[ Home ] [ Speeches & statements ]

INTRODUCTION

Good morning ladies and gentlemen, and thank you for your interest in this morning's briefing.

In my address this time last year I indicated that the years 1997-1998 would be the years of delivery and implementation. It gives me great satisfaction to report that these objectives have been, and are being, largely achieved. Good progress has been made in the transformation and restructuring of the State Owned Enterprises into efficient and competitive industries. It is worth noting that where similar restructuring processes overseas involving SOEs have been pursued, the process has taken ten years or more. In the United Kingdom, for instance, the full privatisation of British Airways took over ten years. Beyond corporatising these institutions to become profitable entities for the Government and the people of South Africa, we have to consider the social impact of these changes and the repercussions on their immediate communities as well as their contributions to the broader transformation of South African society. From this it is clear, that my portfolio responsibility extends well beyond the limitations of privatisation, therefore, I would like to point out that I am not the Minister for Privatisation, inasmuch as my task is far wider and more complex than that.

At the outset, let me take you through the recent progress and achievements regarding the restructuring of State Enterprises.

AIRPORTS COMPANY

With respect to the introduction of an SEP into the company we are now at an
advanced stage of the company's partial privatisation. Five companies are
preparing due diligences in order to bid for the equity being made available. These are Aeroports de Montreal (Canada), Aeroporti di Roma (Italy), Amsterdam Airport Schipol (Netherlands) British Airports Authority (UK) and Flughaven Frankfurt ( Germany) .

It is envisaged that this process, including the introduction of empowerment shareholders, should be concluded by mid-1998.

ALEXKOR

The mine and its economic activity supports the Namaqualand Region, so in restructuring the business we have had to ensure that its various business activities are not only retained but that its contribution to the communities around it is not reduced.

For the short to medium term we plan to raise the efficiency of the business by transferring its management to the private sector through a competitive bid. In a proposal to be placed before the IMCC it is envisaged that on-shore, shelf, deep-sea mining and non-core (agricultural) activities will be split and run separately.

At the end of this period, the successful companies will have the option to acquire significant equity in the various businesses.

SAFCOL

In restructuring SAFCOL's business we have to consider all of the Government's forestry assets, evaluating various options to ensure that maximum returns are gained, and business is enhanced in regions where it is currently neglected.

Restructuring our best forestry assets is the easy part. Finding a solution to our non-performing DWAF (Department of Water Affairs and Forestry) forests in the Eastern Cape is an essential part of the process.

We have recently sent out tenders for transaction advisers for the restructuring of our forestry sector. It will be part of this adviser's mandate to investigate these options and recommend the best route forward. A decision to appoint a transaction adviser will be made next month.

Contrary to misinformed reports in some financial publications there are several international companies that have already expressed interest in the options being investigated .

TRANSNET

A master plan for restructuring Transnet is being completed and it is anticipated that the final draft will be presented to the Transnet Board by the end of February. Attention during the course of the year is going to be devoted to some of the smaller companies in Transnet.

SAA

SAA has been earmarked by Government as a candidate for a strategic equity partner. In line with this process the corporatisation process is already under way and Government has already appointed Merril Lynch as the transaction advisers to deal with this process and African Merchant Bank has been appointed as the Empowerment Adviser (responsible for the sale of ESOPS to employees and empowerment groups).

AUTONET

The restructuring of Autonet in the form of full privatisation is also proceeding well. A workshop is planned for the 26th February between Government and Labour to investigate the full privatisation process.

PORTNET

It is expected that a substantial amount of progress will be made in the restructuring of Portnet. As previously reported Rob Childs has been appointed as the Executive Director in charge of Portnet. It is likely that he will immediately co-ordinate the current restructuring initiatives.

METRORAIL

The government is exploring with business and labour the possibility of concessioning components of Metrorail and there is progress on planning the restructuring of the company.

SUN AIR

The transaction for the 100 % sale of Sun Air was completed in September last year. The airline was sold to the Rethabile Comair Consortium for approximately R50 million. We expect Rethabile to comply fully with the terms of the sale by 15th February.

AVENTURA

A decision for 100 % privatisation of Aventura has been made. There are five bidders short listed. The next stage in the process will be a due diligence exercise involving presentations by Aventura's management and visits to all the resorts. The pre-qualifiers will be invited to submit binding bids. Land claims have been made in Blydepoort and Swadini resorts. However, the issues are not insurmountable and we believe can be resolved to effect a complete sale of this enterprise.

DENEL

A study of the defence industry and the position of Denel in it has been completed.

