Address by Mr Malusi Gigaba, Minister of Public Enterprises, at the Annual College day event in UNISA (main campus), Pretoria
31 Mar 2011
Ladies and gentlemen
The topic we have been requested to address with this gathering of young students gives me the opportunity to address a matter that is quiet pertinent both to our economy at this stage of its development as well as to the oversight responsibility we as the department are tasked with in relation to the State-Owned Enterprises (SOE) going forward.
On Monday we hosted an occasion to address two relatively different crowds: one being a group of corporate and public sector leaders and thinkers; whilst the other being an organisation of young professionals that lobbies for transformation within the workplace and consequently the economy at large.
As you can imagine the messages that came from these different groups was quiet contrasting, but there were also synergies.
Some among the earlier group advocated that the state should reduce its role to the minimum and just focus on some social and economic regulations, while the other encouraged us as the government and specifically as public enterprises to be more assertive in restructuring the economy to be more inclusive and representative of our country.
The one group feared that our intervention would be interference; while the other group feared that our intervention has not been sufficient enough to address the current socio-economic disparities and alter the patterns of ownership and production relations.
On our part, our message was consistent and did not differ from one crowd to the next.
We reiterated our unapologetic view that the government has an important to play in the economy to help address the significant economic challenges that South Africa faces as a country.
We reminded them of the urgent need to accelerate the growth rate to create wealth that enhances the standard of living for all South Africans; dramatically increase employment creation; develop industrial capabilities to decrease the country’s dependence on commodity exports; and transform the ownership and management profile of the economy to reflect that of the broader South African population.
We reminded both groups of the fact that the unfolding South African developmental has the objective actively to intervene in the economy to drive investment in targeted areas to achieve a long term vision of a higher value added, labour absorptive and racially integrated economy.
In order to do this, the state needs the ability to plan for long term growth, drive investment in areas of the greatest impact and form strategic economic partnerships to develop capabilities in targeted areas of the economy.
We are repeating some of the things we said to these groups because we believe that they are important to repeat to you too on this occasion.
SOEs are extremely strategic instruments in the context of the unfolding South African developmental state – to drive growth in the economy, lead to the development of local technological, industrial and manufacturing capabilities, and lead to skills development.
In a way, SOE investments crowd in spend by other role-players. In essence, SOE are levers for economic growth and have a fundamental role to play in achieving the State’s developmental objectives.
Because key sectors of the economy are completely dependent on the availability of infrastructure capacity for their existence and growth, SOEs cannot continue to be viewed in isolation from the impact they have on their customers and suppliers and the broader economy.
This is because SOE investment can unleash a unique group of multipliers on the economy if managed correctly; accordingly, they either constrain growth or they act as a catalyst for additional investment in these sectors.
Furthermore, given their strategic position, SOE can play a leadership role in both the customer and supplier community in driving programmes that catalyse socio-economic transformation in these sectors.
Consequently, our new vision as the department is to drive investment, efficiencies and transformation in its portfolio of State-Owned Enterprises, their customers and their suppliers to unlock growth, create jobs and develop skills.
Clearly, to achieve these goals, government cannot act alone. We have to rely on partnerships, not just with the private sector, but with labour and other partners.
None of the sectors must ask government, what are you doing, without also responding to the same question. The fact is, together we can and must do more and better.
As you may well know, we are at one of the most challenging points in our history since democratisation as the triple challenges of joblessness, inequality and poverty are at their most intense and we cannot go on along the same old way as though we are oblivious to this challenge.
What should concern us is that unemployment is highest among the groups between 16 and 35 years of age, which group also lacks general economic opportunities which would facilitate or enhance their economic participation.
State-Owned Enterprises play a pivotal role in laying the foundation for nationally-meaningful economic growth to occur precisely because government is the only social agent with an intrinsic interest in ensuring adequate investment in infrastructure.
The Department of Public Enterprises (DPE) lies at the heart of this endeavour and is indeed a challenging and interesting place to work.
The DPE is the government shareholder department for eight State-Owned Enterprises namely Eskom, Transnet, Denel, South African Airways (SAA), South African Express (SAX), Broadband INFRACO, South African Forestry Company Ltd (SAFCOL) and Alexkor.
The work of the department aims to develop the SOEs as focused and sustainable state-owned business entities delivering on a specific strategic economic and social mandate.
The department is focused on directing the SOEs to align their strategies with the needs and policy direction of the domestic economy by positioning the SOEs in pursuit of industry or sectoral policy objectives, as well as by the development and promotion of policies by DPE that enhance the operation of SOEs.
DPE provides shareholder oversight of the SOEs – in essence, the DPE’s mission is to ensure that the SOEs are both financially sustainable and deliver on the government’s developmental objectives.
The management of DPE’s portfolio is largely aimed at ensuring the security of supply in the energy sector; a national presence in airline capacity, enhanced broadband capacity and accessibility; an efficient freight logistics transportation infrastructure (which lowers the cost of doing business); the consolidation of aerospace capability / advanced manufacturing capability and export of defence solutions.
Consequently, SOEs provide for an exciting array of career opportunities spanning the transportation logistics (rail, port and aviation sectors); telecommunications; electricity generation and distribution; mining; defence and forestry sectors.
For the next five years, Eskom and Transnet’s Build Programmes are in the order of R460 billion, aimed at meeting the needs of a growing economy.
We know however that these investments alone are not enough. South Africa has a particular challenge in that the infrastructure investment backlog resulting from under-investment in infrastructure at around 5% of Gross Domestic Product (GDP) between 1994 and 2004, has resulted in a significant public investment shortfall of R1.5 trillion (using 1994 – 2009 benchmark based on 10% GDP investment in infrastructure in 2010 Rand).
