Presentation to the Portfolio Committee on Public Enterprises 19 March 2013

1. Strategic Plan and Annual Performance Plan 2013/14 Presentation to the Portfolio Committee on Public Enterprises 19 March 2013

2. Contents Context and Background Strategic Priorities over the Medium term Highlights on key achievements for 2012/13 Strategic priorities for 2013/14 Resourcing of the Department Human Resources Budget Performance Monitoring and Review Conclusion

3. Context and Background • In June 2009, the government adopted the Medium Term Strategic Framework (MTSF) that outlined the key priorities for the administration period • The MTSF was developed in an environment where: • The global economy was going through serious recession as a result of the collapse of the financial sector in 2008 • Developed economies such as the US, UK and Spain were in recession • Growth and employment in the domestic economy was on the decline • The key thrust of the MTSF was to: • Minimise the impact of the economic downturn on the country’s productive capacity as well as jobs and introduce poverty reduction measures • Identify opportunities for new areas of growth and economic participation, and progressively to set the country on a new growth and development path 3

4. Context and background • The global downturn, due to the collapse of the financial system, affirmed the need for a strategic role for the state in counteracting the effects of the downturn and stimulating recovery, This entailed: • Increasing investment in the economy by the state • Much more effective use of monetary policy to stimulate economic activity • More pertinently, this has challenged both Government and the private sector with regards to establishing more focused partnerships to drive growth, investments and employment • The MTSF clearly recognised the dangers of a Laissez-faire approach which is not appropriate to deal with the developmental challenges that the country currently faces 4

5. Investment slide – included • Investment by public corporation has been on the upward trend since 2004 and has more than tripled • High levels of growth experienced between 2008 and 2012 in support of a government’s countercyclical approach • Year on year, investment by public corporation increased by 9.1% compared to 3.9% by private enterprises in 2012 • Public corporation invested R134.8bn in 2012 Source: Quarterly bulletin

6. Context and background • The recognition of the State’s role in the economy has increased the need to ensure that SOC align their activities to support the broad developmental outcomes of Government • This required the Department to: • Strengthen oversight on the activities of SOC and ensure their alignment to the developmental objectives of Government • Strengthening oversight mechanisms to improve governance within SOC 6

7. Context and Background: Planning cycle • In 2009, the National Treasury published the Framework for Strategic Plans and Annual Performance Plan to enhance the relationship between plans and budgets • In terms of the Framework, departments are required to table a: • Strategic Plan with a five-year planning horizon, and • Annual Performance Plan (APP) that outlines delivery targets for one year and make projections for the next two years • As from 2011, Departments have been required to produce APP and this must be tabled at Parliament • The Department will monitor the implementation of the APP on the quarterly basis and the reports will be submitted to National Treasury and DPME

8. Context and background: Planning cycle Annual performance plans and budgets Monthly financial reports Quarterly performance Report Source: National Treasury 8

9. Strategic Plan Objectives • Adequate infrastructure that responds to the economic needs of the country • Clear framework for economic regulation and competition in sectors in which our SOC operate • High levels of productivity and operational efficiencies supported by an appropriately skilled labour force and innovations in technology • Adequate maintenance levels leading to sustained life cycle of assets and high standards of maintenance • Increased investments in network roll-out (broadband) to increase connectivity as per license obligations 9

10. Annual Performance Plan (APP) 2013/14 • The Department’s 2013/14 APP is informed by the Department’s Strategic Plan that is aligned to the National Development Plan (NDP), seeks to achieve the objectives of NGP and IPAP • The 2013/14 APP builds on the progress that has been made since 2009 • It does not reflect a change in strategy but rather sustaining and accelerating the implementation of key programmes within the Department and its SOC to meaningfully contribute to the objectives of Government • Development of new frameworks seek to support implementation of existing programmes rather than the development of new initiatives 10

11. Priorities for the Department in 2013/14

12. Strategic priorities for 2013/14 • The Department will focus on the following: • Increased oversight on the implementation of the build programme of SOC in particular Eskom and Transnet • Strengthening capacity of the Department to oversee the build programme • Facilitate creation of a supportive policy environment for the SOC to increase investment into the economy • Promote increased localisation of procurement spend through the CSDP • Explore ways to support financially challenged SOC

13. Programme 1 • Programme 1 provides support to the core programmes to ensure that the Department is sufficiently resourced and meets all legislative and regulatory requirements • In the period ahead, the Programme will focus on: • Strengthening of financial management tools to maintain the clean audit record • Strengthening the monitoring and evaluation function through the review of the policy on management of performance information • Payment of invoices within 30 days • Finalisation of Department’s performance management policy and begin implementation to promote a high performance culture within the organisation • Maintain the vacancy rate at below 10 percent as a norm • Implementation of the Department’s communication strategy including improving engagements with provinces and other stakeholders 13

14. Programme 2: Legal and Governance Priority areas • Provide advise and assistance in taking forward the recommendations of the PRC • Strengthening implementation of the SOC Logical Framework for Planning, Monitoring and Evaluation • Secure Cabinet approval on the Government Shareholder Management Model • Implementation of SOC Board and Executive Remuneration Standards • Framework for SOC procurement of mega projects • Review of the current Board Performance Framework • Development of an Enterprise Risk Management Framework • Proposals to reduce copper theft 14

15. Programme 3: Portfolio Management and Strategic Partnerships The sub-programmes in this Programme are as follows: • Energy and Broadband Enterprises – Includes Eskom, Pebble Bed Modular Reactor (PBMR) and Broadband Infraco. • Manufacturing Enterprises- Includes Denel, Alexkor and South African Forestry Company (SAFCOL). • Transport Enterprises - Includes South African Airways (SAA), South African Express (SAX) and Transnet Limited. • Economic Impact and Policy Alignment – aligns SOC with overarching government economic, social and environmental policies. • Strategic Partnerships – aims to ensure SOC commercial sustainability and attainment of desired strategic outcomes and objectives by SOC. 15

