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Our SOEs have been stripped by ruthless looting and destruction – this is how we will begin the recovery

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Pravin Gordhan is South Africa’s Minister of Public Enterprises.

We are taking decisive steps to recover assets, money and intellectual properties stolen from SOEs as part of State Capture. Most of the money has been sent out of the country using complex financial mechanisms and schemes with the participation of lawyers, financial advisers and institutions. The stolen money belongs to the people of South Africa.

Over the years, state-owned enterprises (SOEs) have played an important role in the South African economy. The well-operated and financially sound enterprises are and have been crucial for infrastructure services such as energy, transport, and water, all of which are necessary to grow our economy and to ensure equity.

However, in recent years, the SOEs have been honey pots of State Capture, largely because of their large procurement spend. As Daniel Kaufmann puts it, “corruption is the name, but procurement is the game.” Unfortunately, we are still recovering from the terrible damage caused by looting and State Capture.

We are hard at work to reform and restructure the SOE sector, which has been so badly impacted by State Capture. It will take time, courage and huge energy to achieve. But achieve it we will.

Repositioning, reforming and repurposing SOEs

This year we will witness changes to the architecture of SOEs and the direction being taken. A set of structural reforms is being introduced to ignite growth in the economy and to address our capacity challenges which have been compounded by the Covid-19 pandemic.

To recover from ruthless looting and destruction, we will:

  • Reposition Eskom for energy security, the increased use of clean renewable sources of energy and the energy mix prescribed in the IRP 19, and implement a Just Transition;
  • Introduce key changes in the freight logistics: rail, ports and large investments in infrastructure; and partnerships with particularly the black private sector through appropriate concessions;
  • Reposition Denel with a new business model; and
  • Select a Strategic Equity Partner for South African Airways (SAA).

The above strategic areas will be accompanied by other interventions across the SOEs, including:

  • Review of their mandates;
  • Recover funds lost through theft and looting;
  • Review contracts irregularly obtained;
  • Change procurement policies for efficiency and integrity;
  • Ensure the implementation of localisation policies; and
  • Economic transformation which will include: empowerment of small businesses and others.

In addition, our SOEs will take the lead in:

  • Research and development;
  • Innovation and technology development; and
  • Support Information Communication Technology developments

These activities will positively impact renewable energy, address climate change and support our education and health sectors. And in doing so, we shall be actively seeking ways to co-create wealth in partnerships with the private sector and other enterprises.

Here are examples of a set of structural reforms being introduced to four of our biggest SOEs, Eskom, Transnet, SAA and Denel:

Energy security and Eskom

Restoring Eskom to operational and financial health and accelerating its restructuring process is central to this objective. In this regard, the Department of Public Enterprises (DPE) will work with the Department of Mineral Resources and Energy and other departments to ensure that all sources of energy are accessed.

Eskom will continue the intensive maintenance of power stations, improve emissions compliance, and complete the construction of Medupi and Kusile.

The electricity public utility will rapidly develop and deploy new, clean sources of electricity. It will also procure more generation capacity by opening up the power system to renewable sources of clean energy.

Eskom will participate in the building of renewable energy, and private sector partners must build a significant part of the renewable capacity. Government and Eskom will expedite Eskom restructuring into three separate subsidiaries, i.e. Generation, Transmission and Distribution. Implementation of the Framework Agreement for the Social Compact (Eskom Social Compact) on supporting Eskom for inclusive growth will be critical to ensure energy security.

Transnet

The logistics and transport sectors are vital to the success of the economic recovery plan and stimulate economic growth. Our ports and rail must become efficient and competitive and we need to lower the cost of doing business. Transnet will implement third-party access on freight rail lines.

That is why the three Transnet Port Terminals (TPTs) — Cape Town, Richard’s Bay and Durban — are the focus for opportunities for new entrants to drive transformation in port operations.

The initiative to upgrade Durban as a hub port for Southern Hemisphere shipping will see Transnet, the National Port Authorities and Transnet Port Terminals initiate the process to concession Point Terminal for construction and operation.

