Restructuring Status Report: Portfolio Committee August 2002 Page 1 Presentation to the Portfolio Committee on Public Enterprises Presenter:Malixole Gantsho Venue:Cape Town Date:19 August 2002

Restructuring Status Report: Portfolio Committee August 2002 Page 2 DPE - Background The Office for Public Enterprises was originally established in 1994 as a Schedule two organisation. At the time the primary objective of the Office was to champion and direct the restructuring of State Owned Enterprises (SOEs) to ensure optimum economic and development impact. On 25 July 1995 the Ministry of Public Enterprises, issued a "Discussion Document by the GNU on the Consultative and Implementation Framework for the Restructuring of State Assets". HSBC was government’s overall restructuring adviser from October 1996 to October 1999, with various advisors’ involvement at a specific transaction level. Their mandate allowed various government departments to draw heavily (transfer skills) on their expertise and resources at a fee.

Restructuring Status Report: Portfolio Committee August 2002 Page 3 DPE - Background At a Government “ Lekgotla ” in November 1999, a decision was taken to accelerate the restructuring of State Owned Enterprises (SOEs). In 1999 the Minister of Public Enterprises made a representation for the upgrading and re-designation of the Department of Public Enterprises as a schedule I National department, from being a schedule III Office. This necessitated the need to source sector specific skills in energy, telecommunications, defence and the transport sector. Furthermore, the department also focused on non-core assets and specialist services where transaction are managed within the restructuring programme of the department. In August 2000 Government through the Department of Public Enterprises unveiled its restructuring of state owned enterprises framework – Policy Framework: Accelerated Agenda for the Restructuring of State Owned Enterprises This framework forms the basis of the South African Government’s restructuring programme.

Restructuring Status Report: Portfolio Committee August 2002 Page 4 DPE - Vision The Department feels that it is important to have one common, shared understanding of where it is going as an organisation. That a clear vision would provide the rallying cry and spirit of camaraderie needed in order to enable it to deliver on its mandate. The Department has formulated the following organisational vision to guide it through the next four years: “ Restructured SOEs in a globally competitive environment promoting economic growth and a better life for all ”. New Vision (confirmed): Restructured State Owned Enterprises, in a globally competitive environment, promoting economic growth and a better life for all.

Restructuring Status Report: Portfolio Committee August 2002 Page 5 DPE - Mission The vision can only be accomplished if it is translated into actions that people can engage in and having done so can be measured in terms of how well their efforts contributed towards achieving the vision. Therefore the next level of operation of the vision is the mission. The Department has formulated the following organisational mission to guide it through the next four years “ To direct and manage the accelerated restructuring of SOEs to maximise shareholder value ”. New Mission (revised): Maximize shareholder value, to support the achievement of economic and social objectives of Government.

Restructuring Status Report: Portfolio Committee August 2002 Page 6 Accelerate the restructuring agenda of SOEs Maximising shareholder value Promoting macro-economic growth and competition Promote wider participation in the economy (IPOs retail offer for HDIs) and restructuring (BEE) Mobilise private capital and expertise Ensure that SOEs are efficient, competitive and promote service delivery Monitor and measure performance Contribute to lower public sector borrowing Mitigate country risk associated with implicit contingent liabilities and also those that are explicit (guarantees) DPE’s Mandate

Restructuring Status Report: Portfolio Committee August 2002 Page 7 Social and Economic Impact 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

Restructuring Status Report: Portfolio Committee August 2002 Page 8 INSTITUTIONAL FRAMEWORK NEDLAC NFA PARLIAMENT INSTITUTIONAL FRAMEWORK Other

Restructuring Status Report: Portfolio Committee August 2002 Page 9 DPE Organisational Chart Jeff Radebe Minister Sivi Gounden Director-General Ike Ike Nxedlana Chief Financial Officer Finanical Management Nonkululeko Msomi Chief Director Performance Monitoring & Benchmarking Malixole Gantsho DDG Restructuring Moretlo Mokuele Chief Director Corporate Services Eugene Mokeyane DDG IPO Office Nthabiseng Seperepere Director Alternative Service Delivery

Restructuring Status Report: Portfolio Committee August 2002 Page 10 Executive Summary - Biography Jeffrey Radebe, MP, Minister of Public Enterprises Minister Radebe is the political head of the Department of Public Enterprises. He holds advanced international law degrees and was an awarded an honorary Doctrate in Humane Letters by University of Chicago. His development and thinking is insipired by writings of progressive thinkers like Karl Marx, Angela Davis, Albert Luthuli.He is currently serving his second term as a cabinet Minister, and was previously Minister of Public Works. His long standing political history and activism in liberation struggle of our country contributed in his vision and commitment to the cause of the people. It is this experience that inspire his work in his current potfolio in ensuring that the plight of State Enterprises contributes to the socio- economic developments in our society.

Restructuring Status Report: Portfolio Committee August 2002 Page 11 Dr Sivi Gounden – Director General Dr Sivi Gounden In April 1999, he was appointed Director General of the newly established Department of Public Enterprises. He holds a PhD – Engeneering from Univesity of Natal. He has extensive experience in developmental projects through public sector procurement. His previous position at Department of Public Works saw him introducing the concept of Public Private Partnership for Public sector procurement and he also contributed to government’s green paper on Public Sector Procurement in 1996.

Restructuring Status Report: Portfolio Committee August 2002 Page 12 BACKGROUND OVERVIEW “WHY RESTRUCTURING” Macro- economic benefits – reduction of Government’s borrowing requirement, contingent liabilities (guarantees) and lower interest rates Ensure wider active participation in the South African economy Enhancing dynamism & competitiveness thereby enhancing the efficiency of the various SOEs Unlocking Private Sector – led growth Free resources for social services and infrastructure spending Consumers to benefit from lower prices and higher quality services brought by expanded competition A catalyst for Foreign Direct Investment (FDI) a.k.a “brick and mortar” Accessing globally competitive technology Development of Capital Markets

Restructuring Status Report: Portfolio Committee August 2002 Page 13 Forms of Restructuring Concessions (BOT) Strategic Equity Partner (SEP) Strategic Management Partner (SMP) Public Private Partnership (PPP) Privatisation (Full or Partial) Securitisation Equity Linked Products (Convertibles) Floatation of SOEs (Initial and Secondary)

Restructuring Status Report: Portfolio Committee August 2002 Page 14 Overview of Restructuring Government remains strongly committed to restructuring of state owned enterprises as an integral part of our economic and social transformation. Commitments Made to the Portfolio Committee Last Year 2002/2003 represents acceleration in the implementation of SOE restructuring. Need for the alignment of Portfolio Committee program with Departmental program to ensure constructive engagement prior to implementation. Commitment to avail Ministry and Departmental resources to support Portfolio Committee program.

