presentation to the joint meeting of portfolio and select committees on public enterprises

Department of Public Enterprises DATE - April 20, 2023

Presentation to the Joint

Meeting of Portfolio and

Select Committees on

Public Enterprises

Presenter: Dr Sivi Gounden - DGDate: 13 November 2002

Restructuring of State Restructuring of State

Owned Enterprises Owned Enterprises

20022002


Outline of Presentation

• Restructuring Objectives

• Proceeds and SOE performance

• Progress on SOE restructuring

• Addressing concerns of Organized Labour


Social and Economic Impact of Restructuring

Internal to the firm, industry or sector

Broader economic impacts

Social impacts

Enhancing efficiency and effectiveness of state enterprises

Reducing the public sector borrowing requirement

Ensuring wider participation in the South African economy

Accessing globally competitive technology

Attracting foreign direct investment and portfolio inflows

Mitigating possible negative social impacts arising from restructuring

Creating effective market structures in the sectors currently dominated by state owned enterprises

Financing growth and the requirements for industrial competitiveness

Promote sustainable employment, either directly or indirectly, through improvements in the economy

Mobilising private sector capital and expertise


Proceeds from Restructuring

• Since 1997 – proceeds to the fiscus - R20 billion• For the period (2000 – 2001) – proceeds to the

fiscus - R7.5 billion (SASRIA & MCell)• National Treasury projection for the current year

is R12 billion. – Telkom IPO– Safcol Proceeds– Alexkor– Apron Services– Air Chefs– Aventura Resorts


Total Proceeds from Restructuring endeavours

State Owned Enterprise (SOE) DATE % SOLD PROCEEDS N.R.F. FORM

SABC Stations March-97 100% 510 510 SEP/BEETelkom May-97 30% 5,631 1,165 SEPSun Air November-97 100% 42 21 BEETransnet's Viamax May-98 30% 12 N/A BEEACSA June-98 20% 819 819 SEPACSA October-99 4% 173 173 BEEACSA October-99 1% 44 44 ESOPSAA July-99 20% 1,400 611 SEPTransnet's Connnex August-99 80% 15 N/A SEP/BEESASRIA February-00 N/A 7,100 7,100 RESTRUCTURING DIVIDENDM-Cell/MTN June-00 6% 2,400 2,000 BEETransnet's Production House July-00 100% 11 N/A BEETransnet's Chemical Services August-00 100% 3 N/A SOE - TSITransnet's Transwerk Perway September-00 65% 19 N/A SEPTransnet's Transmed Administrator September-00 100% 5 N/A SEPTelkom (Ucingo) November-00 3% 564 564 BEESASRIA April-01 N/A 2,400 2,000 RESTRUCTURING DIVIDENDSafcol - ECN August-01 75% 100 75 SEP/BEESafcol - KZN October-01 75% 45 SEP/BEEM-Cell January-02 20% 5,500 5,000 MONETISATION

TOTAL 26,793 20,082

AcronymsN.R.F = Natioanal Revenue Fund (a/c managed by the National Treasury).SEP = Strategic Equity Partner.BEE = Black Economic Empowerment.ESOP = Employee Share Ownership Programme.SASRIA = South African Special Risks Insurance Association.N/A = Proceeds were either not paid to the National Revenue Fund or no percentage stake is applicable.TSI = Technology Services International, a division of Eskom Enterprises.


SOE borrowings as a percentage of SA’s External

debtSOEs' Borrowings as a Percentage of SA's External Debt

46.0%

42.3%40.2%

35.8%

29.9%31.4%

27.0%24.7%

21.8%20.0%

22.5%

18.4%

0%

10%

20%

30%

40%

50%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Year

Per

cen

tag

e

SOE borrow ings as % of international debt

As at end of J une 2001. Dec 2001 not available yet


• Defence

• Transport

• Energy

• Telecommunications

• Forestry

• Mining

• Hotels and Leisure

Restructuring of SOEs (Progress Update)


Defence Sector

• Denel (Pty) Ltd

• Cabinet approved the acquisition by BAE Systems of 30%

of Denel Aerospace and Ordnance for R375 million.

• Government will retain its 70% share in the interim.

• We will explore the options for the ESOP, BEE and other

SEP’s including a possible IPO down the line.

• Government will also hold a “golden share” in respect of

setting clearly defined issues that pertain to our national

security as well as other issues such as size and extent of

future shareholding.

• Negotiations ongoing with BAE Systems


• Rail

– Rail Safety Bill in process of being enacted (NDOT).

– Adoption by Government of a restructuring model for Spoornet (NFA

sectoral signoff secured 25/2/02).

