Presentation to a joint sitting of the Portfolio Committee on Public Enterprises and the Select Committee on Labour and Public Enterprises Presenter: Minister Jeff Radebe Venue: Cape Town Date: 19 March 2003

Outline of Presentation Recap on DPE’s Restructuring Mandate Achievements in 2002/2003 and planned activities for 2003/2004 Restructuring of SOEs Performance Monitoring and Strategic Analysis MTEF Budget Allocations

Recap on DPE’s Restructuring Mandate The primary mandate of DPE is to restructure and transform SOEs so that they can fulfill the requirements of Government’s development agenda in an efficient and sustainable manner.

Programme 2: Restructuring of SOEs Overview Energy Telecommunications - M-Cell - Telkom IPO Defence Transport Forestry Restructuring of Non-Strategic /Non Core Assets Alexkor Aventura

Energy Sector Progress to Date Incorporation of Eskom as a company in terms of the Eskom Conversion Act - Act No. 13 of 2001 Appointment of Eskom Holdings’ new Board of Directors in 2002. Work in Progress Ongoing restructuring of Eskom Enterprises

Energy Sector (Cont.) Key Activities for 2003/2004 Complete the Generation Cluster Review Study Complete the Design of the Multi Market Model and Implement the Market Rules Improve regulatory frameworks to sustain competitive markets. Ring fence Transmission appropriately Finalize BEE participation in Eskom Generation and commence with implementation. Proceed with 30% disposal of Generation market Complete the rationalisation of Eskom Enterprises

Telecommunications Sector M-Cell Progress 2002/2003 19% of M-Cell was disposed of to an SPV comprising of M-Cell Management and Staff for R4.8 billion and the ICE BV Structure was wound down. Activities for 2003/2004 Detailed preparatory work is currently being finalized to dispose of the remaining 4% of M-Cell shares currently held by Transnet.

Telkom IPO 2002/2003 ACHIEVEMENTS 25% of Telkom listed on the JSE and NYSE (ADR) 5 March 2003. Proceeds to date: approx R4.1 Billion Largest mobilisation of ordinary South Africans countrywide through a public education campaign Largest retail offering ever in South Africa. 127,000 citizens participated in the retail scheme to the total sum of R340 million. Diabo Trust comprising 2% of Telkom Shares established to ensure the transfer of shares to Telkom employees. The only significant listing in the Asian, Middle-East and African market, demonstrating SA’s economic resilience

Defence Sector Denel 2002/2003 Turbomeca Africa established from Denel's Airmotive division and 51% stake of Turbomeca [France] 2003/04 Negotiations are at an advanced stage with BAE Systems to acquire 30% stake in Denel On the basis that acceptable terms are reached, aim to complete transaction within the next 8 weeks.

Transport Sector Rail The internal restructuring and efficiency improvements at Spoornet are continuing Shadow incorporation of Spoornet divisions is continuing Options for Orex are being reviewed, in terms of the development of the iron ore deposits of the Northern Cape Integration of Passenger Rail, initially the merge of Metrorail and SARCC and later Shosholoza Meyl - process now at stage where a study is complete and Cabinet approval will be sought.

Transport Sector (cont.) Concession of DCT to commence in May 2003 as the first of a series of Port Operation Concessions. National Ports Authority Bill referred back to Departments. Will return to parliament well before 2 month deadline required by Transport Portfolio Committee. Establishment of Ports Regulator in the next fiscal year. 3 year tariff reform negotiation process continuing.

Transport Sector (cont.) Aviation and Airports Re-acquisition of SairGroup’s 20% stake in SAA complete The incorporation of SA Express into SAA is currently being investigated. ACSA End-State Model currently under review

Forestry Sector Komatiland MTO Amatola The new bidding process has commenced and it is expected that it will be completed by December 2003. MTO The negotiations with the preferred bidder are in process and will be completed by end of June 2003. Amatola The finalisation of this transaction is expected by end of June 2003.

Alexkor - Mining Sector Cabinet decision taken to dispose of 51% of Alexkor stake to an SEP with BEE characteristics and international marketing exposure. 10 % Namaqualand community stake (in Trust) set aside. 4 Bidders have submitted final bids Adjudication process currently underway

Aventura 7 Resorts currently disposed of. These are : Aldam, Bloemfontein, Christiana, Eiland, Kareekloof, Heidelberg and Roodeplaat. Remaining 8 resorts currently in the process of being sold. These 8 Resorts have Club Privè liabilities, bids are currently in the process of being adjudicated.

Transnet Housing and Eskom Finance Company Other Transactions Apron Services 51% of Apron Services disposed of to Equity Aviation for R117 million. Air Chefs Ownership of Air Chefs now vests with SAA following acquisition of 51% from Transnet and Fedics Transnet Housing and Eskom Finance Company Model for disposal has been approved by Cabinet. It is envisaged that the disposal of these 2 entities will be finalised during 2003/04.

Performance Monitoring Achievements for 2002 – 2003 The financial evaluation model to evaluate the SOE’s financial performance has been developed, communicated to the SOE’s and is now at an implementation stage; Shareholder compacts are in place with Transnet, Eskom and Denel and reporting is in line with these; The Protocol on Corporate Governance in the Public Sector has been revised, approved and adopted by Cabinet and came into effect from September 2002. The SOE Boards have been restructured successfully in terms of Government’s Policy for Board Appointments.

Performance Monitoring(contd.) Achievements For 2002-2003 An audit of compliance with corporate governance in SOE’s was completed. Overall all SOEs are compliant with King II and the Protocol on Corporate Governance. Improvement measures such as training and capacity building of directors have been implemented to address the shortcomings identified; The design of the SOE Database is now complete. Consistent policy for Affirmative Procurement within SOEs finalised

Performance Monitoring (contd.) Projects Planned For 2003-2004 In order to achieve the objectives that the Department has set itself in terms of its role as a shareholder in SOEs, the following are some of the projects which have been planned for the year: Finalization of the Remuneration Policy for SOE Boards, including issues of bonus payments to executives; Completion of an Investment Map of SOE’s; Research on Socio Economic and other best practice and benchmarks for each SOE, as well as the development of a database for the said benchmarks; Finalize the post-restructuring proposal for government’s shareholding in SOEs; Ongoing training and development for current and potential directors; Implementation of the ESOP Policy for SOEs; Implementation and monitoring of the affirmative procurement framework at an SOE level;

VOTE 09: PUBLIC ENTERPRISES MTEF ALLOCATIONS for Financial 2003/2004 R 60 205 000 Responsible Minister: Minister of Public Enterprises Administering Department: Public Enterprises Accounting officer: Director-General of Public Enterprises Budget Breakdown per programme reflected on the next slide

Budget Breakdown per programme BUDGETED AMOUNT 2003/04 2002/03 EXPENDITURE 2002/03 as of 13/03/2003 Administration R 28 676 000 R 26 018 000 R 26 335 000 Restructuring of State Owned Enterprises R 15 847 000 R 207 583 000 R 169 581 000 Restructuring R 10 475 000 R 9 390 000 R 6 453 000 Initial Public Offering R 5 372 000 R 198 193 000 R 163 128 000 Performance Monitoring and Strategic Analysis R 15 682 000 R 15 477 000 R 7 077 000 Performance Monitoring and Benchmarking R 12 102 000 R 11 330 000 R 5 119 000 Strategic Analysis R 3 577 000 R 4 147 000 R 1 958 000 DEPARTMENTAL TOTAL R 60 205 000 R 249 078 000 R 202 993 000

Thank You