Restructuring Status Report: Portfolio Committee August 2002 Page 15 Overview of Restructuring Commitments Made to the Portfolio Committee Last Year (Cont) Finalization of sectoral policies. Finalisation of critical legislation Interaction with organised labour on restructuring initiative Careful review of current shareholder compacts and development of future shareholder compacts 2002/2002 represents acceleration in the implementation of SOE restructuring

Restructuring Status Report: Portfolio Committee August 2002 Page 16 Overview of Restructuring Progress Made 2001 – 2002 Significant progress was made in key sectoral polices, such as telecommunications, energy, mining and ports. These policies and legal frameworks lay the basis for accelerated restructuring this year and beyond. Last year saw also a concentrated emphasis on non-core assets, such as Aventura, Alexcor, and Air Chefs. Significant progress was made also in developing a culture of corporate governance in SOEs through strengthening of boards, conclusion of shareholder compacts, and a framework for managing shareholder interests.

Restructuring Status Report: Portfolio Committee August 2002 Page 17 Overview of Restructuring Progress Made 2001 –2002 (continued) Significant progress was made in key sectoral polices, such as telecommunications, energy, mining and ports. These policies and legal frameworks lay the basis for accelerated restructuring this year and beyond. Last year saw also a concentrated emphasis on non-core assets, such as Aventura, Alexcor, and Air Chefs. Significant progress was made also in developing a culture of corporate governance in SOEs through strengthening of boards, conclusion of shareholder compacts, and a framework for managing shareholder interests.

Restructuring Status Report: Portfolio Committee August 2002 Page 18 Overview of Restructuring Progress Made 2001 –2002 (continued) We have clearly demonstrated our commitment to engage and consult with all relevant stakeholders to build consensus and support for restructuring initiatives. We have strengthened the functioning of the NFA, which has seen greater participation by labor in the development of restructuring models for energy, (rail) transport and defense. DPE and SOEs have continually provided briefings to the portfolio and select committees to ensure a common understanding of restructuring challenges and for Parliament to effectively fulfill its oversight role.

Restructuring Status Report: Portfolio Committee August 2002 Page 19 Overview of Restructuring Progress Made – (continued) We have continued to enhance our internal capacity to manage the complex challenges of restructuring. For the past financial year, the Department achieved an unqualified audit report, which reflects prudent financial management systems and controls, in compliance with the PFMA. In spite of major difficulties and challenges in 2001, including volatile financial markets and a global economic slowdown, especially in airline and telecom sectors, government’s restructuring program remains on track and moving ahead.

Restructuring Status Report: Portfolio Committee August 2002 Page 20 Key Challenges Continue to make a meaningful contribution to government’s macroeconomic objectives Continuous engagement with labor Unfavorable market conditions Communicating restructuring program to the wider South African community Achieving meaningful Black Economic Empowerment

Restructuring Status Report: Portfolio Committee August 2002 Page 21 KEY PROJECTS FOR Restructuring Initial Public Offering (IPO) Performance Monitoring Strategic Analysis Alternative Service Delivery Communications International Relations Finance Non-Core Restructuring Summary of Challenges and Proposed Way Forward

Restructuring Status Report: Portfolio Committee August 2002 Page 22 Introduction Energy Telecommunications M-Cell Second National Operator (SNO) Defence Transport Forestry Mining – Alexkor Aventura Non-Core Restructuring Restructuring of State Owned Enterprises Overview

Restructuring Status Report: Portfolio Committee August 2002 Page 23 Introduction Purpose Statement of Restructuring Branch “To co-ordinate development and accelerate the execution of restructuring plans for state owned enterprises in line with the Department’s vision” Key Objectives * Coordinate, Develop and Implement Restructuring and Transaction Plans * Promote Wider Economic Participation In the SA Economy * Realize Proceeds from Restructuring Transactions * Enhance Global Competitiveness of SOEs * Promote Long Term Sustainable Employment * Ensure Stakeholder Support for Restructuring Plans * Safeguard the Integrity and Transparency of the Restructuring Process Key Functions and Activities Support services; Legal Services; Financial Modeling and Risk Analysis; Projects and Transaction Management; Sectors: Energy;Mining; Hotels and Resorts; Defence; Forestry; Telecommunications; Non-Core Assets Core Values Honesty/integrity; Trust; Professionalism; Teamwork; Respect; Commitment;; Transparency; Accountability; Effectiveness/efficiency; Discipline.

Restructuring Status Report: Portfolio Committee August 2002 Page 24 Energy Sector Global Trends The electricity sector of most countries in the world are being driven by:   The desire to improve allocative and operational efficiencies   The desire to widen customer choice   Technological change   Financing needs and markets   Environmental pressures   The particular needs of the country

Restructuring Status Report: Portfolio Committee August 2002 Page 25 Energy Sector (cont.) Progress to Date 2002 Incorporation of Eskom as a company in terms of the Eskom Conversion Act - Act No. 13 of 2001 Appointment of new Board of Directors by end of Generation, Transmission and Distribution set up as operating divisions, as a result of the Act Ongoing restructuring of the Eskom Enterprises of Eskom - process of identifying a SEP for Rotek underway to complete 2002 Technical team comprised of DPE, DME, DPLG, NER, Eskom, SALGA set up and submitted recommendations on key issues regarding restructuring of the energy sector.

Restructuring Status Report: Portfolio Committee August 2002 Page 26 Energy Sector (Cont.) Implement Generation, Transmission and Distribution as wholly owned subsidiaries of Eskom Ringfencing of Distribution Business: Distribution moves out of Eskom Holdings into a separate EDI holdings company (Dependent on EDI process led by DME). Legal documentation setting up EDI Holdings in process of cabinet approval Commence commissioning and sale of 10% of Eskom’s capacity with BEE focus. Introduction of 20% SEP stake to commence, with focus of foreign direct investment. Further planning and development of the market structure will be dependent on prevailing conditions This is subject to the development of an appropriate regulatory framework and market rules being in place. Multi Market Model is currently being developed 2002 – 2003

Restructuring Status Report: Portfolio Committee August 2002 Page 27 Our objectives are – to encourage the development of a strong local telecommunications sector with strong growth prospects and high quality service, and –to maximise value through an efficient and orderly sale process The disposal of Transnet’s stake in M-Cell is an important part of the programme of restructuring of Government ownership in the telecommunications sector In July 2000 Government sold 75 million shares to Johnnic R33 per share resulting in Transnet holding 24% of M-Cell The detailed preparatory work is now complete for the next phase of the disposal to be implemented Telecommunications Sector (cont.) M-Cell