Denel

The success of Denel is dependent on a clear national vision of the role and place of defence and related industries in a changing globalised world. The new business model of Denel must respond to these challenges.

Therefore, Denel will be restructured so that it can become fit for purpose, commercially sustainable and not dependent on the fiscus. We anticipate that Denel will enter into strategic partnerships with original equipment manufacturers (OEMs) to add value to the local economy while benefiting from a growing and untapped international market.

SAA

South African Airways has been in business rescue for just over a year. It is time for the business rescue practitioners to exit. The restructuring, we believe, will result in the emergence of a competitive, viable and sustainable national airline that is agile, techno-savvy and that will not need any further funding from the fiscus.

We are nearing finality with the appointment of a strategic equity partner that will not only fund the new airline but also introduce the technical expertise to ensure a successful SAA.

Recovering stolen money and assets

To maintain and upgrade SOE operations, we are also taking decisive steps to recover assets, money and intellectual properties stolen from SOEs as part of State Capture.

Most of the money has been sent out of the country using complex financial mechanisms and schemes with the participation of lawyers, financial advisers and institutions. The stolen money belongs to the people of South Africa.

It is money required to maintain and upgrade SOE operations – like supplying electricity to homes and factories, getting rail passengers to work on time and then back home in the evening, and for moving freight across the country.

Reviewing procurement processes

Procurement processes and contract management were deliberately collapsed and as a result, billions were paid by SOEs with no services being rendered or with zero value accruing to the state.

So, as part of the effort to clean up after State Capture, the SOEs are continuing to review existing contracts. Corrupt contracts will be set aside.

Embracing localisation

As we reform state-owned enterprises, making them more dynamic and responsive, one of the key public interest mandates is to embrace localisation. Localisation can drive growth in jobs and economic output. For example, the DPE has contracted all SOEs within its portfolio on the following to spend 75% of their procurement on locally manufactured products, 15% on companies owned by women, and 10% on entities owned by black youth.

We are working hard to reposition, repurpose and stabilise the SOEs to contribute to the acceleration of economic growth and development.

No more bailouts

Government’s aim is to stop the reliance of SOEs on the fiscus. Bailouts need to be a thing of the past. We expect SOEs to boost and support the economy and in doing so play an entrepreneurial role.

We are determined to root out corruption and all vestiges of State Capture. There will, of course, be resistance, misinformation, whataboutism and distractions. Once repositioned, reformed, repurposed and stabilised, the SOEs will be at the forefront of co-creating value and transforming the economy for national prosperity.

We are single-minded in this endeavour. We shall give no quarter to those bent on retaining the status quo to advance their self-interest. We must collectively as one nation, reclaim our sovereign assets – human and material.

These institutions belong to South Africans. They must serve the national purpose – equality, jobs and eliminate hunger in our country and the development of its people. DM

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All Comments 57

  • While the ANC’s cadre deployment committee remains at the centre of appointments to senior executive positions and the boards of SEOs they are doomed to fail. As JZ acknowledged ‘clever blacks’ do not join the ANC.

    • You’ve hit the nail on the head Jax. It is the appointment of the Board Members where the problem lies – these people are only slightly answerable to the people who elected them to the board, and the way they get to keep their positions is to remain loyal to the ANC henchmen who put them there. Mr. Gordhan says these institutions belong to the people, therefore the stakeholders should elect the Boards, and those elected officials should report back to their constituencies – Agriculture, Mining, Tourism, Commerce, Industry, Civic Society, etc. Only when the deliberations of the boards are entirely transparent will any progress be made. These SOEs are Common Pool Resources and the work of Elinor Ostrom has taught us EXACTLY how to operate a common pool resource successfully and sustainably. Her answer does NOT lie with grandiose government plans. Bruce Danckwerts, CHOMA, Zambia

