SPEECH BY CT FROLICK ON BUDGET VOTE 9 - PUBLIC ENTERPRISES

14 June 2004

Chairperson and Honourable members,

Let me make use of this opportunity to congratulate honourable Minister Erwin on his appointment to provide the political leadership in this crucial govt department.

From this side of the House, Honourable Minister you can be assured of our continued support and constructive interaction to fulfil the mandate of Public Enterprises.

The portfolio of state assets contains entities and agencies that operate in various ways in our country. As a result, state owned enterprises play a fundamental and strategic role in the ongoing development of our country and our continent, through various NEPAD initiatives. As we continue our quest for a better life for all, state enterprises will continue to play this important role. The ANC thus welcomes the continued commitment of government as articulated by you Honourable Minister on the process of restructuring and eagerly await more detailed announcements in this regard.

The restructuring of SOE's can impact on:

• the quality, accessibility and affordability of services provided to communities especially the poor.
• the efficient operation of strategic sectors of our economy; and
• employment and human resource development. The 51st Congress of the ANC held in Stellenbosch resolved to "reaffirm ANC Policy on restructuring, particularly the role of SOE's in economic transformation, democratisation and deracialisation of our economy, which ensures that transfers of assets to the private sector strengthens our development agenda.

Chairperson, the President in the state of nation address of 21 May 2004 further reiterated the need to consolidate the practice of creating public private partnerships and building government -civil society co-operation.

Eskom, Transnet, and Denel has been identified as focal areas for future restructuring initiatives and increased ifrastructure development. My colleagues have referred to the role of Transnet & Denel. It is thus prudent to examine the development of Eskom in the light of the crucial role its plays in the economy.

A key challenge for the post 1994 democratic government was to address the socio- economic legacy left by apartheid. The RDP was developed as the main intervention of government to address this legacy. Central to Eskom's development role is the provision of electricity. With electricity, children can get quality education, basic health care becomes possible, industrial development and therefore jobs creation is possible, commercial activities increase and household injuries and deaths caused by paraffin stoves and candles is reduced.

As we celebrate our 10 years of democracy, we can say that Eskom has to a large extend successfully executed its developmental mandate. Eskom's performance in terms of its RDP commitments reads as follows:

• In 1994 over 60% of the population did not have electricity. At the time, only 36% of the country was electrified,12% of rural household were electrified. Since 1994, almost 3 million homes have been electrified. According to figures released by the National Electricity Regulator, South Africa is now 70% electrified .At the end of 2002, 50% rural houses were electrified.
• Since 1994, the real price of electricity have been reduced by 25%
• In terms of BEE, during 1995 contracts to the value of R15 million were awarded to emerging black businesses. Since then the Eskom database of black business has grown significaly .In 2003 R7, 3 billion was directed to BEE.
• Since 1994, the illiteracy rate of its employees have been reduced from 45% to 10%; and
• Eskom's BEE programme has evolved to a level where there is heightened focus on the empowerment of black women owned and run businesses.

The Eskom Development Foundation drives its corporate social investment programme .Its focuses mainly on rural areas and newly established settlements with an emphasis on women, people with disabilities and youth. The economic programme of the Development Foundation supports community- based, income generation projects and the enhancement of SMME's.

The social programme focuses on health, nutrition, environment, education as well as arts and culture projects. This year Eskom paid a grant of R15 million to the Medical Research Council of S.A. for the SA Aids Vaccine Initiative. Since its inception R37, 5 million have been paid to this project. Since the establishment of the foundation in 1999 a total of R 278 billion has been disbursed to various sustainable programmes.

The energy sector is not only a critical component of SA's growth and development, but crucial to the development of Africa. South Africa's commitment to NEPAD requires the concrete implementation of a number of actions . As a developmental plan of action, NEPAD encourages African countries to establish and nurture public, private partnership as well as grant concessions towards the construction, development and the maintenance of ports, railways, roads and maintain transportation . Eskom Enterprises together with other SOE's such as Transnet, Arivia.kom, Denel and its subsidiaries is currently engaged in more than 20 African countries either in joint ventures or with strategic partners.

The increased involvement of South African SOE's must continue to be mutually beneficial while simultaneously building capacity in African States and economies to turnaround the downward spiral of underdevelopment which characterise a number of African countries. Apart from being commercially viable SOE involvement in African countries must ensure the empowerment of SMME's, favourable procurement policies for local companies and a bias towards local labour and services, while encouraging sustainable development in the countries of operation. Chairperson, (once again in this debate) critics of SOE activities in neighbouring countries suggests that they would better addressing problems at home. This view is not only wrong, but symptomatic of an arrogance that has no place on the African continent. Such an approach will isolate South Africa from the rest of the continent and will fly into the face of our developmental agenda to strengthen regional economies and accelerate the physical integration of our continent through regional integration.

CHALLENGES FACING SOE's

• Chairperson, the Minister emphasized in his speech the need for higher levels of investment in the economy and the building of strong state-owned enterprises in partnership with the private sector. To achieve this, SOE's must operate with greater efficcy. SOE's will have to participate in the economy as strong corporate entities governed by sound corporate governance principles that attract high levels of investment. However, given the developmental mandate of SOE's to provide quality and affordable services to all citizens, a balance must be found for it to operate in the economy not entirely to the rules of the marketplace alone
• South Africa still produces some of the world's cheapest energy, which is the pillar of our economy. New expensive investment is required to keep up with the increasing demands for energy. A reliable supply of energy is crucial for the development of ksectors in the economy and sustainable industrial development.
• Some of our SOE's are world leaders in their respective fields and possess vast intellectual and technological expertise. This capacity must be exploited to the benefit of our whole economy. Clear targets for BEE, SMME, development and infrastructure dlopment needs to be set to link the second economy with the first economy.
• At the 2002 World Summit on Sustainable Development, Eskom committed itself to reduce the level of harmful gases emitted from its coal- fired plants. This is necessary to make coal burning power station more environmental friendly. The installation fils at the Hendrina power station is expected to reduce about 99% of visible emissions from this PowerStation. SOE's will need to continue research into renewable energy technologies and must include in it the potential for local ownership and community participation without increasing the cost to the poor.
• Over the last few years, SOE's and the DPE attracted highly skilled staff. While it is inevitable that new, specialised skills will be recruited, the DPE must embark on a clear strategy to retain key personnel in order to put a halt to the high attritirates of recent years.

CONCLUSION

Chairperson, once again in this debate the opposition has highlighted its call for the privitization of key SOE's. This is to be expected, since their thirst for the unbridled privitization of key entities with a developmental mandate is spurred on by neo-liberal policies that expose the poor, the vulnerable and the unemployed to market forces alone. The fire-sale of strategic state assets will have disastrous consequences for the majority of our people.

As part of our contract with the people, SOE's must play a crucial role in the implementation of the Extended Public Works Program to achieve the objectives of the development of the social and economic infrastructure, human resource development, enterprise development and poverty alleviation.