In the meantime the emphasis at Denel is internal restructuring. The future of the IT component in Denel is under discussion within the structures of government. In the meantime it is in the process of being corporatised for efficiency.

1 998 PROGRAMMES

* (Consider the enactment of the restructuring bill designed to facilitate the smooth restructuring and transformation of SOEs

* Pursue the implementation of the framework on Corporate Governance of the state owned enterprises on issues of accountability, transparency, representivity, payment of taxes and dividends

* Monitor the adherence to RDP targets on affirmative action, outsourcing non-core activities to the business from historically disadvantaged communities

* Accelerate the implementation of the National Empowerment Fund and the Employee Share Ownership SchemeSeriously explore the need for and possibility of establishing new strategic SOEs such as, for example, in the Liquid Fuels Industry and the possibility and feasibility of consolidating the housing portfolios of SOEs and combining them with the existing housing parastatals in an attempt to drastically improve the pace, quality and size of affordable, decent houses for most of the needy sections of our people

* Work on the Social Plan as envisaged in the National Framework Agreement. In terms of the NFA process steps are at an advanced stage to develop a social plan for employees who may be adversely affected by the restructuring process. This process is already gaining momentum under NEDLAC and significant progress has been made by Transnet and its unions towards finalising a joint position on this process. The Ministry is also working together with all the parties concerned including the Department of Labour to finalise the framework for a social plan in the context of the restructuring process.

* Ensure that the Public Enterprises 2000 Programme for Human Resource Development is given maximum scope and opportunity for contributing to the national economy

UPCOMING LEGISLATION

- The Eskom Amendment Bill
- The incorporation of Eskom as a public company
- Facilitation of Restructuring Transactions Bill

These objectives have been achieved while the Office for Public Enterprises was and still is understaffed, although handsomely supported by a dedicated and hard working team and an advisory group of financial experts and professionals whose international skills and contributions have proven invaluable. Against this background the Office for Public Enterprises approached the Inter Ministerial Cabinet Committee on Restructuring and Privatisation for increased capacity and specialised skills which are predominantly to be found in the private sector, as well as looking to the SOEs themselves which dispose of a wide variety of capabilities which can also make a most helpful and constructive contribution.

In practice this means identifying three or four qualified individuals who will be bale to assist me directly in driving the overall restructuring programme. They will be required to ensure that policy documents for decision-taking by Ministers are comprehensively researched, that all stake holders are effectively consulted and that Minister's decisions are fully executed. In this way we will develop a group of officials who are fully conversant with the implementation of restructuring HSBC, the Government's overall advisers on restructuring, will have an important role to play in passing on the necessary skills to this group.

CAPACITY BUILDING

Capacity building is therefore an essential ongoing component based on the requisite needs for the foundations of our implementation programme for the future. This is occurring on two levels: one comprising the needs and demands of the restructuring and privatisation process itself which requires specialised skills and training as it unfolds, and the broader needs of the SOEs which must attract improved management skills and administrative expertise comparable to that in the private sector as it unfolds. The Project 2000 in collaboration with the University of Warwick in the UK has generated a tremendously encouraging response from a vast range of businesses and industries across the country. This project is designed to expose middle and senior level managers to international state of the art management techniques, practices and technology.

SHAREHOLDER RESPONSIBILITIES

In practice this means resource development based on the objectives outlined in 1994 and 1995 by my Ministry. These objectives involved restructuring the Ministry and Office for Public Enterprises with a view to appointing personnel with relevant skills and promoting affirmative action; continuously monitoring and evaluating the performance of the six enterprises resorting under the Ministry for Public Enterprises, i.e. Eskom, Transnet, Alexxor, Aventura, Denel and Safcol; and the management and co-ordination of the programme for the restructuring of state enterprises.

Between 1995 and the present, the Ministry and the Office for Public Enterprises have been effectively restructured in order to maximise the contribution to the national economy by the public enterprises; to improve and ensure accountability in the process of stewardship over the resources entrusted to the public enterprises; and to enhance transparency in the financing and performance of the public enterprises. To this end the Ministry receives monthly reports from the Chief Executives and Chairpersons of the Boards of the SOEs to ensure transparency and accountability which complies with good corporate governance as articulated in the Principles on Corporate Governance and meeting financial objectives.

In line with the Government's policy on black economic empowerment the SOEs are being encouraged to procure significant proportions of their business requirements from companies owned and managed by historically disadvantaged groups. This policy is being implemented without compromising the integrity of the principles associated with the Protocol on Corporate Governance.

<EOD>