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It was on the 21st September in 1994 that I presented my first Budget in these Parliamentary Chambers. As a Minister in the ANC led Government, I took that Budget speech to be the one That would constitute the first building blocks by my Office in the Governments programme of Reconstruction and Development - a programme that would ensure a better life for all our people.

What a task! After only a couple of months in office I knew for a fact that it could not be business as usual in the various entities. We had to abandon the bureaucratic structure that impeded good business principles
and our businesses had to be truly South African The days when the entities were the playing fields for white mates were over The South African Constitution does not allow for that.

In order to introduce new entrants to the management structures, training for employees had to be provided ensuring that they remained at the cutting edge of the technologies and competencies that are required in
order to survive in the highly competitive world that was emerging We needed to transform these entities if we were to serve South Africa better. Thus we embarked on a five point programme of Good Governance;
Transformation: Empowerment; Restructuring; RDP and Social Upliftment.

RDP AND SOCIAL INVESTMENT

The Public Enterprises Review from 1994 - 1999 which has been distributed outlines in broad terms some of the social responsibility programmes that the various entities have undertaken. All of them have
one or two themes:-

i that of the provision of affordable, good quality basic services to all South Africans, and
ii the economic empowerment of historically disadvantaged communities.

In bringing electricity to the people, Eskom makes not only 1000 connections per day and is sure to meet its RDP target of 1, 750, 000 connections by the year 2 000, but it has also made a commitment to
reduce the real price of electricity by 15% - a target which it is also on track to meet

Stories of happiness with what has been achieved come from all corners or South Africa, even from the most rural of communities. Tata Nondoda from Kwa-Bhipha in Flagstaff no longer says electricity will blind his oxen and chase the ancestors away but is happy that he will be able to buy himself a small TV set and thus be linked to the rest of the world.

Nonceba now runs a successful supermarket which she has also extended to include a bakery and a butchery. Even Dubulisikhova can now serve cold drinks in his tavern.

All the entities have well co-ordinated projects in community development education and training, primary health care and entrepreneurial development - demonstrating that they are all responsible citizens.

One of the best examples is the Phelophepa health train which since 1994, has attended to 141 544 patients. At the last count 40 000 children had been screened and educated in health care at various schools- 705 local volunteers have been educated in various health aspects and 37
stations visited annually.

The latest involvement of Spoornet on the project - "On the Track" - which was a project of Women in Partnership Against Aids is further evidence of enterprise involvement with communities.

RESTRUCTURING

The Public Enterprises Review 1994 - 1999 contains full details of what has been done to date - see pages 8 - 9. However, there are some entities to which I shall specifically refer.

SAFCOL

The formal process of restructuring of the State Forestry Assets began with the distribution of the Initial Information Memorandum during the week ending 5 March 1999 to both local and international companies that have registered an interest in line with the time-table. This will be followed by the submission of non-binding Expression or Interest documents by Friday, 16 April 1999, after which the process of short-
listing will take place.

At the end of April, a detailed Information Memorandum will be distributed to the short-listed bidders on condition that they sign a Confidentiality Undertaking. Bidders will be given three months from the beginning of May to have access to the data-room and the Forestry Assets and submit binding bids by the end of July 1999.

The announcement of the Preferred Bidders is expected by mid August 1999, and thereafter the negotiations with the Preferred Bidders will be conducted.

ALEXKOR

Government has awarded a Management Contract to Nabera with the mandate to turn around the mine and to expedite the exploration of potential new reserves to extend the life of the mine from both land and
marine operations.

SAA: CHANGES AT SM UNDER THE NEW LEADERSHIP TEAM

With the inception of its new leadership team SM has devised a strategy for winning, built on six major initiatives. To achieve this, it was necessary to thoroughly diagnose the flaws in the prevailing SM strategy,
operations and organisation which had underpinned SAA's previous losses.