  • Love the “We” bit.
    Always with the We when grand plans are talkshopped, or when some touted ‘success’ is paraded to a gullible public but always the “wasn’t me’s” when yet another grand theft has been outed by either a disgruntled former fellow eater or nosey newshound.
    No thinking man can believe a single word from the disgrace that are those who sat & still sit beside the thugs & thieves who still roam free.
    So many old wisdoms to guide us;
    “By their WORKS you shall know them”
    “Birds of a feather flock together”
    Etc…
    Even now your fellow club members defy the law and the justice system Mr Gordhan – a shining example We shall surely all follow.
    And then what…

  • Some green shoots but Pravin, recognise that ideology, which continues to drive reverse apartheid and cadre deployment, is the root cause of corruption and underperformance.
    Highly skilled Non black South Africans have left to contribute to other economies because of this and the poor suffer. OWN GOAL.

    • Correction the above comment should read “largely non Black” as sadly largely highly skilled South Africans in general have left to grow other country’s economies as a result of ANC bankrupt ideology, mismanagement and corruption.

  • “… one of the key public interest mandates is to embrace localisation. Localisation can drive growth in jobs and economic output. For example, the DPE has contracted all SOEs within its portfolio on the following to spend 75% of their procurement on locally manufactured products, 15% on companies owned by women, and 10% on entities owned by black youth …”

    There is your problem. Government interference raising the cost of doing business to the detriment of all – except for the tenderpreneurs and connected cadres.

    • This is the sort of empowerment that leads to Pretoria type enrichment.
      Youths buy tins of polish for X and sell it to govt at XXXXXXXXX x 5
      thereby developing black youth
      You need to be a bit more left field in thinking
      What about running local local business skills classes and paying the youth a grant to attend, roll out computer literacy programmes.
      Give the people fishing rods not fish

    • “75% procurement locally manufactured; 15% owned by women”…. how many “local companies and companies owned by women” were registered just before or after the PPE requirements were put out to tender. PPE’s supplied by paint suppliers; coffee shops; upholsterers…. all local. It’s just another excuse to steal.

  • Minister Gordhan, I hold you in high regard for your efforts to address the SOE mess created by the ANC. It is a massive and complicated job, made more difficult by the various interest groups in your party. Thank you for setting out your strategic intentions, however, I’m sure you’ll forgive me for a high level of skepticism wrt goverment’s ability to implement these plans. Many of the looters remain in goverment and are just waiting for the opportunity to rob the system again. We have to address this deep seated culture of corruption in the country in the rebuilding process, else the effort will be wasted. Until then, your plans are only good intentions – and as we know, the road to hell are paved with these…

  • Whoever wrote this didn’t so much write an article as much as a press release that neatly ties requisite actions that any right-minded investor would need to be able to tick as a box, with a few long-decided strategic aims. while the coherence is admirable… this is not news it is olds, ahead of the budget speech. I appreciate connecting the dots as much as anyone, but this is spoon-feeding us in a way that makes me think that everyone has their fingers up the bums of our intelligence staff, moving them like marionettes, and that’s not good for anyone and can leave people with stinky fingers.

    The problem with the good guys it seems is that they follow the rules and write the papers and plans at massive cost outlay, then nobody does what was put down in the plan. It’s been like this for 25 years now. The arrest and speedy prosecution of someone implicated, the immediate return of a Gupta or three, a series of HR meetings where public servants, technocrats and political actors get fired for their refusal to read and abide their oaths of office, guidelines and the laws of the country as a prequel to an article like this would have helped.
    So much so, that the article wouldn’t have been needed in the first place.
    I remain unconvinced I’m afraid
    :-/

  • More lip service to the ignorant. Every year at this time, we hear the same promises, commitments, and yet, every year, we sit with same problems. As long as cadre deployment takes precedence over employing the right person for the job, nothing will change.

