department of public enterprises annual … · 2019-08-08 · 4.3.1.2 manufacturing enterprises 47...

DEPARTMENT OF PUBLIC ENTERPRISESANNUAL PERFORMANCE PLAN

2014/2015

TABLE OF CONTENTSMinister’s Foreword 5Glossary 6 PART A: STRATEGIC OVERVIEW 91 UPDATED SITUATIONAL ANALYSIS 10 1.1 Performance Delivery Environment 10 Economic Overview 10 1.2 Organisational Environment 132 REVISIONS TO LEGISLATIVE AND OTHER MANDATES 163 OVERVIEW OF BUDGET AND MTEF ESTIMATES 17 3.1 Expenditure estimates 17 Relating expenditure trends to strategic outcome oriented goal 20

PART B: PROGRAMME AND SUB-PROGRAMME PLANS 294. PROGRAMMES 30 4.1 PROGRAMME 1 - ADMINISTRATION 30 4.1.1 Strategic Objective Annual Targets for 2014/15 for Administration 31 4.1.2 Programme Performance Indicators and Annual Targets for Administration for 2014/15 32 4.1.3 Reconciling Performance Targets with the Budget and MTEF 35

4.2 PROGRAMME 2 - LEGAL & GOVERNANCE 38 4.2.1 Strategic Objective Annual Targets for Legal and Governance for 2014/15 38

Over the MTEF period the programme will ensure effective shareholder oversight of state owned companies by:

• Providing legal services and coordinate governance systems 38• Facilitate the implementation of all legal aspects of transactions that are strategically

important to the department and state owned companies 38• Ensuringthatfinancialandoperationalriskmanagementprocessesareembedded throughout the department as and when required, over the medium term 38• Addressing constraints on state owned companies’ contract negotiations and management to improve commercial competence and contribute to economic growth and development on a regular basis 38• Providing assistance on developing and negotiating shareholder compact frameworkannuallyintermsofPublicFinanceManagementAct(1999) 38• ProvidingguidanceonapproriatedelegationframeworksbetweentheSOCboards and executive management on a regular basis 38

4.2.3 Programme Performance Indicators and Annual Targets for Legal and Governance for 2014/15 40 4.2.4 Quarterly Targets for Legal and Governance for 2014/15 40 4.2.5 Reconciling Performance Targets with the Budget and MTEF 40

DPE ANNUAL PERFORMANCE PLAN 2014-2015 P 3

4.3 PROGRAMME 3 - PORTFOLIO MANAGEMENT AND STRATEGIC PARTNERSHIPS 42 4.3.1.1 Energy and Broadband Enterprises comprises: 43 4.3.1.1.1 Strategic Objective Annual Targets for 2014/15 43 4.3.1.1.2 Programme Performance Indicators and Annual Targets for Energy and Broadband Enterprises for 2014/15 44 4.3.1.2 MANUFACTURING ENTERPRISES 47 4.3.1.2.1 Strategic Objective Annual Targets for 2014/15 47 4.3.1.2.2 Programme Performance Indicators and Annual Targets for Manufacturing Enterprises for 2014/15 48 4.3.1.2.3 Quarterlytargetsforfinancialyear2014/15 49 4.3.1.3 TRANSPORT ENTERPRISES 50 4.3.1.3.1 Strategic Objective Annual Targets for 2014/15 51 4.3.1.3.2 Programme Performance Indicators and Annual Targets for Transport Enterprises for 2014/15 52 4.3.1.3.3 Quarterly targets for Transport Enterprises for 2014/15 53 4.3.1.4 ECONOMIC IMPACT AND POLICY ALIGNMENT 55 4.3.1.4.2 Strategic Objective Annual Targets for 2014/15 56 4.3.1.4.3 Programme Performance Indicators & Annual Targets for Economic Impact & Policy

Alignment for 2014/15 56 4.3.1.5 STRATEGIC PARTNERSHIPS 58 4.3.1.5.1 Strategic Objective Annual Targets for 2014/15 58 4.3.1.5.2 Programme Performance Indicators and Annual Targets for Strategic Partnerships for 2014/15 59 4.3.1.5.3 Quarterly targets for strategic partnerships for 2014/15 60 4.3.2 Reconciling Performance Targets with the Budget and MTEF 61 PART C: LINKS TO OTHER PLANS 655 LINKS TO THE LONG-TERM INFRASTRUCTURE AND OTHER CAPITAL PLANS 666 CONDITIONAL GRANTS 667 STATE OWNED COMPANIES REPORTING TO THE DEPARTMENT 66 7.1 Alexkor 67

7.2 Broadband Infraco 69

7.3 Denel 69

7.4 Eskom 70

7.5 PebbleBedModularReactor(PBMR)mentionthatPBMRisnowwithEskom 71

7.6 South African Forestry Company 71 7.7 South African Airways 72

7.8 South African Express Airways 73

7.9 Transnet 73

PART D: LINKS TO OTHER PLANS 758 ANNEXURE E 76

P 4 DPE ANNUAL PERFORMANCE PLAN 2014-2015

FOREWORD BYTHE MINISTER

This Annual Performance Plan is the detailed articulation of what the Department of Public Enterprises is undertaking to achieve, in the firstinstance,inthecurrentfiscalyearandwhatithopesto achieve over the Medium-Term Expenditure Frameworkperiod.The performance plan arises from the Department’s Five-Year Strategic Plan which, in turn, is informed by the National Development Plan and its effective Five-Year implementation plan, the Medium-TermStrategicFrameworkof theFifthDemocraticAdministration.

In the past month, the programme of action contained in these seminal plans has tasked thisportfolio with, inter alia, acting with the utmost urgency to accelerate the pace of developing and executing the following critical mega-initiatives:• Overcome the constraint on growth and the

recruitment of investment arising from the undersupply of electricity. The scale and innovative nature of these initiatives need to be a game-changer for the economy.

• Find ways to finance significant levels ofadditional electricity generation capacity without excessive tariff increases which would harm growth.

• Accelerate the pace of delivery of the State-Owned Companies’ infrastructure build programme and use it to drive sustainable and inclusive growth.

Giventhatthefiscalyearisalreadyunderway,Iama latecomer to the unfolding of this APP which has

been underway for a few months now. However, I happy to report that the interventions and activities contained in this Annual Performance Plan have set inplaceallthenecessarybuildingblockstoallowitto rise to these challenge immediately.

In general, the Department’s raison d’etre is to support the Minister, as the Shareholder Representative, to obtain the best possible outcomes for the State, the fiscusand,hence,allcitizens,fromtheeightState-owned Companies in its remit. What is promised in this Annual Performance Plan leaves me with a senseofbeingwell-supportedinfulfillingthatrole.

In this light, it gives me great pleasure to table the Annual PerformancePlan for the 2014/2015 fiscalyear for the Department of Public Enterprises.

Ms Lynne Brown, MP Minister


OFFICIAL SIGN-OFF

ItisherebycertifiedthatthisAnnualPerformancePlanwasdevelopedbythemanagementoftheDepartmentof Public Enterprises under the guidance of Mr Tshediso Matona, Director-General, and was prepared in line with the current Strategic Plan of the Department of Public Enterprises.

ItaccuratelyreflectstheperformancetargetswhichtheDepartmentofPublicEnterpriseswillendeavortoachievegiventheresourcesmadeavailableinthebudgetforthe2014/2015financialyear.

Mr Gcina Hlabisa Signature: Date: 21/08/2014 Director: Strategic Planning Monitoring and Evaluation

Ms Sandy Hutchings Signature: Date: 21/08/2014 ChiefFinancialOfficer

Ms Yoliswa Makhasi Signature: Date: 21/08/2014 Deputy Director-General: Corporate Management

Mr Tshediso Matona Signature: Date: 21/08/2014 Director-General

Approved by: Ms Lynne Brown, MP Signature: Date: 21/08/2014 Minister


GLOSSARY

Below is a glossary of acronyms used in the Department of Public Enterprises

AFDB AfricanDevelopmentBankAGM Annual General MeetingBB-BEE BroadBasedBlackEconomicEmpowermentCAPEX Capital ExpenditureCFO ChiefFinancialOfficerCS Corporate ServicesCSDP Competitive Supplier Development ProgrammeDAFF Department of Agriculture, Forestry and FisheriesDCT Durban Container TerminalDEA Department of Environmental AffairsDG Director-GeneralDDG Deputy Director-GeneralDHET Department of Higher Education and Training DM Deputy MinisterDMR Department of Mineral ResourcesDOC Department of CommunicationsDOD Department of DefenceDOE Department of EnergyDOT Department of TransportDPE Department of Public EnterprisesDRDLR Department of Rural Development & Land ReformDTI Department of Trade and IndustryEDI Electricity Distribution IndustryEE Economic EquityEIA Environmental Impact AssessmentsEMP Environmental Management PlanExCo Executive CommitteeFET Further Education and TrainingFOSAD Foundations of Security Analysis and DesignFSN FullServicesNetworkHR Human ResourcesICASA Independent Communications Authority of South Africa ICT Information and Communication TechnologyIGR Inter-Governmental RelationsIP Intellectual Property


IPO Initial Public OfferingIPP Independent Power ProducersIRP Integrated Resource PlanISMO IndependentSystemandMarketOperatorEIPA Economic Impact Policy Alignment JV Joint VentureKLF Komatiland ForestsKPI Key Performance IndicatorLTTS Long Term Turnaround StrategyMISS Minimum Information Security StandardsMOU Memorandum of UnderstandingMTEF Medium-TermExpenditureFrameworkMTSF MediumTermStrategicFrameworkMYPD Multi- Year Price DeterminationNCPM National Corridor Performance Measurement NDP National Development Plan NEDLAC National Economic Development and Labour CouncilNERSA National Energy RegulatorNT National TreasuryPAIA Promotion of Access to Information ActPBMR Pebble Bed Modular ReactorPFMA Public Finance Management ActPPP Public-Private PartnershipsPSJV Pooling and Sharing Joint VenturePSP Private Sector ParticipationR&D Research and development RMC Richtersveld Mining CompanySAA South African AirwaysSAAT South African Airways TechnicalSAFCOL South African Forestry Company LtdSAQA SouthAfricanQualificationAuthoritySAX South African Express AirwaysSCM Supply Chain ManagementSIP Strategic Integrated Projects SLA Service Level AgreementSOC State Owned Companies SSA State Security AgencyTNPA Transnet National Ports AuthorityTOR Terms of ReferenceTFR Transnet Freight RailWACS West Coast Submarine Cable


PART ASTRATEGIC OVERVIEW

1. UPDATED SITUATIONAL ANALYSIS1.1 Performance Delivery Environment

In 2013/14, the government formally adopted the National Development Plan (NDP) as an overarchingframeworkthatmustinformandshapetheprogrammesofgovernmentdepartmentsincludingStateOwnedCompanies(SOC).Thiscoincidedwiththeendoftheadministrationterm,whichmeantthattherealignmentoftheDepartmentalPlanscouldonlybedoneduringthefirstyearofthenewadministrationinthe2014/15financialyear.The2014/15to2018/19administrationperiodrepresentsthefirstphaseofimplementationofthe NDP.

Inthe2013/14financialyear, theDepartmentembarkedonacomprehensiveplanningprocesstoassesstheperformanceoftheDepartmentoverthepreviousadministrationperiodandbegintodefinetheprioritiesfor the new administration period. Reflection on the Department’s performance clearly showed that thedelivery of infrastructure projects and refocusing of state entities to support government outcomes such as industrialisation and transformation will remain crucial in the new administration period. The continued lacklustreeconomicperformancewillrequiresustainedimplementationofpolicyinitiativesidentifiedintheprevious administration. This will include increased oversight on SOC to ensure that their investment and operational activities support the developmental objectives contained in the NDP and other government policiessuchastheNewGrowthPath(NGP)andIndustrialPolicyActionPlan(IPAP).

Reflectiononthepast5years(2009–2014)depictedanincreasedroleoftheSOCintheeconomythroughthe implementation of the build or capacity expansion programme. During this period, Transnet launched itsMarketDemandStrategythatsubstantiallyincreasedtheirinfrastructureexpenditureoverthenextsevenyearsfromR110billiontoR300billion.Furthermore,EskomcontinuedwiththecapacityexpansionprogrammewiththeReturntoService(RTS)programmebeingconcludedandworkatthe3mainconstructionsitesi.e.Medupi, Kusile and Ingula progressing. The turnaround plan for Denel began to yield results and refocusing of theSAFCOLandAlexkorStrategiescontinued.The turningaroundof theaviationentitiesalsogainedtraction through increased government support and focus on improving governance.

ECONOMIC OVERVIEW Overthepast20years,theSouthAfricaneconomyhasgrownsignificantlyandhasbuiltanewlayerofmiddleclassthatdroveeconomicexpansionbetween2004and2007.ThissectionfocusesattheeconomicoutlookandhowtheDepartmentexpectsthistoevolveovertheMTEFaswellasthepolicyframeworkthatseeksto achieve a step change in the level of economic growth. The growth rate over the past 10 years has been mixed. Between 2003 and 2007, the economic growth averaged 4.8 percent and 2.2 percent between 2008 and 2012. The growth between 2003 and 2007 was largely supported by strong consumption growth and global demand that increased demand for South African commodities.


PERCENTAGE CHANGE IN GDP 2003-2012

Source: Stats SA GDP data, 2013

The high unemployment rate remains a major challenge that threatens to erode the economic progress that has been made since 1994. While the economy created over 3 million jobs between 1994 and 2012, this hasnotbeensufficienttoreducethestubbornlyhighunemploymentrate.Theeconomyhasbeenunabletocreate new job opportunities at a high rate, and this has resulted in the unemployment rate remaining above 23 percent. Between July 2013 and September 2013, the economy created 308 000 jobs, recuperating all the jobs lost during the economic crisis between 2008 and 2009.

UNEMPLOYMENT RATE 2008-2013

Source: Stats SA Quarterly Labour Force Survey, 2013

Investment in the economy by the public corporations has remained buoyant over the past years. This has played a crucial role to limit the impact of the global economic slowdown and pushing the economy towards aninvestmentdrivengrowthpath.InvestmentbypubliccorporationsinparticularEskomandTransnethasplayed a crucial role in crowding in private sector investment and boosting demand for supplier industries. Investment by public corporations increased from R22.6 billion in 2003 to R134.9 billion in 2012. The increases ininvestmentbetween2008and2012reflectedthecountercyclicalpolicyapproachadoptedbygovernment.


Investment by Transnet and Eskom remained dynamic between 2003 and 2012. Transnet investmentincreased from R7.8 billion in 2003 to R27.5 billion in 2012. This was essential in increasing the infrastructure capacityoftheeconomyandimprovedtheefficienciesinthefreightlogisticssystems.InvestmentbyEskomhasalsoplayedanimportantroleinavertingtherollingblackoutsthatwerelastexperiencedinJanuary2008,although the system remains tight. Thus, the investment drive by the public sector has played a fundamental roleinreflectinggovernment’scommitmenttowardsaninvestmentdriveneconomicgrowthpath.

Source: SARB, 2014

The 20 Year Review shows that progress has been made in the transformation of South Africa from an apartheid dispensation to ademocratic society that seeks topromote cohesion and transformation. The economicassessment over the 20 year period showed progress that has been made in economic transformation and rebuildingof theSouthAfricaneconomy.TheStrategicPlan (2014/15–2018/19)of theDepartmentrecognisesthechallengesthatcurrentlyexistinthetransformationoftheSouthAfricaeconomyandseeksto leverage state ownership in the economy to accelerate transformation. Over the MTSF period, growth isexpected to recover to justover3percent levelbut therearestillstrongdownwardrisks thatcontinueto persist. In this regard, shareholder management will be informed by a need to ensure that the build or expansion programmes are leveraged to support higher growth levels.

2014/15 – 2018/19 STRATEGIC PLAN SOC

TheDepartmenthasconcludedtheStrategydevelopmentprocess.TheStrategicPlandefines6Strategicobjectives that will inform the formulation of priority programmes and allocation of budget to these keyprogrammes over the MTSF period. The 6 objectives are: • Review the shareholder oversight management function to ensure alignment of SOC to developmental outcomes • Promote good governance • BuildinternalcapacitytoenhancetheDepartment’sabilitytoexecuteitsstrategicplanandfulfilitsmandate• StabilisetheSOClookingatstrengtheningofbalancesheetsandfundingoptions• Drive economic infrastructure investment to enhance the capacity of the economy with emphasis on the SIPs • LeverageSOCprocurementspendtosupportindustrialisation,transformationandskillsdevelopment The strategy will be implemented under the new administration which commenced post the 2014 election. This APP is informed by the Strategic Plan of the Department that outlines the strategic objectives that would need to be achieved in the new administration period. In this regard, the Strategy is informed by the long term aspirations outlined in the National Development Plan. The annual plans of the different programmes

11

demand for supplier industries. Investment by public corporations increased from R22.6 billion in 2003 to R134.9 billion in 2012. The increases in investment between 2008 and 2012 reflected the counter cyclical policy approach adopted by government.

Investment by Transnet and Eskom remained dynamic between 2003 and 2012. Transnet investment increased from R7.8 billion in 2003 to R27.5 billion in 2012. This was essential in increasing the infrastructure capacity of the economy and improved the efficiencies in the freight logistics systems. Investment by Eskom has also played an important role in averting the rolling blackouts that were last experienced in January 2008, although the system remains tight. Thus, the investment drive by the public sector has played a fundamental role in reflecting government’s commitment towards an investment driven economic growth path.

Source: SARB, 2014

The 20 Year Review shows that progress has been made in the transformation of South Africa from an apartheid dispensation to a democratic society that seeks to promote cohesion and transformation. The economic assessment over the 20 year period showed progress that has been made in economic transformation and rebuilding of the South African economy. The Strategic Plan (2014/15 – 2018/19) of the Department recognises the challenges that currently exist in the transformation of the South Africa economy and seeks to leverage state ownership in the economy to accelerate transformation. Over the MTSF period, growth is expected to recover to just over 3 percent level but there are still strong downward risks that continue to persist. In this regard, shareholder management will be informed by a need to ensure that the build or expansion programmes are leveraged to support higher growth levels.

0

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200000

300000

400000

500000

600000

700000

Government

Public Corpora;ons

Private sector


havebeendefinedbytheseobjectives.ThisallowstheDepartmenttofocusonfewerprojectsthatwilldirectlycontribute to the achievement of these objectives.

TheconstrainedfiscalframeworkrequirestheDepartmenttoexploreadditionalmechanismstosupporttheexpansion plans of SOC. The shareholder related functions will be executed such that the achievement of the outcomes outlined in the NDP is supported.

1.2 Organisational Environment

In the2011/12financialyear, theDepartmentunderwentaprocess to review itsestablishment toensurethat it was properly structured and capacitated to carry out its mandate. From this process, it was clear that additionalhumanresourceswererequiredtoensure that theDepartment isappropriatelyandsufficientlycapacitated. Extensive engagement with the Department of Public Service and Administration and National TreasurywasundertakentoexploreoptionstocapacitatetheDepartmentinlightoftheconstrainedfiscusand the need to increase capacity within government to oversee the build programme. In 2012/13 National Treasury approved an additional 12 critical posts and a further 17 posts over the MTEF to augment the capacity of the Department.

The assessment of the Department’s capability to deliver on the new Strategic Plan shows that there is a need toboostthecapacityoftheDepartment.Giventheconstrainedfiscalenvironment,theDepartmentneedstoemployinnovativesolutionstoaugmentitscapacityanddevelopatalentpoolsufficienttorespondtothefuture human resource requirements of the Department. In this regard, the following has been prioritised. • Expansionof thegraduateprogramme toensurea talentpool that theDepartmentcan tap into tofill

critical positions • EnhancementofthetrainingprogrammesthatwillensureimprovementofskillsforthelevelsbelowSMS• ContinuedmarketingoftheDepartmentasanemployerofchoiceforyoungtalent• Development and implementation of the talent management strategy

In order to improve organisational efficiency, theDepartment is engaging in a comprehensive businessmapping process. This will ensure that the current processes within the Department are streamlined to improve productivity and efficiency. The focuswill be on eliminating duplications, streamlining approvalprocesseswithin the organisation, identification of strategic processes crucial for oversight and gradualautomation of these processes.


