboweni may have got some inkling of what the problems will be when it comes to political interference being wielded amongst those apparently without a moral understanding of what is required in the case of government process.

Fired in anger

That the Covid-19 emergency provision, or officially the Adjustment Appropriation Budget, would be passed by the National Assembly was never in doubt.    It had to be passed.   But for the first reading of the Bill, the vote was 226 in favour with 129 against recorded as a token protest and consequently the Bill was carried through on the back of the ANC numbers in the House.

The Bill from Treasury, being a Money Bill, cannot be stopped by Parliament but a warning shot had therefore been fired at treasury officials and the Minister.

 

Posted in Finance, economic, Health, Public utilities, Trade & Industry0 Comments

Funny business at the National State Lottery

………article 25 July 2020……..

NLC Commission finally to be investigated…

For both the years 2018/9 and 2019/2020, Parliament has been unable to obtain from the National Lotteries Commission (NLC) any official list of beneficiaries and any funding details by the State Lotteries Fund run by the secretive Prof. Alfred Nevhutanda, also chairman of its Fund.

No amount of parliamentary requests, annual reporting requirements, or encounters with investigative journalists have convinced the professor to break the veil of secrecy on projects run by the Fund.

With the doors closed to any form of questioning on beneficiaries, even to the department of trade and industry reporting to the minister concerned, it also appears just as important to Prof. Nevhutanda not to part with any information on how decisions are made on funding and what criteria is used. Again he remains silent when  asked by MPs.

Playing mum

After three years of harassing the NLC when it presents its annual returns to Parliament and briefs the Trade and Industry Portfolio Committee as required by the public management financial legislation, opposition MPs over this period have so far only managed to get the Fund to categorize outgoing funds into the types of grant it makes. In accounting terms this means absolutely nothing, of course.

In the last few weeks, however, matters at last might be coming to a head.  If things are as Parliament suspects, there is to yet to be another mighty crash for the reputation of public sector governance.

Fund income

The sale of lottery tickets to the public and disbursement of prizes are separated by law, such operations being run by a service provider, the names and addresses of winners being protected.   It is from the sale of these tickets that the Fund gets its percentage of revenue.

Every year, with the publishing of the NLC annual report, the professor has presented a picture of respectability with a special chapter devoted to the activities of the SL Fund.  2019/2020 was no different until it came to question time during the parliamentary briefing.

Extracting teeth

Professor Nevhutanda, (who was bestowed with his doctorate in Azerbaijan it appears) was asked this year by the same MPs the same questions.  Once again he quoted the necessity for privacy on the grounds of the Fund’s need for neutrality and to maintain the appearance of impartiality.    The same phrases were trotted out that the naming of projects would expose the Fund’s beneficiaries to all kinds of risks and accusations that the Fund favouring one NGO or beneficiary over another.

The professor also told parliamentarians this year that his enemies could include extortionists and spamming operators, even refusing to supply such a list to MPs “for their eyes only” which would have been subject to parliamentary rules. In the past, ANC MPs had nodded at these wise comments.

Enough is enough

For the last three years  at the same time but coming to a head this year, has been a parallel series of stories appearing in the Daily Maverick into the funding of the of SLF projects staring in the Northern Cape, more appearing in Free State, then Gauteng. Pressure this year was seriously put upon the Professor Nevhutanda to answer questions on the Funds’ activities.

In committee beforehand, ANC MPs have stood mute and never commenting, the EFF subsequently joining with the DA this year demanding answers.  It was a stormy meeting.

Turnabout

ANC MPs were finally convinced this year by Mat Cuthbert (DA) in a recent August meeting that it was in everybody’s interests that there be a court challenge on whether Parliament was constitutionally supreme in calling for oversight of all State Lotteries funding, unanimous vote being recorded to request such from experts.

Legal opinion has now come down in time for the most recent meeting with the NLC advising that, on this matter, the Constitution clearly indicates that Parliament can trump the State Lottery Fund Act in equal fashion to any other government institution and that all financial aspects of the Fund should be subject to disclosure and parliamentary oversight thus obtained.