Restructuring Status Report: Portfolio Committee August 2002 Page 28 On 30 May 2001 Request for Proposal (RFP) and other transaction documents to suitable potential bidders issued In January 2002 the 20% Transnet M.Cell stake was “monetized”, for 18 months and taken by Ice Finance BV, a Dutch company, yielding USD 475 Million. JP Morgan facilitated the transaction. Payments have since been transferred to Transnet bank account by Ice Finance BV Transnet will benefit from the economic performance of these shares during the 18 months but have hedged against poor performance Process of identification of buyer of the 20% stake is ongoing, with intention to dispose in the 2002/2003 financial year. Government is committed to sell its strategic stake in M-Cell at a price that reflects the true market value of the stock Different options are now being considered. Telecommunications Sector (cont.) M-Cell

Restructuring Status Report: Portfolio Committee August 2002 Page 29 Telkom IPO Report - Introduction SNO It has been agreed that there will be a 30% set aside for Eskom (Esi-tel) and Transnet (Transtel) in the SNO DPE has facilitated that Esi-tel and Transtel” participation in the SNO by making recommendations as to the value added that these entities will bring to the SNO SOE partners set data rooms in preparation for due diligences Esi-tel and Transtel will be able to begin operations once the licence is issued

Restructuring Status Report: Portfolio Committee August 2002 Page 30 Defence Sector Denel BAE Systems invited to become SEP in Denel on the basis of the complementary fit between the two broad based defence groups. Negotiations are at an advanced stage with BAE Systems to acquire significant minority stake in Denel Turbomeca of France invited to become a SEP for Denel's Airmotive division and acquire a majority stake. Negotiations currently underway with both SEPs with regard to shareholders agreements and transaction documents. On basis that acceptable commercial terms are reached, aim is to complete both transactions by end March Heads of agreement with Turbomaca signed 25 Feb 2002

Restructuring Status Report: Portfolio Committee August 2002 Page 31 Government and Transnet’s management are currently of the view that Transnet should remain a holding company and position itself as an integrated transport infrastructure and logistics company. A Cabinet decision on the Transnet end state is expected before end March This will clarify the future of its divisions and subsidiaries, give direction to finalization of Transnet restructuring plans and help to coordinate concurrent restructuring projects. Transport Sector (cont.) Transnet End State

Restructuring Status Report: Portfolio Committee August 2002 Page 32 Establishment of Rail Safety Regulator including legislation by end of calendar year – DoT (provisional) Adoption by Government of a restructuring model for Spoornet’s freight business in December 2001 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 Shadow incorporation of division to be performed – to establish accountability and address cross-subsidization audit trails and impact Transport Sector (cont.) Spoornet

Restructuring Status Report: Portfolio Committee August 2002 Page 33 Transport Sector (cont.) Ports Draft Establishment and separation from Transnet of National Ports Authority and Port Operations Division ( 2002) Establishment of Ports Regulator (March 2002) – NDoT (provisional) 3 year tariff reform process started December 2001 Concession of some port operations to commence after enabling legislation has been finalised (Mid-2002) Ports policy was finalised in January 2002 and is has served before Cabinet. DOT has been expected to publish this as far back as May 2002 This will be followed by new Ports legislation – NDoT Consideration is being made to the fast tracking of the Durban Container Terminal concession, due to congestions at this port. An Economic Impact Study is underway for the development of a concession architecture and framework on the basis of which this concession will take place

Restructuring Status Report: Portfolio Committee August 2002 Page 34 Technical analysis on restructuring model for Petronet was completed in November 2001 Implementation of policy framework for regulation of liquid fuel pipelines (March 2002) – DME (provisional) DME engaged in finalizing liquid fuel industry framework Legislation for regulator (March 20010) - DME (provisional) Establish liquid fuel pipelines regulator (June 2002) – DME (provisional) Transport Sector (cont.) Petronet

Restructuring Status Report: Portfolio Committee August 2002 Page 35 Decision taken to reacquire SairGroup 20% stake Transnet has finalized negotiations and reacquire the Group’s 20% stake in SAA at a significant discount translating to over R 1billion gain for the Group. Price for reacquisition had been agreed to in terms of the original shareholders agreement. Global market conditions in the airline industry and the financial standing of SAA will determine the timing of the decision to either to list SAA or sell minority stake to an SEP, or any other option. A Government Task Team has been set up to review and consider different options for the restructuring of SAA as well as a merger of SAA and SA Express, and possibly SA Airlink Transport Sector (cont.) SAA

Restructuring Status Report: Portfolio Committee August 2002 Page 36 KwaZulu-Natal Transaction Legal Agreements signed by SAFCOL and Purchasing Consortium. The sale was finalized and Assets were transferred in October 1, Sale Value was R100 million Eastern Cape North Transaction Sale and transfer of assets to purchaser was concluded in August 2001 Sale Value was R 17 million Forestry Sector Achievements / Progress to Date

Restructuring Status Report: Portfolio Committee August 2002 Page 37 Northern Forest Transaction Package The Timetable for the Transaction is confirmed. The Invitation to Offer was available to the three preferred bidders on July 6, 2001 Formal bids received 14 September 2001 Cabinet approved two preferred bidders in November 2001 Negotiations with the bidders are underway The allegations of impropriety against a DPE official are being investigated by the PSC Pending these investigations, sale of shares and transfer of assets is anticipated before end of 2002 fiscal year Forestry Sector (cont.) Future Plans

Restructuring Status Report: Portfolio Committee August 2002 Page 38 Cabinet has approved the conversion of 45,000ha of Safcol unsustainable forestry assets to other uses over a 20 yr period 7000ha immediately available for distribution This includes 4642ha earmarked for conservation, 1170ha for agriculture and other options including housing 312ha Over the period to 2005, 12556ha will be available for conservation and 2499ha for agriculture This process is a major step in the ensuring that uneconomic forestry forestry assets are transferred to and for the benefit of the people of SA. Advisors have been appointed. Forestry Sector (cont.) Future Plans Southern and Western Cape land conversion

Restructuring Status Report: Portfolio Committee August 2002 Page 39 Southern and Western Cape - SEP Safcol is in negotiations with Steinhoff regarding the formation of a JV between the two parties to increase the capacity and technology of the Safcol sawmill This will involve a major capital investment from Steinhoff and downstream employment opportunities in this area Forestry Sector (cont.) Future Plans

Restructuring Status Report: Portfolio Committee August 2002 Page 40 Alexkor - Mining Sector Act introduced and passed by Parliament Act removes restrictions imposed on government when desiring to dispose its shareholding in Alexkor Cabinet decision taken to dispose of 30% of Alexkor stake to an SEP with BEE and international marketing exposure to add value. 10 % Namaqualand community stake (in Trust) set aside. Process in place to introduce SEP by 4 th Q 2002 Task team in place composed of DPE, Alexkor to accelerate transaction. Terms of reference for advisors and issue of RFP done. Advisors appointed. Expression of interest process and prequalification of bidders complete. Final bids to be invited before end of September. Transaction process to introduce SEP and BEE to be completed Feb 2003 Retrenchment process in Alexkor halted and Alexkor agreed to look at alternative means to carry on with current work force up to final introduction of SEP later this year Some employees will engaged in the shallow water contract to avoid permanent displacement.