Organisational Structure

MinisterPublic Enterprises

Deputy MinisterPublic Enterprises

Director-GeneralPublic Enterprises

Programme 2Legal and

Governance

Programme 3Portfolio Management

and StrategicPartnerships

Corporate Management

Programme 1Administration

Energy and BroadbandEnterprises

ManufacturingEnterprises

Strategic Partnerships

Economic Impact and

Policy Alignment

TransportEnterprises


OVERVIEW OF PROGRAMMES

PROGRAMME 1 - ADMINISTRATION

MinistryMinisterDeputy Minister

ManagementDirector-GeneralCorporate Management

Corporate ServicesSecurity and Facilities ManagementInformation Management and Technology

Chief Financial Officer ChiefFinancialOfficerHuman Resources Human ResourcesCommunications CommunicationsStrategic Planning, M and E Strategic Planning, Monitoring and EvaluationInter-Governmental and Stakeholder Relations Inter-GovernmentalandStakeholderRelations

Internal Audit Internal AuditOffice Accommodation OfficeAccommodation

PROGRAMME 2 - LEGAL AND GOVERNANCE

ManagementLegalGovernance

PROGRAMME 3 - PORTFOLIO MANAGEMENT AND STRATEGIC PARTNERSHIPS

Energy and Broadband Enterprises ManagementBroadband InfracoEskom

Manufacturing EnterprisesManagementDenelAlexkorSAFCOL

Transport EnterprisesManagementTransnet South African Airways and South African Express Airways

Economic Impact and Policy AlignmentManagementEnvironmental Policy AlignmentEconomic Policy AlignmentTransformation,SkillsandYouthDevelopment

Strategic Partnerships ManagementProject oversightFunding MechanismsSupplier Relationships


2. REVISIONS TO LEGISLATIVE AND OTHER MANDATES As the shareholder Ministry, on behalf of Government, the Department’s mandate continues to evolve to ensure that SOC within its portfolio are clearly directed towards the prioritised outcomes in order to serve the Government’s strategic objectives. This evolution is underpinned by an overarching shareholder management process aimed at providing enduring strategic rationale for the SOC. Expansion of the role of the SOCwithin the current economicmanagement framework has required theDepartment to introduce measures to ensure that SOC contribute to the following: • Promotion of economic growth by facilitating development of new industrial capabilities through supplier

development and expansion of local content particularly in the build programme;• ExpansionoftrainingandskillsdevelopmentprogrammestosupporttheGovernmenttodevelopskills

required by the economy; • Achievementofminimumstandardsofuniversalserviceandaffordability forkeyservicessuchasrail,

broadband and electricity, and• The correction of past social injustice.

PENDING COURT CASES

Oneofthemajorshareholderrisksislitigation.Thisriskis,inmostcases,inherenttotheMinisterbecause,inevitably, when SOC are sued, the Minister is in most cases cited as a defendant. Over-time, the Department hasimprovedoncooperativearrangementsandstakeholderrelationstominimiseandmitigateagainsttheriskofbeingjoinedinasapartytoSOClitigation.Theseeffortshavepaidoffandtodate,therearefewcaseswhere the Minister is cited as a party. However, because SOC are separate juristic personalities, there are a numberofpendingcourtcasesagainstAlexkor,Eskom,TransnetandSAA.Thecasesareatdifferentstagesof litigation and legally the details thereof cannot be disclosed as they are still sub judice.


3. OVERVIEW OF BUDGET AND MTEF ESTIMATES3.1 Expenditure estimates

Table 1 Department of Public Enterprises

2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17

Rand thousand Audited outcome

Audited outcome

Audited outcome

Adjusted Appropriation

Revised Estimate

Revised Baseline

Revised Baseline

Revised Baseline

ProgrammesAdministration 88,192 108,635 115,367 131,032 131,032 152,123 160,528 158,286 Legal and Governance

14,653 19,518 23,477 22,338 22,338 23,967 25,536 26,885

Portfolio Management and Strategic Partnerships

437,156 217,962 1,228,205 140,769 140,769 83,696 93,260 100,451

Total for Programmes

540,001 346,115 1,367,049 294,139 294,139 259,786 279,324 285,622

Direct charge against the National Revenue Fund

- - - - - - - -

- - - - - - - - Total 540,001 346,115 1,367,049 294,139 294,139 259,786 279,324 285,622 Change to 2013 Budget Estimate

(57,250) - - -

Economic classification

Current payments

160,148 185,060 195,661 234,450 234,450 255,617 275,620 281,721

Compensation of employees

83,058 96,158 105,327 131,887 131,887 149,574 159,527 169,945

Salaries and wages

78,165 96,158 105,327 131,887 131,887 149,574 159,527 169,945

Social contributions

4,893 - - - - - - -

Goods and services

77,090 88,902 90,334 102,563 102,563 106,043 116,093 111,776

Administrative fees

79 131 866 1,064 1,064 810 817 823

Advertising 3,482 1,778 1,962 3,649 3,649 2,515 2,667 2,825 Assets less than the capitalisation threshold

308 362 444 983 983 1,055 1,113 1,174

Audit cost: External

2,580 4,117 1,908 1,294 1,294 2,200 2,300 2,400

Bursaries: Employees

917 629 393 1,000 1,000 1,000 1,054 1,110

Catering: Departmental activities

1,144 1,136 1,341 1,867 1,867 949 996 1,045


2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17


Audited outcome

Audited outcome


Revised Estimate

Revised Baseline

Revised Baseline

Revised Baseline

Communication (G&S)

2,431 3,260 3,741 3,439 3,439 3,645 3,961 4,173

Computer services

3,035 2,726 3,078 3,102 3,102 3,974 4,188 4,410

Consultants and professional services: Business and advisory services

26,809 26,815 22,995 29,981 29,981 37,551 43,673 35,229

Consultants and professional services: Legal costs

5,419 2,396 430 2,000 2,000 3,166 3,282 3,402

Contractors 1,780 1,012 2,250 2,304 2,304 1,476 1,941 2,059 Agency and support / outsourced services

2,857 2,542 4,110 3,552 3,552 3,979 4,067 4,246

Entertainment 26 60 32 415 415 312 326 341 Fleet services (includinggovernment motortransport)

349 765 805 1,302 1,302 1,108 1,168 1,232

Inventory: Clothing material and accessories

- - - 14 14 - - -

Inventory: Food and food supplies

- 122 113 199 199 - - -

Inventory: Fuel, oil and gas

- - 21 - - - - -

Inventory: Materials and supplies

30 85 64 50 50 - - -

Inventory: Medical supplies

- 1 8 - - - - -

Inventory: Medicine

- - 2 - - - - -

Inventory: Other supplies

49 24 25 19 19 - - -

Consumable supplies

- - 34 2 2 708 747 787

Consumable: Stationery, printing andofficesupplies

1,555 2,028 2,693 3,186 3,186 1,361 1,502 1,607

Operating leases

2,814 1,720 1,814 684 684 1,790 1,887 1,986


2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17


Audited outcome

Audited outcome


Revised Estimate

Revised Baseline

Revised Baseline

Revised Baseline

Property payments

5,435 6,884 9,137 8,100 8,100 8,472 8,918 9,380

Travel and subsistence

12,185 24,329 23,499 26,522 26,522 24,977 26,515 28,308

Training and development

1,645 2,386 1,624 2,238 2,238 2,004 2,112 2,223

Operating payments

1,161 1,655 3,618 2,006 2,006 1,491 1,278 1,350

Venues and facilities

1,000 1,939 3,327 3,591 3,591 1,500 1,581 1,666

Transfers and subsidies

237,990 156,978 118,638 57,405 57,405 100 105 111

Public corporations and private enterprises

237,296 156,255 118,313 57,250 57,250 - - -

Other transfers to public corporations

237,296 156,255 118,313 57,250 57,250 - - -

Households 694 723 325 155 155 100 105 111 Other transfers to households

694 723 325 155 155 100 105 111

Payments for capital assets

3,169 4,071 2,742 2,284 2,284 4,069 3,599 3,790

Machinery and equipment

3,169 3,922 2,649 2,284 2,284 4,069 3,599 3,790

Transport equipment

1,821 1,411 - 608 608 3,356 2,853 3,005

Other machinery and equipment

1,348 2,511 2,649 1,676 1,676 713 746 785

Software and other intangible assets

- 149 93 - - - - -

Payments for financial assets

138,694 6 1,050,008 - - - - -

Total economic classification

540,001 346,115 1,367,049 294,139 294,139 259,786 279,324 285,622

Detail of transfers and subsidies

2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17

Recipient Audited outcome

Audited outcome

Audited outcome


Revised Estimate

Revised Baseline

Revised Baseline

Revised Baseline

Rand thousandGifts and donations

694 723 93 100 100 100 105 111

Employee social benefits

- - 134 55 55 - - -

Total 694 723 227 155 155 100 105 111


Relating expenditure trends to strategic outcome oriented goal

The spending focus over the medium term will continue to be on strengthening and expanding the Department’s capacity to carry out its oversight role in relation to the state owned companies, and improving internal efficienciesandthefunctioningoftheDepartment.SupportfortheachievementoftheNDPgoalswillformthecentral part of the oversight function. To this end, the personnel establishment is expected to increase over themediumtermto265posts,including6graduatesand30interns.Attheendof2013/14financialyear,theDepartment had a vacancy rate of 2.8 percent. The strong recruitment drive implemented by the Department betweenthe2012/13and2013/14financialyearsisexpectedtoincreaseexpenditureoncompensationofemployees, which, at 54.6 per cent, is the largest spending item of the Department’s budget over the medium term.TocarryouttheDepartment’shighlevelstakeholderinteractions,intergovernmentalandcoordinatingactivities and general oversight role of the government’s investment in state owned companies, personnel travel extensively domestically and internationally; and the Department relies on the services of consultants who conduct highly technical research in the transport, manufacturing, energy and broadband sectors. As a result, travel and subsistence and consultants are the largest spending items in goods and services, and spending on these items is projected to increase over the medium term.

Between 2010/11 and 2013/14, certain SOC, such as Denel and Broadband Infraco, received non-periodic recapitalisationpayments,whichexplainsthesignificantfluctuationinspendinginthePortfolio Management and Strategic Partnerships programme over this period. Spending in the programme is expected to decline significantlyoverthemediumtermasnorecapitalisationsarecontemplated.

Achievements with regard to outcomes announced by the Department of Performance Monitoring and Evaluation

InrelationtoGovernment’s12Outcomes,theDepartmentisprimarilycontributingtocreatinganefficient,competitive and responsive economic infrastructure network (Outcome 6), which forms the basis of thedelivery agreement signed in October 2010. This delivery agreement forms the core of the performance agreement between the President and the Minister. Furthermore, the Department, through the activities of its SOC,contributestootheroutcomessuchasdecentemploymentthroughinclusivegrowth,skillsdevelopmentand rural development. The following is the Department’s contribution towards achieving the outcomes that have been prioritised by government:

3.1 Creating an efficient, competitive and responsive economic infrastructure network (Outcome 6)

ThepastMTSFwasadoptedduringtherecession.Oneofthekeyobjectiveswastostabilisetheeconomyand place it on a different growth trajectory. At the centre of this objective was: implementation of the capital expenditure programme that would address the capacity constraints experienced by the economy during high growth periods between 2005 and 2007; to act as a stimulus to jump-start the economy. In this regard, Eskom’sbuildprogramme,aswellastheTransnetcapitalexpenditureprogramme,formedthecoreofthegovernment’s infrastructure investment strategy.

The progress that has been made to accelerate infrastructure investment in the economy is highlighted below.


Eskom

Funding of the build programme up to 2018 Funding of the build programme emerged as one of the major challenges with roll-out of the build programme intheelectricitysector.Thisisasaresultoftariffsnotbeingsufficienttocoveroperationalcostsaswellasprovide a reasonable return on investment to allow the utility to fund investment in additional generating capacity.Overthepastfiveyears,theDepartmenthassupportedEskomtosecuretariffadjustmentsthatwillsupportitsfinancialsustainabilityaswellasprovisionofguaranteestokeepthefinancingcostlower.Asat31March2014,R271.6billion(90.5%)oftheR300billionborrowingprogrammehadbeensecured.TheR300billion borrowing programme is based on the original funding requirements as at April 2010 and covers the period 1 April 2010 to 31 March 2017.

It should be noted that additional funding requirements, including those resulting from the lower than expected MYPD 3 tariff determination, are not included in this borrowing programme. The drawdowns for the year ending 31 March 2014 against the R300 billion funding plan is R44.7 billion, bringing the cumulative amount that has been drawn to execute the build programme to R188.7 billion.

Additional funding for the period until 31 March 2018, as a result of the MYPD3 decision amounts to R301 billion which still needs to be secured.

Progress on delivery of build programme (Medupi, Kusile, Ingula, Transmission Lines and Renewable Projects)

EskomspentR58.2billiononcapitalexpenditurein2013/14,reflectingasustainedincreaseinthecapitalexpenditure in support of Government outcomes. The following are the key achievements of the buildprogramme: • Eskom completed the return-to-service project during the reporting period. All three power stations

(Camden,GrootvleiandKomati)arefullyoperational.Thelastunitofthisproject–KomatiPowerStation’sUnit3–wascommissionedinSeptember2013.Thisbroughtthetotalamountofgeneratingcapacityforreturn-to-service added to the grid since 2005 to 3 731MW. This has been one of the factors that have played a crucial role in averting the collapse of the national electricity grid.

• The refurbishment projects have made good progress, despite the ongoing challenge of outage constraints. AlltheKrielunitshavenowbeenrefurbished,withthefinalunit(Unit5)beingsynchronisedonloadon15March2014.Furthermore,threeofthesixMatlaunitshavebeenrefurbished,withthethirdunit(Unit5)synchronised on load on 25 March 2014. Delays were experienced at Duvha due to outage movements.

• Asat31March2014,Medupihadadayvarianceof24.48days(withinthetargetof30dayslatevariance).Eskomremainsontrackforsynchronisationduringthesecondhalfof2014.CommissioningofthefirstunithasstartedandEskomisworkingwithcontractorstoensurethatagreedschedulesandprocessesareadheredto.Keychallengesincludefindingsolutionsforthecontrolsystems.

• Kusileachievedadayvarianceof12.9days(withinthetargetof30dayslatevariance).Thestationisscheduled for synchronisationby theendof 2015. The keychallenge is findinga solution for controlsystems to avoid a repetition of the delays experienced at Medupi. Four medium term contracts have been signed for coal supply to Kusile Power Station during the commissioning phase. The conclusion of long term coal and limestone supply agreements for Kusile Power Station remains a focus area.

• Workcontinuesat Ingula,but the tragic incident thatcost the livesofsixcontractorshasaffected theschedule. The delay has been estimated at 18 months. At the end of the reporting period, Ingula had a day varianceof11.6days(withinthetargetof30dayslatevariance).Worktoinstallturbinesandgeneratorswill begin soon.


Construction of the 100MW Sere Wind Farm is progressing well, with 69% of the tower foundations and 17% of the turbines completed.

• Approximately 811kmof power lines and3 790MVAof sub-station capacitywere also commissionedduring the course of the year.

• MegaGenerationProjectsreportedconstructionprogressasfollowsasat31March2014”Medupi-60%;Kusile-30%;Ingula-72%;andSereWindFarm-47%.

IPP contracts that have been signed

The electricity industry is undergoing reforms targeted at: enhancing participation of the private sector; attracting additional investment to address current capacity challenges; enhance the use of renewable energy.ThefirstprojectundertheDepartmentofEnergy(DOE)renewableindependentpowerproducers(RE-IPP)programmewasconnectedtothegridon27September2013andthefirstIPPwascommissionedon 15 November 2013. A total of 467.3MW is currently available to the system from these Independent Power Producers(IPPs).TheDOEapprovedanadditional1457MW,pursuanttothethirdwindowsubmissions.Nocontracts have yet been signed for this capacity.

Further PPAs, totalling 1 005MW, for DOE Peaker Plants were entered into on 3June2013andbecameeffectiveon29August2013(DOEPeakerProgramme).Commissioningoftheseplantsisexpectedduringthe2015/6financialyear.

Transnet

Transnet Capital Investment Five Years Review Division(s) 2009/10 2010/11 2011/12 2012/13 2013/14 TotalTFR 9.7 12.5 14.8 18.3 25.1 80.4TE 0.4 0.5 0.7 1.3 1.0 3.9TNPA 3.2 2.0 1.7 1.7 1.2 9.8TPT 2.4 0.7 1.5 2.2 1.6 8.4TPL 3.1 6.1 4.5 2.8 3.4 19.9Other (O.4) (0.3) (0.9) 1.1 0.2 (0.3)Total capex 18.4 21.5 22.3 27.4 32.5 122.1

The2014/15financialyearisthethirdyearofTransnet’sroll-outoftheMarketDemandStrategy(MDS)thatisunderwrittenbyarollingcapitalprogrammeworthoverR300bn.Inthepastfiveyears,Transnethasinvestedover R120bn in infrastructure and capital projects, most of which has been committed to the rail business. Thisiscrucialtoenhancetheefficiencyofthelogisticssystemandtoreducethecosttomovegoods,whichwill contribute to the overall competitiveness of the economy. Keyprojectsexecutedbythecompanyoverthepastfiveyearsincludedthefollowing:

GFB locomotives

Duringthe2013/14financialyear,TransnetawardedaR50billioncontractforacquisitionof1064locomotives(599newdual-voltageelectriclocomotivesand465diesellocomotives)–thismakesitthelargestlocomotiveacquisition contract in the history of South Africa. Not only will this acquisition of locomotives enable Transnet to increase its rail volume capacity, but the procurement process has been structured in such a way as to allow formaximisationof localisationbenefits.Thetransactionisexpectedtoboostthecountry’smanufacturingcapacity while also transforming the rail industry.


Nine of the 95 electric locomotives were delivered in the 2013/14 financial year. Local assembly of thelocomotives commenced on 4 February 2014 at Transnet Engineering in Koedoespoort. The remaining 23 of the43Class43diesellocomotiveswerereceivedinthe2013/14financialyear.

Iron ore line expansion up to 60,0mt

The last 26 of the 32 locomotives needed to facilitate the increase in iron ore capacity to 60,0mt were tested andacceptedintooperationsduringthe2013/14financialyear.Thepre-feasibilitystudytoexpandcapacityfrom61mtto82,5mthasbeencompleted.Phase1D(beingtheadditionofa3rdtipplerandassociatedrailworks)hasbeenapprovedbytheTransnetBoardofDirectors,atacostofapproximatelyR1,6billion.The3rd tippler will ensure that 60mt can be exported on a sustainable basis, as the existing two tipplers currently do not allow for any down time.

Coal line expansion up to 81,0mt

Infrastructurework required to expand the coal line from 68mt to 81mt commencedduring the 2013/14financialyear.Theworkisexpectedtogainmomentumduringthe2014/15financialyear,withconstructionoftheconsolidationyardsatSaaiwaterandBlackhillyards.

Durban Container Terminal (DCT)

Transnet has commenced with the reconstruction and deepening of seven steel sheet piled berths at Maydon Wharf, in thePort ofDurban.Constructionof thefirstberthwassuccessfullycompletedand isnow fullyoperational. The contract for the remaining six berths was awarded recently and on-site construction is expected to commence in the near future.Durban Dig-Out Port

TheDurbanInternationalAirport(DIA)siteacquisitionfromACSAwasconcludedduringthe2012/13financialyear at a total cost of R1,85 billion. The DIA site is proposed to be developed into a dig-out port to address demandrequirementsinthecontainer,liquidbulkandautomotivesectorsupto2040.

Cape Town Container Terminal

Expansion of the Cape Town Container Terminal aims to increase capacity from 0.9 million TEUs to 1,4 million TEUs to address growth in demand for containers in the Western Cape region. The capital project to deepen berths and increase container handling capacity to 900 000 TEUs has been completed. Consideration is now being given to increasing the container handling capacity to 1, 4 million TEUs.

Ngqura Container Terminal

The Nqgura Container Terminal was launched in 2012. The port is positioned as a trans-shipment hub and agatewayforcontainertrafficintoSouthernAfrica.ThesecondphaseAoftheproject,toexpandcapacityfrom 800 000 TEUs to 1.5 million TEUs, has commenced and is expected to be completed during the 7 year MDS period.


New Multi-Product Pipeline (NMPP)

Significant progress has been made on the NMPP with favourable weather conditions having enabledacceleratedconstructionworktotakeplace.Theprojecthas,however,facedsomechallengeswithregardtoindustrialactionandtankconstructionwork.Inspiteofthesechallenges,theproject isexpectedtobecompleted during 2015.

Ports productivity

DurbanDuring the period under review, ship turnaround time was slightly below the target of 59, largely due to inclementweather.Thegrosscranemovesperhour(GCH)onPier1andPier2arebelowtarget,withPier1at24moves(targetis28)andPier2at25moves(targetis30).Anchoragewaitingtimewasalsobelowtarget,at57hrs(targetis46).Infrastructureupgradesarebeingimplementedtoimprovefunctioningoftheport.