16. Energy and Broadband Enterprises Priority areas • Strengthen oversight on the roll out of the build programme • Development of industry benchmark to improve operational efficiencies within the company • Quarterly monitoring of the build programme, financial and operational performance • Assessment of Eskom’s financial position and technical capacity to undertake the build programme post 2017 • Secure Cabinet decision on the PBMR end state post December 2013 • Approval of BroabandInfraco’s capital Expenditure programme and funding plan 16

17. Manufacturing Enterprises Priority areas Denel • Framework that outlines interventions to improve financial sustainability of Denel • Alignment of Denel’s industrial capabilities and DoD acquisition and support requirements • Review of the RooivalkProgramme Alexkor • Review of Alexkor’s financial sustainability and recommendation to Cabinet on its future role as a state owned mining company SAFCOL • Implementation of SAFCOL’s new strategy based on Cabinet approval • Enhancement of the company’s developmental contribution 17

18. Transport Enterprises Priority areas Transnet • Ensure the contribution of Transnet to achieving an efficient, competitive and responsive infrastructure (output 3 of outcome 6) – As per Minister’s performance agreement • Oversee the concessioning of 3 branch lines pilot phase • Review of the logistics cost in the economy • Development of a long term integrated transport infrastructure network plan. SAA and SAX • Development of long term strategies for the airlines • Fleet acquisition programme for SAA and SAX 18

19. Economic Impact and Policy Alignment The sub-programmes in this Programme are as follows: • Environmental Policy Alignment - oversees alignment and implementation of SOC strategically important developments (SIDs) with special focus on the Eskom and Transnet Build Programmes. Oversight of SOC alignment with Climate Change Policy and with ‘Green Economy’ strategies. • Economic Policy Alignment - will focus on appropriate macro-economic modeling and research to enhance the links between industrial policy, macro-economic policy and the role of the SOC. Economic modeling will be outsourced to relevant institutions to determine the impact of SOC investment and operations on the economy, including the impact on customers and suppliers. • Transformation, Skills and Youth Development - will focus on the provision of scarce and critical skills by the SOC in support of the National Skills Agenda and the New Growth Path as well as optimizing the SOC skills training facilities through National Skills Funding, amongst others. Transformation and Youth Development areas will form new areas for incorporation into SOC Shareholder Compacts. 19

20. Economic Impact and Policy Alignment • Priority Areas • Development of SOC macroeconomic model to assess contribution of SOC to the economy • Finalisation of an Aviation Biofuel Strategy and Shareholder position on the carbon tax • Finalise MOU between DPE, DWA and DEA to fast track EIA and water licensing approvals • Oversee alignment and the provision of scarce and critical skills by SOC and their suppliers in support of the National Skills Agenda and the New Growth Path. • Facilitate partnerships for artisan and technician development to optimise SOC training facilities by increasing the number of artisan learners for the national pool. • Oversee SOC compliance with the environmental laws and climate change mitigation measures, while supporting SOC business needs. • Finalisation and implementation of the Youth Empowerment Programme • Development of an overarching transformation strategy for SOC 20

21. Strategic Partnership Priority areas • Innovative funding solutions to support SOC to sustain implementation of the build programme • Establishment of the Project Management Office (PMO) to improve capacity to oversee the build programme • Oversee development and implementation of SIPs Business Plan coordinated by the Department and its SOC • Quarterly assessment of the implementation of Competitive Supplier Development Programme (CSDP) • Development of the Private Sector Participation Framework • Development of SOC Africa Investment Strategy 21

22. Resourcing the DPE Evolving Mandate 22

23. Evolving mandate • The mandate of the Department has evolved significantly since 2009 resulting to an expanded role of SOC in supporting the state to achieve its objectives • This has required the Department to reorganise itself to support the achievement of these objectives through effective oversight on SOC • In the current MTSF period the Department has: • Reviewed its vision to align it to the objectives of Government • Reviewed its organisational structure to ensure appropriate resourcing of key functions • Secured budget for the expanded structure and key projects 23

24. Budget overview • The Department's budget decreased from R3.983 billion in 2009/10 to R1.4 billion in 2012/13 and this decrease continues over medium term to R279.3 million in 2015/16 as a result of reduction in transfers to SOC • Over the medium term Compensation of Employees is expected to increase from R111.5 million in 2012/13 to R155.5 million in 2015/16 as a result of the expansion of the establishment over this period • Goods and Services including Payments for Capital Assets is expected to increase from R96.8 million in 2012/13 to R123.7 million in 2015/16 to support the increased establishment 24

25. Strengthening capacity within the Department • The structure of the Department increased from 168 in 2009 to 210 in the 2012/13 financial year and will increases to 227 over the MTEF period • The Department has also succeeded in reducing its vacancy rate from 16.7% in 2009 to 11.9% in March 2013 • The Department still faced with challenges in respect of retention of specialists skills • The Department is exploring ways to retain key skills beyond increases in remuneration packages 25

26. Conclusion • The SONA has re-emphasised the Government’s commitment to address the developmental challenges • The NDP provides the long term vision and the Department will ensure alignment of SOC activities to support the achievement of the vision • Over the medium term, implementation of actions aligned to the NDP contained in the NGP and IPAP will remain crucial • The Department will work with SOC and DFIs to improve its project management capacity to improve monitoring of the build programme

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