Restructuring Status Report: Portfolio Committee August 2002 Page 41 Aventura – Hotel and Leisure Government owns number of hotel and leisure resorts In 1999 appointed a management contractor to turn Aventura around with a view to dispose as going entity. Recently Cabinet resolved to dispose of all Aventura resorts either in single entities or groups. Process of Phase 1 disposal of the non-viable resorts in place for completion anticipated in March Finalization of disposal of two of the three non viable resorts nearing completion before end of March The 3 rd unit is still awaiting offer. Government guarantee issued to Aventura to cater for period up to disposal of all business units Phase 2 entails disposal of the rest of Aventura by 2002 calendar year. Currently bids are being considered for some resorts.

Restructuring Status Report: Portfolio Committee August 2002 Page 42 Other Assets Disposals Apron Services New mandate from Cabinet will be requested : -Sale of 51% inclusive of BEE -SEP to come with BEE before end of 2002 Air Chefs Non binding bids received SAA have been approved as purchasers of Air Chef Transaction finalized Transnet Housing and Eskom Finance Consolidation of these entities feasibility study approved Transaction advisors to be appointed before end January 2002 Study to be finalized before end August 2002 Other Assets The Department is in the process of identifying all Non-core assets and projects to be considered for restructuring. The following have been earmarked for a speedy restructuring programme:  Government Printers;  Autopax;  Transmed;  Marine Data Systems;  SASRIA;  Government Printers; Arivia.Kom; SABC; Post Office/Post Bank

Restructuring Status Report: Portfolio Committee August 2002 Page 43 PROPOSED WAY FORWARD - RESTRUCTURING Develop and execute a plan to bring labour back on board Develop a clear end state options for each restructuring project. No two restructuring projects are the same. Develop a clear terms of reference for each advisor DPE should appoint a team to audit advisors on: –Legitimate roles for BEE and skills transfer –Promising senior staff but allocating junior staff when the project is sold –Scope Management –Quality of Deliverables Develop from Spoornet and Portnet a template to use on Eskom to develop a restructuring plan Exert tighter control on SOE management to execute the Departments restructuring mandate Execute regular strategy forum sessions to discuss project issues Execute regular internal and external communication

Restructuring Status Report: Portfolio Committee August 2002 Page 44 Telkom IPO Report Introduction……………………………….. Regulatory regime ………………….…… Governance and other shareholder matters …………………………………… Telkom IPO budget ……………………… Syndicate structure ……………………. Telkom matters ……………….………… Targets ……………………………………

Restructuring Status Report: Portfolio Committee August 2002 Page 45 We are ready for the planned listing of Telkom during this financial year (subject to market conditions) The Legislative amendments have been published and the process is finalized The Regulatory provisions have been developed and ICASA has indicated that it will be published in time. Negotiations with Thintana have progressing well and should be concluded soon Since the transaction process commenced, market conditions in the sector has continued to slide, depressing the price even further The telkom IPO is scheduled to proceed in ernest in the 3 rd –4 th Q of Telkom IPO Report - Introduction Telkom IPO

Restructuring Status Report: Portfolio Committee August 2002 Page 46 The Company preparations for the listing are at an advanced stage Listing Venues are JSE (primary) and NYSE or LSE (secondary) The size of the offering will be finalised shortly IPO will be the largest telecoms listing on JSE We will also launch the largest Black retail offering in South Africa which will be preceded by an unprecedented education campaign of significant scale to highlight the benefits of share ownership to historically disadvantaged South Africans Telkom IPO Report - Introduction Telkom IPO

Restructuring Status Report: Portfolio Committee August 2002 Page 47 Telkom IPO Report REGULATORY REGIME 1.Second National Operator (“SNO”) process STATUS The process of licensing the SNO is to be undertaken in 3 phases. RECOMMENDED STRATEGY If the SNO process and the additional substantive regulatory issues discussed below are unresolved at the time of the IPO, the assumptions in Telkom’s business plan, and subsequently by the analysts and investment community, will be significantly more conservative. Consequently, there will be a reduction in demand and a significant discount in the IPO valuation when Telkom is compared to its peers and to previously considered valuations.

Restructuring Status Report: Portfolio Committee August 2002 Page 48 Telkom IPO Report 2.Regulation: fees and charges in the PSTN STATUS · Telkom has been subject to a tariff regulation from 7 May 1997 untill 7 May Term of this regulation was extended by a further 18 months to November 7, Telkom filed its current tariff proposal with ICASA on 14 November The Minister of Communications signed the new tariff regulation on 26 November · Regulation will remain in force for 18 months from 26 November 2001 or until such time as a new regulation is promulgated. Telkom contesting this regulation. · Telkom indicated both Telkom and ICASA have requested a postponement of the next court date. Telkom wish to prepare an application to set aside the entire regulation. RECOMMENDED STRATEGY The settlement of the tariff structure is now subject to a court timetable, which is inherently uncontrollable.

Restructuring Status Report: Portfolio Committee August 2002 Page 49 Telkom IPO Report 3.Carrier pre-selection STATUS · Based on discussions with ICASA, this regulation will only be issued in Q · DoC have indicated that they will discuss with ICASA the possibility of accelerating the regulation to ahead of the IPO. RECOMMENDED STRATEGY · Do whatever is possible to reduce the regulatory uncertainty by accelerating the regulation, notwithstanding that the discount resulting from the tariff dispute and the SNO process may significantly outweigh the discount resulting from uncertainty regarding carrier pre-selection. · Be prepared to proceed with the IPO without this regulation in place.

Restructuring Status Report: Portfolio Committee August 2002 Page 50 Telkom IPO Report 4.Facilities sharing STATUS ICASA/DoC intend to finalise and issue this regulation in Q RECOMMENDED STRATEGY Continue to monitor progress. 5.Number portability STATUS Based on discussion with ICASA and DoC, this regulation will only be issued in 2005 RECOMMENDED STRATEGY · The JGCs are comfortable that investors will not need additional information in relation to the introduction of number portability in · Telkom has not disagreed with this position.