In the first place it was essential to sharply improve SAA's customer service. A year ago "on time" departures were below global norms. Today SM is setting higher "on time" performance standards than any other major US, European, Asian or African airline. In the past, there had been little or no customer service training for ground and cabin staff. Now, from the moment a passenger approaches the check-in desk until the moment of exiting the airport precincts, staff trained to the highest standards look after the client.

It was also critically important to make substantial cost reductions through closing money-losing routes and offices and rightsizing the company. It had been earlier calculated by the previous management that 3 000 job losses were on the cards as a result of this exercise, but retrenchments to date number only1 1 100 and every effort is being made to minimise the impact of such a policy.

There have been dramatic gains in sales and improvements in revenue management. Antiquated computer systems, costing time and money, have been discarded in favour of "best in the world" systems and
software. Proven and effective leadership has been installed and a massive refraining programme is underway.

SAA is busy building powerful new alliances with established and successful airlines such as Singapore1 Swissair, Lufthansa and British Midland Airways. Profitable new international markets are being opened
every week enabling much higher business and tourist traffic inflows into South Africa, while on the African continent new East-West network routes are being pioneered by SM in collaboration with already
established airlines.

An incompatible fleet comprising several different makes of aircraft is being rationalised with upgraded and coherent fleet enhancement through the purchase of four new Boeing 747-400s bought at extremely
competitive prices. The strategy to upgrade the rest of the fleet is nearly complete.

The airline is offering new first class and business class products, involving a complete redesign of the cabin interior, food selection and service excellence. The company is also devising a "blueprint for
transformation" to train the next generation of managerial and administrative leaders.

As a result of these innovative initiatives, customers are coming back to SAA. Profitability has been restored to the extent that from October 1998 until December1998 a R24 million loss from the same period in 1997 turned into an R8.4 million profit This trend was reinforced in January to March 1999 with a R400 million profit as opposed to an R82 million loss in the same period for the previous year. Morale, enthusiasm and corporate loyalty have alt shown dramatic improvements and the airline is reflecting
the impact of the new management in a positive and encouraging way

TIME TABLE FOR RESTRUCTURING

DATE (1999)

ACTIVITY

February 22 - March 5
Meetings conducted by Merrill Lynch
March 31
Corporatisation of SAA (transfer of assets and liabilities from Transnet to SAA)
April 1
Distribution of Information Memorandum to selected parties
April 16
Deadline for preliminary non-binding offers
April 23
Notification to potential equity partners selected for second round
April 26 - May 20
Due diligence by potential equity partners
May 31
Deadline for final binding offers
June 7 - 18
Final negotiations with potential equity partners

CHANGES IN PORTNET SINCE MARCH 1998

In the early part of 1998 Pornet faced major problems involving morale, performance, management resourtes1 labour relations and customer relations.

Employee motivation was low for various reasons, which most seriously included a management vacuum. Transnet appointed an Executive Director, responsible for Portnet, in February 1998 The operating
performance was on the decline and had reached crisis proportions in certain areas1 including container cargo handling in the Port of Durban. Portnet had lost most of its experienced senior management resources in 1997 and early I 998, and the relationship between management and organised labour was marked by conflict. In mid 1998 strikes were launched by various unions for different reasons. Relationships between Portnet and key port users, including shipping lines and major cargo
owners, were at an all time low. Numerous complaints were received on a daily basis concerning performance problems, staff attitude and monopolistic practices.

Nevertheless, in the last year or so, definite progress has been made in key areas such as halting the overall slide, stabilising morale, strengthening management, enhancing performance and improving
customer relations.

The deterioration in the overall business was stemmed and a turnaround programme was initiated. In general, the loss of resources has halted and the organisation has begun to believe in itself again. The turn-around programme has created new hope That the situation will improve. A team of eight general managers was appointed to a new organisational level between the Managing Director and the existing management structure. There were three internal promotions and five external appointments. Of
the eight general managers, five are black and one is female.