The truth will out

Thanks therefore to the persistence of two DA MPs, Mat Cuthbert and Dave Macpherson, yet another castle of cards involving senior government officials is about collapse.

Looking back things had started to get hotfor Professor Nevhutanda when he was reported as suing a group of investigative journalists, known as Ground-up, for R600,000 in respect of defamation damages. This was an unusual incident in the life of the NLC, it seemed.

Rumblings

It also appeared at the time that the argument was all about reports run by the Daily Maverick, sourced by Ground-up, that in Kuruman, Northern Cape, there were three particular State Lottery projects, an old-age home, a drug rehabilitation centre and a library/museum, being built and all meant to celebrate the life and work of a sangoma, Credo Mutwa.

According to the Daily Maverick article some R60m was granted as far back as 2016/7 but by 2019 two were still “under construction”, having received funding two years before.  The third, a museum, had not single exhibit therein and the library’s shelves were empty”, said Ground-up, who had been to Kuruman to see for themselves.

Photographs of fences, a few walls and piles of bricks were included in various articles and in subsequent articles the construction companies had suspicious links to NLC officials, the Daily Maverick said.

Out of sight

The NLC has distributed on average around R1.6bn per annum in recent years before Covid 19 arrived.  For a good deal of the earlier years, Minister of Trade and Industry Rob Davies, has presided over the affairs of the NLC very much at arm’s length since his department has been at pains, it seems, not to get too involved in lottery matters to any great depth.

Similarly, the Chair of the Portfolio Committee on Trade and Industry for years, Joanna Fubbs, just asked for assurances every year that all funds went to good causes and were distributed particularly amongst the poor. She received such assurances.

Writing the rules

Prof Nevhutanda, always aware that the Lotteries Act demanded no political interference in its affairs, would talk little on what motivated decisions on his  grants. This was a tightly held process within the NLC, he said, and the tenets and principles behind the formulae for consideration of funding had been designed by no less than the professor himself, the annual report of the State Lotteries Commission stated., with the Professor as author.

Consequently, DTI presentations to Parliament on this portion of their responsibilities made to the Portfolio Committee of Trade and Industry have been less than sketchy, particularly on report backs on whether DTI inspectors of NLC staff ever visited project sites.

Grants were declared as annual totals simplistically broken down into projects falling into four categories, the arts, charities, sports and miscellaneous. No more.

 Build up

Meanwhile, Minister Patel has been playing difficult and not really helping obviously not wishing to get too involved in problems of an entity run for so many years by a predecessor.

 

The Auditor General over the years seems to have accepted that no follow through was necessary but last year, with a tightening up of the rules, has now flagged some of the  issues as “irregular”.

D-Day

The letter now sent from Parliament to Prof. Nevhutanda from Parliament demands that the NLC should submit within seven days of receipt of the letter the names of beneficiaries who had received funds from the NLC in respect of the Covid-19 pandemic as well as the amount received as  beneficiaries referred to in the 2018/9 annual report and which were required by the Lotteries Act.

It also calls for details of all the categories under which the grants were made, names of beneficiaries and the amounts involved.  A similar call is made for 2019/20 figures in the 2019/2020 annual report as required in law.

 In the past

To sit through a meeting with the National Lotteries Commission (NLC) has been an insult to the average person’s intelligence for some years now, but the last virtual meeting was short and quick.  Chair Duma Nkosi read from the Courts findings and all quickly sided with Opposition MPs that Parliament had to exercise its authority immediately.

In the most recent meeting, Cuthbert said he was “horrified” to see how many ANCs had suddenly decided to vote agreeing on the matter after three years of disagreement, only siding with the DA when the Courts opinion posed a threat to the blind-eye approach of the past.

Nevertheless, it was a total majority decision made that NLC be hauled before Parliament and explanations given.

Past bad apples

Prof Nevhutanda is not short of publicity either.  Two years ago, he stood accused when a company with the improbable name of the Makhaya Arts & Cultural Development Co, and which employed Prof Nevhutanda’s daughter, controversially received a massive R64m from the National State Lotteries Fund, a story covered by Mail & Guardian.