Cape TownThe ship turn-around time was 29,6hrs better than the set target of 30hrs. The gross crane moves per hour were better than target, at 34 moves against a target of 32. Anchorage waiting time was below target at 57 hrs(targetwas46hrs).

Average ship turn-around time in Cape Town and Durban improved from the previous year. The Port of Durban improved anchorage waiting time from the previous year, which is important for customer satisfaction. Cape Town’s performance was marginally lower than in the previous year.

Volumes Transported by Rail

Transnethascontinuedtomovevolumesabove200mtperannum,despitethelacklustreperformanceoftheeconomy.Duringtheperiodunderreview,210.43mtwereshowinga1.3%increaseinvolumescomparedtothepreviousfinancialyear.Thevolumegrowthwasattributabletothefollowing:• Generalfreight(GFB)volumesof88mtreflectedapositivegrowthof6%comparedtothepreviousyear.• Exportcoalvolumesof68.2mtwere11%belowbudgetand1%belowthepreviousyear.• Exportironorevolumesof54.3mtwere12%belowbudgetand3%belowthepreviousyear.

The8.4%shortfallonthebudgetedvolumeof229.72mtwasmainlyduetoexportcoalandexportironore.Keyreasonsforthedeviationofa19mt(88.4%)shortfallontotalrailvolumeswereasfollows:• A 7.3mt shortfall on export iron ore due to customer production problems and a decline in export iron

prices due to slow global economic growth.• The 8.8mt export coal volume shortfall was partly due to a decline in export coal prices, customer related

equipmentfailure,aswellasinternalandexternaloperationalconstraints(suchaslocomotivefailureandpowerfailure,includingRBCTcablefailureandcabletheft).

• The GFB sector accounted for the remaining shortfall of 3.2mt. A range of factors affected volume performance, including slow domestic growth, industrial strikes, customer loading and offloadingchallenges and wet weather conditions.


Migration of transportation of coal from road to rail

The coal business under-achieved on its annual target of 95.151mt. The actual achievement for coal was 83,13mtin2014,whichrepresentsa12.6%under-achievement.

Road to rail migration efforts are as follows:• FreightRail’smarketdevelopment initiatives target retentionandgrowthof traditional railcustomers in

theminingandheavymanufacturingsectors(e.g.exportcoaland ironore), includingcompanies thatbeneficiateminingcommodities.Othermajorcustomersareinthefuel,chemicals,agriculturalandtimbersectors.

• The business is targeting new customers in the FMCG, textile and light manufacturing industries, where there are opportunities for ‘rail friendly’ commodity types to be shifted from road to rail.

• TherailmigrationprogrammethatfocusesonEskomcoalisprogressingwellinsupportoftheroadtorailprogramme.

GFB Productivity

On-timetraindeparturesimprovedby24%comparedtothepreviousyearandby5%comparedtobudget;this was due to diligent monitoring and follow-up on the root causes of deviations. On-time arrivals also improvedby4.5%comparedto thepreviousyear,butdeclinedby31%comparedtobudget,partlydueto en-route system-failures. Diligent monitoring and follow-up on the root causes of departure and arrival problems will continue.

The gradual delivery of 43 Class diesel locomotives for General Freight and focused attention on operational efficiencyandvolumegrowthresultedinan8%improvementinassetutilization,comparedtoboththeprioryear and budget.

3.2 Outcome 4: Decent employment through inclusive growth

TheDepartmentwasidentifiedasoneofthecontributorsrequiredtosupportimplementationoftheoutcome4delivery agreement. Infrastructure investmentwas identifiedas oneof the jobdrivers in theNGP. Theindustrial capabilities that exist within SOC such as Denel are being leveraged to support the development of advanced manufacturing in the South African economy, in line with IPAP.

Denel

The turnaround of Denel has been crucial to preserve advanced industrial capabilities within the State’s portfolio. The company has continued to support the needs of the South African Defence Force, which has playedacrucialroleindevelopingcapabilitytosecureothermarkets.InJune2013,thecompanyreportedaR21billionorderbook,whichincreasedtoR30billionbyDecember2013.ThiswillenablethebusinesstomeetitsplanofdoublingrevenuestoR8billionby2018/19.OnesignificantordersecuredbytheSOCinthe2013/14financialyearwasaR10billioncontractbytheSouthAfricanDepartmentofDefencetoproduce238Hoefysterinfantryfightingvehicles(IFV)fortheSouthAfricanArmy.Theprogrammeiscriticalinmaintainingthe country’s advanceddefencemanufacturing capabilities. Importantly, 70%of the components for thevehicles will be developed and manufactured in South Africa, with 2 000 jobs to be created at Denel and in the related South African defence industry.

In 2013/14 Denel revived its space and satellite capabilities, after entering into a collaborative relationship withtheSouthAfricanNationalSpaceAgency(SANSA).Thiswillnotonlyensurethatthecountry’sspaceand


satellite capabilities are enhanced, but will provide local industry with the opportunity to tap into the growing and strategic global space and satellite industry.

TheSOChasdeliveredandsupportedthedeploymentoftheRooivalkcombatsupporthelicopterincombatoperations in the Democratic Republic of Congo (DRC). The deployments were done under the UnitedNationsOrganisationStabilisationMission(MONUSCO)andhaveproventobeagamechangerinpeaceenforcement operations.

Localisation and transformation

TheDepartmenthascontinuedtomonitorimplementationoftheSupplierDevelopmentPlansofbothEskomand Transnet. Furthermore, the Department has incorporated localization targets into the shareholdercompacts of these entities; to ensure that their procurement expenditures advance the industrializationprogramme of Government. The proportion of both components and services sourced locally by these SOC hasgraduallyincreasedsincetheintroductionoftheCompetitiveSupplierDevelopmentProgramme(CSDP).In the2013/14financialyear,Transnetachieved92%localcontentprocurementasapercentageof totalspend.Thisisanexceptionallygoodperformancefortheyear,especiallyifyoutakeintoconsiderationthatthelocalcontenttargetwasonly70%oftotalspend.

Transnet also exceeded the supplier development target by achieving 37% commitment of contractvaluetobeinvestedinthecountry:thetargetwasonly35%.Transnet’sperformanceinregardtosupplierdevelopmentwouldhavebeensignificantlyhigheriftheSOCwasnotboundbythePreferentialProcurementPolicyFrameworkAct(PPPFA).EngagementwithNationalTreasuryonthePPPFAisongoinginordertofindasolutionthatwillallowSOCtomaximizetheirprocurementspend. BBBEEspendamountedto94%ofTotalMeasurableProcurementSpend(TMPS);thiswasagainstatargetof70%.SpendonBlackWomenOwnedandBlackYouthOwnedremainslow.TheDepartmentis,however,continuingtoengageTransnettofindwaystoimprovespendonthesetwogroups.

3.3 Outcome 5: A skilled and capable workforce to support an inclusive growth path

SOCwithin theDPEportfoliocommitted tosupport theNationalSkillsAgenda through implementationofvariousskillsinitiatives,withaspecificfocusonscarceandcriticalskills.TheseinitiativesincludealignmentofskillsdevelopmentprogrammestotheNationalSkillsDevelopmentStrategy(NSDS)andNationalSkillsAccord in support of theNewGrowthPath (NGP)and theNationalDevelopmentPlan (NDP). Toensurealignment to these interventions, the Department has established partnerships with the Department of Higher EducationandTraining(DHET),theEconomicDevelopmentDepartment(EDD)andtheDepartmentofTradeandIndustries(DTI).This iscrucial toensurethattheskillsdevelopmentcapacityofSOCis leveragedtodevelopcoreandcriticalskillstomeettheeconomy’srequirements.The commitments made by SOC and partnerships with relevant government departments has resulted in the enhancementofprovisioningofscarceandcriticalskillsbySOCtoaddressskillsgapswithinSOC,aswellasclosingthenationalscarceandcriticalskillsgaps.ThusSOC’alignmenttotheNationalSkillsAccordfocuseson the following commitments:• Commitment 1: Expand the level of training using existing facilities more fully.• Commitment 2:Makeinternshipsandplacementopportunitiesavailablewithinworkplaces.• Commitment 5: Improve funding of training and the use of funds available for training and incentives.• Commitment 8: Improve the role and performance of FET Colleges.


These commitments have been translated to form part of the targets that are included in the shareholder compactsconcludedwiththeExecutiveAuthority.Inthe2013/14financialyear,andinlinewiththeNationalSkillsAccord,SOCcollectivelycommittedtoenrol2764newartisantraineesofwhich:1040traineesweretobeenrolledatEskom;1550weretobeenrolledatTransnet;andtheremainderweretobeenrolledatSouthAfricanAirways,SouthAfricanAirwaysExpress(SAX),AlexkorandSAFCOL. Transnet’s enrolment includes 1000 additional artisan trainees funded through the R175 million from the NationalSkillsFund(NSF)tobetrainedoveraperiodofthreeyears,whichwilloptimisetheirtrainingfacilitiesinaddressingthenationalskillsgapsandwithaspecialfocusonsupportingSIPs.Tothisend,aMemorandumofUnderstanding(MoU)wasconcludedbetweentheDepartmentandtheDHETinOctober2013.

Other commitments made by SOC include: training of technicians and engineers supported through bursary schemes and internship programmes; enrolment for training of cadet pilots; and training of learners in scarce andcriticalskillsinareassuchastraindriversatTransnet,energyfieldworkersatEskom,forestryworkersatSAFCOLandairportcrewmembersatbothSAAandSAX.

Inaddition,Eskomhasalsocommittedtoensuringthatatleast2500matriculantsand2500graduatesinthepipelinearetrainedinartisantradeskillsandsupportedinworkexperientiallearningprogrammesthroughEskomanditssuppliernetwork.

As at 31 March 2014, a total of 2 109 new artisan trainees were enrolled at SOC in the Department’s portfolio, ofwhich:1569artisanswereenrolledatTransnet;94newartisanwereenrolledatEskom;306newartisantrainees enrolled at Denel (237 of the trainees enrolled for training through Denel Technical Academypartnershipswithprivatecompanies);147artisantraineesenrolledatSAA;36artisantraineesenrolledatSAX;4and6artisantraineesenrolledatAlexkorandSAFCOL,respectively.

Atotalof459techniciantrainees(Transnet–339;Eskom–100;Denel–12;BroadbandInfraco–6;SAFCOL- 2) and 367 engineering trainees (Transnet – 138; Eskom – 179; Denel – 41; Broadband Infraco – 4;andSAFCOL-4)wereenrolledinvariousprogrammessupportedthroughbursaryschemesandinternshipprogrammes.OtherSOCscarceandcriticalskillsenrolmentsinclude55newcadetpilotsenrolledfortrainingatSAA(34)andSAX(21),with2176newlearnersenrolledinsectorspecificscarceandcriticalskillslearningprogrammestoaddresssectorskillsshortages.

Inaddition,Eskomhasenrolled172matriculantsinartisantradeskillsand195graduatesinvariousworkexperientiallearningprogrammeswithinEskomanditssuppliernetwork.Thus,asatMarch2014,Eskomandits suppliers had 2 718 matriculants and 1 607 graduates in the pipeline, who are being trained and placed in various learning programmes.

3.4 Outcome 7: Vibrant, equitable and sustainable rural communities with food security for all Alexkor

The SOC has delivered on government obligations to the Richtersveld community, with a R120 million upgradeof theAlexanderBayTownship infrastructure (roads,electricalandwater reticulationandwastewatertreatment)beingcompletedon31March2013andthetown’sregistrationconfirmedon22November2013. This means that the town, which was previously a mining compound, is one of the new towns in South Africa and part of the Richtersveld Local Municipality. The value of property in the town that will be transferred to the community is estimated at R200 million.


The jointly-owned mine, which had previously seen its diamond production decrease substantially due to the land restitution process, has seen an improvement in carat production from 35 000 carats to over 50 000 carats.ThishasbeenonthebackofanewlycommissionedR50millionprocessingplantatMuisvlaknearPort Nolloth, which has created 200 jobs for the community.

During theperiodunder review, theMinisterapproved thestrategy for theSOC tobecomeadiversifiedmining company; this will include coal supply in support of the national energy security imperative. The DepartmentisworkingcloselywiththeSOCtoensuresuccessofthestrategyandsignificantprojectswillbeannounced in 2014/15.

SAFCOL

In2012/13,theDepartmentrevisedtheSOCmandatetoenableproductdiversificationandfurtherverticalintegration. The SOC will announce the new corporate strategy within the ambits of the revised role in 2014/15.Asattheendofthefinancialyear,SAFCOLspentR6,591milliononsocio-economicdevelopmentinitiatives.Thisrepresents3.3%oftheNetProfitAfterTax(NPAT)-asignificantachievementcomparedtotheShareholderCompact(SHC)targetof1%.SAFCOLcontinuestocreatejobsincommunitiessurroundingitsplantationsthroughtheExtendedPublicWorksProgramme(EPWP).

SAFCOLcompleted11socio-economicdevelopment initiativeprojectsduring the2013/14financial year. Details of the completed projects are as follows:• EmhlabaneniPrimarySchool(classroomandablutionblock)• EsihlengeniCombinedSchool(supplied20newcomputersandinstalledtabletops,ICTburglarproofing

andelectricalwork)• MayflowerDisabilityCentre(retainingwallsandburglarproofing)• DinethembaandDaviddaleECDcentres(washbasinsandablutionblocks)• TshitavhaduluCommunityHall(newbuilding)• MantjoloMarketStalls(marketstallsandablutionfacility)• NtabamhlophePrimarySchool(3ablutionblocks)• Thathe-VondoGuestHouse(renovations)• LeroroShelter(burglarproofing)• Diepdale Youth Centre (site establishment has been completed and excavation of trenches is 90%

complete)• DeskManufacturingProject(industrialmachinesandtoolshavebeenprocured)


PART BPROGRAMME AND

SUB-PROGRAMME PLANS

4. PROGRAMMES4.1 PROGRAMME 1 - ADMINISTRATION

Purpose: Provides strategic management, direction and administrative support to the Department, which enables the Department to meet its strategic objectives

Programme Overview:TheprogrammeincludestheMinistry,theOfficeoftheDirector-GeneralandSupportServices.Theprogrammeis currently made up of the following sub-programmes: Ministry; Management; Corporate Services; Chief FinancialOfficer;HumanResources;Communications;StrategicPlanning,MonitoringandEvaluation;Inter-GovernmentalandStakeholderRelations;InternalAuditandOfficeAccommodation.

Office of the Director-General is responsible for Corporate Management.

Corporate Services is responsible for:Security and Facilities Management–Provideasafeandsecureenvironmentandinternaladministrationandfacilities services to internal customers.Information Management and Technology–ITinfrastructureandsupport,RecordsManagementandLibraryServices.

Office of the Chief Financial Officer is responsible for Financial Management Services to ensure compliance withthePublicFinanceManagementAct,1999(ActNo1of1999)andTreasuryRegulations;andefficientand effective supply chain management services

Human Resources is responsible for assisting line management to implement operational excellence and developing the Human Capital potential in the department.

CommunicationsisresponsibleforrepositioningtheDPEasanactivistshareholder;maketheDPEbrandrelevant and meaningful to ordinary South Africans; impact media relations and media communication; and improve employee engagement.

Strategic Planning, Monitoring and Evaluation is responsible for co-ordination, management and oversight of outcomes based performance reporting of the Department; implementation of performance monitoring and evaluation processes for individual programmes and business units as a mechanism for measuring delivery ofourstrategicobjectives;andreportingtovariousstakeholders.

Inter-Governmental and Stakeholder Relations is responsible for coordination, support and provision of advice to the Minister, Deputy Minister, Director-General and the Department on matters related to the Intergovernmental,InternationalandStakeholderRelations.

Internal Audit is responsible for the preparation of a three year strategic plan and a one year internal audit planbasedonitsassessmentofkeyrisksfortheDepartment,inconsultationwithandforapprovalbytheAudit Committee

Office Accommodation is for thedevolution of funds from theDepartment of PublicWorks for theDPEpremises


4.1.1 Strategic Objective Annual Targets for 2014/15 for Administration

Office of the Director-General• Provide strategic direction and leadership to the Department.

Corporate Services• Information Management and Technology• Security and facilities management

Office of the Chief Financial Officer• Soundfinancialmanagementpoliciesandpractices• EfficientandeffectiveSupplyChainManagementfunction

Human Resources• Development of staff and succession planning.• High performance culture.• Effective,efficientandtimeousrecruitmentandselectiontoensureanadequatelycapacitateddepartment.• Skillsdevelopmentprogramme.• Communications• Provide strategic Communication support that aligns with DPE goals and objectives to the executive

leadership and the Department.• Provide internal communication services, based on departmental mandate to ensure awareness,

understanding and acceptance on strategic and operational priorities of the department.• Providestrategicstakeholdersupportonmattersthatareimportanttothedepartment.• Adhere to Government’s communication protocol, policy guidelines, and align with the strategic priorities

contained in the Government Communication Strategy.

Inter-Governmental Relations• Foster closer relations and co-operation between DPE and other departments to advance the DPE

mandate and objectives. • Manage DPE International Relations’ responsibilities ensuring alignment to South Africa’s Foreign Policy. • Establishandmaintainmutuallybeneficialrelationswithstrategicstakeholders.• Support the BRICS programme that relate to the State Owned Companies

Strategic Planning, Monitoring and Evaluation• Co-ordination, management and oversight of outcomes based performance reporting; performance

monitoringandevaluationandreportingtostakeholders• Oversee the strategic planning within the Department and ensure its alignment to Medium Term Strategic

Frameworkpriorities• Development and implementation of tools to support outcome based planning, monitoring and reporting• Strengthen SOC performance review tools and system • Provide secretariat support to the Department’s governance structures

Internal Audit• Provide independent and objective assurance and consulting Internal Audit services designed to add

value and improve the Department’s operations.• Assist the Department to accomplish its objectives by bringing a systematic, disciplined approach to

evaluateandimprovetheeffectivenessofriskmanagement,controlandgovernanceprocesses.


Office Accommodation• ManagementofdevolutionoffundsfromtheDepartmentofPublicWorksfortheDPEpremises.

4.1.2 Programme Performance Indicators and Annual Targets for Administration for 2014/15

Programme 1 is a support function and its primary focus is to create an organisational environment necessary toachievetheobjectivesoutlinedinDepartment’sStrategicPlanandAPP.Inthe2014/15financialyear,theprogramme will focus on improving processes and systems within the Department and capacitation of the Department,as themandateof theDepartmentcontinues toevolveandexpand. In the2014/15financialyear, the focus will be on achieving the following: • Continuedstrengtheningoffinancialmanagementtoolstoreturntoacleanauditopinion• Implementation of the Strategic Planning, Monitoring and Evaluation Policy • Payment of invoices within 30-days. • Alignment of individual performance to organisation performance and implementation of talent management

processes • Strengthening of the human resource function within the Department to ensure that the vacancy rate is

keptbelow10percent.• Implementation of the Department’s communication strategy including improving engagements with

provincesandotherstakeholders.• Improvement in IT governance • Expansion of the Public Sector Participation Programmes to improve engagements with ordinary South

Africans

Performance indicator

Reporting Period

Annual targets

Quarterly targets

2014/15 1st 2nd 3rd 4th

1.1 Promote good governance

HUMAN RESOURCES

1.1.1 Business Process Mapping

Quarterly Business Pro-cess Mapping concluded

initiate BPM project and map prioritised processes

Mapping of as is completed

Conductworkstudies, gap analysis and benchmarking

Review DPE structure in line with the workstudy,gap analysis and bench-markingreport.