The operating performance of Portnet's various services has also improved. Performance returned to previously established levels. In general, pod users could again rely on a predictable level of productivity
and service from Portnet. Through various interactions the relationship with Portner's union grouping was turned around. Various forums, including port and national level Joint Transformation Councils (JTCS")
were established. Management and labour began to jointly address various important problems and issues. Because service levels were improved and stabilised, relationships with customers were also
established. Various contact groups and consultative forums have been revived or established. Portnet is now making good progress in the right direction.

In 1998 it was agreed that there should be a separation of Portnet into Operations and Ports Authority and the establishment of a Regulatory regime. Work in that respect is ongoing. Possible options for the
restructuring of Portnet are going to be a subject matter for discussion before the end of the month

PETRONET

Petronet will continue to seek new business opportunities and position itself for restructuring as per the Transnet Masterplan on Restructuring. Interaction with the Department of Minerals and Enemy on the future dispensation of the liquid fuels industry has been ongoing. Petronet has just completed an options study for the Department of Minerals and Energy on ways and means of developing the gas opportunities in Mozambique and South Africa.

DENEL AEROSPACE

It is hoped that the process to corporatise Denel Aerospace as a stand at one company will be completed by the end of April 1999.

The process to consolidate Denel Aerospace with local partners whose primary business is aerospace and defence is close to completion. Discussions with a prospective international equity partner are taking
place. It is hoped that the consolidation process will be completed in May 1999.

DENEL LIGHT AND HEAVY ORDINANGE

A Task Team investigating the restructuring options for this sector is due to report in a week's time.

CONSOLIDATION Or INFORMATION TECHNOLOGY

Information technology and telecommunications resources have become critical components of a nation's infrastructures, similar to the role played by railroads and ports in the past century. Today companies, industries and countries compete in an increasingly competitive global economy where the key differential advantage comes from knowledge through software, market information and prices, the distribution and outsourcing of production, electronic commerce and educational content, for instance.

Knowledge is increasingly distance independent due to the explosion in global bandwidth in the global information and telecommunications infrastructure. Consequently, those who will be able to compete most
effectively in the future are those who have access to the broadest range of telecommunications and information services at the lowest cost per bandwidth.

The primary factors, which drive this, are:

* Advancements in technology (such as the exponential capacity growth of micro electronics, Internet Protocol, fibre and wireless facilities), and
* The lifting of monopoly protection for government telecommunications bandwidth (through fibre, wireless and satellite) at ever decreasing costs.

The Ministry for Public Enterprises recently conducted extensive research during a study mission to the United States. The purpose of the mission was to gain first hand insights that would enable us to help South Africa develop the most appropriate framework to facilitate the utilisation of selected state-owned telecommunications networks and information technology assets; with the intent to serve as the basis for the introduction of competition in these sectors. This will be accomplished in conjunction with the injection of private capital and attracting of global partners.

The Ministry for Public Enterprises plans as its marquee project to combine the information technology assets of Datavia, Ariel Technologies and Eskom on the one hand, and the telecommunications assets of
Transtel and Eskom on the other hand. In the future, the assets of these two world-class entities will serve as the basis for robust competitors in information technology and telecommunications. Moreover, by adapting the latest technology trends, such as Internet Protocol, these entities will be able to leapfrog into the information technology and telecommunications environment of the 21 century.

While in the US, our delegation reviewed the information on leading edge trends in IT and telecommunications technology from global leaders and innovators such as Lucent Technologies1 IBM and Hewlett Packard. We visited "new wave" telecommunications operators such as Qwest and Formus who are challenging the incumbents with networks based on revolutionary new technologies. We also received substantial information on the diverse policies deployed to execute privatisation and deregulation around the world from the World Bank, FCC and other global experts. We tried to find out what worked and what did not, so that we could tailor the most appropriate approach for South Africa - an approach that strikes a balance between providing incentives for competition while also ensuring that social objectives (black empowerment, for example) are met and that important stakeholders (such as the Communications and Trade and Industry Ministries) are sufficiently consulted.

GOVERNANCE

With the adoption of the Protocol on Corporate Governance, sound principles have been established for the conduct of relations between the parastatals and the Government as the sole shareholder.