Restructuring Status Report: Portfolio Committee August 2002 Page 51 Telkom IPO Report 6.Regulatory accounting and revision to Interconnect Guidelines STATUS PriceWaterhouseCoopers are engaged to assist with the drafting of this regulation. ICASA/DoC intend to finalise these by May/June 2002 RECOMMENDED STRATEGY Ensure that timing of finalisation of these processes does not conflict directly with offer / listing / stabilisation period

Restructuring Status Report: Portfolio Committee August 2002 Page 52 Telkom IPO Report 7.Sentech licence STATUS · Sentech license was gazetted for public comment on 20 December 01. Hearings are scheduled for 10 February. · DoC has indicated that it has no current intentions to introduce an SEP into Sentech. However, at that time, a Sentech/DoC workshop was scheduled for 26 January DoC indicated that Sentech may request the introduction of an SEP at that time. · The introduction of an SEP would significantly change the competitive landscape for both Telkom and investors. RECOMMENDED STRATEGY Continue to monitor progress. License needs finalisation.

Restructuring Status Report: Portfolio Committee August 2002 Page 53 Telkom IPO Report 8. SMME’s STATUS ICASA and DoC have issued a regulation on how to apply for a SMME licence as opposed to issuing individual ITAs by area. ICASA has listed 8 areas for consideration. Further areas to be considered thereafter. RECOMMENDED STRATEGY Continue to monitor process. 9.Amendments to Telkom’s licence STATUS DoC has indicated that it believes Telkom will not have any further Universal Service Obligations in relation to its existing licence. New licences to Telkom (e.g. fixed-mobile, 1800 MHz, UMPCS (3 rd generation)) will have associated USO. RECOMMENDED STRATEGY Obtain greater clarity as to the possibility of the introduction of further USOs to Telkom’s existing licence.

Restructuring Status Report: Portfolio Committee August 2002 Page 54 Telkom IPO Report 10.GOVERNANCE STATUS  Broad agreement has been reached between Government and Thintana on the key issues.  The Independent Committee of the Board of Telkom continues to dispute the acceptability of the exclusive authority of the Operating Committee and the veto rights of shareholders at Board level. There also appears to be significant unresolved matters between Thintana and the Board in relation to the Strategic Services Agreement.  The JSE will, prima facie, share the concerns of the Board in relation to the Operating Committee and the veto rights of shareholders. The Board has in the past represented their concerns to the JSE, although they since agreed with Thintana not to approach the JSE again until agreement had been reached.

Restructuring Status Report: Portfolio Committee August 2002 Page 55 Telkom IPO Report GOVERNANCE (continues) RECOMMENDED STRATEGY  A final governance structure is a necessity at the time of the analysts presentation (mid-May for a July pricing and mid-August for an October pricing).  Given the current intentions, it will require significant time for the Board and shareholders to negotiate an acceptable governance structure with the JSE. It may be that current intentions are entirely unacceptable to the JSE.  Therefore, if a July offering is to be achievable, there is a requirement to accelerate the process to finalise the proposed governance structure by early March 2002, to give a reasonable minimum period of two months in which to engage the JSE. This structure should include substantially advanced and agreed Articles and Strategic Services Agreement, together with the related Shareholders Agreement.

Restructuring Status Report: Portfolio Committee August 2002 Page 56 Telkom IPO Report 11.OTHER SHAREHOLDER MATTERS STATUS · 20% cap on IPO falls away after May · Broad agreement between shareholders on other key IPO related matters..Telkom had elevated the cost sharing discussions to the level of the shareholder negotiations..Today, agreement at Joint IPO Steering Committee to elevate it to Board level and not shareholders.

Restructuring Status Report: Portfolio Committee August 2002 Page 57 Telkom IPO Report 12.TELKOM IPO BUDGET STATUS · Approval required to rollover unused portion of current funds into the 2002/03 fiscal year and an additional budget of approximately R47m will be required to extend third parties contracts and accommodate exchange rate movements. · Consideration is currently underway to balance Government’s social objectives in relation to the IPO with currently available funds (assuming a full roll-over and amount to extend third party contracts). Further funding would allow these objectives to be more fully achieved. RECOMMENDED STRATEGY · National Treasury to release additional funding when there is a definitive decision on the timing of pricing. · Negotiation to take place with Telkom with respect to establishing cost sharing principles.

Restructuring Status Report: Portfolio Committee August 2002 Page 58 Telkom IPO Report 13.SYNDICATE STRUCTURE STATUS Initial paper on mechanics of syndicate structure presented. Cabinet memorandum on syndicate structure prepared and submitted to IPO Office which requests that the IPO Office is enabled to undertake the syndicate selection process. RECOMMENDED STRATEGY Government to revert with position to the JGCs at appropriate timing. 14.TELKOM MATTERS : SCENARIO PLAN / PROSPECTUS STATUS Telkom intends to prepare a draft scenario plan by mid March, to be discussed by the board by the end of April. It is intended to submit the first draft of the prospectus to the SEC before end March, as it is necessary to have audited financials within the last twelve months at the time of submission. RECOMMENDED STRATEGY None

Restructuring Status Report: Portfolio Committee August 2002 Page 59 Telkom IPO Report 15.TARGETS Complete SEP negotiations- 1Q ‘02 Develop business plan of Telkom and Vodacom- 1Q ’02 Launch the media and education campaign - 1Q ’02 Roll out communication strategy on the IPO - 1Q ‘02 Offering and listing of Telkom shares– 3 Q ’02 Obtain approval to proceed with the ACSA transaction – Q1 ’02 with the aim of listing 2003 / 2004 Monitor development of company and industry performance to prepare SAA for listing 2004 Hold discussion to explore SEP / IPO options arising from Arivia.kom business model – Q1 ’02 Monitor the introduction of an SEP in Alexkor with the aim of listing in 2004

Restructuring Status Report: Portfolio Committee August 2002 Page 60 PERFORMANCE MONITORING AND BENCHMARKING REPORT

Restructuring Status Report: Portfolio Committee August 2002 Page 61 CONTENTS Introduction Objectives for the financial year Projects undertaken during the financial year Achievements to-date Objectives for the financial year Projects planned for the financial year The Unit’s medium-term objectives for the next four years The Unit’s long –term objectives for the next ten years Post-restructuring model

Restructuring Status Report: Portfolio Committee August 2002 Page 62 INTRODUCTION Government, as a shareholder in state owned enterprises (“SOE’s), seeks to protect and maximize the benefits of its investments in the SOE’s. This can be achieved by monitoring the overall performance of SOE’s within their environments and benchmarking the said performance with other companies whether public or private, locally and internationally. Performance Monitoring and Benchmarking Unit is intended to and undertakes the function of safeguarding the shareholder interests in SOE’s. It is, however, the Government’s intention to consolidate its whole shareholding interests in public entities and manage it under one Business Unit /Department in order to avoid the current fragmentation in the management of the shareholding interests. To give effect to the intention of Government, the government shareholding model is currently being developed by the Unit.