  • Pravin used to be my hero.. Seems he has bent to the will of the rest of his party and toes the party line.. BLAH, BLAH… Talk is cheap! Where’s the money for the whisky?
    Great opinion piece but when I read all the BS about locally produced and favouring the PDI’s I loose interest! Read, we will all subsidise inefficient and incompetent local industry (in our business between 2 to 3 times the price of an imported and better quality product) and the excessive prices charged by the businesses (cadres and clueless) because they are owned by women and black youth. Why continue with a policy that has not worked since 1994 and will never work? These policies are the root cause of our problems with corruption in the SOE’s and business in general.
    DISAPPOINTED but not surprised!

  • In addition, our SOEs will take the lead in:

    Research and development;
    Innovation and technology development; and
    Support Information Communication Technology developments.

    Don’t make me laugh!

  • Nice in theory but why did this revelation take 4 years to formulate? This article was written in 2017. The goodwill you were graced with has since evaporated. And it looks like your faction is doomed. RET is making its play. I’ll wager you have merely shown the crooks how to take their looting to the next level. Cyril’s UNITY clarion call was always a disgraceful copout – he sold us all down the river. Let the looting continue

  • Dear Minister:

    SOE will remain a black hole as long as strategic national companies continue to be viewed as useful tools in government policy implementation, as being part of a “Just Transition”.

    Eskom’s critical role is to deliver cheap reliable energy, nothing else. If it does that well, government and society can get on with policy matters. Same goes for Transnet. Have you considered that it might be able to deliver better logistics infrastructure and services if it did this with the best of ANY partners rather than the best of the available black (and party connected) partners?

    It would be cheaper if you just handed out bags of cash to a few cadres than the monumental amounts we lose when you house the cadres in places like SABC and Denel and SAA and turn them into weapons of mass destruction.

  • I think Pravin is totally committed, but unfortunately is trying to fix the system without abandoning the philosophy that caused the problems. Whether the ANC accept it or not, South Africa operates in a global economy and we have to be competitive to survive. You cannot run any business, big or small, with a “social objective” as you will not be competitive and ultimately the business will fail, causing harm to the very people the “social objective” was designed to help. It applies to all but if we use Eskom as an example. Eskom must produce power as efficiently, reliably and inexpensively as possible – whatever it takes! If that means employing the best people from other countries, outsourcing, privatising or retrenching all surplus staff, so be it. Just do it! That may seem harsh, but in doing so South Africa will become competitive and sustainable, “real” jobs will be created, which in turn creates increased demand and rising business confidence. The efficient and cheap power supplied, combined with rising business confidence are major factors in the decision making process on whether to invest in capital projects, which in turn lead to further employment. (Obviously, there are other impediments preventing capital investment including EWC, BBBEE and employment equity.)

    • 1. “Social objective” – wasn’t that the Verwoedian dream? How’d that work out? 2. The only “cheap” energy is what pollutes the air, water, and land. (Sorry, Gwede, there’s no such thing as “clean coal”). Renewable generation on the other hand is small-scale, which means it can be locally owned, is not mega-capital intensive, has short build time-frames, and can supplement day-time/peak demand, create jobs, all without the pollution. Sadly, IPPs produce much more power but this feed-in is capped, which means we currently generate more renewable power than we use, but it doesn’t suit the powers to increase the caps so we can at leats avoid blackouts. 3. We can forget about “trickle down” policies. South Africa requires direct interventions like BBEEE, etc, simply because business has shown itself unwilling to open up the economy, I mean who is going to give up economic power willingly, even for “social objectives” ends. Right. Ergo, state intervention isn’t just necessary, it is expected.

  • It would be wonderful to see turnaround, South Africans want to see decisive actions and positive turnarounds, not waffle and ineffective committees. The citizens are tired of the corruption and cadre deployment, and degradation of living standards while the looting continues unchecked and unprosecuted.
    South Africa is a beautiful country, with unsurpassed resources, and a general citizenry who wants to live in peace and harmony. Its a shame when greed and politics impedes the potential for greatness.

  • Dear Minister Gordhan. I will always be grateful to you for protecting us from the JZ corruption machine, not long ago you were just about the only person between SA and the precipice. The damage to the SOE’s is irreversible and you’re wasting time and money trying to fix them. The only solution is to privatise the lot and move on.