The charmed life of Prof Nevhutanda seems set to end very shortly. One hopes that endless SIU reports, NPA paralysis and blunted Hawks investigations are not to follow, as the State Lotteries Fund Pandora’s box opens up.  It would seem a question of who gets there first; the SIU or Parliament.

Posted in Justice, constitutional, Public utilities, Security,police,defence, Trade & Industry0 Comments

Economic Regulation of Transport Bill plans for future


 

…….article 15 July……

Its all about regulating prices, says govt….

The Economic Regulation of Transport Bill, now in final process in Parliament, represents the complex task of bringing together a multitude of factors governing the regulation of the transport in South Africa within one framework, intended to deliver “a transport system enabling economic activity and the stimulation of growth”.  The objective is lower the cost of doing business by the regulation of pricing, says government.

In one of the better Bills to come before Parliament in 2020,  the Bill proposes to empower a Transport Economic Regulator as the functionary authorised to sign off on the prices imposed by regulated transport entities in the sector.  The Bill is the result of two periods of public comment in 2018.

 Order in chaos

A portion of 2019 was used by the Department of Transport (DoT) to digest all the information and come up with a final answer to a complex situation since public comment from stakeholders was extensive.   M

any of the issues, as emerged during the debate in Parliament, have always been about Sou

th Africa’s poor record in port handling facilities; entry and export and other border nightmares; Transnet’s rail turn-around problems; and the country’s prohibitive road transport pricing matters.

Recognising this, the Bill has as an objective to rationalise of transport pricing but in order to do this, DoT has to first consolidate all the working parts into a single framework and policy.

Not just rubber stamping

To take a step back, in order to execute the new plan, the establishment of a Transport Economic Regulator is called for as the working body and, secondly, Transnet must establish a Transport Economic Council which will act as arbiter for decisions made.  This has been achieved but not ratified. There also has to be “a mutual consideration between the many stakeholders to make things work”, DoT says.

Good news is that as part of the process Transnet is about to appoint a Corruption Investigation Officer whose work, no doubt, will be cut out.  What has been achieved in this regard was the subject of a recent parliamentary report, but SOEs about to be drawn into the body of the Regulator will be the Transnet National Ports Authority; Transnet Port Terminals; Transnet Freight Rail; ACSA; Air Traffic and Navigation Services; PRASA and SANRAL plus its concessionaires.

Such a big bite worried MPs in the first transport parliamentary committee meeting as much as it did private sector comment sector beforehand, i.e. the idea of establishing a national entity for all forms of transport i.e. road, rail, air and maritime all in one go. MPs  suggested that the Regulator be allowed to take on one area of endeavour at a time.

Even a bigger bite will be that eventually, the proposed Bill includes the concept of regulation within the taxi industry, it was noted from the meeting from the comments made by DoT representatives in their time slots.

Price determination

The body of the Bill provides that the Regulator will consult with interested parties and the public when considering the pricing proposal of a regulated entity and whether it is fair and reasonable. Subsequently if agreed to, a consent order will be published in the government gazette taking effect on the date set.

On the whole question of the roads on which transport survives for its existence, since the Regulator would be a “Chapter 9 institution outside the public service and its independence subject only to the Constitution”, it therefore can be the functionary authorised to sign off on the prices it decides upon.  Important was the fact that should issues arise, the Economic Regulation of Transport Bill as proposed would trump the SANRAL Act.

Up to date

As a Section 76 Bill, the Transport Economic Regulator Bill will now have to be passed through the NCOP to all nine provinces for comment and mandates.

 

Posted in Finance, economic, Public utilities, Trade & Industry, Transport0 Comments

Battle of the Bulge

…….editorial …..August 2020…….

What size the SA public service?

It is plain to see that the country’s major liability in terms of over-expenditure is the massive public sector wage bill which, by any standard, is totally out of proportion to that spent by other countries, let alone in the developing world.     However, when any suggestion is made of trimming this down, or even cutting down on the regular cycle of pay increases, such proposals are immediately met with a threat of a government shutdown by the union front.