Restructuring Status Report: Portfolio Committee August 2002 Page 63 OBJECTIVES FOR In line with the Departmental Business Plan, the Branch had set for itself the following objectives for the abovementioned period: Monitor and interrogate the financial performance of SOE ’ s with a view to holding SOE leadership accountable for performance. Monitor, implement and advocate improved corporate governance ensuring improved ethics and probity in SOE ’ s. Manage healthy relations between the shareholder and SOE ’ s. Monitor broader socio-economic indicators of SOE ’ s including empowerment strategies. Be the State's custodian for the portfolio of SOE ’ s and advise government of SOE performance and progress towards established targets and indicators. Develop a database of relevant benchmarks and SOE information to entrench a performance mindset in the SOE ’ s.

Restructuring Status Report: Portfolio Committee August 2002 Page 64 PROJECTS DURING Development of a financial model as an instrument and a framework to measure the financial performance of the SOE’s. Develop a shareholder compact for each SOE as an instrument to give effect to good governance in SOE’s. Undertake an “AS IS” corporate governance audit in SOE’s and within the shareholder to ascertain the status of compliance with corporate governance principles as set out in the Corporate Governance Protocol for Public Entities and in the King Reports. Develop a Web-based database system of SOE’s and other Public Entities. Develop a shareholding model within which government shareholding will be consolidated and managed. Advocate good corporate governance within the various structures of government through presentations, discussions and providing advice.

Restructuring Status Report: Portfolio Committee August 2002 Page 65 ACHIEVEMENTS FOR The financial evaluation model to evaluate the SOE’s financial performance has been developed and communicated to the SOE’s to prepare for its implementation. Concerns of the SOE’s are currently being factored into the model in order to ensure the smooth operationalization of the evaluation model. The financial reports of the SOE’s such as Eskom, Transnet, Denel and Safcol have been or are in the process of being tabled to Cabinet. All efforts are being put on Alexkor and Aventura to finalize their financial statements. The financial statements have been interrogated and reported in the progress reports to Cabinet.

Restructuring Status Report: Portfolio Committee August 2002 Page 66 ACHIEVEMENTS FOR ( Continued) Shareholder compacts have been signed with Transnet, Eskom and is in the process of being signed with Denel. The process of operationalizing the shareholder compacts is currently under way. The revision of the Protocol on Corporate Governance for use in the Public Entities is under way, and the first draft is out for comment. The following Boards have been restructured successfully: –Transnet; –SAA; –Safcol; –Aventura –Eskom

Restructuring Status Report: Portfolio Committee August 2002 Page 67 ACHIEVEMENTS OF FOR (Continued) The challenges in Aventura called for the board to be restructured before the annual general meeting. The new Aventura Board is now in place and therefore the disposal strategy as approved by Cabinet is under way. The government “Shareholding end-state/ model” has been developed albeit a draft document for consideration at this stage. An audit of compliance with corporate governance in SOE’s is in the second phase whilst the third and the final phases are to be completed soon. The objective of the audit is to determine the status of the SOE’s compliance with the principles of good governance as spelt out in the Protocol and the King Report. The report of this audit will assist the Department and the SOE’s to develop intervention measures where shortfalls have been identified.

Restructuring Status Report: Portfolio Committee August 2002 Page 68 ACHIEVEMENTS FOR 2001 – 2002 (Continued) ESKOM: All systems are now in place to incorporate Eskom Holdings Limited and to form the board of Eskom Holdings accordingly. The Memorandum and Articles have been published in the Government Gazette for public comment, submitted to Cabinet for noting and circulated to key stakeholders for comments. The final document has been tabled in Parliament. The process of appointing a Board of Eskom Holdings, which replaced the Electricity Council, is complete.

Restructuring Status Report: Portfolio Committee August 2002 Page 69 ACHIEVEMENTS FOR 2001 – 2002 (Continued) AVENTURA Whilst offers have been received for three business units of Aventura, which were ear-marked for short term disposal, namely, Christiana, Aldam and Bloemfontein, only two offers have been accepted. These offers relate to Aldam and Bloemfontein whilst additional information is being considered for Christiana. The disposal process of the three business units finalized Disposal process for the rest underway.

Restructuring Status Report: Portfolio Committee August 2002 Page 70 OBJECTIVES FOR One of the Department ’ s mandates is to serve as custodian of Government ’ s shareholding interests in SOEs which entails a responsibility to: - Monitor and interrogate the financial performance of SOE ’ s with a view to holding SOE leadership accountable for performance - Monitor, implement and advocate improved corporate governance ensuring improved ethics and probity in SOE ’ s - Manage healthy relations between the shareholder and SOE ’ s - Monitor broader socio-economic indicators of SOE ’ s including empowerment strategies - Be the State's custodian for the portfolio of SOE ’ s and advise government of SOE performance and progress towards established targets and indicators - Develop and monitoring a database of relevant benchmarks and SOE information to entrench a performance mindset in the SOE ’ s.

Restructuring Status Report: Portfolio Committee August 2002 Page 71 PROJECTS PLANNED FOR 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: –The revision of 1997 Protocol on Corporate Governance and alignment thereof with the King Report II and the PFMA. –The development 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. –Conduct second phase of the Post restructuring model DPE end- state. –Awareness of SOE web-based database to all SOE’s resulting in the population of the said database. –Conduct Director’s training.

Restructuring Status Report: Portfolio Committee August 2002 Page 72 PROJECTS PLANNED FOR (Continued) ALEXKOR: In order to prepare Alexkor for restructuring, it has been necessary to create capacity within the Board. The Board appointment process is already underway with the final appointment being targeted for Alexkor’s AGM. A full capacity Board will be able to deal with the current dynamics that Alexkor faces in a pre-restructuring environment. Legislation is already in place to give effect to the restructuring as approved by Cabinet.

Restructuring Status Report: Portfolio Committee August 2002 Page 73 MEDIUM TERM-OBJECTIVES 2002 – 2004 The Department ’ s strategic objectives for the medium-term 2002 – 2004 include the following: -Safeguarding of government ’ s shareholding interests in State Owned Enterprises, thus serving as a “ holding company ”. -Provide advice to shareholder on performance of its investment and continued ownership, on a holistic and integrated basis. -Ensure efficient performance and maximum return on investment through rigorous performance monitoring and evaluation.