  • Just more talk, I’m afraid. Until the fundamentals are addressed, very little will change. Competent staff, appointed and promoted on merit; independent, competent boards empowered to lead; proper planning and budgeting; no government interference; consequence management and rewards for performance… Just the basics would be a start.

  • So this is what PG did after disappearing from the public eye. Surrounding himself with a bunch of corporate strategic planners who are not able to engage the ‘critical thinking’ button. Wonderful words, more words, bla, bla, bl…zzzzzz. I am dreaming such sweet dreams. Please don’t wake me up.

  • Wow… So much negative response from DM readers? How many of you have even managed to overcome your self-created life’s challenges that are as deeply rooted? Pravin, I applaud your efforts and wish you all the strength and support to bring these strivings to fruition. You have suffered attack from all sides now. This must mean that you are doing the right thing. Love and respect to you for your continuing efforts.

    • Philip I believe we all support PG and have admired his efforts over the years. But he unfortunately works for a company that rewards incompetence, allows senior members to steal from the fiscus, never holds senior members to account and have overseen the wholesale destruction of of every SOE. As has been repeated again and again the comrades didn’t fight the struggle to remain poor.

    • What do you expect if the same person has told lie after lie? We all dance and sing Cum-bajah? Peter Worman is right – we support the idea, but the proof is in the eating of the pudding.

    • It’s depressing to see this much negativity directed at a man of integrity who is doing all he can to rein in corruption and try to turn things around. People like Pravin need support and encouragement, not just armchair carping and sniping. Personally I think he is fighting a lonely and brave fight, and at this stage, each small victory, each corrupt practice attacked, and each conviction, when we have them, plays its part in turning things around. I’d much prefer to see constructive suggestions, proposals and encouragement, rather than this litany of moans, that just repeats some variant of “nothing can possibly work because everybody is so bad, sez me from my armchair on the sidelines”.

    • Philip: I wish for a better destination but do not see a concrete path among the various adjectives and nothing-meaning nonsense. A “just transition” at Eskom! Cheap reliable energy would be both just and a transition. We ALL deserve both.

      Sorry, but I glaze over when another minister uses Black as a more desirable adjective ahead of Best when it gets to MASSIVELY important concessions that Transnet will now hand out. If it is both black and best, great, I will support that. We don’t have the luxury of social engineering niceties to get out of this hole.

  • Dreams of a demented mind. The “indigenisation” alone will doom them. This is the same problem as the BEE purchasing. They can over pay by several 100%.

  • Pravin is living in LaLa land. The ANC has proven time after time that they are incapable of execution. They spend a fortune on consultants who draw up strategies, frameworks etc. etc. BBEEE – Black enrichment has sent us into Creek Street. Surely the time has come to stop passing work at 3x the value to “Black” companies. You’ve driven out millions of skills – across all races. When will this stupidity cease?
    The Latest PIC Bill has entrenched the Governemnt selection of Board Chair – more of the same!

  • Jim Collins in Good to Great “The executives who ignited the transformations from good to great did not first figure out where to drive the bus and then get people to take it there. No, they first got the right people on the bus (and the wrong people off the bus) and then figured out where to drive it.”
    There’s not even hope with the wrong people. And that includes parliament and councils at every level.
    Without the right strategy nothing will improve.

  • It took a long time for me, but I finally realised that PG is all talk and no action. The restructuring of Eskom has been on the table for 2 years with no action. The SAA debacle drags on. Sorry, I don’t believe anything you say.

  • Puh-leeeze!! Don’t make me read this while I am drinking tea. I almost choked to death while laughing. “We are hard at work to reform and restructure the SOE sector”. “Government’s aim is to stop the reliance of SOEs on the fiscus”. Are you serious? While there is an ANC government, there will be theft, bleeding and corruption, no matter what Gordhan promises.

  • “These institutions belong to South Africans. They must serve the national purpose – equality, jobs and eliminate hunger in our country and the development of its people.” Isn’t this exactly what the anc should have been doing since 1994? Where were you when there were a number of opportunities to get rid of jz? Who did you and cr vote for then? Your conscience, the people, or the anc?

