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Ladies and gentlemen of the media, good day to you and thank you for your time and trouble in being here today.

I know there is a keen interest in the subject of restructuring both inside South Africa and internationally. This opportunity to bring you up to speed with the process is particularly welcome in light of the fact that the Government recently announced its advisers on the conduct and execution of the process, the HSBC Group and James Capel of London in co-operation with Simpson McKie of South Africa.

At the outset may I also take this opportunity of conveying my gratitude to the South African Communication Service for their conspicuous time, effort and trouble in making this presentation possible. It is very much appreciated.

The Present Position

The Government has devoted earnest consideration to the selection of advisers at central Government level for the approach to the process and its implementation.

Some 98 tenders were received in response to the advertisement for the latter and after exhaustive scrutiny culminating in a series of penetrating interviews the HSBC/James Capel/Simpson Mckie group were chosen against the backdrop of a carefully crafted and mutually satisfactory contract.

THE MAIN TASKS OF THE ADVISER WILL INCLUDE THE FOLLOWING:

to assist the Government with the review and assessment of options presented by Sectoral Task Teams;
to assist in prioritisation of the recommendations of the Task Teams into a restructuring programme which will achieve the objectives of the government.
to assess the existing regulatory framework and laws and comment and advise the government accordingly; and
to assist in developing a communication strategy that will keep all stake holders in the restructuring process abreast of the development in the restructuring process.

The work of the advisers will be supervised by an Oversight Committee (OC) reporting to the Inter Ministerial Cabinet Committee (IMCC) through the Minister for Public Enterprises (MPE). The OC will work independently of the Office of the Deputy Director General in the Office for Public Enterprises (OPE) who shall retain responsibility for managing the ongoing affairs of the Office for Public Enterprises. The OC will operate independently of the OPE in the immediate future, but will be incorporated into the OPE in the medium term. The MPE shall establish a Project Team (PT) to provide technical support to the OC and the PT shall work under the direct auspices of the OC and report to it on all matters.

The OC will monitor and evaluate the work of the advisers and actively manage the processes undertaken by the advisers in the course of their work. The OC shall receive regular reports, analyses and recommendations from the advisers and regular reports from the Heads of those departments affected by restructuring. The OC shall also receive reports from any other advisory group which the MPE may have established or may establish in the future. The OC shall analyze and process all such reports, analyses and recommendations and forward the results to the MPE and through the

Minister to the IMCC responsible for overseeing the restructuring process.
The PT shall provide technical support to the OC as directedby the OC and such technical support shall be requested by the OC on a case by case basis. The OC will comprise approximately seven persons drawn from the affected Ministries endowed with the appropriate knowledge and skills. The MPE shall appoint a convenor of the OC.

The number of members of the PT will be determined by the specific tasks that need to be performed and the members of the PT will be drawn from the departments affected by restructuring.

The OC shall work closely with the advisers and shall facilitate and manage the process by which the advisers conduct their work. The OC shall receive ongoing analyses, reports and recommendations from the advisers, and closely monitor and evaluate their work.

The IMCC shall receive all reports and recommendations from the OC and the recommendations of the IMCC will be directed to the Cabinet prior to final approval. The OC shall be established with a time-frame commensurate with that within which the advisers execute their mandate. The contract between the Government and the advisers commences on 1 September 1996 and is for the duration of one year.

RESTRUCTURING AND HUMAN RESOURCE DEVELOPMENT

It should be emphasised that the public enterprises under restructuring review employ in excess of 300 000 workers, many of whom are unskilled and understandably apprehensive over the implications of restructuring. The success of South Africa's infrastructural development programme is largely dependent on the country's ability to develop simultaneously the nation's human capital resources.

Consequently, it is a cardinal theme underpinning the restructuring process that restructuring ought to develop the human resource capacities of South Africa through decent employment conditions, efficient use of training and retraining, redressing previous discriminatory practices and enhancing technical and managerial capacity.

The process must also take into account the fact that SA has one of the highest disparities in the world between rich and poor.

It has an economy where extreme concentrations of power reside with the five major conglomerates who control approximately 80 % of the share value of the JSE. This is the case in an economy in which 40 % of the households earn less than 6 % of the total income whilst the richest 10 % earn in excess of 50 %.

In conjunction with the recently appointed strategic advisers to Government it is intended that restructuring should be an all embracing holistic tool to address present levels of economic inefficiency and inequities. A phased approach will be required to correct the structural defects and maximise economic and social welfare.

THE WAY FORWARD

On the 23rd May speaking as a panelist at the World Economic Forum I indicated that the process would start moving - restructuring would gather momentum as from the 15th June. Two things were to happen:

The announcement of the Macro-Economic Strategy for Growth Employment and Redistribution.