Both sides in this constant and wearisome idealogical battle on the subject of who actually runs government service, goes right back to the outcomes thrashed out during the 1991 peace negotiations at Kempton Park, the chief negotiators at the time being Cyril Ramaphosa and Roelf Meyer.

Paying the piper

Over subsequent years since the CODESA multi-party talks took place, the peace formula has produced a kind of “don’t you dare touch this” mantra with the trade union movement.  Clearly, ownership of the public sector was seen as the tool that the new governing party would need to change the country.

As time has passed, this thinking has become embedded in the politics of the country.  It has nothing to do with the country’s Constitution, its legislation or its government structures.   Legislative authority is held by the Parliament of South Africa.    Executive authority is vested in the President of South Africa who is head of state and head of government, and his Cabinet.   Nevertheless, there is always a doubt who is at the controls when it comes to the pay-packet.

Hitting the rocks

The subject of control of the public sector has now become very real as a result of the coffers running dry. At the last Budget in March there was an indication that it was about to happen and the need for a Supplementary Budget in July indicated that it had.    At that point, Minister Tito Mboweni shot off to Washington and convinced the IMF, in a letter signed by himself, that a loan, small by international terms, was necessary to see South Africa through the COVID 19 backlash.  It seemed at the time he had Cabinet backing, of a sort.

This application for an international loan was with total disregard of the ANC Alliance’s known dislike of the IMF and the World Bank, mainly as a result of the tight “rules” or encumbrances that come with such loans.   Ebrahim Patel, for example, has clearly shown his dislike for the World Bank in parliamentary meetings two years ago when involved with International Relations at meetings at Union Buildings.

The feud with the ANC goes back to the dawn of democracy with the loans surrounding the GEAR initiative. Many, like Minister Patel, on the Left seem to think that strict terms imposed by World Bank or IMF bankers “undermine South Africa’s sovereignty” and many have said so recently.

Beggars can’t be choosers

In fact, the “ANC Alliance Secretariat” issued a statement, upon learning of the Minister of Finance’s departure which confusingly read, ”The ANC Alliance affirms the need to safeguard South Africa’s democratic national sovereignty, the fundamental right to self-determination, our independence, all of which are non-negotiable, even in the midst of a crisis.”

Two things were noticeable.  The ANC rarely uses the term “Alliance” in its releases and also immediately upon Minister Mboweni’s return, the minister was at pains to explain to Parliament during Supplementary Budget questioning that very little in the terms of “usual rules“ that applied to this particular  IMF loan, which he had successfully obtained.

He told MPs that the loan itself was small and the IMF “was not the devil in town” that it was supposed to be.     A loan payable over a period of five years at an interest rate of 1.1% can hardly be called punitive, he said.

Small print

But if one reads the letter to the IMF that Minister Mboweni wrote (which accompanied the Minister’s parliamentary presentation) the words of South Africa’s Finance Minister are carefully put.   It is quite evident that the subject of SA’s bulging and expensive public service is one of the items which have now to be debated.

Minister Mboweni said he will “take any necessary measures to maintain debt sustainability” which, whilst open-ended, puts this matter on the ANC agenda whatever COSATU might like to think.

For the moment, however, and perhaps timeously in favour of the ‘radical’ faction in the ANC, Parliament has now been made aware of the report of the Commission for Employment Equity (CEE) which shows that after 20 years, whites still dominate top management positions in the private sector, which card was played by the Minister of Labour on introducing the Employment Equity Bill.

Downhill

Cabinet has a dismal record of listening to common-sense on financial issues   Straightforward economic thinking is often referred to as “neo-liberalism” or “colonialist thinking” and instead of listening to sensible people like Cas Coovadia and Iraj Abedian, business and industry gets exposed to such useless Cabinet expressions such as “deepening economic reform” and “the need for strategic alliances”.

Reuben Maleka, of the Public Servants Association (PSA) made another pretty pointless comment by saying a few days ago before the arbitration on the government pay increase started.    He said, “If 1.2 million public sector workers don’t have money to spend then the retail environment will die. And when there is no demand from consumers, who are also public sector workers, then you are destroying a pillar of the economy.”