INFORMATION MANAGEMENT

1.1.2 IT Independent assessment

Quarterly Independent assessment concluded

Develop TORs, RFQ process, Appointment of service providers

Draft and sign -off of project plan, Conduct assessment

Produce ICT Assessment report

Implemen-tation of recommend-ed plans

COMMUNICATIONS

1.1.3 Communica-tion plan

Quarterly Approved communica-tion plan

Review of the current com-munication plan

Communi-cation plan approved

Quarterly monitoring of implementation

Quarterly monitoring of implementa-tion



Reporting Period

Annual targets

Quarterly targets

2014/15 1st 2nd 3rd 4th

STRATEGIC PLANNING, MONITORING AND EVALUATION

1.1.4 Service Delivery Improvement Plan

Quarterly Approved Service Delivery Improvement Plan

Completion of the SOC Satisfaction Survey

New Service Delivery Improvement Plan Approved

Quarterly monitoring

Quarterly monitoring

1.1.5 SOC performance review standards

Quarterly SOC Perfor-mance review standards

- Standard SOC financialratiosidentified

SOCfinancialperformance index devel-oped

Applica-tion of the performance index in SOC financialperformance review

1.1.6 Development 3 Year Evaluation Plan

Quarterly Approved 3 Year Evalua-tion Plan

- List of projects to be part of the Evaluation Planidentified

Funding proposals submitted to DPME

1 project funded

OFFICE OF THE CHIEF FINANCIAL OFFICER

1.1.7 Payment within 30 days (Compliancewith Treasury Regulations 8.2.3)

Monthly Payment of correct invoic-es within 30 days

3 monthly re-ports on the 30 days payment of service providers



3 monthly reports on the 30 days payment of service providers

1.1.8 Reporting PFMA s40 (4)(c)

Annual Submission of 12 monthly management reports to DG and Minister and National Treasury 15th of each month

3 x monthly management report




1.1.9 Contract Management

Annual Contract management policy

Approved con-tract manage-ment policy

Monitoring of renewal date and capturing of new con-tracts on the system

Monitoring of renewal date and capturing of new con-tracts on the system

Monitoring of renewal date and captur-ing of new contracts on the system

INTER-GOVERNMENTAL RELATIONS

1.1.10 Annual Plan for the Public Participation programme

Quarterly Public Partici-pation engage-ments

Development and approval of PPP annual plan and cal-endar

4 PPP en-gagements held. Quarterly reporting on commitments

4 PPP en-gagements held. Quarterly reporting on commitments

4 PPP en-gagements held. Quarter-ly reporting on commit-ments

1.1.11 Provincial engagements

Quarterly 4 provincial engagements

Approved Plan for provincial engagements

Two provincial engagements held. Quarterly reporting on commitments

One provincial engagement held. Quarter-ly reporting on commitments

One provin-cial engage-ment held. Quarterly reporting on commitments



Reporting Period

Annual targets

Quarterly targets

2014/15 1st 2nd 3rd 4th

1.2 Build internal capacity to enhance Department’s ability to execute its strategic plan and fulfil its mandate

HUMAN RESOURCES1.2.1 Human Re-

sources Plan Quarterly Approved Hu-

man Resourc-es Plan

Review existing HR Plan based on DPSA guide-lines

HR plan half yearly implemen-tation report submitted to DPSA before 30 September 2014

Review demand and supply of hu-man resources based on the Department’s capability and competency requirements

Conductworkstudies, gap analysis and benchmarking

Review DPE structure in line with the workstudy,gap analysis and bench-markingreport.

Annual HR Plan report submitted to DPSA.

1.2.2 Attraction and retention policy

Quarterly Attraction and retention policy approved

Capabilities and competen-ciesdefinedin line with the DPE Strategic Plan

Draft Retention Policy and identificationof core and criticalskillscompleted

Attraction and retention policy approved

Implementa-tion plan

1.2.3 DPE Compe-tency Model

Quarterly Approved DPE Competency Model

Assessment of the Strategic Plan Capability requirements

Competency catalogue and proficiencylev-elsidentified

Draft compe-tency model

Consultation withstake-holders and approval of the compe-tency model

1.3 Support transformation initiatives within the Department

1.3.1 Internal DPE Transformation plan

Quarterly Approved internal transformation framework

Transformation Committee established

Operational-izeandtraincommittee members

transformation plan devel-oped and Approved

Transfor-mation plan implementa-tion

1.3.2 Implemen-tation of the Performance Management policy

Annual Roll out of the new performance management policy

Workshopem-ployees on the new policy

Implement quarterly reward and recognition for high perform-ers

Moderate and payout individual performance incentives

Implement Performance Management policy

Implement Performance Management policy

1.3.3 Current vacancy rate reduced

Annual 10%vacancyrate

14%vacancyrate

12%vacancyrate

11%vacancyrate

10%vacancyrate


4.3.1 Reconciling Performance Targets with the Budget and MTEF

Expenditure Estimates

Table 2: Administration

Expenditure estimates - Table 2: Administration

Rand thousand2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17Audited outcome

Audited outcome

Audited outcome


Revised Estimate

Revised Baseline

Revised Baseline

Revised Baseline

Sub-programmes

Ministry 25,766 31,861 30,036 31,375 31,375 34,799 36,595 38,612 Management 5,198 8,240 4,173 10,346 10,346 18,180 24,238 15,187 Corporate Services 21,443 23,920 28,334 26,545 26,545 29,437 27,837 29,253 ChiefFinancialOfficer 9,557 11,171 10,074 9,834 9,834 11,725 12,417 13,032 Human Resources 9,877 9,499 12,698 18,189 18,189 19,753 21,006 22,077 Communications 7,929 13,050 12,840 10,727 10,727 12,042 10,103 10,369 Strategic Planning, Monitoring and Evaluation

- - 3,379 4,850 4,850 5,625 6,729 7,075

Intergovernmental Relations

- - 1,772 7,158 7,158 7,657 8,109 8,509

Internal Audit 3,009 4,285 3,276 4,250 4,250 4,823 4,976 5,202 OfficeAccommodation

5,413 6,609 8,785 7,758 7,758 8,082 8,518 8,970

Total 88,192 108,635 115,367 131,032 131,032 152,123 160,528 158,286


Current payments 84,235 103,835 112,390 128,593 128,593 147,954 156,824 154,385 Compensation of employees

42,657 51,287 56,714 66,372 66,372 70,972 75,533 79,333

Salaries and wages 39,240 51,287 56,714 66,372 66,372 70,972 75,533 79,333 Social contributions 3,417 - - - - - - - Goods and services 41,578 52,548 55,676 62,221 62,221 76,982 81,291 75,052 Administrative fees 79 131 718 261 261 810 817 823 Advertising 3,482 1,771 1,883 3,649 3,649 2,515 2,667 2,825 Assets less than the capitalisation threshold

308 362 442 983 983 1,055 1,113 1,174

Audit cost: External 2,580 4,117 1,908 1,294 1,294 2,200 2,300 2,400 Bursaries: Employees 917 629 393 1,000 1,000 1,000 1,054 1,110 Catering: Departmental activities

981 974 1,147 1,483 1,483 835 877 920

Communication(G&S) 2,054 2,864 3,344 2,639 2,639 2,759 3,026 3,188 Computer services 3,035 2,726 3,078 3,102 3,102 3,974 4,188 4,410 Consultants and professional services: Business and advisory services

1,847 3,237 2,325 7,456 7,456 20,901 21,726 12,321


716 96 - - - 1,000 1,000 1,000


Expenditure estimates - Table 2: Administration

Rand thousand2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17Audited outcome

Audited outcome

Audited outcome


Revised Estimate

Revised Baseline

Revised Baseline

Revised Baseline

Contractors 1,779 983 2,130 2,302 2,302 1,476 1,941 2,059 Agency and support / outsourced services

2,281 2,199 3,558 2,397 2,397 3,979 4,067 4,246

Entertainment 20 57 30 355 355 252 264 279 Fleet services (includinggovernment motor transport)

349 765 805 1,261 1,261 1,108 1,168 1,232

Inventory: Food and food supplies

- 122 113 199 199 - - -

Inventory: Fuel, oil and gas

- - 21 - - - - -


30 61 63 50 50 - - -


- 1 3 - - - - -

Inventory: Other supplies

49 24 25 19 19 - - -

Consumable supplies - - 34 2 2 708 747 787 Consumable: Stationery, printing and officesupplies

1,553 2,021 2,616 3,120 3,120 1,361 1,502 1,607

Operating leases 2,814 1,720 1,814 363 363 1,790 1,887 1,986 Property payments 5,435 6,884 9,137 8,100 8,100 8,472 8,918 9,380 Travel and subsistence

8,621 16,418 14,838 17,108 17,108 16,392 17,690 18,733


1,259 1,932 1,068 1,990 1,990 2,004 2,112 2,223

Operating payments 1,031 1,078 2,352 1,938 1,938 1,491 1,278 1,350 Venues and facilities 358 1,376 1,831 1,150 1,150 900 949 999


694 723 227 155 155 100 105 111

Households 694 723 227 155 155 100 105 111 Other transfers to households

694 723 227 155 155 100 105 111


3,169 4,071 2,742 2,284 2,284 4,069 3,599 3,790

Machinery and equipment

3,169 3,922 2,649 2,284 2,284 4,069 3,599 3,790

Transport equipment 1,821 1,411 - 608 608 3,356 2,853 3,005 Other machinery and equipment

1,348 2,511 2,649 1,676 1,676 713 746 785

Software and other intangible assets

- 149 93 - - - - -


94 6 8 - - - - -

Total 88,192 108,635 115,367 131,032 131,032 152,123 160,528 158,286


DETAIL OF TRANSFERS AND SUBSIDIES

2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17


Audited outcome

Audited outcome


Revised Estimate

Revised Baseline

Revised Baseline

Revised Baseline

Rand thousandGifts and donations

694 723 93 100 100 100 105 111


- - 134 55 55 - - -

Total 694 723 227 155 155 100 105 111

Performance and Expenditure Trends for Administration

The spending focus over the medium term will be on supporting the Department in playing its oversight role over SOC by providing administrative support to the minister, and corporate and human resource servicestotheDepartment.TheprogrammewillalsofocusonimprovingtheDepartment’sefficiencyandproductivitybyreconfiguringitsbusiness,whichwillenableittocarryoutitsmandate;andwillputinplacea three-year rolling evaluation plan to assess the impact of programmes that have been implemented by theDepartmentandthestateownedcompanies.Thusoverthemediumterm,thebulkoftheprogramme’sallocation will be spent on compensation of employees, who provide technical and administrative support totheDepartment.Spendingonthisitemisprojectedtogrowfollowingthereconfiguration.Thiswillresultin the number of personnel increasing from 138 in 2013/14 to 141 in 2016/17. The increase in expenditure on compensation of employees between 2010/11 and 2013/14 was due to additional funding for improved conditionsofserviceandto fundthe increase in thenumberofpersonnelneededto takeuproles in theStrategic Planning, Monitoring and Evaluation and intergovernmental Relations sub programmes, which deal with international and intergovernmental issues and performance monitoring and evaluation processes for individual programmes.

Directly related to the growth in personnel is an increase in expenditure on goods and services. Within this, significant items are consultants and professional services. These provide the specialist expertiserequired particularly in the transport, manufacturing, energy and broadband sectors. Over the medium term, expenditure on consultants is expected to increase due to the reassignment of consultants from the Portfolio Management and Strategic Partnerships programme to this Administration programme, following the reorganisation of the department programmes.


4.2 PROGRAMME 2 - LEGAL & GOVERNANCE

Purpose: Provides legal services and corporate governance systems, as well as facilitates the implementation of all legal aspects of transactions that are strategically important to the Department and SOC, and ensures alignment with Government’s strategic intent.

The sub-programmes in this programme are as follows:• Managementcomprisestheofficeofthedeputydirectorgeneral,whichprovidesstrategicleadershipand

management of the programme personnel. The sub-programme has a staff complement of 2 and 82.07 per cent of the budget is used for compensation of employees.

• Legal - internal legal services and support to oversight of the SOC. The unit provides legal services, includingtransactionandcontractmanagementsupporttotheDepartmentaswellasworkspecificallyrelated to the commercial activities of the sector teams in respect of the SOC within their oversight. The sub-programme has a staff complement of 12 and 62.5 per cent of the budget is used for compensation of employees whilst the balance of the budget is used on goods and services which includes, expert legal advice and normal operational expenditure.

• Governance – develops and manages effective corporate governance and shareholder management systems for the Department and its portfolio of SOC. This includes:

Risk Management -identifiesreportsandmonitorsboththeoperationalandshareholderrisksincludingbutnotlimitedtoSOCspecificandcrosscuttingrisks;

Compliance - Ensures that the Department eestablishes and implements systems and processes to ensure the department and its SOC comply with legislative, regulatory and supervisory requirements in line with international best practice.

4.2.1 Strategic Objective Annual Targets for Legal and Governance for 2014/15

Over the MTEF period the programme will ensure effective shareholder oversight of state owned companies by:• Providing legal services and coordinate governance systems• Facilitate the implementation of all legal aspects of transactions that are strategically important to the

department and state owned companies• Ensuring that financial and operational risk management processes are embedded throughout the

department as and when required, over the medium term• Addressing constraints on state owned companies’ contract negotiations and management to improve

commercial competence and contribute to economic growth and development on a regular basis • Providingassistanceondevelopingandnegotiatingshareholdercompactframeworkannuallyintermsof

PublicFinanceManagementAct(1999)• Providing guidance on appropriate delegation frameworks between the SOC boards and executive

management on a regular basis Advising the Minister regularly on the appointments of board of directors including remuneration,

preparations for AGMs, conducting annual reviews of ownership policies


4.2.2 Programme Performance Indicators and Annual Targets for Legal and Governance for 2014/15

Programmeperformance indi-cator

Audited/Actual per-formance

Estimated perfor-mance

Medium-term targets

2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/172.1 Review oversight function to ensure alignment of SOC to developmental outcomes

2.1.1 Aventura Deregistra-tion

Addressed litigation matters and the Annual General Meeting

The ap-proach to the wind-ing-up process reviewed and ap-proved. The Department had the AFS for 2010/11 audited and secured the Master’s directive on the provision of security require-ments.

The Aven-tura Board resolution secured in May 2012 to liquidate the company.

Lodge of relevant documenta-tion with the registrar of companies

Liquidation process initiated and appoint-ment of a liquidator by the Master of the High Court

Bill to repeal the Overvaal Resorts Act developed

Repeal of the Overvaal Resorts Act, 1993 initiated and submit legis-lation to Parliament

-

2.1.2 Resolution ofthe20%state share-holding in Namaqual-and Mines

- - - - Agreement on the dis-posal of the 20%statesharehold-ing

Implemen-tation

Implemen-tation

2.1.3 Government Shareholder Manage-ment Bill (CTSM)

- - - Presiden-tial Review Committee on State Owned Enterpris-es Report Issued by Presidency including recommen-dations

Draft Bill approved by Cabinet

Bill tabled at Parliament andratifiedinto law

Implemen-tation

2.2 Promote good corporate governance

2.2.1 Riskmodel-ling tool

- - - Approved RiskEnter-priseRiskManage-ment Frame-work

Feasibility Report on Modelling

Implemen-tation

Implemen-tation


4.2.3 Quarterly Targets for Legal and Governance for 2014/15

Performance indi-cator

Reporting Period

Annual tar-gets Quarterly targets

2014/15 1st 2nd 3rd 4th

2.1 Review shareholder oversight function to ensure alignment of SOC to developmental outcomes

2.1.1 Deregistration of Aventura

Quarterly Draft Bill to repeal the Overvaal Act 127 of 1993

Assist the Liquidator to prove cred-itor’s claims and transfer of assists

Transfer of initiated

Transfer of assets com-pleted(con-firmationfromthe liquidator received)

Draft Bill developed

2.1.2 Resolution of the20%StateShareholding in Namaqual-and Mines

Quarterly Agreement on the disposal or housing of the 20%share-holding in Namaqualand Mines

Agreement on the warehous-ingofthe20%state’s share-holding

complete eval-uation of the 20%stake

Commence negotiations on the dispos-al approach

Agreement on the disposal approach sent to the Minister of Mineral Resources for ratification

2.1.3 Government Shareholder Management (GSM)Bill

Quarterly GSM Bill - Development of project plan in line with in-struction from Presidency

Implementa-tion of project deliverables as per project plan(inlinewith progress asperQ2)

Implementa-tion of project deliverables as per project plan

2.2 Promote good corporate governance

2.2.1 Riskmodel-ling tool

Quarterly Feasibility reportonriskmodelling tool

- Assessment of Maturity ofSOCRiskManagement Practices (Interviews/Consultation withSOCRiskOfficers

Assessment of Maturity ofSOCRiskManagement Practices (Interviews/Consultation withSOCRiskOfficers

Compile and issue a report with recom-mendations to the Minister


Expenditure Estimates Table 3: Legal and Governance

Rand thousand2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17

Audited outcome

Audited outcome

Audited outcome


Revised Estimate

Revised Baseline

Revised Baseline

Revised Baseline

Subprogrammes

Management 1,581 1,822 2,252 2,089 2,089 2,826 2,999 3,158

Legal 10,340 12,775 13,370 11,789 11,789 12,919 13,737 14,461

Governance 2,732 4,921 7,855 8,460 8,460 8,222 8,800 9,266

Total 14,653 19,518 23,477 22,338 22,338 23,967 25,536 26,885


Rand thousand2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17

Audited outcome

Audited outcome

Audited outcome


Revised Estimate

Revised Baseline

Revised Baseline

Revised Baseline


Current payments 14,653 19,518 23,450 22,338 22,338 23,967 25,536 26,885

Compensation of employees

6,453 13,206 14,111 15,429 15,429 18,198 19,459 20,486

Salaries and wages 6,145 13,206 14,111 15,429 15,429 18,198 19,459 20,486

Social contributions 308 - - - - - - -

Goods and services 8,200 6,312 9,339 6,909 6,909 5,769 6,077 6,399

Administrative fees - - 148 - - - - -

Advertising - - 41 - - - - -

Assets less than the capitalisation threshold

- - 2 - - - - -

Catering: Departmental activities

51 54 74 71 71 24 24 27

Communication(G&S) 79 78 124 125 125 204 215 226

Consultants and professional services: Business and advisory Services

2,404 422 4,322 2,924 2,924 1,450 1,529 1,610


4,557 2,300 430 2,000 2,000 2,166 2,282 2,402

Contractors - 28 84 - - - - -

Agency and support / outsourced services

576 343 552 705 705 - - -

Entertainment 6 1 2 8 8 14 15 15


- 24 - - - - - -


- - 2 - - - - -

Consumable: Stationery, printing and officesupplies

- 2 74 1 1 - - -

Operating leases - - - 5 5 - - -

Travel and subsistence 402 2,547 2,753 775 775 1,831 1,928 2,030


34 120 170 191 191 - - -

Operating payments 48 275 325 24 24 - - -

Venues and facilities 43 118 236 80 80 80 84 89


- - 27 - - - - -

Households - - 27 - - - - -

Other transfers to households

- - 27 - - - - -


- - - - - - - -


- - - - - - - -

Total 14,653 19,518 23,477 22,338 22,338 23,967 25,536 26,885


DETAIL OF TRANSFERS AND SUBSIDIES

2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17


Audited outcome

Audited outcome


Revised Estimate

Revised Baseline

Revised Baseline

Revised Baseline

Rand thousand


- - 22 - - - - -


- - 5 - - - - -

Total - - 27 - - - - -

Performance and Expenditure Trends

The spending focus over the medium term will be on increasing the programme’s capacity to provide legal services and transaction and contract management support; and on facilitating the creation of a legislative framework for the department’smandate to ensure compliance with applicable legislation and enhancecorporate governance procedures by state owned companies. As a result, the Legal and Governance sub programmes receive thebulk of theprogramme’sallocationover themedium term. In linewith the lawsgoverning state owned companies, the Minister of Public enterprises is obliged to exercise care in carrying out these responsibilities. Specialist corporate legal expertise is frequently required to assist on issues including proposals by state owned companies, and the assessment of contractual obligations and transactions. Spending on consultants who provide legal services decreased between 2010/11 and 2013/14 as the internal capacity to perform this function increased. However, due to an increase in transaction services, contractual arrangements and governance arrangements, spending on legal costs is expected to increase over the medium term.

Over the medium term, 74.5 per cent of the programme’s budget is allocated to spending on compensation of employees, with the number of personnel projected to increase from 19 in 2013/14 to 27 posts in 2016/17. The projected increase in the establishment and its effect on compensation of employees is a continuation of the trend observable between 2010/11 and 2013/14. There were 3 vacancies as at 30 November 2013 due tothescarcityofskillsinthesesectorspecificareas.However,thesevacanciesareintheprocessofbeingfilled.

4.3 PROGRAMME 3 - PORTFOLIO MANAGEMENT AND STRATEGIC PARTNERSHIPS

Purpose: to align the corporate strategies of the SOC with Government’s strategic intent, as well as monitoringandbenchmarkingtheirfinancialandoperationalperformanceandcapitalinvestmentplans.Toalign shareholder oversight with overarching Government’s economic, social and environmental policies as well as building of focused strategic partnerships between the SOC, strategic customers, suppliers and financialinstitutions.

The sub-programmes in this programme are as follows:• Energy and Broadband Enterprises – Includes Eskom, PBMR and Broadband Infraco.• Manufacturing Enterprises - Includes Denel, Alexkor and SAFCOL.• Transport Enterprises - Includes South African Airways (SAA), South African Express (SAX) and Transnet.• Economic Impact and Policy Alignment – aligns SOC with overarching government economic, social

and environmental policies.


• Strategic Partnerships – has evolved from the work of the Chief Investment and Portfolio Manager (CIPM) and aims to ensure SOC commercial sustainability and attainment of desired strategic outcomes and objectives by SOC.