All directors are equally accountable for the proper stewardship of the company's affairs. The executive directors have specific responsibility for the various businesses and functions of the group. The non-executive directors have particular responsibility to ensure that the proposals and strategies sought to be implemented by the executive directors are fully discussed and critically examined against the best long term interests of the shareholder and all other stakeholders of the company.

EMPOWERMENT

Empowerment programmes have been initiated in a number of entities ranging from the employment of black auditing companies and legal firms to technicians and engineers. More user friendly Procurement and Tender Policies are required of the various entities, although much progress has been made in this regard.

The restructuring process has also introduced substantial participation by historically disadvantaged people. Each restructuring gives a certain percentage of shares to empowerment groups, the ESOPs for the
workers the NEF, and the various black firms who are also contracted as advisers on the restructuring process.

TRANSFORMATION

This refers not only to addressing the numbers side of affirmative action, but also catering for the mind set of many employees derived from generations of being deprived of any form of control over their own
destinies.

AFRICAN RENAISSANCE

Transformation includes1 as has been stated a number of times by the Deputy' President, not only change in South Africa, but a contribution to the development of all economies in the region.

Projects in Africa - by both Eskom and Spoornet - give expression to the African Renaissance in several ways:

ESKOM:-

* Eskom is a full operational member of the Southern Africa Power Pool.
* Eskom is sharing technical capability on a utility-to-utility basis involving co-operation and support as well as on a commercial basis.
* Eskom is establishing long-term associations through institutions such as the Power Institute of East and Southern Africa (PIESA). Such associations enable African utilities to share research, technical training, incident investigation and standardisation to the benefit of all utilities.
* It is an integrated electricity grid which will encourage commercial buying and selling of electricity between countries1 paving the way for enhanced co-operation and economic growth.
* Eskimo's skills and expertise are already shared through subsidiaries such as Technology Services International, Trans- Africa Projects, Electricity Africa and Rotek.

Scope of work undertaken or planned in Africa:-

NAME
FIELD OF OPERATIONS
CLIENTS
Rotek engineering
Electricity operations & Management
Tanzania, Namibia and Kenya

Roshocon
Construction
Botswana

Rovec
Transport
DRC, Zimbabwe and Zambia

TAP
Transmission design and project management
Mozambique, Namibia and Mauritius

Electricity Africa
Transmission and Distribution lines
Zanzibar, DRC and Mozambique

Y2K Solutions Africa
Year 2000 embedded software
Botswana, Namibia and Kenya

HVT
High voltage test and investigations
Southern African Development Community

ELGAZ
Generation, Transmission, Distribution of electricity/gas
Mozambique

Laser Survey
Airborne laser survey
Mozambique and Namibia

Among many proposed electricity projects in various stages of planning or construction are:-

* A line from South Africa to Zimbabwe via Botswana (completed);

* Rehabilitation of the South Africa-Cahora Bassa DC lines and upgrading of the terminal stations (completed);

* A line from Zambia to Tanzania;

* A new 400 kV line from South Africa to Namibia (scheduled for May);

* A DC line from Namibia to Angola;

* A strengthening of the line from Zambia to Inga in the Democratic Republic of Congo;

* A hydro electric scheme at Mepanda Uncua downstream from Cahorn Bassa;

* Angolan inter-connector to Inga; and

* A new 400 kV line from South Africa to Maputo.

SPOORNET

Spoornet is continuing with its restructuring process in order to give its customers predictable service. Many of Spoornets customers have been bruised by the volatility of the world markets. However, the Company contrives to invest in the Coal line and the Iron Ore line which will increase its output from the current 2i MT of iron ore to 25 MI.

The strategy of Spoornet is to secure the survival of rail, not only in South Africa but throughout the continent of Africa. The strategy is to work with partners such as the World Bank and other investors and to offer its skills as an operator. Spoornet's activities in Africa have brought close the dream of a rail system that moves goods and people from Cape to Cairo.