The cold fact is that  National Treasury, as Minister Mboweni has told MPs,  has “no intention of allowing South Africa to spend its way out of debt. It must control the expenses.”    As Clair Bisseker noted in Business Day last week, the fact that has emerged is that the SA government will be spending almost 60% of tax revenue in 2020 on just 1.3 million public servants – a mere 2.2% of the population.  Worse probably is the other fact that for every R1 the SA government spends, it only generates 27c in economic growth.

Fronting

Perhaps it was a good idea for the IMF request letter to be signed by Minister Tito Mboweni rather approaching the IMF with the endorsement of the country’s President, since the letter seems to only commit National Treasury and the Finance Minister to an austerity drive, letting President Ramaphosa off the hook in terms of a face-down with unions.   Whatever the case, South Africa still seems to have no agreed common financial approach to its debt problems.

In the meanwhile, the public service wage bill is running rampant, Bisseker notes.  Pay increases are equivalent to 40% in real terms in the last 12 years and have tripled the wage bill to R629bn, but Mboweni’s letter to the IMF clearly states the South Africa will ““take any necessary measures to maintain debt sustainability”.

Aside from cutting down on staff there is also the question of pay increases, previously mentioned, amounting cumulatively to 7% year on year, the unions stating that this “was won after a long, hard fight” therefore at the same time giving an indication that the battle starts on this subject first.

For starters

This first IMF loan is not the one that South Africa is going to need eventually from the IMF and to be approved by Parliament and, as all bankers do, they will be no doubt watching carefully from Washington what steps are taken with this initial loan with soft terms and masked as a COVID 19 matter.

Bloated

It is plain to see that the country’s major liability in terms of over-expenditure is the massive public sector wage bill which, by any standard, is totally out of proportion to that spent by other countries, let alone in the developing world.     However, when any suggestion is made of trimming this down, or even cutting down on the regular cycle of pay increases, such proposals are immediately met with a threat of a government shutdown by the union front.

Both sides in this constant and wearisome idealogical battle on the subject of who actually runs government service, goes right back to the outcomes thrashed out during the 1991 peace negotiations at Kempton Park, the chief negotiators at the time being Cyril Ramaphosa and Roelf Meyer.

Paying the piper

Over subsequent years since the CODESA multi-party talks took place, the peace formula has produced a kind of “don’t you dare touch this” mantra with the trade union movement.  Clearly, ownership of the public sector was seen as the tool that the new governing party would need to change the country.

As time has passed, this thinking has become embedded in the politics of the country.  It has nothing to do with the country’s Constitution, its legislation or its government structures.   Legislative authority is held by the Parliament of South Africa.    Executive authority is vested in the President of South Africa who is head of state and head of government, and his Cabinet.   Nevertheless, there is always a doubt who is at the controls when it comes to the pay-packet.

Hitting the rocks

The subject of control of the public sector has now become very real as a result of the coffers running dry. At the last Budget in March there was an indication that it was about to happen and the need for a Supplementary Budget in July indicated that it had.    At that point, Minister Tito Mboweni shot off to Washington and convinced the IMF, in a letter signed by himself, that a loan, small by international terms, was necessary to see South Africa through the COVID 19 backlash.  It seemed at the time he had Cabinet backing, of a sort.

This application for an international loan was with total disregard of the ANC Alliance’s known dislike of the IMF and the World Bank, mainly as a result of the tight “rules” or encumbrances that come with such loans.   Ebrahim Patel, for example, has clearly shown his dislike for the World Bank in parliamentary meetings two years ago when involved with International Relations at meetings at Union Buildings.

The feud with the ANC goes back to the dawn of democracy with the loans surrounding the GEAR initiative. Many, like Minister Patel, on the Left seem to think that strict terms imposed by World Bank or IMF bankers “undermine South Africa’s sovereignty” and many have said so recently.

Beggars can’t be choosers

In fact, the “ANC Alliance Secretariat” issued a statement, upon learning of the Minister of Finance’s departure which confusingly read, ”The ANC Alliance affirms the need to safeguard South Africa’s democratic national sovereignty, the fundamental right to self-determination, our independence, all of which are non-negotiable, even in the midst of a crisis.”