• Spoornet to be run as an integrated freight company on an extended

rail network.

• Internal restructuring and efficiency improvements to be implemented.

• Options for Orex to be reviewed. Inter-departmental process instituted

to investigate options base case(DPE, DTI & DME).

• Shadow incorporation of divisions to be performed – to establish

accountability and address cross-subsidisation audit trails and impact.

• Lux Rail (Blue Train) - Concession currently underway.

• Integration of Rail Passenger Services in progress

Transport Sector


Transport Sector cont…

• Ports

– Ports policy was approved by Cabinet and gazetted 2002.

– Incorporation of National Ports Authority and Port Operations

Division.

– 3 Year tariff reform process started December 2001.

– Ports restructuring options principles and concession

architecture developed to further its multiplier effect role in

the economy as well as SADC.

– An Economic Impact Study will be performed to identify the

asset packages

– The Port Regulator and New Ports Act legislation is currently

under development. (NDoT)


Fast tracking concessioning of Durban container terminal

• Durban port congestion has resulted in the fast tracking of concessions for the Durban container terminal.

• ITA will be issued in Q1– 2003• International (Canadian consortium) consultants to

assist the DPE in developing concession architecture and model already at work

• Expected to provide reports early next year.• Labour engagements have been initiated


Energy Sector

ESKOM General

• Incorporation of Eskom as a company in terms of the Eskom

Conversion Act – Act No. 13 of 2001.

• Generation, Transmission, Distribution to be set up as independent

operating divisions.

• The unregulated businesses, Eskom Enterprises, incorporated as a

separate subsidiary

• Interaction with organised labour is ongoing.

• 2002 – 2003 Activities

• Ongoing restructuring of Eskom Enterprises, with emphasis on

governance issues and internal rationalisation


Energy Sector cont…

• Commence process for disposal of 10% of Eskom’s capacity

with BEE focus. Introduction of 20% for the Private Sector

Participation (PSP) stake to commence, subject to the

development of an appropriate regulatory framework and market

rules being in place;

• Consultants already engaged to assist in the development of the

Market Model and evaluation of the Cluster Model of Eskom.

• Energy Distribution

– Co-ordinated by DME – (Work ongoing)


Telkom IPO

• IPO will proceed in the 2002/03 fiscal year

• Education campaign in progress.

• No further comment as a result of SEC

requirements


• KwaZulu-Natal Transaction

• 75% stake was sold to Siyaqhubeka Consortium for R100 million.

• The sale was finalised and assets were transferred on October 1, 2001.

• 14% will be made available to Black Farmers, 10% has been set aside for Community Trust and 9% was set aside for ESOP.

• The Community will receive R5,3 million per annum in rentals.

Forestry Sector


Forestry Sector

• Eastern Cape North Transaction– Sale and transfer of assets to Singisi Consortium

including 168 communities was concluded in August 2001.

– Sale value was R 17 million.

– An additional 10% was set aside for community trust and 9% for an ESOP.


• Komatiland Forest Package– Currently going out to rebid

• Western and Southern Cape– Land Conversion

• Process commenced

– SEP/BEE

• RFP issued

• Preferred SEP/BEE to be determined

• Amatola– Transaction negotiations in progress

Forestry Sector cont…


Mining Sector

• Alexkor Amendment Act promulgated.

• Decision taken to dispose of 51% of Alexkor stake to a SEP inclusive of

BEE and international marketing exposure to add value.

• 10% Namaqualand community stake (in Trust) to be set aside.

• Project Plan for transaction implementation developed.

• Phase 1 for prequalification of prospectve bidders finalized

• Phase 2 for the submission of final binding bids in progress

• Preparatory work complete and evaluation criteria finalized- November

2002

• SEP transaction should be finalized – February 2003

• SEP could commence operations shortly thereafter


• Cabinet resolved to dispose of all Aventura resorts either in single entities or groups.

• Disposal of 4 non-strategic resorts concluded, (Aldam and Christiana).

• Four resorts currently being disposed off:– Heidelbergkloof ( to be finalized soon)– Kareenkloof (Finalized)– Eiland (Finalized)– Pretoria (Finalized)

• Prospectus and adverts for remaining 8 resorts issued Oct 2002 and bids received on 4 October 2002

• Evaluation process has commenced and expected to complete by end November 2002

• Disposal of the remaining Aventura resorts by end 2002 /2003 financial year.

Hotels and Leisure


Addressing concerns of Organized Labour

• Engagement with Organized Labour ongoing within the context of NFA.

• Different Sector Forums play a critical role in facilitating these processes of engagement.


Thank You

presentation to the joint meeting of portfolio and select committees on public enterprises

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