4.3.1.1 Energy and Broadband Enterprises comprises:• Managementcomprises theofficeof theDeputyDirector-Generalwhichprovidesstrategic leadership

and management of the programme personnel.• Eskom - shareholder management and oversight of the Eskom business, including the generation,

transmission and distribution of electricity with particular emphasis on ensuring security of supply. To alsoprovidestrategicfinancialandtransactionalanalysisofEskombusinessesaswellasmonitoringofits capital investment programme. Additionally, provide oversight of the implementation of the PBMR care and maintenance programme to preserve intellectual property and assets.

• Broadband Infraco - shareholder management and oversight of Broadband Infraco and monitoring of theimplementationofitsinvestmentprogramme,aswellasstrategicfinancialandtransactionalanalysisincludinginterfacingwithinvestorsandstrategicstakeholdersacrossthesector.

4.3.1.1.1Strategic Objective Annual Targets for 2014/15Over the MTEF period the sub-programme will ensure the following:• Strengthen the department’s oversight role by ensuring the alignment of strategic intent in relation to

the state owned companies’ role in achieving government objectives in the energy and information and communication technology sector on an ongoing basis.

• Contribute to the enhancement of the performance of state owned companies by:- Evaluating corporate plans to determine whether state owned companies’ performance aligns with

agreedkeyperformanceindicators,andprovidingadviceandguidancetotheirboardsonanongoingbasis.

- Monitoring the implementation of corporate plans and shareholder compacts quarterly- Assessingshareholderandenterpriseriskquarterlyandadvisingboardsonareasofconcern.

Eskom

• Support the security of electricity supply by:- Examine Eskom’smaintenance plans, operational practices, electricity generation and distribution

efficiency,anditsreservemarginsonanongoingbasis.- EnsuringthatEskomsupplieselectricitybymonitoring,evaluatingandengagingwithEskomonsystem

security and the new build programme to alleviate constraints on an ongoing basis.- Monitoring the rollout of the capital investment programme to ensure it is delivered on time, is of

appropriate quality and within budget.• EnsurethelegalandregulatorycomplianceofEskombyregularlyengagingwithrelevantstakeholders

such as the department of Energy, Environmental Affairs and Water Affairs and with the National Energy RegulatorofSouthAfricaregardingpoliciesandregulationsaffectingEskom.

• ReduceEskom’sdependenceon funding fromthefiscusbymonitoringcostescalations for itscapitalinvestment programme and operations in order to cost effectively roll out the build programme.

• Exercise oversight to ensure that Eskom’s capital investment support local suppliers industries bymonitoring the implementation of the competitive supplier industries by the company’s quarterly reports to assess progress.


Broadband Infraco

• Support Broadband Infraco in securing government as an anchor client after the fanalisation of the information, communication and technology strategy and the broadband implementation plan, thus contributing to its long term sustainability, which will reduce reliance on government for recapitalisation of the company.

4.3.1.1.2 Programme Performance Indicators and Annual Targets for Energy and Broadband Enterprises for 2014/15

Programmeperformance indi-cator2010/11

Audited/Actual performance Estimated performance

Medium-term targets

2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17

3.1 Ensure effective shareholder oversight and monitoring of Eskom and Broadband Infraco3.1.1 Approved

Corpo-rate Plans aligned to Department and Gov-ernment De-velopmental Objectives

Approved Corporate Plans



Obtain assessed Corporate Plans

Assessed Corporate Plans



3.1.2 Analysis of annual report

Annual Report As-sessments produced before the AGMs.



Draft Annual Report Assessments completed

Draft Annual Report Assessed.

Draft Annual Report Assessed.

Draft Annu-al Report Assessed.

3.1.3 Minister’s address in preparation of the Annu-al General Meetings (AGMs)

Minister’s addresses issued at the AGMs







3.1.4 Strategic Intent State-ment

Strategic Intent Statements issued at AGMs



Strategic Intent State-ments issued at AGMs

Strategic Intent Statement developed



3.1.5 Negotia-tion and approval of shareholder compact

Approved Shareholder Compacts



Shareholder Compacts approved

Approved Shareholder Compacts.

Approved Shareholder Compacts.

Approved Sharehold-er Com-pacts.

3.1.6 Assessment of quarterly reports

Quarterly report as-sessed






Quarterly report assessed




Medium-term targets

2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17

3.1.7 Finan-cial and Technical assessment of PFMA Ap-plications

Rigorous as-sessment of PFMA appli-cations with appropriate recommen-dations to Minister within required timeframes



Rigorous as-sessment of PFMA appli-cations with appropriate recommen-dations to Minister with-in required timeframes

All received PFMA application assessment submitted



3.2 Stabilise our SOC looking at strengthening their balance sheets and funding options 3.2.1 Funding for

BBITransfer of R138.6 million for capital and operational cost

- - - Secure funding for BBI

- -

3.2.2 MYPD 3 - - - NERSA decision on MYPD3 application

MYPD 3 Implemen-tation

Implemen-tation

3.2.3 Position paper on the 10 year tariff path

- - - - Position paper on the 10 year tariff path

- -

3.3 Driver economic infrastructure investment to enhance the capacity of the economy with emphasis on the SIPs 3.2.4 Assessment

ofEskomCapex Program

- - Indepen-dent review study of the Eskom’sCAPEXcom-pleted

Quarterly Assessment ofEskomCAPEXprogram

Review and update

Review and update

4.3.1.1.3 Quarterly targets for financial year 2014/15


Reporting Period

Annual tar-gets

Quarterly targets

2014/15 1st 2nd 3rd 4th

3.1 Ensure effective oversight and monitoring of Eskom and Broadband Infraco

3.1.1 Analysis of EskomandBBI Corporate Plans

Annual Assessed Corporate Plan

Decision Memo on the assessment of the Corporate Plan submitted

- - -

3.1.2 Analysis of Annual reports

Annual Draft Annual report as-sessed

- Assessment of the draft annual report completed

- -


3.1.3 Minister’s addresses in preparation of the AGMs

Annual Minister’s addresses submitted for the AGMs

- Minister’s addresses issued at the AGMs

- -

3.1.4 Strategic Intent Statement(SIS)

Annual Strategic Intent Statement developed

- Strategic In-tent Statement issued

- -

3.1.5 Negotiation and approval of shareholder compact

Annual Approval of 2015/16 Shareholder Compact

- Engagement with SOC on the compact initiated

Identificationof KPAs and KPIs for Minis-ter’s approval

Approved 2015/16 Shareholder Compacts

3.1.6 Assessment ofEskomandBBI quarterly reports

Assessment of operational andfinancialkeyareasMonitoring Road to rail migration

Quarterly 4 quarterly reports as-sessed

Quarterly report(Q4)assessed and investor brief developed when neces-sary


Quarterly report(Q2)assessed and investor brief developed

Quarterly report(Q3)assessed and investor brief developed

3.1.7 Assessment of PFMA applications

Quarterly Assessment of PFMA applications





3.2 Stabilise our SOC looking at strengthening of balance sheets and funding options

3.2.1 Funding for BBI

Quarterly Secure funding for BBI

- - Progress of report on the participation and project based funding

Submission of guarantee application for BBI

-

3.2.2 MYPD 3 Quarterly Brief Cabinet onEskomfinancialchal-lenges

Decision Memo on the Business Productivity Program

Draft a joint cab memo with Nation-al Treasury Shareholder’s loan to equity

- -

3.2.3 Position paper on the 10 year tariff path

Quarterly Position paper on the 10 year tariff path

Engagements government departments and SOC to definethescope

Review modelling of various tariff and demand scenarios to determine the optimal tariff

Position paper on 10 year tariff path

-

3.3 Drive economic infrastructure investment to enhance the capacity of the economy with emphasis on the SIPs

2.3.1 Assessment of EskomCapexProgram

Quarterly Quarterly assessment of EskomCAPEXprogram

Assessment memo on EskomCapexProgram





4.3.1.2 Manufacturing Enterprises

• Managementcomprises theofficeof theDeputyDirector-Generalwhichprovidesstrategic leadershipand management of the programme personnel.

• Denel – Shareholder management and oversight of Denel’s financial performance and strategyimplementation.

• Alexkor – ShareholdermanagementandoversightofAlexkor including reviewofAlexkor’s strategy toenhancefinancialsustainability,andoverseeingtheimplementationoftheRichtersveldDeedofSettlement.

• SAFCOL- shareholder management and oversight including forestry management, timber harvesting, timber processing and related activities, both domestically and internationally as well as oversight of the entity’s restructuring.

4.3.1.2.1 Strategic Objective Annual Targets for 2014/15

Over the MTEF period the sub programme will:• Ensure continuous alignment between shareholder strategic intent and the objective of state owned

companies in the defence, mining and forestry sector by annually reviewing their enterprise strategies and mandates in the context of industry and sectorial policy shifts, and alert their boards and enterprises to material deviations.

• Support the state owned companies in delivering on their outcome as set out in the shareholder compacts andcorporateplanbybenchmarkingkeyperformancemeasuresannuallyandanalysingquarterlyandannual reports in order to assess the extent of progress

• Collaborate with other state owned companies to contribute to achieving the national economic development objectives.

Denel

• Oversee the development of a long term growth strategy to achieve financial stability and growth ofmanufactured export products.

• Leverage off the company’s advanced manufacturing capability through securing work packages insupport of the industrialisation drive aligned with industrial policy action plan.

Alexkor

• Monitoring the implementationofAlexkor’sstrategy topromotefinancial sustainabilityandmonitor theimplementation of the pooling and sharing joint venture turnaround strategy to ensure increased production andpromotefinancialstabilityofjointventure.

South African Forestry Company

• Oversee the formulation and implementation of the SAFCOL corporate strategy, within the forestry sector over the medium term.


4.3.1.2.2 Programme Performance Indicators and Annual Targets for Manufacturing Enterprises for 2014/15

Programmeperformance indicator

Audited/Actual performance Estimated performance Medium-term targets

2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17

3.1 Ensure effective shareholder oversight of Denel, SAFCOL and Alexkor

3.1.1 Approved Corpo-rate Plans aligned to Department and Gov-ernment de-velopmental objectives








3.1.2 Analysis of annual reports

Annual Report assessment produced before the AGMS

Annual Reports assessment produced before the AGMS

Annual Reports produced before the AGMs

Draft Annual Report assessed

Draft Annual Report Assessed

Draft Annual Report Assessed

Draft Annu-al Report Assessed

3.1.3 Minister’s address in preparation of Annual General Meeting (AGM)




Minister’s main ad-dress issued at AGMs

Minister’s addresses issued at AGMs



3.1.4 Strategic Intent State-ment(SIS)




Strategic Intent State-ments issued at AGMs




3.1.5 Negotia-tion and approval of shareholder compact




Shareholder Compacts approved



Approved Sharehold-er Com-pacts










Rigorous as-sessment of PFMA appli-cations with appropriate recommen-dations to Minister within required timeframes.



Rigorous as-sessment of PFMA appli-cations with appropriate recommen-dations to Minister with-in required timeframes.

All received PFMA ap-plication as-sessments submitted

All received PFMA ap-plication as-sessments submitted

All received PFMA application assess-ments submitted

3.2 Stabilise our SOC looking at strengthening their balance sheets and funding options

3.2.1 Monitor the Implemen-tation of Alexkor’sStrategy

- - - Draft Strategy developed byAlexkor

AlexkorStrategy approved by the Shareholder to ensure sustainabil-ity of the company

Monitor implementa-tion

Monitor implemen-tation



Audited/Actual performance Estimated performance Medium-term targets

2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/173.2.2 Review SAF-

COL’s New Strategy

- - Study on state ownership in the forestry sector com-pleted

Draft Strate-gy submitted by the com-pany to the shareholder

Submission of SAFCOL’s Strategy to the share-holder for approval

Implemen-tation of interventions

Implemen-tation of interven-tions

3.3 Leverage SOC procurement spend to support industrialisation and transformation

3.3.1 South Afri-ca’s MRO Services Hub

- - - - Technical capability assess-ment of the 3 entities concluded (SAA,SAXandDenel)

Structure for the MRO agreed

begin integration and monitor implemen-tation

4.3.1.2.3 Quarterly targets for financial year 2014/15


Reporting Period


2014/15 1st 2nd 3rd 4th

3.1 Ensure effective oversight and monitoring of Denel, Alexkor and SAFCOL

3.1.1 Analysis OF SAFCOL, Denel and Alexkor’sCorporate Plans

Annual Assessed Corporate Plans

Decision Memo on the assessment of Corporate Plans submitted

- - -

3.1.2 Analysis of SAFCOL, Denel and Alexkor’sAnnual reports

Annual Annual reports assessed

- Assessment of draft annual reports completed

- -



- Minister’s addresses issued at the AGMs

- -

3.1.4 Strategic In-tent Statement (SIS)

Annual Strategic In-tent Statement developed

- Strategic Intent Statement issued

- -

3.1.5 Negotiation and approval of shareholder compacts

Annual 2015/16 Shareholder compacts approved


Identificationof KPA and KPI for Minis-ter’s approval.

Approved 2015/16 shareholder compact



Reporting Period


2014/15 1st 2nd 3rd 4th

3.1.6 Assessment of SAFCOL, Denel and Alexkor’squarterly reports

• Assess-ment of operational andfinan-cialkeyareas


Quarterly report(Q4)assessed and investor brief developed when necessary




3.1.7 Assessment of PFMA applications

Quarterly Assessment of PFMA applica-tions





3.2 Stabilise SOC looking at strengthening of balance sheets and funding options

3.2.1 Monitor the implementa-tion of Alexkor’sstrategy

Quarterly Monitor the Implementa-tionofAlexkorStrategy

Monitoring the imple-mentation of the strategy (throughtheassessment of quarterly reports)




3.2.2 Review SAF-COL’s new strategy

Quarterly Submission of SAFCOL’s Strategy to the shareholder for approval

- Submission of Corporate Strategy by SAFCOL

Assessment and approval of the Corpo-rate Strategy

Monitor the im-plementation of the strategy


3.3.1 South Africa’s MRO Services Hub

Quarterly Technical capability assessment of the 3 entities concluded (SAA,SAX,andDenel)

Consultation (internallyandexternally)Finalisation of the MOU

Finalisation of the MOA Finalisation of the TORs

Develop a benchmarkingframework

Decision support for the roadmap

4.3.1.3 TRANSPORT ENTERPRISES

Purpose: to align the corporate strategies of Transnet, South African Airways (SAA) and South AfricanExpressAirways(SAX)withGovernment’sstrategicintentandtomonitorandbenchmarktheirfinancialandoperational performance.

The programme comprises of the following sub programmes• Managementcomprises theofficeof theDeputyDirector-Generalwhichprovidesstrategic leadership

and management of the programme personnel.• Transnet - shareholder management and oversight of Transnet which includes the capital expansion

programme and the effective operation of Transnet and its business units.


• SAA and SAX shareholdermanagementandoversightofSAAandSAXaswell asmonitoringSAA’stransformation into a commercially successful national carrier that will contribute to the development of tradeand tourismdomestically and the rest ofAfrica, andoverseeing theestablishment of SAXasaregionalcarrierwithafocusontheAfricanmarket.


Over the MTEF the sub programme will:• EnsurethealignmentofthecorporatestrategiesofTransnet,SAAandSAXwithgovernment’sstrategic

intentandensurethatthesestateownedtransportcompaniesremaincompetitive,financiallysustainable,and deliver an optimal service to the economy.

• SupportTransnet,SAAandSAXindeliveringtheiroutcomesbyidentifyingappropriatebenchmarksandkeyperformancemeasuresfortheirrespectiveshareholdercompactsandcorporateplansandassesstheir performance on a quarterly and annual basis.

• Create an enabling environment for transport enterprises and ensure an appropriate balance between the enterprises’ interests, sustainability and developmental objectives by engaging with policy departments and relevant regulators at least once every quarter to discuss and resolve areas of misalignment; and informboardsofTransnet,SAAandSAXaccordingly.

• Implement the national corridor performance measurement system, over the medium term, which will identify inefficiencies in the logisticssystems inSouthAfrica;contribute to increasedcompetitiveness;ensure an appropriate modal split between road, rail, and pipeline services ensure effective utilisation of existing logistics infrastructure and identify those areas that legitimately qualify for investment and upgrade.

• Contribute to and facilitate the national transport policy formulation, as and when required, to achieve improvements in passenger and cargo movements.

Transnet• ProvideoversightofTransnet’simplementationofthemarketdemandstrategytooptimisetheeconomic

impact of infrastructure investment on the economy by monitoring the rollout of Transnet’s capital expenditureprogrammeonquarterlyandannualbasistoassessanysignificantdeviationsfromcorporateplansandpotentialcostoverrunsandtimedelaysonmajorcapitalprojects;andtakennecessaryactionwhen there are deviations.

• EnsuresthatTransport’soperatesanefficient,competitiveandresponsivetransportandlogisticssystemsby:- Reviewing the logistics cost in the economy and finalising themethodology omeasure Transnet’s

contribution to transport costs as a percentage Gross Domestic Product; this will be completed in March 2016

- Overseeingtheintroductionofmultipleprivaterailoperatorsonthebranchlinenetworktorevitalisetherailnetwork,andquantifyingtheoperationalefficiencyoffreightcorridorstorealisesocioeconomicbenefitsbyMarch2015

- Monitoring the implementation of the competitive supplier development programme to leverage off Transnet’s locomotivefleetprocurement for thedevelopmentof local railwaysupplier industriesbyevaluating progress towards achieving localisation targets in the Transnet quarterly and annual reports.

South African Airways and South African Express Airways• MonitorandassistwiththeimplementationofSAALongTermTurnaroundStrategy(LTTS)andSAX20:20

Vision, on an ongoing basis.• ProvidestrategicguidanceasandwhenrequiredtostrengthenthefinancialpositionsofSAAandSAXto

ensure their long-term sustainability.


4.3.1.3.2 Programme Performance Indicators and Annual Targets for Transport Enterprises for 2014/15


Audited/Actual performanceEstimated perfor-mance

Medium-term targets

2011/12 2012/13 2013/14 2014/15 2015/16 2016/17

5.1 Effective shareholder oversight of SAA, SAX and Transnet5.1.1 Approved

Corpo-rate Plans aligned to Department and Government Develop-mental Objectives








5.1.2 Analysis of Annual Report

Annual Report assessment produced before the AGMs



Draft Annual Report assessment completed




5.1.3 Minister’s address in preparation of the Annu-al General Meeting (AGMS)

Strategic Intent Statements issued at the AGMs




Minister’s address issued at the AGMs



5.1.4 Strategic Intent State-ment(SIS)








5.1.5 Negotia-tion and approval of Shareholder Compacts





















All received PFMA appli-cations as-sessments submitted



5.2 Stabilise SOC looking at strengthening of balance sheets and funding options5.2.1 Monitor the

Implemen-tation of the SAA LTTS andSAX20:20 Vision

- - - LTTS sup-ported by the share-holder and presented to Cabinet

Quarterly monitoring of the SAA LTTS and SAX20:20Vision





Audited/Actual performanceEstimated perfor-mance

Medium-term targets

2011/12 2012/13 2013/14 2014/15 2015/16 2016/175.2.2 Review

Funding requirement for SAA and SAX

- - Approval of the guar-antees to support the airlines

Approval of the LTTS and 20:20 Strategy

Funding re-quirements for SAA andSAXdefined



5.3 Drive economic infrastructure investment to enhance the capacity of the economy with emphasis on SIPs 5.2.3 Quarterly

Assess-ment of the Transnet’s investment programme

Quarterly Assess-ment of the Transnet’s investment programme







5.2.4 Quarterly assess-ment of the airlinesfleetrenewal programme

- - - - Quarterly assess-ment of the airlinesfleetrenewal programme

Quarterly assess-ment of the airlinesfleetrenewal programme

Quarterly assess-ment of the airlinesfleetrenewal programme

5.2.5 Whole-of-state policy review

- - - - Whole-of-state policy review

• Fly South Africa policy

• Transit visa

• Airlift strategy align-ment with Tourism with Tourism strategy

- -

4.3.1.3.3 Quarterly targets for Transport Enterprises for 2014/15


Reporting Period


2014/15 1st 2nd 3rd 4th

5.1 Ensure effective oversight and monitoring of Transnet, SAA and SAX

5.1.1 Analysis of Transnet, SAA andSAXCor-porate Plans

Annual Assessed Cor-porate Plan

Decision memo on the assessment of Corporate Plan submitted

- - -

5.1.2 Assessment of Annual Reports

Annual Annual report assessed

- Assessment of the draft annual report completed (Transnet)

Assessment of the draft annual report completed (SAAandSAX)

-



Reporting Period


2014/15 1st 2nd 3rd 4th



Minister’s addresses issued at the AGMs (Transnet)

Minister’s addresses issued at the AGMs (SAAandSAX)

- -

5.1.4 Strategic In-tent Statement (SIS)

Annual Strategic Intent Statement developed

- Strategic Intent Statement issued

- -

5.1.5 Negotiation and approval of shareholder compacts

Annual 2015/16 Shareholder compacts approved


Identificationof KPAs and KPIs for Minis-ter’s approval

Approved 2015/16 Shareholder Compact

5.1.6 Assessment of Transnet, SAA andSAXquar-terly reports






5.1.7 Assessment of PFMA applica-tions

Quarterly Assessment of PFMA applica-tions





5.2 Stabilise our SOC looking at strengthening of balance sheets and funding options

5.2.1 Monitor the implementa-tion of the SAA LTTSandSAX20:20 Vision

Quarterly Monitor the Implementa-tion of the SAA LTTSandSAX20:20 Vision

Quarterly monitoring of the SAA LTTS andSAX20:20Vision




5.2.2 Review Fund-ing require-ment for SAA andSAX

Quarterly Funding requirements for SAA and SAXdefined

Review of funding re-quirements for SAAandSAX

Submission to National Treasury developed for recapital-isation of the Airlines


5.3.1 Quarterly assessment of the Transnet’s investment programme

Quarterly Quarterly investment programme assessments

Quarterly investment programme assessments




5.3.2 Quarterly assessment of the airline’s fleetrenewalprogramme

Quarterly Quarterly assessment of the airline’s fleetrenewalprogramme

Quarterly assessment of the airline’s fleetrenewalprogramme






Reporting Period


2014/15 1st 2nd 3rd 4th

5.3.3 Whole-of-state policy review

Annually Whole-of-state policy review

• Fly south Africa policy

• Transit visa

• Airlift strat-egy align-ment with Tourism strategy

DPE and state owned airlines position paper onthewhole–of-state policy

DPE and state owned airlines position paper onthewhole–of-state policy

- -

4.3.1.4 ECONOMIC IMPACT AND POLICY ALIGNMENT

Thesub-programmehasbeenrealignedfromafunctionasaconsultingfacility(previously inProgramme6:JointProjectFacility)anditspurposeistoalignShareholderoversightofSOCinrelationtooverarchinggovernment economic, social and environmental policies, and implement strategic interventions to contribute towards achievement of national objectives in support of economic growth and transformation.