Restructuring Status Report: Portfolio Committee August 2002 Page 74 MEDIUM TERM-OBJECTIVES (Continued) 2002 – 2004 Entrench a culture of and promote good corporate governance, probity and business ethics in terms of best practices within SOEs. Monitor and evaluate socio-economic performance and “ organizational health ” of SOEs within established frameworks. Develop and implement intervention measures within framework of relevant acceptable benchmarks, to enhance value. Provide inputs and insights on impact of DPE Programmes and restructuring.

Restructuring Status Report: Portfolio Committee August 2002 Page 75 MEDIUM TERM-OBJECTIVE (Continued) 2002 – 2004 Monitor and interrogate the financial performance of SOE ’ s with a view to holding SOE leadership accountable for performance. Continuously monitoring the succession planning in SOEs to ensure that the shareholder is positioned to replace executives management should a need arise. Manage healthy relations between shareholder and SOEs. To provide building blocks for the proposed post-restructuring model in the form of creating capacity and marketing the concept. Finalizing the post restructuring model for approval by Cabinet.

Restructuring Status Report: Portfolio Committee August 2002 Page 76 MEDIUM TERM-OBJECTIVES ( Continued) 2002 – 2004 Approved economic, investment and integrated risk management strategies; Approval and implementation of relevant databases for the SOE ’ s;

Restructuring Status Report: Portfolio Committee August 2002 Page 77 LONG-TERM OBJECTIVES (the the next 10 years) POST –RESTRUCTURING MODEL: Shareholding of SOE’s is held by various Government Departments and there is a necessity to consolidate governments approach with a view to enhance shareholder value. The rationale for the development of a Post-Restructuring Model is based on the understanding that government will continue to own a stake in SOE’s in varying proportions, and as such, will continue to have a significant interest in how its shareholding is managed and of ensuring that its socio-economic objectives are met.

Restructuring Status Report: Portfolio Committee August 2002 Page 78 POST –RESTRUCTURING MODEL (the next 10 years) The current position is that government shareholding is held and managed by various departments within government with different and wide ranging objectives resulting in the fragmentation of approaches thereby undermining the maximum benefits that could be derived from consolidated government shareholding in SOE’s. It is within this context that government shareholding interest in SOE’s has to be consolidated and managed by one entity. Any Restructuring that will invariably be executed post 2004 will have to be identified through a performance evaluation process.This entails monitoring the performance of SOE’s in the following areas: - -Corporate Governance. -Financial performance. -Risk analysis identification, monitoring and management. -Socio Economic and Environmental risk performance of SOE’s. -Identifying investment and business development opportunities for SOE’s.

Restructuring Status Report: Portfolio Committee August 2002 Page 79 A.THE EMPLOYMENT PROJECT Funded by USAID Discussion with Consultant Haroon Borat and USAID (funders) have to make slight changes to the Terms of Reference. We have supplied him with data but would need month of February to assess it relevance to the study and also to clean it up. On the 3 rd week of March he will be coming back to us with his first tae on employment trends. In April he will be simulate and give us an alternate job re-allocation strategy. The report will be ready in the first two weeks of May. Programme of the Strategic Analysis Unit

Restructuring Status Report: Portfolio Committee August 2002 Page 80 It will show us:   The historical patterns of employment in the 4KI, the major reasons for employment fluctuations and the reasons for the change in employment by the SOEs and to find out whether these are due to restructuring or other reasons   A simulation model and report on the possible future outcomes for unemployment   Various options for dealing with those worker who cannot be assimilated back into the job market.   Pre 199e employment in the 4KI   The viability of the social plan to mitigate job the effects of job losses. Programme of the Strategic Analysis (Cont.) B.POLICY FRAMEWORK REVIEW Collating inputs into policy review from different Units. Most inputs do not respond to the policy review. Will re-orientate questioning for Units to be self critical brutally honest about where policy hinders them. Refocus people towards looking at the framework, identifying what they should action from it and then tell us whether they are achieving this or are inhibited by policy. Most of the inputs are about progress in their Units and they do not interrogate the policy framework. Process will be over latest Mid-May

Restructuring Status Report: Portfolio Committee August 2002 Page 81   Percentage of government shares that need to be divested and allocation to each employee   Administration and management of shares by a trust on behalf of employees   Pricing of shares Programme of the Strategic Analysis (Cont.) C:The EMPLOYEE SHARE OWNERSHIP PROGRAMME (ESOP). Terms of reference approved by DG Awaiting for finance from USAID next financial year. Implement ESOPs in the various SOEs and will cover the following issues: A review of international best practices of ESOPs and the applicability of such models to the South African Operational models for implementing ESOPs successfully in South Africa with special emphasis on design to evaluate the following:

Restructuring Status Report: Portfolio Committee August 2002 Page 82 Programme of the Strategic Analysis (Cont.)   Funding e.g. credit and/or discounting of shares to ensure affordability   The criteria used to determine eligible employee in the process and allocation of shares   The vesting period for shares   Effective participation of employees in the management of an enterprise once they have shares. This could be done by giving employees voting shares (role of unions)

Restructuring Status Report: Portfolio Committee August 2002 Page 83 Programme of the Strategic Analysis (Cont.) D: DEVELOPMENTAL RESPONSIBILTIES OF THE SOE’S The study will look at whether the developmental demands of the country and of the continent (NEPAD) can be fulfilled by the SOE without resorting to Government underwrites on their project. Concern has been raised from the outset that some of them cannot balance their books – let alone engage in developmental issues.

Restructuring Status Report: Portfolio Committee August 2002 Page 84 Programme of the Strategic Analysis (Cont.)   The possibility of co-operative ownership and management buy-outs for broad based empowerment   Taxation issues   Conditions for sale of shares: Incentives for keeping shares for longer period and to safeguard against reselling to minority shareholders while at the same time ensuring liquidity of shares Education Project will be finished Three months after commencement.

