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SOEs’ missed performance targets, losses of billions of rands and more laid bare

SOEs’ missed performance targets, losses of billions of rands and more laid bare
From left: Pylons at Eskom’s Koeberg nuclear power plant. (Photo: Gallo Images / Nardus Engelbrecht) | The Port of Durban, operated by Transnet. (Photo: Kevin Sutherland / Bloomberg via Getty Images) | (Photo: Leila Dougan)

As the IFP called for an urgent parliamentary debate on the state-owned enterprises crisis, a swathe of departmental annual and Auditor-General reports detailing losses, failed targets and governance lapses came up for scrutiny at Parliament on Wednesday.

The Transnet calamity was public even before the recent departure of CEO Portia Derby, CFO Nonkululeko Dlamini and Transnet Freight Rail boss Siza Mzimela. But it was again underscored in Wednesday’s Auditor-General’s report to MPs on the public enterprises committee.

“Overall, the entity has not achieved the planned service delivery objectives and this had a direct impact on the entity’s mandate of lowering the cost of doing business in South Africa through providing cost-effective and efficient logistical solutions,” the AG’s presentation for the 2022/23 financial year said.

A “not achieved” status was marked alongside targets, from the export of coal and manganese, to ships’ turnaround times and the movement of containers. Also not achieved were public-private partnerships at the Ngqura and Durban ports and elsewhere. 

In the freight rail sector, a similar picture emerged: of the planned 240 available locomotives, only 91 were available, and while more money was spent to increase the security of infrastructure, not all breaches were recorded, as required.

A red flag was raised over Transnet’s upcoming R8.5-billion debt repayment tranches — R7-billion in November 2023, R580-million in February 2024 and R940-million in March that year, according to the AG document for Parliament’s Budget oversight process, the Budgetary Review and Recommendations Reports. 

The AG said it was “critical for Transnet that it has sufficient cash to continue operating”. A year ago, in the 2022 Medium-Term Budget Policy Statement (MTBPS), the logistics state-owned enterprise (SOE) received a R5.8-billion bailout — R2.9-billion to repair its flood-damaged infrastructure in KwaZulu-Natal and R2.9-billion “to accelerate the repair and maintenance” of out-of-service locomotives.

Read more in Daily Maverick: Ailing Transnet on the brink of becoming South Africa’s next Eskom

The AG’s recommendations for the whole public enterprises portfolio included the “clear and urgent” need for more monitoring and ensuring performance against targets, bailout conditions to be aligned to specific steps in turnaround plans, and the implementation of reforms at SOEs to be finalised.

“The entities’ low recovery will persist unless leadership diagnoses and responds promptly to the weaknesses noted in the Zondo Commission,” the AG’s presentation to MPs said.

Missed deadlines and failed targets

Denel, which received a R3.4-billion bailout in October 2022, continues to flail. It has failed to finalise its financial audit and thus its annual report for the 2022/23 financial year as catch-up audits for other years are ongoing, according to the AG.

“Denel has indicated that the audit will only be finalised in November 2023,” wrote Public Enterprises Minister Pravin Gordhan to Parliament to explain the non-tabling by the statutory end-of-September deadline. On the same track are SAA, Eskom and the state diamond miner, Alexkor.

“The audited reports for Eskom, SAA, Denel and Alexkor will be promptly tabled, as each entity finalises and submits their respective reports,” Gordhan said in the letter dated 29 September and published in Parliament’s Announcements, Tablings and Committee Reports, or its record of work.

While on SAA, which received R1-billion in the 2022 MTBPS, the AG noted a valuation of the national airliner was now under way while the sale to the  Takatso consortium remained pending.

At Alexkor, the non-existence of a CEO, CFO and an internal audit committee amid a lack of procurement compliance and oversight were noted.

The Department of Public Enterprises also had a list of failed targets against it. These included not ensuring an SOE shareholder law was in place by March 2023, not hitting the energy availability factor of more than 80% — it’s in the mid-50s, according to Eskom — not developing a shareholder oversight model and not implementing the Eskom Roadmap that was published in October 2019.

Public Enterprises’ presentation to MPs highlighted that a gender-responsive plan was drafted and implemented, SOE forums were held and the target of a centre of governance excellence was met by releasing a governance handbook “as a tool to assist [SOEs] to comply with governance standards” and to align board and organisational performance.

Other targets that were attained, according to Public Enterprises, were the shareholder compacts with Eskom and its forestry company, Safcol, and reports on the life extension at the Koeberg Nuclear Power Station. The progression of Unit 5 at Kusile on to the grid was reflected as “target met”.

Elsewhere in the (online) parliamentary meeting rooms, the report on the financials of the Post Office, which has been under business rescue since July, showed net losses of R2.16-billion even after getting a R2.4-billion bailout in the February Budget.

Following Postbank’s social grant payment debacle in September and the resignation of board members — or dismissal, as the minister maintained — this should not be a surprise. It lost R2-billion and only managed to hit one performance target — the launch of a new corporate brand and identity, according to the presentation to MPs.

Even after another R3.2-billion bailout in the 2019/20 financial year, the SABC lost R1.18-billion, according to its 2023 report presentation to MPs. That includes a R460-million loss in advertising revenue and R115-million less in TV licence collections than in the previous financial year.

What the public broadcaster will do about that wasn’t to be known — unlike in the past when, for example, the then SABC chairperson Ben Ngubane shared rands and cents and other details of turnaround plans. On Wednesday, the communication committee closed that part of its meeting to the public, citing “commercial sensitivities”.

Committee chairperson Boyce Maneli’s subsequent public and undetailed summary effectively was: the SABC is “in dire need of assistance”. DM

Gallery

Comments - Please in order to comment.

  • Denise Smit says:

    I is just sickening to read the failures. Despite billions in bailouts, again billions of losses. All under the control of ANC deployed cadres. Denise Smit

  • Denise Smit says:

    How can this not be a failed state. Denise Smit

  • paul Volker says:

    Pravin Gordhan was excellent at SARS. He’s been a disaster DPE. He should be fired, but won’t be. Cyril will let him stay on and continue wrecking these SOE’s until he retires after the elections.

  • Alley Cat says:

    Public Enterprises’ presentation to MPs highlighted that a gender-responsive plan was drafted and implemented. Postbank – the launch of a new corporate brand and identity, according to the presentation to MPs.
    These are “achievements” Really? Fiddle and Rome burns come to mind as well as deckchairs on the Titanic? What a bunch of incompetent cadres and losers! Well we can sleep soundly knowing that there is a “gender responsive plan” whatever that is at public enterprises and that postbank has a new corporate brand and identity.

  • A.K.A. Fred says:

    ANC = Absolutely No Capability
    The managemeny of a multilevel, complex organisation is just beyond the capabilities of the cadres. Cadres are basically underskilled placements, generally too dim to even realise they are out of their depth. Couple this with populist rhetoric and no understanding of business economics and the recipe is complete. What a shame for South Africa.

  • Hermann Funk says:

    “The AG’s recommendations for the whole public enterprises portfolio included the “clear and urgent” need for …..” For our President, nothing is clear and definitely nothing is urgent.

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