MINISTRY OF PUBLIC ENTERPRISES
14 September 2000
MEDIA BRIEFING
Relevant documents: Public Enterprises Media Briefing (Appendix 1)
Joint Statement on the Restructuring of State Forest Assets (Appendix 2) Minister Radebe presented his Media Briefing (see document). Minister Kasrils, of Water Affairs and Forestry, was also present and responded to questions to the Joint Statement on the Restructuring of State Forest Assets Questions from the media (Q) What are the plans for Telkom and target for the Initial Public Offering (IPO)? Will the government keep the majority shareholding after the IPO?
(A) Minister Radebe: I cannot answer this question now, but after we have appointed a global co-ordinator.
(Q) What are the terms for the transformation of Portnet?
(A) Minister Radebe: Ports can play an important role in economic development. We are not sure of the terms at this point but are looking to role models. Ports can accelerate economic development.
(Q) When will you be able to provide more detail on the energy sector and how will this be affected by the recommendations by Price Waterhouse and Coopers? Will a new ports policy be part of new investment?
(A) Minister Radebe: None of these have been finalised yet. There will be meetings between SALGA (South African Local Government Association) and local authorities as well as the Department of Minerals and Energy to determine policy frameworks. All the various processes must resonate.
(Q) When will South African Airways be listed?
(A) Minister Radebe: We can’t say when now, but will announce it when the time comes. It will, however, be listed.
Minister Kasrils summarised the Restructuring of State Forest Assets, saying they were talking about 330 000 hectares of forestry. 90 000 hectares of this will now be leased and 57 000 hectares will be converted out of forestry. He is very happy with this. Safcol will remain with 61 000 hectares of land.
Appendix 1: PARLIAMENTARY MEDIA BRIEFING ON PROGRESS IN THE RESTRUCTURING OF STATE-OWNED ENTERPRISES BY THE MINISTER OF PUBLIC ENTERPRISES, JEFF RADEBE, Cape Town, 14 September 2000
Ladies and gentlemen of the media
Thank you for your attendance at this briefing. During the parliamentary recess we have had occasion to interact with most of you, so today I just want to outline very briefly developments since the last session of Parliament, and then give you some idea of the overall progress of the restructuring process and what we can expect over the next few months.
In August government launched the Policy Framework on the Accelerated Agenda for the Restructuring of State Assets. This document was also formally tabled in Parliament on Tuesday, 12 September 2000. It has already been widely distributed to the media, an has been widely reported. We have also unveiled the Department's Business Plan that outlines how we will carry out the restructuring mandate given to us by Cabinet. Furthermore, the Director-General, Sivi Gounden, and I have signed his Performance Agreement as required by our Public Sector transformation.
My Department and I will be briefing the Portfolio and Select Committees on Public Enterprises on key elements of our work during this session and I would request that you keep your eye on the Order Paper announcements in due course.
As far as legislation is concerned, a major step forward will be the passage through Parliament of the Transnet Pension Fund Amendment Bill, that has emerged from the Portfolio Committee with minor amendments and which enjoys all-party support. I cannot overemphasise the critical importance of this Bill and the opportunities it will present in the restructuring of Transnet, but I will reserve further comment until it is debated in the National Assembly.
We had also hoped to process the Eskom Conversion Bill during this session of Parliament, but due to delays in the drafting process, we will now present the Bill to Parliament in February 2001. The Bill aims to convert Eskom from its existing form into a company in terms of the Companies Act.
Over the last few months a great deal of attention has been placed on our relations with labour as they are a critical stakeholder in the restructuring process. I am pleased to inform you that labour (i.e. the three labour federations) and government have agreed to retain the National Framework Agreement in its current form until the end of 2004. The spirit and the letter of the agreement shall be honoured, and we also agree that it does not need codification in legislation.
We agree, furthermore, that there will not be any moratorium on the restructuring programme. Instead, whenever the restructuring process and/or management appear not to meet agreed objectives in a particular enterprise, labour will be able to use existing mechanisms to raise their concerns directly with Government. On our part, we have already issued directives to all SOEs indicating that they should honour and observe the spirit and letter of the NFA. There are clauses in the relevant Shareholders Agreements that we have negotiated between government and the SOEs to this effect.