Restructuring Status Report: Portfolio Committee August 2002 Page 85 ALTERNATIVE SERVICE DELIVERY

Restructuring Status Report: Portfolio Committee August 2002 Page 86 ASD PROGRAMME  KEY STRATEGIC PROJECTS  Public Sector Procurement and Black Economic Empowerment  ASD International Benchmarking  KEY STRATEGIES (IMPLEMENTATION)  Operational Framework; Operational Guidelines and Procedures; Supply/Support Strategy; Reporting; Monitoring and Evaluation Models  Programme Conceptualisation; and  Comparative Study/Strategies on ASD practices

Restructuring Status Report: Portfolio Committee August 2002 Page 87 KEY ACTIONS 2002/03 Development and implementation of the Procurement Operational Framework for the SOEs; Launching of the Reporting, Monitoring and Evaluation System (Electronic); International Benchmarking of ASD with international best practices Development and implementation of restructuring BEE approach within the National Strategy Framework (DTI)

Restructuring Status Report: Portfolio Committee August 2002 Page 88 Three broad constituencies whose support is needed: 1.Government, supports the restructuring programme 2.Business, supports privatization, understanding superficial 3.General Public, the historically disadvantaged groups, the most important constituency for DPE. Overview

Restructuring Status Report: Portfolio Committee August 2002 Page 89 Role of Communications To set the agenda with regard to how restructuring is talked about. Control the flow and content of information to the media and through the media to key constituencies; Build understanding and support for the restructuring program and Explain the mission and contribution of the DPE.

Restructuring Status Report: Portfolio Committee August 2002 Page 90 Proactive Communications Bi-weekly communications meetings with DPE managers. Restructuring Update, quarterly newsletter-format publication. (priority program). Monthly briefing sessions, with print and electronic media, and parliamentarians. DPE website to be redesigned, and made more accessible Information/education materials to be produced

Restructuring Status Report: Portfolio Committee August 2002 Page 91 Public Education Awareness and opinion surveys. The first will provide baseline data and help focus messages. The second will demonstrate increased public understanding and acceptance of the government’s restructuring programme An outreach programmed, series of meetings in all nine provinces. Briefing sessions with local and regional media, to give background to understand the restructuring programmed. Community radio call-in shows in which DPE managers can address developments/issues in local vernacular.

Restructuring Status Report: Portfolio Committee August 2002 Page 92 Messages Should be consistent and repeated frequently in speeches, documents, press releases… For government: Restructuring is not privatization, but rather the rationalization and redeployment of state assets. For Business and labour: Supports empowerment objectives by and helps build strong black businesses that are essential for stable and sustainable growth. For the public: Uses the resources of the state to improve the quality of life for all.

Restructuring Status Report: Portfolio Committee August 2002 Page 93 Transaction Support Strategic planning. Messaging. Positioning. Organizing road shows and presentations. Preparing information materials and Organizing media coverage.

Restructuring Status Report: Portfolio Committee August 2002 Page 94 Services Advice on communication strategy Daily monitoring of news coverage Writing/editing speeches, brochures… Press conferences, media interviews….

Restructuring Status Report: Portfolio Committee August 2002 Page 95 Staffing Immediate recruitment of two additional professional staff. One administrative assistant and one secretary.

Restructuring Status Report: Portfolio Committee August 2002 Page 96 INTERNATIONAL RELATIONS

Restructuring Status Report: Portfolio Committee August 2002 Page 97 INTERNATIONAL RELATIONS AND RURAL DEVELOPMENT –INTERNATIONAL RELATIONS Action plan for this year is already focused in the international market without excluding other regions. RURAL DEVELOPMENT Up to the present the Unit have been planning how to take this project forward. In this regard: It has clarified the role of the Department in the Free State which the Minister is the Nodal Champion. It has identified a project with ESKOM that can be used as the Pilot project in which involve other SOEs as way of managing and coordinating the involvement in the rural development project (that Ms Msibi is attending) –NEPAD At present DPE have not involved NEPAD programme and or its structures. This challenge was identified and discussed at the EXCO meeting on the 28 th January It was agreed that the DG would write a letter to Professor Nkuhlu indicating the role of the department and the need to involve the department in this relevant projects International Relations

Restructuring Status Report: Portfolio Committee August 2002 Page 98 FINANCIAL MANAGEMENT

Restructuring Status Report: Portfolio Committee August 2002 Page 99 CONTENTS Budget Budget Budget Control The way Forward

Restructuring Status Report: Portfolio Committee August 2002 Page 100 BUDGET Total Available FundsR Total Estimated ExpenditureR Total savingsR Expenditure status of the Department for the financial year is as follows: R’000 Original Budget R Total AdjustmentsR Total Available FundsR Expenditure to 31 Dec 2001R Projections (Jan to March)R Total Estimated ExpenditureR Possible RolloversR SavingsR Total savingsR

Restructuring Status Report: Portfolio Committee August 2002 Page 101 Reasons for saving Reasons for saving: * Personnel Expenditure – vacant posts not yet filled * Inventories – stocks were delayed due to the vacant posts * Professional and special Services – Funds were requested to be rolled over for the Telkom IPO and projects delayed due to the problems encountered within the STB.

Restructuring Status Report: Portfolio Committee August 2002 Page 102 BUDGET PROGRAMMESR’000 Administration Restructuring of State Owned Enterprises Restructuring (2A) Restructuring (2A) Initial Public Offering Initial Public Offering Office (2B) Office (2B) Performance Monitoring and Strategic Analysis Performance Monitoring and Performance Monitoring and Benchmarking (3A) Benchmarking (3A) Strategic Analysis (3B) Strategic Analysis (3B) Alternative Service Delivery DEPARTMENTAL TOTAL

Restructuring Status Report: Portfolio Committee August 2002 Page 103 BUDGET CONTROL a) a)Training programmes and workshops b) b)Distribution of Budget programme c) c)Strict control on monthly expenditure d) d) Program managers accountable to take corrective actions. THE WAY FORWARD Create awareness of rules and regulations Improve service delivery Training and workshops – PFMA, Treasury Regulation and Departmental instructions 4. Stricter control over payments (this could result in a 5 year imprisonment)

Restructuring Status Report: Portfolio Committee August 2002 Page 104 CORPORATE SERVICES

Restructuring Status Report: Portfolio Committee August 2002 Page 105 Organizational Performance Management System: The new Organizational Performance Management System will be operational from the beginning of the 2002/03 financial year. Corporate Services will maintain the system and provided support to the entire Department. Preparations for the implementation of the system are on track and the data required (which includes the Business Plan and Performance Agreements for all Senior managers) will be signed off by the DG and the Minister in the middle of March. Human Resources: Corporate Services will continue to provide support to the Department towards the acquisition of appropriate skills, and ensure that vacant posts that are funded are filled as early as possible in the financial year. An effort will be made to towards ensuring the attainment of Employment Equity targets. Current progress is satisfactory, although representation of People with Disabilities is still a challenge. Plans for the Year 2002/03 – Corporate Services

Restructuring Status Report: Portfolio Committee August 2002 Page 106 Skills Development: Support on skills development will continue. Other support: Plans have been developed for improving support and services provided in other areas like IT and Special Programmes. A project on the introduction an Electronic Document Management System is under way and it is envisaged that a package will be purchased from the current year’s budget and implement the system in the next financial year. Plans for the Year 2002/03 – Corporate Services