This sub-programme comprises:• Management-comprisesoftheOfficeoftheDeputyDirectorGeneral,whichprovidesstrategicleadership,

andmanagementoftheprogrammeandspecialprojects(i.epropertydisposal)• Environmental Policy Alignment - oversee alignment and implementation of SOC Strategically Important

Developments(SIDs)withspecial focusonEskom’sandTransnet’sBuildProgrammes.OversightandalignmentoftheClimateChangePolicyFrameworkforSOCinsupportofnationalpoliciesandthegreeneconomy.

• Economic Policy Alignment - focuses on appropriate macro-economic modeling and research to enhance thelinksbetweenindustrialpolicy,macro-economicpolicyandtheroleoftheSOC.Economicmodelingwill be outsourced to relevant institutions to determine the impact of SOC investment and operations on the economy including the impact on customers and suppliers.

• Transformation, Skills and Youth Development -focusesontheprovisionofscarceandcriticalskillsbytheSOCinsupportoftheNationalSkillsAgendatheNewGrowthPath(NGP)andtheNationalDevelopmentPlan(NDP)aswellasoptimizingtheSOCskillstrainingfacilitiesthroughNationalSkillsFundingamongstothers. The unit’s mandate includes overseeing the alignment and implementation of SOC transformation agendainsupportofnationalpoliciesandtheNewGrowthPathFrameworkwithfocuson:Jobcreation;Youth development and development of targeted groups (i.e. women, people with disabilities, co-operatives,etc);Broad–BasedBlackEconomicEmpowerment (B-BBEE),EmploymentEquity (EE)anddisposal of non-core property.

The activities and outputs of this sub-programme entails systematic coordination and partnerships with the relevantgovernmentDepartmentswithprimarymandateontheaboveaswellasotherkeystakeholders.



1. Oversee and supervise processes to conduct macro-economic modelling, research and impact evaluation to ensure SOC contribution towards economic growth Enhance alignment between national industrial policy, macro-economic policy and the role of SOC as well as monitor implementation.

2. Oversee processes to ensure that SOC comply with the environmental laws and optimise the impact of SOC on the reduction of carbon emissions and development of a green economy, while supporting SOC business needs.

3. Oversee alignment and implementation of SOC economic and social transformation agenda in support of national policies and economic growth, with specific focus on skills development, job creation,procurement/BBBEEandcorporate social investments targetedatdesignatedgroups (youth,women,PWDandco-operatives,etc)

4.3.1.4.3 Programme Performance Indicators & Annual Targets for Economic Impact & Policy Alignment for 2014/15


Audited/Actual performance Estimated perfor-mance

Medium-term targets

2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/176.1 Drive economic infrastructure investment to enhance the capacity of the economy with emphasis on the SIPs

6.1.1 Transet’s pricing structure assessment

- - - - Impact assessment reports on Transnet Pricing Structure on logistical costs

Monitor progress of the adjust-ments

Monitor progress of the adjust-ments

6.1.2 Monitor the Streamlining of envi-ronmental processes (EIAs,WUL,WA and AEL through MoU struc-tures)

- - Quarterly monitoring of the appli-cations

Quarterly monitoring of the appli-cations

Analysis of SOC quar-terly WULs applications on Dash-board



6.2 Leverage SOC developmental and transformation interventions to support socio-economic objectives

6.2.1 Approved Transforma-tion Frame-workandGuidelines

- - - Draft frame-work

Transforma-tion strate-gic Frame-workandGuideline approved

Monitoring implementa-tion

Monitoring Implemen-tation

6.2.2 Developed Transforma-tion mea-surement tool

- - - Transforma-tion mea-surement tool

Transfor-mation measure-ment tool developed





Audited/Actual performance Estimated perfor-mance

Medium-term targets

2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/176.2.3 Defined

transforma-tion indi-cators the shareholder compacts

- - Transfor-mation indicators incorpo-rated in shareholder compacts

Transfor-mation indicators incorpo-rated in shareholder compacts

SOC Trans-formation indicators incorporated in share-holder com-pacts and Corporate Plandefined

SOC Trans-formation indicators incorpo-rated in shareholder compacts

SOC Trans-formation indicators incorpo-rated in shareholder compacts

6.2.4 SOC con-tribution to transforma-tion moni-tored and assessed

- - Reports on SOC contribution to transfor-mation

Reports on SOC contribution to transfor-mation

Transforma-tion imple-mentation monitored and as-sessed



4.3.1.4.4 Quarterly targets for Economic Impact and Policy Alignment for 2014/15

Performanceindicator

Reporting Period

Annual targets

Quarterly targets

2014/15 1st 2nd 3rd 4th


7.1.1 Transnet pric-ing structure assessment

Quarterly Impact assessment reports on Transnet Pric-ing Structure on logistical cost

- Best practice review and stakeholderengagements

Draft pricing structure and assess impact of the pricing structure

Validate pric-ing structure and submit proposal to the share-holder

7.1.2 Monitor Streamlining of environmental processes (EIAs,WUL,WA and AEL through MoU structures)

Quarterly Analysis of SOC quarterly WULs & EIAs applications on Dashboard

Analysis of SOC quarterly WULs & EIAs applications on Dashboard




7.2 Leverage SOC developmental and transformation interventions to support socio-economic objectives 7.2.1 Approved

Transformation Frameworkand Guide-lines

Quarterly Transforma-tion strategic Frameworkand Guideline approved

Develop TORs for Trans-formation frameworkand Guide-lines internal procurement process

Facilitation of theStakehold-er Consulta-tion process by appointed services pro-vider

Finalise and undertakeap-proval process of Transforma-tion Frame-workANDGuidelines

Review SOC shareholder compacts KPIs against the Frame-work.

7.2.2 Developed Transformation measurement tool

Quarterly Draft Trans-formation measurement tool developed

- - - Develop a draft measure-ment tool and checklists


Performanceindicator

Reporting Period

Annual targets

Quarterly targets

2014/15 1st 2nd 3rd 4th

7.2.3 DefinedTransformation indicators in the Sharehold-er compact

Quarterly SOC so-cio-economic indicators in Shareholder Compacts and Corporate Plansdefined

- Engage SOC todefineso-cio-economic indicators in the Sharehold-er Compacts

Conclude engagement process and incorporate finalindicatorsinto the Com-pacts

Inputs on the approval process of the Compacts

7.2.4 SOC con-tribution to Transformation monitored and assessed

Quarterly Reports on SOC trans-formation contribution

Quarterly assessment reports




4.3.1.5 STRATEGIC PARTNERSHIPS

The sub-programme drives the building of strategic relationships between SOC and key customer andsupplier sectors to transform the sectoral and social composition of the economy.

The sub-programme comprises of the following components• Managementcomprises theofficeof theDeputyDirector-Generalwhichprovidesstrategic leadership

and management of the programme personnel.• Project Oversight - definition of catalytic investments to be driven by DPE and oversight of project

implementation from pre-feasibility to completion, including the design of relevant compacts.• Funding Mechanisms - development of innovative funding structures and design of associated compacts

with relevant partners.• Strategic Relationships - development of overarching procurement leverage policies; oversight of SOC

fleetprocurementdesignandimplementation,anddevelopmentandimplementationofcapabilitybuildingprogrammes and institutions.


1. Oversight of catalytic project implementation from pre-feasibility to completion, including the design of relevant compacts.

2. Implementation of innovative funding structures and design of associated compacts with relevant partners.3.OversightofEskom’sandTransnet’simplementationoftheCompetitiveSupplierDevelopmentProgramme;

oversightofTransnet’slocomotivefleetprocurementdesignandimplementation,anddevelopmentandimplementation of Executive Leadership Programme.


4.3.1.5.2 Programme Performance Indicators and Annual Targets for Strategic Partnerships for 2014/15



Medium-term targets

2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17


6.1.1 DPE MOA with DBSA

- - - Establish-ment of the Steering Committee to evaluate projects

Projects Evaluation by the Steering Committee



6.1.2 Funding strategy for SOC

- - - - Funding proposals forkeyin-frastructure projects that are part of the SIPs

Monitor implemen-tation and project evaluations

Monitor implemen-tation and project evaluations

6.1.3 Private sec-tor participa-tion concept framework

- - - Draft private sector participation framework

Approved private sector participation framework


Monitor implemen-tation

6.1.4 Implemen-tation of the Africa Strategy

- - - Establishment of the Steer-ing Commit-tee

Africa Strat-egy Project Pipeline

Update proj-ect pipeline and monitor implementa-tion

Update project pipe-line and monitor implemen-tation

6.1.5 Coal Mining Fund

- - - - Quarterly monitoring on the es-tablishment of the Fund

Monitor on a quarter-ly basis expenditure and projects funded by the Fund

Monitor on a quarter-ly basis expendi-ture and projects funded by the Fund

6.1.6 Project Man-agement Office

- - - Project Man-agement Of-ficeStructureapproved

Operational PMO within the Depart-ment

Quarterly reports on SIPs within the portfo-lio of SOC reporting to the Depart-ment

Quarterly reports on SIPs within the portfo-lio of SOC reporting to the De-partment

6.2 Leveraging SOC procurement spend programmes to support industrialisation and transformation

6.2.1 Strategic SOC cus-tomer sector forum–Oiland Gas and Boat Repair

- - - - Proposals on service offering im-provements by Transnet

monitor progress

Monitor progress




Medium-term targets

2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17

6.2.2 Strategic SOC cus-tomer sector forum–Au-tomotive

- - - - Proposals on service offering im-provements by Transnet

Monitor progress

Monitor progress

6.2.3 DPE-SOC industriali-sation and localisation forum

- - - Approved supplier development plans and Forum estab-lished

Quarterly meeting of the DPE-SOC industrial-izationandlocalizationforum



4.3.1.5.3 Quarterly targets for strategic partnerships for 2014/15


Reporting Period

Annual tar-gets

Quarterly targets

2014/15 1st 2nd 3rd 4th


6.1.1 DPE MOA with DBSA

Quarterly Establish steering com-mittee for the reviewofkeyinfrastructure projects for funding

Establish the secretariat functions to support the steering com-mittee and its activities

Schedule quarterly meeting to review and refer projects to DBSA for funding



6.1.2 Funding strat-egy for SOC

Quarterly Funding pro-posalforkeyinfrastructure projects that are part of SIPs

Assessment of funding re-quirements of SIPs projects that are lead by SOC in the Department’s portfolio

Assess SOC equity and debt require-ments

Proposals on the Common Borrowing Authority and infrastructure bond

Begin consultation with National Treasury and private sector and agree implementa-tion plan with SOC

6.1.3 Private sector participation concept framework

Quarterly Draft Pri-vate sector participation framework

Appoint spe-cialist team to design the guidelines for private sector participation

Consultation with SOC on the concept and approach

Consultation with SOC on the concept and approach

Agreement reached with SOC on the applica-tion of the private sector participation framework

6.1.4 Implemen-tation of the Africa Strategy

Quarterly Establishment of the Steering Committee

Set up the coordination structure (steeringcom-mittee)todriveAfrica strategy

Project pipe-line developed and updated

Update project pipeline

Update project pipeline

6.1.5 Coal Mining Fund

Quarterly Quarterly mon-itoring of the establishment of the fund

Review and advice on the structuring of the Coal Mining Fund

Participation in the engage-ment with the private sector on the positioning of the fund

Monitor progress on a quarterly basis on the establishment of the fund

Monitor progress on a quarterly basis on the establishment of the fund



Reporting Period

Annual tar-gets

Quarterly targets

2014/15 1st 2nd 3rd 4th

6.1.6 Project Management Office

Quarterly Operational PMO within DPE

PMO Structure implemented

Recruitment ofkeystaffinitiated

Monte Carlo simulations and probability training of the staff

Dashboard development

PICC Quar-terly Reports submitted





6.2.1 Strategic SOC customer sec-torforum–Oiland Gas and Boat Repair

Quarterly Proposals on service offering im-provements by Transnet

Oil and Gas and Boat Repair service requirements defined

Gap analysis undertakenon the service requirements of the industry and services currently provided by Transnet

Value prop-osition to meet industry requirements

Submission of the proposals to the share-holder for consideration

6.2.2 Strategic SOC customer sectorforum–Automotive

Proposals on service offering im-provements by Transnet

Develop TORs for the review of Transnet services against indus-try require-ments

Obtain ap-proval of TOR and commis-sion the study

Proposals on service improvements developed based on the study

Oversee implemen-tation of the proposals

6.2.3 DPE–SOCin-dustrialisation and localisa-tion Forum

Quarterly Quarterly meetings of the Forum

Quarterly meetings of the Forum





Table 4: Portfolio Management and Strategic Partnerships2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17


Audited outcome

Audited outcome

Adjusted Appropri-ation

Revised Estimate

Revised Baseline

Revised Baseline

Revised Baseline

SubprogrammesEnergy and Broad-band Enterprises

170,857 56,488 13,944 17,731 17,731 17,708 21,082 22,032

Manufacturing Enterprises

225,595 123,423 1,178,268 72,896 72,896 18,131 17,975 18,796

Transport Enterprises

19,077 18,752 20,030 20,089 20,089 24,297 25,038 24,089

Economic Impact and Policy Alignment

10,134 11,744 9,990 19,139 19,139 13,286 14,054 14,637

Strategic Partner-ships

11,493 7,555 5,973 10,914 10,914 10,274 15,111 20,897

Total 437,156 217,962 1,228,205 140,769 140,769 83,696 93,260 100,451Economic classificationCurrent payments 61,260 61,707 59,821 83,519 83,519 83,696 93,260 100,451Compensation of employees

33,948 31,665 34,502 50,086 50,086 60,404 64,535 70,126


2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17Rand thousand Audited

outcomeAudited outcome

Audited outcome


Revised Estimate

Revised Baseline

Revised Baseline

Revised Baseline

Salaries and wages 32,780 31,665 34,502 50,086 50,086 60,404 64,535 70,126Social contributions 1,168 - - - - - - -Goods and services

27,312 30,042 25,319 33,433 33,433 23,292 28,725 30,325

Administrative fees - - - 803 803 - - -Advertising - 7 38 - - - - -Assets less than the capitalisation threshold

- - - - - - - -

Catering: Departmentalactivities

112 108 120 313 313 90 95 98

Communication (G&S)

298 318 273 675 675 682 720 759

Consultants and professional services: Business and advisory services

22,558 23,156 16,348 19,601 19,601 15,200 20,418 21,298

Consultants and professional ser-vices: Legal costs

146 - - - - - - -

Contractors 1 1 36 2 2 - - -Agency and sup-port / outsourced services

- - - 450 450 - - -

Entertainment - 2 - 52 52 46 47 47Fleet services (includinggovernment motor transport)

- - - 41 41 - - -

Inventory: Clothing material and accessories

- - - 14 14 - - -


- - 1 - - - - -


- - 3 - - - - -

Inventory: Medicine

- - 2 - - - - -

Consumable: Stationery, printing andofficesupplies

2 5 3 65 65 - - -

Operating leases - - - 316 316 - - -Travel and subsistence

3,162 5,364 5,908 8,639 8,639 6,754 6,897 7,545


352 334 386 57 57 - - -

Operating payments

82 302 941 44 44 - - -

Venues and facilities

599 445 1,260 2,361 2,361 520 548 578


2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17Rand thousand Audited

outcomeAudited outcome

Audited outcome


Revised Estimate

Revised Baseline

Revised Baseline

Revised Baseline


237,296 156,255 118,384 57,250 57,250 - - -

Public corporations and private enterprises

237,296 156,255 118,313 57,250 57,250 - - -

Public corporations 237,296 156,255 118,313 57,250 57,250 - - -Other transfers to public corporations

237,296 156,255 118,313 57,250 57,250 - - -

Households - - 71 - - - - -Other transfers to households

- - 71 - - - - -


- - - - - - - -


138,600 - 1,050,000 - - - - -

Total 437,156 217,962 1,228,205 140,769 140,769 83,696 93,260 100,451DETAIL OF TRANSFERS AND SUBSIDIES

2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17


Audited outcome

Audited outcome


Revised Estimate

Revised Baseline

Revised Baseline

Revised Baseline

Rand thousandDenel(Pty)Ltd 181,296 116,255 118,313 57,250 57,250 - - -AlexkorLtd 36,000 - - - - - - -Pebble Bed Modular Reactor

20,000 40,000 - - - - - -

Employee social benefit

- - 71 - - - - -

Total 237,296 156,255 118,384 57,250 57,250 - - -

Performance and expenditure trends

The spending focus over the medium term will be on enhancing the capacity to boosting the department’s capacity to oversee strategic infrastructure projects. This includes training staff and developing new project management tools to improve oversight of the current build programme. Because of the need to provide effective oversight to the state owned companies spending on compensation of employees increased over the medium term. The increase in the number of personnel from 90 in 2013/14 to 97 in 2016/17 is attributed to additional approved and funded posts, which come into effect in 2014/15 to strengthen the strategic oversight function of the department on infrastructure projects. As at 30 November 2013 there were 4 vacancies due to new positions created, whichwill be filled by 2014/15. The departmentmakes use of consultants forspecialised services in transport, manufacturing, energy and broadband sectors, which, notwithstanding the increased capacity in the department is still a necessity. Due to realignment of functions expenditure on goods and services is expected to decrease over the medium term.

In the Energy and Broadband Enterprises and Manufacturing Enterprises sub programmes, expenditure deceasedsignificantlybetween2011/12and2013/14,andisexpectedtodecreaseoverthemediumtermdue to once-off recapitalising payments in 2012/13 to the state owned companies. Between 201/11 and 2012/13, a total of R473.2 million was paid to Denel for claims under an indemnity agreement, while Denel


received a further R700 million in 2012/13 for recapitalising the entity. In 2010/11, R36 million was paid to AlexkortoestablishajointventurewiththeRichtersveldcommunityunderandoutofcourtsettlementforlandclaims. A further R350 million was allocated to the entity in 2012/13 to address liabilities in terms of the deed of settlement and other obligations. Between 2010/11 and 2011/12 a total of R60 million was transferred to the Pebble Bed Modular Reactor company to comply with statutory requirements for the decommissioning and dismantling of the fuel development laboratory and implementation of the care and maintenance programme. BroadbandInfracoreceivedR138.6millionforcapitalandoperationalcosts;thisisreflectedasapaymentforfinancialassetsduring2010/11.