ACTIVITIES OF SPOORNET IN AFRICA

Pornet has a wagon interchange agreement with the Railway Authorities in neighbouring countries. These railway networks are directly linked to Spoomet. Spoornet also rents locomotives to SNCC and
George Forest Mining in the Democratic Republic of the Congo, to Kenya railways, to NRZ and Lennings Rail in Zimbabwe, to Swaziland Rail as well as Botswana Rail. Spoornet also concluded locomotive agreements with Comazar, a subsidiary of Transnet, for locomotives to be deployed in Tanzania and Cameroon.

Spoornet has an agreement with railway authorities to operate unit container trains from South Africa1 through Zimbabwe, Zambia and on the Tazara rail network to Dar Es Salaam.

Concessioning is also a major and developing interest for Spoornet Transnet has been tendering for the World Bank privatisation project involving the rail network between Ressano Garcia and Machava Yard at
Maputo. The negotiations concerning the financial aspects of the project were terminated in December 1998 by CFM(S) of Mozambique. The Transnet consortium is also one of three consortiums bidding for the privatisation of Malawi Railways. The process is still underway.

The railway infrastructure of NRZ in Zimbabwe was put out to tender in 1998. Spoornet joined a consortium of financiers as well as the owners of the Belt-Bridge - Bulawayo Railways and other service suppliers, including Plasserail and Lennings in forming a consortium in order to bid for the
project. The project was delayed in December 1998 due to the required passage of the necessary legislation in that regard and the infrastructure concessioning project may now be changed to an integrated operating
and infrastructure project of NRZ in Zimbabwe. The latest indications from the Secretary of the Privatisation Committee are awaited with interest.

Comazar is a subsidiary of Transnet and is involved in projects in Africa in Cameroon with Camrail. The World Bank concessioning of the Cameroon Railways was awarded to a French company, Bollore Group
and Comazar was appointed as the operator1 Comazar and the Bollore Group are also the majority shareholders of Sitarail in Ivory Coast/Burkina Faso and Comazar has been pre-qualified for the concessioning of the Dakar Bamako railway network in Senegal - Mali.

Moreover, Comazar has been pre-qualified and is in the process of compiling its bid for the rail network in Madagascar. It participates in TARC'S activities working container trains from a container transhipment
yard at Kidatu on the Tazara line, over the TRC rail network in Tanzania onto the ferries on Lake Victoria to Kampala, Uganda. Discussions were held by representatives of Spoornet, Protekon and Comazar with railway authorities concerning projects in Guinea-Conaky involving construction of 38km of raliway line, and Dilbouti Ethiopia concerning the refurbishment of the railway line while also working in Uganda on the container terminal and Kasese line with the construction of a container terminal in Kampala

VISION OF THE OFFICE FOR PUBLIC ENTERPRISES

Some of the activities outlined above are definitely in line with the vision of the Office to oversee and ensure the competitiveness, efficiency, effectiveness and demographic representivity of State Owned Enterprises and to advise Government on their restructuring and/or privatisation, where necessary.

With such a vision, the Office itself needs to be adequately resourced in terms of both human and financial capacity. It also needs to ensure that it is itself reflective of the values espoused in its vision. We are happy to report that it is, albeit with some limitations. In order for the Office to discharge its mandate fully, it might well be worth considering broadening the human and financial resource base of the Office so as to make it not only more efficient but to also increase its effectiveness, in both its oversight and restructuring roles.

A special word of gratitude and appreciation is in order in respect of the outstanding services rendered by the overall Government Advisers (HSBC) whose expertise and commitment have proven essential. I am
also much obliged to my team in the Ministry and the Office for Public Enterprises for their dedication and hard work.

For the privatisation process to succeed, capacity in the restructuring sector, etc. will have to be enhanced and specific amounts will have to budgeted for.

Solutions must be identified well ahead of time in contending with any land or pension related issues - for It is just such Issues which have created bottle necks in the process in the past.

We have Indeed come a long way, but there Is still much to be accomplished. As President Mandate said in his State of the Nation address this year, "The foundation has been laid - the building is in
progress".

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