Remarks by Mr Malusi Gigaba, Minister of Public Enterprises, to the South African Chamber of Commerce and Industry (SACCI) at the Crown Plaza Hotel in Johannesburg
19 May 2011
Thank you for this opportunity to address you this morning.
In some way, those of us who criss-crossed the length and breadth of the country during the elections campaign, feel a bit “babaalased” after what was an exhausting and yet rewarding effort in the pursuit of the enforcement of our democracy.
Sitting as we do today, on this day, as the results begin trickling in and various South African patriots celebrate their election into the high office of serving our people, and our communities learn who their public representatives will be during the next five years, we cannot but take pride in the fact that our democracy, only 17 years this year, is maturing and becoming a source of national pride.
Such amazing feats that speak so much of the monumental collective achievement of the South African people, find themselves neglected in the pages of many of the global newspapers which many of us gathered in here read, focused as they always are on the negative African story of war and strife, as though these constitute what defines Africa and Africans.
The good story of the World Cup is receding into the distant past, remembered by an increasing few, and the global media, steeped as they are in the practice of Afro-pessimism which they have turned into an ideology, are all too eager to revert to telling the negative story about us.
The manner in which the global superpowers treat and endeavour to trample all over Africa, be it in Libya, Ivory Coast or in the economy as a whole, is a telling testimony of the challenge we face still to lift ourselves by our boot-strings politically, economically and otherwise.
Critical in that is the pursuit of employment and equality – indeed, the pursuit of a better life for all – in order to create shared growth and prosperity.
It is precisely these challenges that the New Growth Path raises as critical, needing urgently to be addressed. In his article, "After the crisis, a chastened International Monetary Fund (IMF) has emerged", Joseph Stiglitz quotes the besieged IMF Managing Director, Dominique Strauss-Kahn, who said that: "Ultimately, employment and equity are building blocks of economic stability and prosperity, of political stability and peace. This goes to the heart of the IMF’s mandate. It must be placed at the heart of the policy agenda”.
Indeed, addressing unemployment, poverty and inequality must be placed at the heart of the policy agenda, and all institutions – political and economic – must be harnessed and galvanised towards that common challenge.
Towards that end, the New Growth Path identifies infrastructure development, amongst other things, as one of the five key jobs drivers.
This then places the State Owned Enterprises at a special position.
The Department of Public Enterprises (DPE) is the shareholder ministry responsible, on behalf of government, for ensuring that the State Owned Enterprises (SOEs) reporting to it, operate efficiently and effectively, and deliver on their respective mandates.
The department’s primary objective is to ensure that the State’s shareholdings in these enterprises are financially sustainable and deliver on government’s strategic objectives in owning the enterprises.
Infrastructure-related SOE like Transnet and Eskom are in a powerful position to drive growth in the economy.
Key sectors of the economy are completely dependent on the availability of infrastructure capacity for their existence and growth.
Accordingly, the SOE either constrain growth or they act as a catalyst for additional investment in these sectors.
In this regard, we cannot continue to see them in isolation from the impact they have on their customers and suppliers.
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 the department has a new vision 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.
We are presently exploring building partnerships with a range of stakeholders to realise this vision.
I will highlight a few examples to you.
First, it is well known that South Africa is not taking adequate advantage of the opportunities created by the global commodities boom. This is extremely problematic, particularly as our iron ore and coal exports will earn us significant quantities of foreign exchange which, in and of itself, should accelerate our rate of growth.
Although Transnet has been steadily investing to increase capacity on the key commodity export corridors, this investment is limited by Transnet’s balance sheet capacity and is insufficient to really unlock new investment and growth in our mining sector.
Consequently, we need new sources of finance to enable a quantum jump in the rate of investment and in the capacity of these corridors.
The DPE will be exploring partnerships with both development finance and mainstream finance institutions to see how equity and quasi equity finance for these projects can be raised.
In addition, the department will be engaging with the large mining houses to explore co-investment relationships given that these company’s have the most to gain through additional investment, but are presently not sharing any of the risk associated with the development of these corridor.
Secondly, the average age of Transnet locomotives is around 33 years old.In the USA, the average age of a class one locomotive is 15 years old. We need both to bring down the age of the fleet and add significant capacity if we are to both unlock Transnet’s customer’s growth potential and move goods from road to rail.
Consequently, we are designing an ambitious fleet renewal strategy which will see us procure consistent and significant quantities of both electric and diesel locomotives annually over the next fifteen years. This will make South Africa one of the most strategic markets for global locomotive equipment manufacturers, particularly in relation to heavy haul electric models.
Our plan is to partner the relevant original equipment manufacturers to build South Africa’s locomotive manufacturing capability.
Our aim is to more than double the quantity of local content embodied in the locomotive and to ensure that South Africa becomes a key global manufacturing and niched engineering hub for the relevant Original Equipment Manufacturer.
Third, our SOEs are facing considerable challenges to ensure that there is an adequate supply of critical and scarce skills, particularly engineers, technicians and artisans.
This is driven by a large proportion of existing skills reaching retirement age as well as the increased demand caused by the capital investment programs.
It is clear to us that our SOEs are not alone in facing this challenge and that many of their suppliers and customers are facing similar constraints.
The SOEs have started to partner with large suppliers to optimise both the SOE’s training capacity, to enhance the quality of output from Further Education and Training colleges and to provide work-place training.
The DPE is playing a coordination role with the Department of Higher Education to access additional resources to ensure that SOE training facilities are used to full capacity. We expect to increase artisan output by 60%.
I know you will not be happy if I do not say anything about private participation in the SOE value chain.
There is a detailed policy framework and process relating to private sector operational participation in the energy sector.
The Minister of Energy is empowered to define the division of labour between Eskom and private producers in delivering on the requirements contained in the Integrated Resource Plan.
National Treasury has made great progress in the definition of power purchase agreements and in the establishment of the institutional capacity to procure power.
We have made the principled decision to establish an Independent Systems Operator, but this will take some time.
In the Port and Rail sectors, we are going initially to focus on areas that are complimentary to Transnet’s strategy. This will include areas such as branch line concessioning, innovative proposals to put cargo from road to rail and reduce road congestion around ports and inland terminal development. We are investigating the establishment of a governance framework to expedite these processes.
I also would like to assure you that we will continue to keep a vigilant eye on the sustainability of South Africa Airways so as to ensure that the airline continues to provide capacity to enable the flow of business people between South Africa and the rest of the globe.
It has become clear post the global recession, and given the immense social challenges that we face, that the importance of a developmental state cannot be over-emphasised.
These developments have already made the argument for such an activist and engaging state seem superfluous. For South Africa not to suffer yet another infrastructure deficit, more visionary thinking, planning and leadership is required of the state.
In pursuing our new vision of driving investment, efficiencies and transformation in its portfolio of State-Owned Enterprises, their customers and their suppliers to unlock growth, create jobs and develop skills, we are acting decisively in pursuit of these goals of placing employment and equity at the heart of our policy agenda.
Further to pursue these, we have to strengthen relations with our stakeholders, especially business, labour, and the provincial and local tiers of government. With regard to the latter, we need to ensure that there is alignment between the capex programmes of the infrastructure-related SOEs and the development plans of provincial and respective local governments.
Once again, I would like to thank you for this opportunity and look forward to a continuous and productive engagement between the department, the SOEs and the chamber.
I thank you very much for your attention.
Issued by: Department of Public Enterprises
19 May 2011
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