Two things were noticeable.  The ANC rarely uses the term “Alliance” in its releases and also immediately upon Minister Mboweni’s return, the minister was at pains to explain to Parliament during Supplementary Budget questioning that very little in the terms of “usual rules“ that applied to this particular  IMF loan, which he had successfully obtained.

He told MPs that the loan itself was small and the IMF “was not the devil in town” that it was supposed to be.     A loan payable over a period of five years at an interest rate of 1.1% can hardly be called punitive, he said.

Small print

But if one reads the letter to the IMF that Minister Mboweni wrote (which accompanied the Minister’s parliamentary presentation) the words of South Africa’s Finance Minister are carefully put.   It is quite evident that the subject of SA’s bulging and expensive public service is one of the items which have now to be debated.

Minister Mboweni said he will “take any necessary measures to maintain debt sustainability” which, whilst open-ended, puts this matter on the ANC agenda whatever COSATU might like to think.

For the moment, however, and perhaps timeously in favour of the ‘radical’ faction in the ANC, Parliament has now been made aware of the report of the Commission for Employment Equity (CEE) which shows that after 20 years, whites still dominate top management positions in the private sector, which card was played by the Minister of Labour on introducing the Employment Equity Bill.

Downhill

Cabinet has a dismal record of listening to common-sense on financial issues   Straightforward economic thinking is often referred to as “neo-liberalism” or “colonialist thinking” and instead of listening to sensible people like Cas Coovadia and Iraj Abedian, business and industry gets exposed to such useless Cabinet expressions such as “deepening economic reform” and “the need for strategic alliances”.

Reuben Maleka, of the Public Servants Association (PSA) made another pretty pointless comment by saying a few days ago before the arbitration on the government pay increase started.    He said, “If 1.2 million public sector workers don’t have money to spend then the retail environment will die. And when there is no demand from consumers, who are also public sector workers, then you are destroying a pillar of the economy.”

The cold fact is that  National Treasury, as Minister Mboweni has told MPs,  has “no intention of allowing South Africa to spend its way out of debt. It must control the expenses.”    As Clair Bisseker noted in Business Day last week, the fact that has emerged is that the SA government will be spending almost 60% of tax revenue in 2020 on just 13 million public servants – a mere 2.2% of the population.  Worse probably is the other fact that for every R1 the SA government spends, it only generates 27cents in economic growth.

Fronting

Perhaps it was a good idea for the IMF request letter to be signed by Minister Tito Mboweni rather approaching the IMF with the endorsement of the country’s President, since the letter seems to only commit National Treasury and the Finance Minister to an austerity drive, letting President Ramaphosa off the hook in terms of a face-down with unions.   Whatever the case, South Africa still seems to have no agreed common financial approach to its debt problems.

In the meanwhile, the public service wage bill is running rampant, Bisseker notes.  Pay increases are equivalent to 40% in real terms in the last 12 years and have tripled the wage bill to R629bn, but Mboweni’s letter to the IMF clearly states the South Africa will ““take any necessary measures to maintain debt sustainability”.

Aside from cutting down on staff there is also the question of pay increases, previously mentioned, amounting cumulatively to 7% year on year, the unions stating that this “was won after a long, hard fight” therefore at the same time giving an indication that the battle starts on this subject first.

For starters

This first IMF loan is not the one that South Africa is going to need eventually from the IMF and to be approved by Parliament and, as all bankers do, they will be no doubt watching carefully from Washington what steps are taken with this initial loan with soft terms and masked as a COVID 19 matter.

This battle for ownership of the  must play out soon or be held over officially by agreement bearing the half term October mid-year budget. No budget speech is going to work with this issue hanging like a black cloud.

Posted in Cabinet,Presidential, earlier editorials, Finance, economic, Labour, Public utilities0 Comments

Eskom starts internal overhaul

…..July 7 article…..