As a result, the build programmes necessitate a high degree of competency in planning, management including project management and procurement competencies.
Just to give you a sense of the employment and skills impacts of the construction of the two coal power stations and the pumped hydro-storage scheme:
160, 000 people are directly or indirectly employed in construction process;
the building of the plants consumes 43% of relevant university graduates, such as engineers and project managers; and
48% of the yearly output of artisans is employed.
The challenge of producing adequate skills for these projects is compounded by the reality that 30% of Eskom’s artisans, technicians and engineers are approaching retirement.
In order to ensure an adequate supply of skills for these programs, Eskom has implemented a number of special initiatives:
Eskom invested over R780 million in training over the last financial year
They established 24 training centres while there are 244 on the job training sites
Presently 5225 learners are registered, of which 3780 are in engineering and technical fields
4075 engineering trainees are under training
In a recent survey Eskom was rated the number one company to work for amongst engineering graduates
Eskom has also leveraged the training of 6130 people by suppliers as part of their contractual obligations in the building of the power stations – a number of whom are getting on the job experience over-seas
With additional funding, 5000 more young people could be put into training and
Eskom’s suppliers are also adopting Further Education and Training colleges to enhance teacher competence, provide bursaries for local students and ensure that they are producing artisans with relevant and rigorous qualifications for the realities of the build program.
Transnet has also significantly enhanced its skills development programs to support its investment programs with the establishment of special “schools of excellence” for each Transnet business unit.
There are presently 20 campuses covering curricula relating to ports, rail, pipelines and engineering.
Transnet needs to increase the number of engineers employed by 200% and the number of technicians employed by 40% as soon as possible.
Yet, the scale of the investment programs needs progressively to grow if we are to unlock the country’s true growth potential. This increased scale will create additional significant skills challenges.
For example, our modelling of a more aggressive energy build program that involves a nuclear build suggests that Eskom and its suppliers will require an additional 3 000 scientists and engineers and 24 000 artisans over a five year period from the commencement of the program.
This excludes highly specialised skills that would be required with technology transfers associated with nuclear design and manufacturing.
Closing this gap will require a concerted collaborative effort between Eskom and its key local and international suppliers, including special programs with international original equipment manufacturers.
These would aim to enhance output from existing facilities, establish new, specialised facilities in South Africa and arrange special on-the-job training abroad.
These calculations exclude the additional skills that would be required by the private sector to manage the investment that would be unlocked through providing additional electricity for the economy.
If we add the impact of an accelerated rail and port investment program, the short-fall becomes significantly more challenging.
University of South Africa (UNISA) graduates generally have work experience which places them at a unique advantage in advancing careers in SOEs particularly at managerial level. There is a major focus on scarce and critical skills which span the SOEs and their relative sectors.
Some of the professions, of relevance to UNISA graduates include but are not limited to the following:
Financial, commercial, management and engineering qualifications. These skills are highly sought after particularly in Eskom, Transnet, Broadband INFRACO, Denel, SAA and SAX. The latter includes mechanical, electrical, civil, aeronautical, Information, Communications and Technology engineers;
Innovation is fundamental to future growth. Research and development and technology management lie at the heart of innovation. Research and development capabilities in the SOEs are of world class standards. However, it is clear that opportunities for Doctoral research graduates exist particularly in the nuclear and renewable energy fields. Scope exists for more synergies between SOEs and universities in the research and development arena.
Within the DPE, Financial and Legal skills are critical in addition to highly specialised expertise in Transport, Energy, Information and Communications Technology and defence sectors in particular.
It is therefore important to note that our government’s strategic intentions and programmes that are currently being undertaken require vast and varying skills and capabilities drawn from audiences such as today’s.
It is equally important for today’s gathering to ensure that you equip yourselves with deeper understanding of government’s vision and programmes to ensure that you assess and gauge what role you are to play in furthering yourselves and the broader agenda of our nation’s success.
The need for more substantive interactions between our department along with our SOEs and learning institutions has surfaced as the department has begun to look at programmes intended to further the economic development of youth in our county.
Key to the success of this programme will be ensuring that we have a clear understanding as to what our SOEs are doing in empowering our youth with the kills needed by SOEs and the economy.
As its stands Eskom is working with various universities on targeted programmes with a specific focus on full time learners for engineering related programmes through bursary support and internship programmes.
Denel is providing financial support to fulltime learners including graduates in the engineering field through bursaries and internship programmes. Denel also embarked on a survey in which a need was identified to establish collaboration with UNISA to develop a Denel Graduate Development programme to bridge gaps identified within management personnel and to ensure the retention of talent. The programme development has been completed and learning will commence in June 2011.
Transnet supports fulltime learners on engineering programmes at both the Universities and Universities of Technologies as bursars and interns. Transnet also provides financial support to its fulltime employees doing long distance learning in various programmes including undergraduates and post graduates including business related programmes.
DPE has a Graduate Development programme in which fulltime learners are supported financially and also placed within DPE and mentored to do work experiential learning.
The programmes I made mention firstly seek to ensure that the SOEs deliver on the number of candidates they have committed to skill and train. Part of the youth development programme we have spoken about will aim to consolidate this information and ensure that the skills development data is readily available to students who wish to be trained in current programmes run by our SOEs.
Its aim will also be to source additional financing to ensure more skills development and training candidates are put through these programmes.
Going forward, we must address the critical matter of committing to a heightened utilisation of young talent produced by such programmes and other learning institution within the Economy, SOEs and the Department of Public Enterprises.
Source: Department of Public Enterprises
Issued by: Department of Public Enterprises
31 Mar 2011
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