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The DPE notes detailed references in the Budget Review to the positive role of restructuring within the context of difficult global conditions over the past few years and challenges that face us in the remaining MTEF period.

In particular, it is important to note the extended role in infrastructure investment that is expected from SOEs in the medium term. This will take place within government's general infrastructure investment program that operates within the municipal, provincial and national spheres. It is necessary to distinguish between state support for public borrowing in support of planned infrastructure investment, and the commitments of individual SOEs from their own bottom line.

Appendix A, table 8 outlines the revenues that have been drawn down by public enterprises in the recent past on the basis of government guarantees, but we should note that not all those entities fall under the authority of DPE.

The Budget Review notes that over the last decade public sector investment has included R38bn in ports, freight rail and air transport, R44bn in electrical infrastructure (page 3), and further details are provided on (page 68.)

However, the Review also points out that after a significant period of low investment, since 2002, there's been a turn around in public sector investment spending, (page 9). Projected spending on infrastructure for the MTEF period will increase.

This is in line with statements made by Minister Radebe since 2002 where he has committed SOEs to increase in infrastructure investment to boost efficiencies throughout the transport system to facilitate trade and job creation.

* SOES are in the process of finalising and seeking approval for their budgets and more specific details will become available.

Proceeds from restructuring initiatives are reflected in summarized form page 116 of the Budget Review.

The Budget Review reflects that extraordinary receipts from the restructuring of SOEs over the last decade have supported the sharp decline in the public sector borrowing requirement. Although the Budget Review projects lower proceeds than previously assumed for the remainder of the MTEF (page 71 and 104), we can confirm that the dept is on track to secure commercial closure of the Komatiland, MTO and Amatola package by the end of 2003/2004, that the DCT concession process will begin by mid year, that we will have a settlement of the Alexkor issue in 2004.

In the meantime Government continues to seek an SEP for Denel. Obviously we will continue to draw dividends that are directly related to the restructuring process where and when these fall due, including increasing dividends for Government possibilities through restructuring of capital structures of some key investments SOEs like ACSA.

Attention is drawn to page (16) of the Budget Review "the treasury operations of the state owned entities are currently under review, with a view to ensuring that appropriate risk management policies and sound government over financial assets and liabilities are in place."

In this context we can say that we cannot provide any further detail concerning the SAA treasury, as indicated by Minister Radebe we will do so at the appropriate time.

We should also note the repeated emphasis throughout the review concerning SA's efforts in NEPAD and Africa's stability, in particular SOE infrastructure investment and participation in development initiatives in Africa.

Minster Jeff Radebe will shortly be releasing a report on the activities of Eskom Enterprise, Transnet and its divisions, SAA, Arivi.kom and Denel in development programmes in the rest of Africa.

In this regard, DPE particularly welcomes the news in the Budget Review of an expectation of 5% growth in Africa and the importance that is being placed on NEPAD development projects (page 29). Specific mention must be made of the tax proposals in so far as they relate to making it easier for South African based companies to do business in the rest of the continent (page 32).

The Budget Review emphasizes the point that Minister Radebe has stressed time and time again, that building and consolidating the efficiency of the nations' transport, rail and harbour systems is a top priority of Government.

Of course the implementation of medium to long term solutions need to be flexible enough to deal with seasonal, unforeseen problems that arise from time to time. More details of specific projects other than those mentioned in the Budget Review in so far as they relate to rail, port etc will be made available in due course.

Within the restructuring process, Government has provided for employee share ownership schemes to promote meaningful equity participation and productivity from employees. The tax concession announced by the Minister of Finance on the shares issued to low-income employees who hold shares for a prescribed period of time will benefit most our employees in SOEs. Schemes such as Diabo Trust, are designed to promote long-term ownership by ordinary workers in State Owned d Enterprises. In other SOEs such as SAFCOL, ACSA and SAA, shares are allocated for employees to ensure that they have equity participation and share the long-term view of these SOEs.

Miranda Strydom
Cell: 082 908 8976

Issued by Department of Public Enterprises
19 February 2004