  • Only one point caught my attention – MR GORDHAN NEVER MENTIONS PROSECUTION OF OFFENDERS! Ha ha ha ha ha – from tax reform hero to State Obsessed Enterprise tout.

  • Minister, I am thankful that I do not have your job. If it is any consolation – I suspect the amount of flack you are getting from people in your orbit is due to you doing your job – or because of the potential repercussions of that. On the other hand, I would have enjoyed seeing some of these repercussions in real life. Consequence management is not one of our strong suites.

  • The good Min Gordhan, as was Pres Ramaphosa, were part and parcel of the cANCer which under Zuma robbed the country blind, but for the sake party ‘unity’ were happy to let it happen. Clearly the pickings are now beginning to get slim, and these guys realize that, and want now to be seen to do the right thing, albeit very belatedly. Too little, too late. Both these guys had my back once, but the way ‘we’ are planning to move forward, will keep access to the feeding trough wide open to the cadres and connected. And stuff the rest…

  • Minister Gordhan, as you can see from the comments above cynicism is pervasive and trust is absent. Literature has it that voters can be characterized into three groups; Hobbits, those who just aren’t interested and don’t have the wherewithal to care; Hooligans, those who will vote for the same party, no matter what; and Vulcans, those who are interested, concerned and worry about the future. You are talking only to the Vulcans, we need to be assured that whatever you do will be based on meritocracy, pragmatism and honesty, we need a roadmap with clear timelines and success measures, we need to be assured of business success not ideological
    gobbledygook. Right now I can’t think of another Minister better able to get the SOE’s back on their feet, however I do think that private sector engagement, collaboration and involvement should be the first move on the chess board.

  • Just a question with reference to the sub-heading : WHO and HOW will the ” …. with the participation of lawyers, …..” be dealt with ? Especially those who come to defend the indefensible with legalese gymnastics … instead of asking their clients (most at taxpayer’s expense) to plea bargain ? Hence saving taxpayer money … and time.

  • This certainly got the folks talking .
    Where he spoke of sorting out Escom to make it viable , I knew where we were going !
    The looting and mismanagement happened when the ANC took over .
    What was the writer doing all this time ?
    The ‘ non white’ hole that is Escom R480 b just in debt , Medupi/Kusile , will be out of date when and if they ever reach completion . Escom will have to double the price to just cover running costs .
    While well covered by the DM team , I am more concerned about Koeberg having its life extended for 20 years , with a planned life of 40 years ! Should be off grid in 3 years .
    Koeberg does not need wet coal or a broken conveyor , just a ‘spanner in the works’ !
    What could go wrong ?
    Did someone say Fukushima /Chernobyl ? NIMBY 🙂
    Koeberg was well planned and designed for a certain life span , see how well our maintenance crews are doing with coal fired plants , that exceed emissions !
    So much for the containment ‘chamber’ ..if things get serious , cracking at the seams . can I get the tender for ‘plastering over the cracks . ‘ ?
    As the DM has mentioned , assuming KB was shut down in 3 years , what to do with all that nasty radioactive stuff ?
    Let the taxpayer foot the bill , again .
    More billions , that is the good part .
    The bad part is if a ‘big spanner falls into the works ‘ !
    Radiation sickness is way worse than the CCP flu .
    5 10 15 years time ?
    I have heard there is an evacuation procedure already in place .
    SAA , just so ANC can get no cost flights , more $$ in the hole again !
    The rest , more plans to fix what we have broken !

  • Recover the looted billions? The ANC at Luthuli House must pay back the money too. They are not a Public Dept and not Civil Servants. All tax payers moneys that found it’s way to Luthuli House must be recovered.

  • State Capture was a means to fund the ANC, then they ‘stopped’ the plundering and couldn’t pay salaries! What do you know, PPE corruption and all of a sudden the ANC could pay their staff. Nothing is going to change, they just getting smarter and better at stealing.

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