State-owned enterprises
In restructuring state-owned enterprises (SOE) the government, and the Public Enterprises Department in particular, put in place a coherent policy framework which focused primarily on the key economic sectors of telecommunications, energy, defence and transport. The reasons for reforming the state-owned enterprises included improving access of the historically disadvantaged to services such as telecommunications and electricity, increasing efficiencies and reducing costs, and using the revenues earned to reduce public debt.
One major constraint was the restructuring had to be carefully managed as the SOEs had employed tens of thousands of workers. Another consideration was that in restructuring corporations, black economic empowerment would be encouraged.
Of these objectives, according to the discussion document Towards a Ten Year Review, the one achieved unambiguously was the reduction of public debt by R24 billion. Other achievements include the creation of a more entrepreneurial class of those interested in restructuring activities, the advancement of regulation, the opening up of some industries to competition and the widening of share ownership.
Commercialisation and or partial privatisation has led to the reduction in public debt by raising funds from the private sector, thereby reducing pressure on the fiscus, and creating an environment for competition. The creation of greater competition still has to be achieved in some sectors.
Greater competition and further improvements to the regulatory environment should ensure that certain nationally strategic services such as energy, transportation and telecommunications are provided at low cost and high quality.
As in the rest of the economy there has been a shedding of jobs mainly through "modernisation", that is, the improvement of business processes and the introduction of new technologies.
There has been a strategic shift in recent years to tighten oversight on financial, economic and socio-developmental activities of SOEs to ensure that they are aligned to the objectives of the developmental state.
Presenting his budget vote in Parliament in April, Public Enterprises Minister Jeff Radebe said restructuring state enterprises would play a significant financial role in the country’s economy.
Radebe said although South Africa's external debt was just over R32-billion at the end of June 2002, the share of SOE borrowings dropped to 14.9 percent of GDP compared to 46 percent in 1990.
He announced that last year the government had carried out 11 restructuring transactions, bringing to 27 the number of restructured assets since 1997.
These included outright disposals, equity sales, participation of BEE groups, the acquisition of dividend payments, proceeds from the rationalisation of interests across SOEs, and the Telkom initial public offering.
He said that to date the total proceeds were R35.5-billion, with the national revenue fund absorbing just under R22.5-billion.
He said a number of initiatives are scheduled for completion in the current financial year. "These include the 100 percent disposal of the loan books of Eskom Finance Company and Transnet Housing that, taken together, are worth about R6-billion."
Radebe said government considers the strategic deployment of the procurement budgets of SOEs as an instrument of black economic empowerment, to complement the ongoing transformation of management and staff profiles.
"During 2002, Eskom, Transnet and Denel had a combined discretionary procurement budget of just under R34-billion, of which just over R9-billion was BEE-centred," he said.
The six SOEs within the jurisdiction of the department are Alexkor, Aventura, Denel, Eskom, Safcol, Telkom and Transnet.
Alexkor
Alexkor was
established in 1989, when the state alluvial diggings was taken over by the government and transformed into the Alexander Bay Development Corporation. Since November 1992 Alexkor has been run as a public company with the state as sole share-holder.
Although Alexkor as a commercialised state asset is not perceived as a strategic asset in the national sense, it has significant strategic importance for the Namaqualand region.
The core business (also referred to as strategic business units) of Alexkor is the mining of diamonds on land, along rivers, on beaches and in the sea along the north-west coast of South Africa. These activities are complemented by geology, exploration, ore reserve planning, rehabilitation and environmental management.
The non-core businesses commenced and/or were revamped in the early 1990's as part of the company philosophy to create alternative employment opportunities on an economically sustainable basis. A total amount of R7 million was invested over the period 1994-1996 to the development for these activities. These include dairy and cattle farming, ostriches, lucerne, grain, fruit, cheese making and mari-culture (oysters).
AventuraEach resort operates as an independently functioning unit, responsible for its own profitability, but supported by head office. Where appropriate, agreements have been entered into with major franchises, which has assisted in improving standards.
The food and beverage operation, which is an integral part of the resort experience, has been upgraded by the appointment of industry trained executive chefs and restaurant professionals.
DenelOn April 1 1992, Denel (Pty) Ltd was established as a private company, incorporated in terms of the Companies Act. The state is the sole shareholder.
The Company is managed by a Board of Directors, appointed by the Minister of Public Enterprises.
Denel's diverse industrial base, advanced technological skills and an appropriate infrastructure enables it to provide clients with complete solutions.
Denel is an autonomous group, managed in accordance with sound business principles. On March 31 1997, shareholders' funds reached R3 080 million, ranking it as one of South Africa's larger industrial groups.
EskomSouth Africa's electricity utility, Eskom, has 24 power stations, a total network of 281 010 kilometres of powerlines and a nominal capacity of 39 872 megawatts and approximately 37 300 employees.
It supplies 95% of the country's electricity, which equals more than half of the electricity generated on the African continent.
Eskom is financed through debt and reserves, and run on business principles for the benefit of its customers.
Eskom's management of its business, focusing on low-cost electricity as well as electrifying large areas of the country, provides a competitive edge to industry and an improved quality of life to all South Africans.
SafcolSafcol, a company charged with the management and imaginative development of the state's investment in forestry, is dedicated to growing its business in the forestry and forest products industry through technical and business excellence and sensitive customer service, thereby achieving recognition as a leader and top performer in the forestry industry.
Telkom
Telkom provides fixed-line and mobile services throughout South Africa and increasingly into other African countries.
Telkom is the incumbent fixed line operator in South Africa and holds the exclusive licence to provide public switched telecommunication services.
The group successfully delivered on the various service, quality and line roll-out targets set by the government five years ago and has invested significantly in its staff and telecommunications infrastructure.
Telkom now has a modernised network with the capacity to provide innovative and technologically advanced products to customers. The group has been transformed into a customer-facing organisation, which is ready to effectively compete in a more liberalised market.
Telkom's 50% shareholding in the Vodacom Group makes it Africa’s leading provider of mobile services. Telkom also has investments in Telkom Directory Services, its yellow and white pages business, and Swiftnet, its wireless data application business.
Telkom posted group revenues of R34 billion for the year to March 2002. The group’s fixed-line business has 39 444 employees and 4,9 million fixed line customers and Vodacom has 6,9 million mobile customers.
Telkom benefits from strong international partners through its 30% equity shareholder Thintana Communications LLC, a consortium comprising of SBC Communications and Telkom Malaysia, and Vodacom's 31.5% equity shareholder Vodafone plc. Ucingo Investments, a broad-based investment company representing more than 20 empowerment groups from all nine provinces in South Africa, has a 3% shareholding in Telkom SA Limited.
TransnetTransnet is governed by the Companies Act and functions in every way as a public company with a board of directors. The entire issued share capital is controlled by the Minister of Public Enterprises.
The group consists of the holding company, Transnet, and seven transport businesses as well as a number of related and support businesses.
In 1990, the South African Transport Services was corporatised to form Transnet Limited. Since corporatisation, the company has constantly been effecting improvements to its system of corporate governance.
This evolution has not been an easy one, but today the company boasts a new culture characterised by improved efficiency levels, an entrepreneurial spirit displayed by its employees and value creation for all stakeholders.
For the first five years the operations of the company were organised into semi-autonomous divisions and business units each operating in niche markets within the broader transport sector.
During 1996 the evolution gained pace when the composition of the board was restructured in line with the tenets of good governance expounded in the King Report on corporate governance. The articles of association of the company were amended to reflect a board that comprises seven executive directors and eight non-executive directors.