De Ruyter keeps his cards close 

When asked by parliamentarians if Eskom would be calling upon retirees and ex-employees to assist with the Eskom recovery plan, CEO André de Ruyter told a joint Public Enterprises meeting called to hear progress on the Eskom unbundling, that at this stage it had not been necessary to rely on consultants.  “For the exercise in hand, money has to be saved.  We have plenty of expertise internally but once things get really complicated, this cannot be ruled out”, he said.

At the moment, he said, things were going well with existing internal sources and Eskom was busy with unbundling, divisionalisation and restructuring, de Ruyter said.   It had re-allocated nearly 9,000 employees to the divisions, of which 6 500 from its head office in Sunnyside, Sandton had moved to ‘hands-on” functions and “moved into operating divisions”.

In place

Most important and in time to meet the human resources plan implementation date, Eskom had appointed its new team of divisional managing directors.  The word “managing” had been incorporated into titles to reflect a clear responsibility in terms of revised job criteria. All had been appointed from existing resources and that had been additional cost in the process. Many existing  employee within the Eskom structure, de Ruyter said, were simply taking on more responsibilities.

MPs from the joint meeting comprised of public enterprises MPs from both the NA and the NCOP were told that critical vacancies were now filled and that all power stations had fully substantiated general manager vacancies. 1,384 learner plant operators had been hired and trained and had filled their positions by April 2020, he said.

Breaking up is hard

In answer to questions from MPs on unbundling  question of divisional unbundling, de Ruyter said that the intention was to divisionalise production into transmission, generation and distribution.    For this it had set up a divisional financial reporting programme design; had already in place power purchasing and electricity supply agreements between divisions; and had commenced the internal trading of energy within Eskom.

De Ruyter reported that a power purchasing and energy supply agreement was in place between a transmission entity named “SA Energy” to handle energy from the 27 different power output stations.    De Ruyter told MPs that it would take some time for the legal separation of all three divisions to take place, the end state being three businesses operating as subsidiaries under Eskom Holdings.

“We have also established a market operator and a central purchasing agency to allow the transmission business to act as the buying agent for electricity and I hope to see considerable private sector investment in generation”, he said.

Much of the old

He warned that Eskom had to retain certain shared services to maximise cost saving opportunities by “leveraging economies of skill and scale.”  For example, Eskom would still only have one IT system, the extremely expensive but highly effective SAP system, and appropriate segregation of equipment and separation  “programming would be installed to give adequate comfort to investors that their commercial information would be adequately protected.”

He said he had rejected the idea of three IT systems, one for each division, purely on the factor of cost. As a result, Eskom would only have one payroll and would maximise certain scarce resources, for example tax and financial resources.  He concluded that the divisionalisation process was aimed at streamlining and driving down accountability, but this had to be “to the right level within the organisation in order to manage cost, bearing in mind that the final arbiter was the cost of electricity to the consumer.”

Big boss

With Minister Gordon Pravin present as a contributor to the speaker panel but who said very little, the only time that the urbane André de Ruyter looked slightly ruffled was when one MP, asking about future load shedding, said that she was tired of hearing “the same old story of broken-down plant that had not been maintained”.

De Ruyter said that the problem was very real and continued to play the major part in the continuity of power supplied to industry and the SA public.

A winter’s tale

“Whilst the Covid 19 lockdown period, de Ruyter said, has led to a direct decline in electricity usage in the country there has been a clear increase in electricity usage since the move to level 4 lockdown and this will obvious change massively and suddenly as we go in lockdown 3 with winter having arrived”.

“Lockdown also provided Eskom with an opportunity to conduct maintenance on its plants, with the power utility’s new base scenario shifting from a possible 31 days of stage 1 load shedding during the winter period to just 3 days,”, he said adding that the unreliability and unpredictability of the system we have has a built-in risk of load shedding.  “That’s how it is, and the situation remains. This will be the reality until after the 18 months of reliability maintenance, which will last until August 2021.”

Small business again

He concluded that large industrial customers are unlikely to be impacted and that any planned load shedding would likely only be required during the evening peak with load shedding schedules being staggered so that customers were not impacted on consecutive days.

Posted in Electricity, Energy, Land,Agriculture, Public utilities, Trade & Industry0 Comments

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