PART CLINKS TO OTHER PLANS

5. LINKS TO THE LONG-TERM INFRASTRUCTURE AND OTHER CAPITAL PLANSNot Applicable

6. CONDITIONAL GRANTSNot Applicable

7. STATE OWNED COMPANIES REPORTING TO THE DEPARTMENT

7.1 Alexkor

Alexkor reportedbetter results for theyearended31March2011 than thepreviousyear’sperformance.AlexkorachievedrevenueofR195.9millionin2010/11,andthisa19.5%increasefromtheR163.9millionachieved in the previous year. Alexkor recorded a gross operating profit of R11.3million, its first grossoperatingprofitsince2005/06.NetprofitfortheyearamountedtoR84.2million.Theimprovedperformanceismainlyasaresultofhighercaratproduction(13.3%highercaratproductionachievedcomparedtothepreviousyear)coupledwithbettercostmanagement.

TheSettlementAgreementreachedbetweenAlexkor,GovernmentandtheRichtersveldCommunityinthematteroftheRichtersveldCommunity’slandclaimagainstAlexkorandtheStateentails,inter alia,thatAlexkortransferitslandminingrightstoRichtersveldMiningCompany(RMC).ThepartiesagreedtoformaPoolingandSharingJointVenture(PSJV)betweenAlexkorandtheRichtersveldMiningCompany(RMC)asfollows:• AlexkorwillremaintheholderofitsmarineminingrightsandRMCwillremaintheholderofitslandminingrights;• AlexkorandRMCwillrespectivelyputtheirmarineminingrightsandtheirlandminingrightsunderthefull

control of a Joint Board of the Joint Venture for purposes of mining both the marine mining resources and thelanddiamondresources.AlexkorandtheRichtersveldMiningCompanyareeachentitledtoappoint,removeandreplacethree(3)membersoftheJointBoard,whoshallbedulyauthorisedtorepresentthatparty in respect of all matters relating to the pooled operations

• Alexkorwillhaveabeneficialinterestof51%inthePSJVandtheRichtersveldCommunity,throughRMC,willholda49%interest

ThecommencementofthePSJVwassubjecttothefulfilmentofanumberofsuspensiveconditionsnamelythat:• RMC and Alexkor must obtain the required approvals to implement the pooling transaction from

the Competition Authorities under the Competition Act, 1998; all on an unconditional basis or under circumstances where any conditions attached to any of such approvals, that such conditions are reasonablyacceptabletoAlexkorandtheRMC.TheCompetitionCommissionsubsequentlyadvisedthatthetransactionwasnotnotifiable;

• TheLandClaimsCourtgrantsanorderconfirmingornotingtheDeedofSettlementand,totheextentnecessary, the terms, provisions and conditions of the PSJV. The Land Claims Court made the DoS an order of court on 9 October 2007;

• The existing Environmental Management Plan of Alexkor be amended as contemplated in the DeedofSettlement.Alexkor’srevisedEMPwassubmittedto theDepartmentofMineralResources(DMR) inNovember 2008; and


• The land mining rights are transferred to RMC with the permission of the Minister of Minerals and Energy, ascontemplatedinclause8.2oftheDeedofSettlement.TheNotarialDeedofCessionoftheAlexkorlandminingright(transferringAlexkor’slandminingrighttoRMC)wasregisteredbytheMineralandPetroleumTitlesRegistrationOfficeon6April2011.

AllthesuspensiveconditionsforthePSJVtocomeintoeffecthavebeenfulfilled.EffectivelywhatthismeansisthatgiventhatAlexkorhastransferreditslandminingrightstotheRichtersveldMiningCompany,andthatthePSJVhasnowcomeintoeffect,Alexkor’soperationsinAlexanderBaynowfallunderthecontroloftheJointBoardofthePSJV.IntermsoftheDeedofSettlement,AlexkorandRMCiseachentitledtoappoint,remove and replace three members of the Joint Board, who shall be duly authorised to represent that party in respect of all matters relating to the pooled operations. The Joint Board has overall supervision of the operations of the pooled operations and will prepare a development plan in order to upgrade the land and sea diamond resources at Alexander Bay.

An amount of R200 million was allocated to the PSJV, which will be expended both with respect to the land and sea operations, for the establishment of a viable mining operation.

SignificantprogresshasbeenmadeintheimplementationoftheDeedofSettlementsignedwiththe.Alexkor’sagriculturalandmariculturalassetshavebeentransferredtothecommunity.AllAlexkor,StateandNorthernCape Provincial land has been transferred, except for the properties in Alexander Bay Township. These properties will be transferred to the community soon after the upgrade of the township’s civil and electrical engineering services to municipal standards. The township upgrade project is expected to be completed in June 2012.

TheDeedofSettlementhasconsiderablychangedthelandscapeofAlexkoranditsstrategicoutlook.Alexkorcurrently has the following outstanding obligations and liabilities:1. Environmental rehabilitation liability at Alexander Bay mine: R256.7 million;

2.Payment to Richtersveld Property Holding Company to secure Alexkor’s right of occupation of thetransferred residential properties for a period of 10 years: R45 million;

3. Post-retirement medical aid liability: R58.4 million.

GiventhatthePSJVhasnowcomeintoeffect,Alexkor’soperationsinAlexanderBaywillfallunderthecontroloftheJointBoardofthePSJV.Alexkor’sonlysourceofrevenuetofunditsobligationsandliabilitiesisrevenuefromthe51%interestintheprofitsofthePSJVoperations.ItisnotexpectedthattheminingoperationsunderthePSJVwillgeneratepositivereturnswithinthefirstthreeyears,asthePSJVwillfirstembarkonexploration.Alexkor’s financial resources are currently insufficient tomeet its obligations and liabilities. AlexkormustthereforeactivelyseekopportunitiestoprocurenewminingventurestosecurenewrevenuestreamsbeyondtheAlexanderBay,and independentof thePSJVoperations.ThiswillensureAlexkor’s futuregrowthandsustainability and enable the company to effectively address its historical obligations and liabilities. In pursuanceofthisnewstrategy,AlexkorwillbeguidedbyGovernment’spolicyobjectives.Alexkorwillalsoexploreopportunitiesfordownstreambeneficiation,tocontributetothecreationofnewjobs,developmentofrequisiteskills,investmentinresearchanddevelopment,economicgrowth,sustainabledevelopmentandcost-effective support for the broader policies of government.

As these opportunities will undoubtedly require funding, it will be important to explore different funding mechanismsandsourcesavailableforthenewminingventures,soasnottodependentirelyonthefiscustofundAlexkor’sgrowthopportunities.Thenewbusinessventureswillbolsterthesustainabilityofthecompanyand contribute to the broader developmental objectives of Government.


7.2 Broadband Infraco

Broadband Infraco SOC Limited is a state SOC in the telecommunications sector, intended to improve marketefficiencyinthelongdistanceconnectivitysegmentbyincreasingavailablelongdistancenetworkinfrastructure and capacity to stimulate private sector development and innovation in telecommunications services and content offerings, as well as to provide long distance national and international connectivity to previously under serviced areas.

ThevaluepropositionoftheCompanyisthattheexistingNationalBackhaulcanandshouldbeleveragedinan expanded manner in that a wider range of services more aligned with large operators can be offered. This value proposition is fully supported by the Government which is evidenced by the appointment of Broadband InfracoasthecoordinatingagentoftheStrategicIntegratedProject15(SIP15)aspartofthePresidentialInfrastructureCoordinatingCommission(PICC)whichischairedbythePresidentofRSA.SIP15dealswith“ExpandingAccesstoCommunicationsTechnology”whichseekstoensure100%broadbandcoveragetoall households by 2020 through a creation of several layers of connectivity across the country by establishing corePointsofPresence(POPs)indistrictmunicipalities,extendfibresandradionetworksacrossprovinceslinkingdistricts,establishPOPs,fibresandradioconnectivityatlocallevel,andfurtherexpandingthenetworkinto deep rural areas. Apart from the said national imperatives, there is also the critical role that the Company plays in consolidating International, Regional and Provincial connectivity.

Pursuant to achieving the above value proposition and the mandate, the Company made strong strides as recordedinits2011/12financialyearhighlights:• TheCompanyturnedcashpositive,postingR52.1milliongeneratedfromoperations,forthefirsttimein

Broadband Infraco’s history.• The company received an unqualified audit recovering from the last year’s (2010/11) qualified audit

opinion.• Managedservicerevenuescontinuetogrowwiththecustomerbaseincreasingfrom3lastyear(2010/11)

to7 thisyear (2011/12)and thecompanyworkedhard to improvenetwork integrity tomeetcustomerexpectations.

• SegmentcommissioningoftheWestAfricaCablesystem(WACS)wascompletedinMarch2012,withinterconnectiontotheterrestrialnetworkontrackforcompletioninearly2012/13.

• TheCompanyhassuccessfullyexpandedmaintenanceactivitiesonthe12750kmfibrefootprinttotwelvesitesacrossSouthAfricawith110PointsofPresence(POPs)establishednationallyofwhich55oftheseare in under-serviced areas.

However in order for the company to entirely fulfil its mandate, investment is required to revitalise thenetwork,expandmetroaccesstoenableconnectivitytootherInformationCommunicationsTechnology(ICT)operators as well deliver on the mandate of expanding broadband access to all. Also the regulatory aspects ofBroadbandInfracowillneedtobeunlockedwithregardstothelicensingofthecompany.TheindividualElectronicCommunicationsNetworkServices(i-ECNS)licenseissuedtoBroadbandInfraco,meansthatthecompanyisabletoexecutemostofitsmandateandselectedbusinessmodel,byprovidingnetworkservicesto themajority of its intended customers (i.e. limited to other ECNS/ECS licensed operators or licensedexemptentities).However,becauseoftherestrictionsincludedinthedefinitionofElectronicCommunicationsServices(ECS),BroadbandInfracomaynotprovideservicesdirectly toendusersor tounlicensedStateentitiessinceitlackstheECSlicense.


7.3 Denel

AlthoughDenelhasmadesomeprogresssincethecompanyembarkedonaturn-aroundstrategyin2005,the solvency position of Denel continues to pose serious challenges. Nonetheless, the turnaround strategy has seen a noticeable reversal of the downward spiral in the fortunes of Denel. Since 2005, when the company postedalossofR1.6billion,DenelhassteadilyreduceditslossesandrecordedaR111millionprofitinthe2010/11financialyear.Denel’sAerostructuresbusinessremainsachallengetotheentireDenelgroupasit continues to be the major contributor to Denel’s losses. This is largely as a result of the A400M contract concludedwithAirbusMilitarywhichisnotcommerciallyviable.AframeworkfortheresolutionofDSAhasbeendevelopedand isunderway.The framework included internal restructuringandrenegotiationof theAirbusA400Mworkpackagecontracts. The28% improvement in theperformanceof theAerostructuresbusiness in the previous year was an encouraging sign that the company is beginning to turnaround, mainly due to the ongoing restructuring in the business. Whilst the trading losses in the other trading entities have beenreduced,someofDenel’sbusinessentitiesremainfinanciallychallenged.Amorerobustturn-aroundplan;onethatpursuesfinancialrecoveryandstabilitythroughimprovementsinitsoperationalandfinancialperformance needs to be developed to secure the company’s long term viability.

The current mandate of Denel is to:• Provide the Department of Defence (DoD) with key strategic defence equipment and services in an

efficientandsustainablemanner;• Contribute towards the building of a dynamic defence-related industrial cluster;• Act as a catalyst for advanced manufacturing in the broader economy and; and• Earn export revenue.

In the main, the current mandate of Denel is still relevant as it points to the company being a strategic state assetthatprovidestheDoDwithkeystrategicdefenceequipmentandservices.However,Denel’scurrentdefence-related strategy is not optimally aligned with the DoD’s strategic defence requirements. A structured mechanism will thus be required in order to effect the necessary re-alignment of Denel’s defence-related strategies with those of the DoD.

Globally,cutbacksindefencebudgetsmaybeseeninthelowerturnoverfiguresforcompaniesspecializingindefence.Thereductioninordersforthedefenceindustryhasbeenreflectedbyacontractionofactivityandhasledtoanunsustainableriseinproductioncostsduetoreductionsineconomiesofscale.Shrinkingdefencebudgetshaveresultedinthescalingbackofcertainprocurementprogrammes,withlowereconomiesofscaleandincreasingunitcosts.Inadditiontothisfirstsourceofcostincreases,thedefenceindustryissubjecttothegeneralphenomenonofincreasesinResearchandDevelopment(R&D)spending(andhenceoverheads).Whencombined, these two trends lead to an increase in unit costs of suchmagnitude thattheycannolongerbecoveredsolelybymilitarybudgets.Thereisthusaneedtore-thinkDenel’sstrategicdirection going forward.

Given the downward trends in domestic defence spending,Denelmust increasingly rationalize defenceproduction, while concentrating on its competitive strengths. Denel must pare back its product lines,collaboratewithotherfirmsthathavecomplementarytechnologicalassets,andfocusonpolesofexcellencewhereitenjoysatechnicalormarketadvantage.

Denelneedstolimititsdependenceondefenceworkandexpanditsmarketshareincommercialareas,aswellasexploringnewmarketsforitsproductofferings.Inthecurrentenvironment,thosecompanieswhoseeconomicsurvivaldependsonanarrowrangeofmilitaryproductswillbeexposedtosharpfluctuationsinprocurement,puttingthematriskofgoingoutofbusiness.Themoreafirmisdiversifiedintothecivilsector,thebetteritcansurviveslowdownsinmilitaryorcommercialsales;assuming,ofcourse,thatbothmarketsdonot decline simultaneously. Denel must diversify by developing civil spin-offs of its core military technologies.


Theabilitytoofferproductstobothcivilianandmilitarymarketsalsoholdsouttheprospectofrestructuringproduction operations tobenefit from joint expenditure and various synergies.Diversification into civiliansectorswillmakeupforthedropinmilitarybudgetsandexploittechnologicaldynamics.

One further trend that Denel and the country may have to consider is increased collaboration on military programmestocontainescalatingR&Dcosts.ThesuccessachievedintheA-DarterprogrammewithBrazilprovides the country with a blueprint. This will assist both Denel and the country to continue improving capabilities whilst containing costs.

Theadvancedindustryresults innetworksofskillsandtechnologiesbeingcreatedinordertodeliverthehightechnologyproductsand/orservices.Duringthisprocess,thenewlycreatedskillsandknowledgeareprovidedfreeofchargetootherfirmsinrelatedindustries.Theprocessof‘learningbydoing’isoneofthemosteffectivewaysoflearningandinnovatingasitisaimsatbuildingtacitknowledge–themostdifficulttypeofknowledgetogenerateandtransfer.Thedevelopmentofnewknowledgeandskillsbytheadvancedindustryisanalogoustowhatoccursatauniversity.However,inanadvancedindustrytheskillsdevelopmentandlearningisnotrestrictedtograduatelevelasitalsotakesplaceattheunskilledandartisanlevel.Inadditiontoskillsandtechnologydevelopment,acommercialproductisbeingproducedwhichcreatesrevenueandasustainablelearningenvironment.Denelwillbeexpectedtoaccelerateitseffortstowardsskills-developmentandtransformation.Thecompanymustgenerateskillsacrossthefullspectrum,rangingfromartisanleveltoengineersandhighlyskilledtechnologists.

7.4 Eskom

Eskomgenerates95percentoftheelectricityusedinSouthAfricaand45percentoftheelectricityusedinAfrica.Eskom’sreservemarginhasbeensteadilydecliningsince1999asaresultofincreasingdemand,increasesinmaintenancebacklogs,andunder-investmentinthenewgenerationcapacityrequiredtomeetrising demand. This was particularly acute in January 2008, when the reserve margin dropped to alarmingly low levels (3.6percentcommerciallyavailable),which resulted inextensive loadshedding that impactedtheeconomynegatively,anddiminishedinvestorconfidenceinEskom’sabilitytoprovidereliableelectricitysupply.

Eskomhassinceintroducedarecoveryplan,whichincludessecuringenoughprimaryenergy(coalstockpileto42dayslevel).Thishasresultedintheaveragereservemarginincreasingtoover10percentcommerciallyavailable.

Additionally,Eskomhassince2004beenundertakingacapacityexpansion(build)programmetoensurethesecure and reliable supply of electricity. Completed projects between 2005/06 and 2011/12 include the return toserviceandconstructionofthreepowerstations.Asaresult,Eskominstalledandcommissioned5381MWofadditionalgeneratingcapacityintothesystemandinstalledandstrengthened3531kmoftransmissionnetworks. The focus for 2012/13 includes securing the balance of the required funding to complete thenew build programme; monitoring the rollout of this programme improving operational and maintenance performancetoensuresecurityofsupply;assessingtheroleofEskomintheimplementationoftheIRP2010,anddevelopingtheappropriateinvestmentplanforEskom’sfuturebuildprogramme.

Over thefive-yearperiod from2011/12 to2017/18, thecostofEskom’sbuildprogramme isestimatedatR453billion.Eskomplanstodeliveradditional11699MWofcapacityintothesystemandtoinstall1169kmoftransmissionnetworkby2017/18.Eskomcontinuesonitsprofitabilitypath,recordinganetprofitaftertaxofR8.4billionforthe2010/2011financialyear,followinganetprofitofR3.6billioninthe2009/10financialyear.TheoperatingprofitfortheyearwasR16.4billionwhilein2009/10itwasR4.8billion.The139%increaseinprofitabilitycanbeattributedmainlytothetariffincreasesinthe2010/11financialyear,ratherthansalesvolume.


- CabinetapprovalwasobtainedforEskomtobegrantedR174billionadditionalguarantees,bringingthetotalguaranteeframeworktoR350billion.AsaresultoftheGovernmentSupportPackage,EskomwasabletoissueaUS$bondandraiseR12billion,withoututilisingaGovernmentguarantee.Eskom’sfundingplanto2017hasbeenfinalised,and70%ofthefundinghasbeensecured.

7.5 Pebble Bed Modular Reactor (PBMR) mention that PBMR is now with Eskom

The PBMR project was initially set up as a nuclear architect engineering company focused on the design and licensing of a standardised nuclear heat supply system and pebble fuel. It was established in 1999 to developandmarketsmallscale,hightemperaturereactorslocallyandinternationally.Thecompanyhasnotbeen able to acquire additional investment into the PBMR project, nor has it been able to acquire a customer, despite revising its business model in 2008/09, since Government’s last funding allocation in 2007, of which the last transfer was made in 2009/10. The company’s business model was subsequently revised in May 2009 and the company’s main focus will be the preservation and maintenance of intellectual property and assets.In the light of the PBMR’s participation, a consortium in the United States Department of Energy’s next generation nuclear programme which did not materialise, Cabinet approved that the company be placed into care and maintenance to protect its intellectual property and assets, while ensuring that no additional funding will be required from Government. The Department of Public Enterprises will therefore be monitoring the implementation of this transition.

No further funds have been committed by Government, except for R20 million, which was provided in the adjustments budget and which was disbursed in 2010/11, and a further R40 million disbursement in 2011/12. These funds were allocated to ensure that the necessary provision for the statutory requirement for decommissioning and dismantling the fuel development laboratory is met by the company.

During 2011/12, the Department commissioned a retrospective review of the PBMR project, as part of the winding down of PBMR in line with Cabinet decision. The focus for 2012/13 includes assessing the recommendations of the retrospective reviews, and monthly and quarterly monitoring of the implementation of the care and maintenance strategy.

7.6 South African Forestry Company

South African Forestry Company (SAFCOL)manages and develops commercial forests. The company’sactivities include forestry management and timber harvesting and processing. The company’s main subsidiary, KomatilandForests, operates inMpumalanga,Limpopo,KwaZulu-Natal andMozambique.SoftwoodsawtimberissoldinSouthAfricaandsoftandhardwoodsawtimberandpulpwoodinMozambique.KomatilandForestshasan80percentshareholdingintheMozambicanforestrycompany,IndùstriasFlorestaisdeManica(IFLOMA),whiletheremaining20percentisheldbytheMozambicangovernmentthroughitsInstitutodeGestão das Participações do Estado. The company plays an important role in rural development, and various enterprise development projects have been initiated to contribute to poverty alleviation in the rural areas in which it operates.

In2007,theMinisterofPublicEnterprisesextendedthedisposalofthecompanybyfiveyearsto2011/12toallow for the resolution of the land claims lodged with the Department of Rural Development and Land Reform, since 61 per cent of South African Forestry Company land is subject to land claims, with the understanding that shareholder value would be preserved in the interim. However, the company’s operations and revenue have been severely impacted by the prevailing economic conditions over the past two years. The company reported a net loss of R468.9 million in 2009/10, yet has since seen improvements, with the net loss of


R79.1million in 2010/11, SAFCOL managed to turnaround the previous two year’s results by generating cash fromoperationsofR73mandpostinganetprofitofR205mforthe2011/12financialyear.