The meeting of the Six-a-side to discuss the way forward in terms of the NFA.

These have duly happened. Sector Teams in line with those currently taking place in Government were set up.

TRANSPORT
MINERAL AND ENERGY
TELECOMMUNlCATIONS
TRADE, INDUSTRY AND DEFENCE
WATER AFFAIRS, FORESTRY AND AGRICULTURE

At the request of Minister Valli Moosa, a sector dealing with Municipal Affairs under the NFA is to be added on. Labour also requested that there should be a sector on Housing.

The six-a-side teams are meeting to discuss sectoral policy issues which would enhance the NFA process and good progress has been registered in this regard to date.

Where policy is still being finalised, it will be refined and developed in a participative process involving all stake holders including labour.

LEGAL AND REGULATORY

Line function ministries have begun the process by developing White Papers to cover a broad range of regulatory reforms and to ensure that the process of public sector restructuring is transparent and leaves no ambiguity in the implementation.

Appropriate legislation has been passed and is due to be passed during this current session of Parliament. This will ensure that the laws and regulations relating to, for example, property, labour standards, monopolies, foreign investment and exports, environmental issues, capital markets and financial investment are all consistent and designed to support the Government developmental initiative. Cabinet have approved a draft Telecommunications Bill which lays the foundation for a Telecommunications Regulatory authority and a Universal Service Agency.

Public Enterprises has drafted a proposed Amendment Bill which addresses the ownership of Eskom. The whole Tariff Structure at the Ports and Petronet have to be looked at.

TELKOM

Telecommunications has already appointed Goldman Sachs as advisers in its search for a Strategic Equity Partner. A team from the Development Bank of Southern Africa is also helping to co-ordinate the process. Telkom is definitely in the vanguard of the process.

LABOUR

Government has recently made available to organised labour a sum of R780 000 as a first transfer out of the allocated R3 million in order to facilitate the appointment of advisers.

JOINT VENTURES

As indicated in this year's policy speech to the National Assembly and Senate joint ventures are already taking place and are encouraged for they enhance efficiency and global competitiveness.

Based on some of the proposals put before Cabinet on December 6, 1995, the work currently taking place, and further based on the guidance which will come from the Government Advisers, interaction with our social partners, and the Portfolio Committee which has to be consulted on a number of issues, it is now possible to provide a tentative and preliminary insight as to how the work which is going to be the subject of consultation and negotiation, seems to be unfolding. It must be emphasised that the process has maximum flexibility and versatility built into it.

TELKOM - STRATEGIC EQUITY PARTNER

Significant strides have been made in this sector. Negotiations are taking place with labour which are close to completion for finding a strategic equity partner. We see implementation towards the end of the second half of the year 1996/early 1997. Indeed in terms of the NFA a Telkom meeting is scheduled to be taking place today. The issues are complex and further details will be provided by the responsible Minister when it is deemed to be appropriate.

AVENTURA

Restructuring activities have progressed substantially in respect of the possible recapitalisation of Aventura. The final steps for approving potential capital investors have not yet occurred.

TRANSPORT SECTOR

1. Metro - An agreement has been reached that Metro be located as a division of Transnet
and later a subsidiary.

The Sub-Committee of Ministers dealing with Transport issues (National and North West) has had preliminary discussions with labour on some of the proposals from Government. At the next meeting which is proposed for the 23rd August further discussions will be held and a decision will be made on how to prioritise the work at hand.

(a) This proposes dealing first with entities which will have less impact on labour - eg. Sun Air, which if privatised, will not lead to any job losses. Workers within Sun Air have no problem with privatisation. Decisions should be made within 1996.

(b) Transkei Airways: This entity is losing a lot of money. The Eastern Cape Government had to provide a subsidy up to end March. That situation is being evaluated and a further proposal may be on the cards soon during the latter half of 1996.

3. PX:PX has all the ngredients to be a money spinner, and plans are afoot to turn it round before any far reaching restructuring.

4. In the energy sector the issues to be resolved first are the legislation on the ownership and fiscal status of Eskom, as well as the structure of the electricity distribution sector. The latter issue is being addressed by an inter departmental committee led by the Department of Mineral and Energy Affairs.

As far as Eskom is concerned, discussions will take place on a variety of options for strategic alliances and joint ventures. For example, attracting strategic partners when reactivating mothballed power stations could realise R1 billion in foreign capital.

In conclusion, may I say that the restructuring programme is destined to be a protracted and carefully considered process. It is a challenging undertaking with dramatic ramifications for the entire South African economy and it offers a unique beacon of hope and inspiration to all South Africans with the ultimate promise of a more prosperous stable and secure future.

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