Government is currently re-examining the privatisation of Komatiland Forests and the future role of the South African Forestry Company, in the context of the developmental state. While the Department is carrying out its own review, the Presidency is conducting a broader review of State Owned Enterprises across all spheres of Government. The department will be engaging closely with the Presidential Review Committee on the implications for the company, aswell as other key stakeholders such as theDepartment of Agriculture,Forestry and Fisheries and the Department of Rural Development and Land Reform. Thereafter, a joint proposal will be submitted to Cabinet for consideration.

7.7 South African Airways

SouthAfricanAirways(SAA)isSouthAfrica’snationalaircarrierwhichoperatesafullservicenetworkintheinternational,regionalanddomesticmarkets,fromitsheadofficeatORTamboInternationalAirport.

Following the2009/10appointment of a newboardofdirectors andanewChiefExecutiveOfficer,SAAcontinues to build on the successes achieved from the restructuring exercise where savings of R2.5 billion wereachievedoveran18-monthperiodtoMarch2009.TheairlineachievedanetprofitofR398millionin2008/09,profitsofR323millionin2009/10andprofitsofR649millionin2010/11financialyears,respectively.Thesustainedprofitswereasa result of strict costcontrol and lowerhedging losses thathave reducedover theperiodfromR1.564billion in2008/09financialyear toR970million in the2009/10financialyear,andR202million in2010/11financial year.The repaymentofR1.567billion inSeptember2009 followingthe recapitalisation of SAA by government also led to savings in interest payment of about R100 million per annum.

Despitetheimprovementsinprofitabilitytherearestillchallengeswithcashgeneration.Thisfollowsreducedforward sales as a result of the slowdown in the world economy. The decline in the cash position resulted in a request for government support in 2009 when government provided a R1.6 billion going concern guarantee. The provision of this guarantee was based on certain commitments made by SAA, to ensure that the achievements made with the 2007-09 restructuring exercise were sustained. The department and National Treasury are jointly monitoring the implementation of the commitments although these were recently revised in 2011 in consideration of current economic circumstances. To date, SAA has only utilised R437 million for AirTrafficLiabilityguaranteefromtheR1.6billionguaranteefromNationalTreasury.ThisindicatesthatSAAhas additional guarantee of R1.163 billion to utilise should the need arise.

Inthe2010/11financialyearSAAachievedtwentyofthethirtyfourKeyPerformanceIndicators.Inaddition,therehavebeensignificantimprovementsinprocurementprocessesandcompliancewiththePFMA.ThelegacyagreementforthepurchaseofAirbusA320aircraftwassatisfactorilyresolvedinthe2009/10financialyearbyreschedulingthedeliverydatesoftheaircraftfrom2010to2013.Deliveryofthefirstaircraftunderthecontractwillbeinmiddleof2013.SAAisdevelopingafinancingplanwhichasindustrypracticerequiresshouldbeinplaceatleast6monthsbeforethefirstdelivery.Theworseningmarketconditionsintheairlineindustry,hasrequiredgovernmenttoprovideadditionalsupportto the Airline to ensure that it continues to function as a going concern. For the period ahead, the focus will betoensurethefinalisationoftheturnaroundplanaspartoftheguaranteerequirementanditssustainedimplementation,implementationofthefleetacquisitionprogramme,consolidateSAA’sRouteNetworkintheAfricanmarket,andestablishSouthAfricanAirwaysTechnicalasanAfricanMaintenanceRepairOverhaulcentreofexcellence.Thesewill seek toensureconsistentgenerationofbottom lineprofits tostrengthentheairline’sbalancesheet.Thefillingofcriticalposts,inparticular,theappointmentoftheCEOwillalsobeprioritised by the shareholder.


7.8 South African Express Airways

SouthAfricanExpressAirways(SAX)wasestablishedin1994andtransferredtotheDepartmentofPublicEnterprises in2008/09. Itoperates regionalanddomesticflights fromORTambo InternationalAirport inJohannesburg,servingsecondaryroutesinSouthAfricaandthecontinent.SAXoperatesregionalroutestoBotswana,Namibia,theDemocraticRepublicoftheCongoandMozambique.ItalsoprovidesafeederairservicethatconnectswiththeSouthAfricanAirwaysnetwork.

Theairline’sjointventurewithalocalpartnerintheDemocraticRepublicofCongo(DRC),CongoExpress,which began in February 2010 as part of the implementation of the African hub strategy, was dissolved in September2010.Thiswassubsequenttoeffortstoaddressthefinancialandoperationalperformancehavingfailed to improve the joint venture prospect. Lessons learnt from the failed operations in DRC will be used in all future implementation of the African hub strategy.

SAXhasbeenconsistentlygeneratingprofits in the last sixyearswhich in turnstrengthened itsbalancesheet.ThefinancialpositionimprovedfromaccumulatedlossesofR228millioninthe2006/07financialyeartoaccumulatedprofitsofR288millionby2009/10financialyear.Howeverduetorecenteconomicslowdowntheairlinehasnotbeenabletosustainsimilarlevelsofprofitgeneration.Mostsignificantly,theoperationofaged aircraft, most of which are over 15 years of age, resulted in high maintenance cost and disruption in flightschedulesduetoregularbreakdown,andthisaffectedtheperformanceoftheairline.FortunatelySAXhasnowcommencedwithafleetreplacementprogramme,andthefirstsixnewaircraftwerereceivedinthesecondhalfofthe2011/12financialyear.SAXexpectstoreceivetheremaining18aircraftoverthenexttwoyears.

Therewereallegationsof irregularitiesatSAX in the2011/12financial year,whichmayhavearisenoverseveralyearsback.Theinvestigationshavebeenconcludedresultingtotherestatementof2010/11financialresults.

ThefocusovertheMTEFperiodwillbetoexpandSAXoperationsintheAfricanmarket,andtostrengthentheairlinesbalancesheetthroughgenerationofprofitandcashflowtofundthefleetrenewalprogramme.

7.9 Transnet

Transnet’s mandate is to assist in lowering the cost of doing business in South Africa, enabling economic growth and ensuring security of supply by providing appropriate port, rail and pipeline infrastructure in a cost-effectiveandefficientmanner,withinacceptablebenchmarks.

Transnet has relentlessly focussed on improving service levels and customer responsiveness over the past five years. Significant investments havebeenmade in infrastructure and equipment to improve theconditionofassetsinordertosupportthedriveforgreateroperatingefficiencies,servicelevelsandcustomerresponsiveness.

Forthefirstsixmonthsended30September2011,Transnetpostedanimpressivesetoffinancialresultsasongoingefficiencies,productivity improvementsand thegrowth involumesweredrivenby the increasedcapital expenditure programme.

Exportironorevolumesincreasedsignificantlyby21.5%to24.9Mt(2010:20.5Mt)duetoimprovementsinoperationalefficiencies,andadditionalcapacitycreatedthroughthecapitalinvestmentprogramme.Exportcoalvolumesimprovedonlymarginallyby2.6%to31.3Mt,primarilyduetotheextendedperiodduringwhichthelinewasshutdownduringthefirstquarter,aswellotheroperationalchallengesfacedbythebusiness.


TransnetFreightRail(TFR)recordeda6.3%increaseingeneralfreightvolumesandreportedanimpressive25.3%improvementincontainerstransportedbyrail,therebyreducingthenumberoftrucksontheroads.

Management focus is now on on-time departures and arrivals for the general freight business and export coal line. For the GFB, a 24-hour, seven days national command centre has been introduced and manned by TFR executives to plan, resource and manage the movement of trains across the country. This initiative is already yielding positive results. At the ports, the Pier 1 Container Terminal at the Port of Durban recorded andimpressiveleapinproductivitywithgrosscranemovesperhour(GCH)–akeymeasureofproductivityforcontainerterminals–improvingtoaninternationallyacceptableaverageof28GCHcomparedto23GCHachieved in the prior period.

TheNewMulti-ProductPipeline(NMPP)isastrategicinvestmenttosecurethesupplyofpetroleumproductsto the inland market over the long term. This line will replace the old Durban-Johannesburg pipeline,whichisrunningatfullcapacityandnearingtheendofitseconomiclife.Someofthebenefitsofthenewmulti-productpipelineinclude(whenfullyoperational)areductionincongestionontheroads,andareductionincarbon emissions from road transportation of petroleum products.

The NMPP construction is progressing according to the revised plan, and Transnet Pipelines successfully commissionedtheKendall-Watloo,JamesonPark-AlrodeandAlrode-Langlaagtesectionsofthepipelineon31 May 2011. Construction of the pipeline and pump stations are now complete, and the focus will be aimed at completing the construction of the coastal and inland terminals.

Thefinancialperformanceforthesixmonthsending30September2011reportedimprovedprofitsandcashflows.NetprofitfromcontinuingoperationsfortheperiodwasR2.3billion,whichrepresentsanincreaseof33.5%percentcomparedtoR1.7billionupto30September2010.Thiswasmainlyduetoanincreaseinrevenue.Revenueincreasedby20.3percenttoR22.4billion(30September2010:R18.7billion).Thegrowthinrevenueismainlyduetothe7.1%weightedaveragegrowthinvolumes,asaresultofstronggrowthinironore and container volumes.

Cashgeneratedfromoperationsincreasedby25.6percenttoR10billion(2010:R7.9billion),demonstratingthe company’s ability to generate strong and sustainable cash flows. The cash-interest cover ratio hasdecreased to 3.1 times from 3.4 times compared to the same period in 2009/10, due to an increase in net financecosts,whichisaconsequenceofthecapitalexpenditureprogramme.Thisratio,however,remainsabove the target of a minimum of 3 times.

TransnetisplanningtoborrowapproximatelyR33billionoverthenextfiveyearstofundtherollingfiveyearcapitalexpenditureprogramme.TheGroupcommenced thefinancial yearwithacashbalanceofR10.9billion. Consequently only an amount of R1.9 billion was raised during the six months ended 30 September 2011.Thecapitalexpenditureforthesixmonthsended30September2011(excludingcapitalisedborrowingcosts)wasR9.5billion.R5billion of the total capital expenditurewas invested in expanding the currentinfrastructure and equipment, while R4.5 billion was invested in maintaining the existing capacity.


PART DANNEXURE E

ANNEXURE EThis annexure provides description of technical indicators and how these will be measured. It does not include all the indicators in the APP of which some are self-explanatory.

PROGRAMME 1

Indicator Payment of invoices within 30 days of receipt of invoice

Short definition In terms of Section 8.2.3 of the Treasury Regulations all invoices must be paid within 30 days of receipt of invoice, or in the case of civil claims, from the date of settlement court judgement. Any invoices in dispute are excluded from this requirement.

Purpose/importance Compliance with TR 8.2.3

Source/collection of data Invoices received from suppliers directly or via units

Method of calculation None

Data limitations None

Type of indicator Compliance

Calculation type None

Reporting cycle Monthly report to DG for submission to National Treasury by the 7th of every month.

New Indicator None

Desired Performance No invoices paid later than 30 days from date of receipt of invoice. This however is the desired outcome – in some cases paymentmay be delayed due to, amongst others, supplier having changed banking details and not notified Finance, unit does not submittimeously (recourse iswarning ito FOSAD resolution afterDGhastaken all circumstances into account), systems are down and nopayments can be effected. When there are instances of late payment an explanatory memo is sent to the DG with the monthly report.

Indicator responsibility OfficeoftheCFO–Director:FinancialManagement

PROGRAMME 31. OVERSIGHT OF STATE OWNED COMPANIES

The oversight role of the SOC is applicable to Denel, SAFCOL, Alexkor, Eskom, Infraco, Transnet, SAA, SAX

Indicator Assessment of SOC Corporate Plan by business units

Short definition Corporate plan demonstrates the SOC Board understanding of its shareholder’s goals, the SOC business & of how the SOC will achieve the shareholder’s objectives outlined in the shareholder compact

Purpose/importance Implementation details on the attainment of key performancemeasures


Source/collection of data Approved Corporate Plan by the SOC Board



Type of indicator Process indicator


Reporting cycle Annually

New Indicator None

Desired Performance Achievement of the planned objectives

Indicator responsibility DDG: Transport

Indicator Approved SOC Shareholder Compacts by the Shareholder

Short definition Documentsthemandatedkeyperformancemeasures&indicatorsto be attained by the SOC in delivering the desired outcomes & objectives as agreed between the SOC Board & Shareholder

Purpose/importance MonitorthekeyperformanceindicatorstobeattainedbytheSOC

Source/collection of data Approved Shareholder Compacts by the Shareholder and SOC






New Indicator None

Desired Performance Attainment of the key performance indicators as outlined in thecompact

Indicator responsibility DDG: Transport, Energy and Manufacturing

Indicator Assessment of SOC Quarterly Reports by business units

Short definition Report that accurately provide information regarding achievement of quarterly targets of the SOC

Purpose/importance Provideperformancefeedbackonthesetofquarterlytargets

Source/collection of data Approved quarterly reports by the SOC Boar







New Indicator None

Desired Performance Achievement of the set of quarterly targets

Indicator responsibility DDG: Transport, Energy and Manufacturing, EIPA

Indicator Annual General Meetings (AGM)

Short definition Gathering of the SOC Directors and shareholder as required by law to be held each calendar year

Purpose/importance Provides a platform for the shareholder to comment on the performance of the company and communicate strategic objectives that must inform the business activities of the company

Source/collection of data The Notice of the Annual General Meeting & the Annual Financial Statements(“AFS”)shouldbesubmitted15businessdaysbeforethe AGM






New Indicator None

Desired Performance Interaction with SOC Boards

Indicator responsibility Chief Director: Governance

Indicator Assessment of SOC Annual Reports by business units

Short definition The annual report provides the shareholders and potential investors with information on how the company has been performing and how it expects to grow in the future.

Purpose/importance To record the activities and provide a report on performance of theSOCduringaparticularfinancialyear

Source/collection of data Approved Annual Report by the SOC Boar






New Indicator None

Desired Performance Evaluate the performance of a public entity after the end of the financialyear

Indicator responsibility DDG: Legal, Transport, Energy, Manufacturing, EIPA and SP


Indicator Financial and Technical assessment of PFMA Applications

Short definition Shareholder approval for Section 54 application in terms of the PFMA

Purpose/importance Rigorous assessment of PFMA applications with appropriate recommendations to Minister

Source/collection of data Section 54 Applications from SOC






New Indicator None

Desired Performance Assessment of applications within 30 days of receipt by business units

Indicator responsibility DDG: Legal, Transport, Energy, Manufacturing

2. LEGAL AND GOVERNANCE

Indicator Title Government Shareholder Management (GSM)

Short definition Legislativeandregulatoryframeworktoprovideforthelegislativeenvironment within which SOC operate

Purpose/importance Tocreatea legislative frameworkon theshareholderoversightfunction

Source/collection of data Governmentgazette





Reporting cycle Quarterly

New Indicator None

Desired performance Government Shareholder Management Bill

Indicator responsibility DDG: Legal


Indicator Title Deregistration of Aventura

Short definition Implementation and monitoring of the deregistering of Aventura

Purpose/importance To assess the deregistration process of Aventura and ensure that it meet all the statutory requirements.

Source/collection of data Reports submitted by the board of Aventura.






New Indicator None

Desired performance Tabling of the Bill to repeal the Overvaal Resorts Act in Parliament

Indicator responsibility Legal and Governance

Indicator Title Risk Modelling Tool

Short definition Assessmentand monitoringof risksaffectingperformanceofSOC

Purpose/importance Measurestomitigaterisks

Source/collection of data SOCRiskOfficers






New Indicator None

Desired performance Feasibilityreportonriskmodellingtool

Indicator responsibility ChiefRiskOfficer

3. INDUSTRY IMPACT

3.1 Energy and Broadband Enterprises

Indicator MYPD 3

Short definition Engagement to develop an MYPD3 response strategy

Purpose/importance Toensurereliableandefficientelectricitysupply

Source/collection of data SOC and other sources







New Indicator None

Desired Performance Response on MYPD 3

Indicator responsibility DDG: Energy

3.2 Manufacturing Enterprises

Indicator Monitoring of Alexkor Strategy

Short definition RealignmentofAlexkor’srole

Purpose/importance Strategy to ensure sustainability of the company







New Indicator None

Desired Performance Alexkorimplementationofthestrategy

Indicator responsibility DDG: Manufacturing

Indicator SAFCOL Strategy

Short definition Realignment of SAFCOL role

Purpose/importance Strategy to ensure sustainability of the company







New Indicator None

Desired Performance SAFCOL Corporate strategy



Indicator South Africa’s MRO service Hub

Short definition Assessment of technical capabilities of the aviation sector

Purpose/importance RoadmaponSAA,SAXandDenelaviation







New Indicator None

Desired Performance StudyonthetechnicalcapabilitiesofSAA,SAXandDenel


3.3 TRANSPORT ENTERPRISE

Indicator Title Ministerial task team to monitor the implementation of the SAA Long Term Turnaround Strategy (LTTS) and SAX 20:20 Vision

Short definition Monitor the implementation of the strategies according to the developed integrated project plan

Purpose/importance To assess the State Aviation operating approach Source/collection of data SAAandSAXMethod of calculation NoneData limitations NoneType of indicator Process indicator Calculation type NoneReporting cycle QuarterlyNew Indicator NoneDesired performance Strategy of the airlines implemented Indicator responsibility DDG: Transport

Indicator Title Assessment of the Transnet’s investment programme

Short definition Delivery of the investment programme on time and within budget

Purpose/importance Quarterly assessment of Transnet investment programme

Source/collection of data Transnet







New Indicator None

Desired performance Oversight monitoring of the Transnet build programme


Indicator Title Assessment of the airlines fleet renewal programme

Short definition Delivery of the investment programme on time and within budget

Purpose/importance Quarterly assessment of the airlines investment programme

Source/collection of data SAAandSAX






New Indicator None

Desired performance Oversightmonitoringoftheairlinefleetprogramme


3.4 STRATEGIC PARTNERSHIPS

Indicator Title Project Management Office

Short definition EstablishmentofthePMOtoassistinthemonitoringofkeystrategicinfrastructure development projects

Purpose/importance Improve the impact of the build programme on the domestic economy and improvement in industrial capabilities

Source/collection of data SOC





Reporting cycle Annual

New Indicator None

Desired performance Enhanced capacity to oversee large infrastructure projects

Indicator responsibility DDG: Strategic Partnerships


Indicator Title Implementation of the Africa Strategy

Short definition Rollout of Africa Strategy - Pipeline of projects

Purpose/importance Coordinating mechanism and pipeline management for South Africa investments







New Indicator None

Desired performance Implementation of the Africa Strategy


Indicator Title Funding Strategy

Short definition Plan that outlines funding

Purpose/importance Secure funding for major investment projects that go beyond SOC balance sheet capacity

Source/collection of data Internal and SOC



Type of indicator Qualitative indicator



New Indicator None

Desired performance Funding proposals on the SIPs


Indicator Title Private Sector Participation (PSP) Framework

Short definition Frameworkthatseekstooutlinetheroleoftheprivatesectorintheinfrastructure development

Purpose/importance Guide private sector participation








New Indicator None

Desired performance Improved investment into infrastructure to support economic devel-opment


Indicator Title Coal Mining Fund

Short definition Strategic advice on the Coal mining fund proposal and structuring

Purpose/importance Advise on the Coal Mining Fund







New Indicator None

Desired performance Monitoring of the Coal Mining Fund


Indicator Title Strategic SOC customer sector forum – Oil and Gas and Boat Repair

Short definition Requirements of oil and gas sector and boat repair industries to build a competitive platform in South African ports

Purpose/importance Improvement of service offering by Transnet







New Indicator None

Desired performance Proposals on the service offering improvements by Transnet



3.5 Economic Impact and Policy Alignment (EIPA)

Indicator Title Economic Model

Short definition Oversee process to conduct macro-economic modelling, re-search and impact evaluation and ensure SOC contribute to New Growth Path

Purpose/importance Assessment of impact of SOC investment and operation activities







New Indicator None

Desired performance Developed economic model to assess impact of SOC investment

Indicator responsibility DDG: EIPA

Indicator Title Transnet Pricing Structure

Short definition Conduct Impact of Transnet pricing structure on logistics

Purpose/importance Assessment of Transnet pricing structure







New Indicator None

Desired performance Transnet pricing structure



Indicator Title Transformation indicators

Shortdefinition Developmentofkeytransformationperformanceindicators

Purpose/importance Identificationofkeysocioeconomicindicatorstobeincludedintothe shareholder compact







New Indicator None

Desired performance Keysocioeconomicindicatorsidentified



RP165/2014 ISBN: 978-0-621-42817-9

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