Let me also just make clear that the restructuring programme driven by my department covers state-owned enterprises only at the national level, and does not involve assets at the local and provincial level. There is, for instance, a clear Framework Agreement between Government, Labour and Local Government on how to deal with and manage municipal services restructuring. The national SOE Restructuring Programme is clearly not aimed at replacing any of these processes at the provincial and local level, and is distinct from them. The question of retrenchment and job creation looms large. The Department currently is examining the pattern of employment and retrenchment since 1994 within SOEs under our control in order to get an accurate picture so that we can ensure that our commitment to creating better and sustainable jobs, together with current efforts to put in place a framework for a Social Plan as a cushion against possible job losses, remains viable. I could just remind people that, in cases where such fears around jobs have been raised with us, for example in Spoornet, government has intervened decisively and made sure that the relevant stakeholders sit down and work out a comprehensive and implementable strategy that will minimise job losses.
The Department is putting the finishing touches to Shareholder Compacts with Denel, Eskom and Transnet. The SOEs have also adopted the Protocol on Corporate Governance. Our Chief Director responsible for Corporate Governance in Department, Mr Mac Gantsho, has been invited to participate in the King Committee on Corporate Governance. Through this forum, the Department will contribute to improved Corporate Governance in South Africa as a whole, and ensure that the SOEs are kept in line with any new developments.
The Department is also finalising the elements of a public education programme in conjunction with the JSE to ensure that the general public is able to participate fully in the IPO listings that we will be launching. We view this type of participation as an important aspect of empowerment but are aware of the pitfalls that such a process could present and so need to make sure that the general ideas become well known. Beyond this, the Department is working closely with the BEE Com in its endeavours to identify workable programmes for black economic empowerment. Our Policy Framework has gone some way along this path already.
Just in terms of our communication strategy, you can note for information purposes that the Department's website will soon be revamped and upgraded and will rapidly become a source of detailed information on the SOEs from our data base that now covers 308 entities, the work of the department as a whole, including information about IPO listings, and will continue to provide all our policy documents, business plans and statements.
Let me turn now to some specific items from the restructuring programme.
Telkom IPO Work on the proposed IPO for Telkom has gained significant momentum. The IPO Office is now in place in my department to pioneer and manage the Telkom IPO as the landmark equity transaction. We will soon appoint the IPO Project Manager, who will have the overall responsibility of the IPO Office and work closely with secondees from the Departments of Finance (the National Treasury), Communications, and Government Communication and Information System (GCIS).
I am pleased to announce that we received 10 bids by the required date for the role of Global Co-ordinator in the Telkom IPO. Let me set this morning's Financial Mail straight by indicating that Bids were received from the following: Barnard Jacobs Mellett Securities (Pty) Ltd, Merrill Lynch International, Credit Suisse First Boston, JP Morgan Securities, Deutsche Bank Securities, HSBC Investment Services (Africa) (Pty) Ltd, Goldman Sachs International, NM Rothschilds & Sons, Cazenove (SA) (Pty) Ltd, and UBS Warburg. The bids will be opened in the presence of an international accounting firm to ensure that the process is free from impropriety. The evaluation process will also be fair and efficient. We aim to complete the selection of the Global Co-ordinator by the end of October 2000.
Telecommunication Sector Government is currently looking at consolidating the telecommunications capability of the state housed in Eskom, Transtel and Sentech with the possibility that this merged entity could form the infrastructural basis for the Second National Operator (SNO). A business case for this merger has been established and we are now looking at how best to package these entities in the light of the evolving telecommunication policy trajectory.
IT Consolidation Cabinet has approved the process of consolidating Transnet's Datavia, Denel's Ariel Technologies, and the Information Technology Division of Eskom. Cabinet approved the implementation of phase two (2) in the IT Consolidation project. This entails the designing and defining of the Business Model for the envisaged new IT Company.
The Business Model will address all questions in relation to the shareholding, empowerment, the capital outlay, financing and how private capital will be mobilised. We are working together with all the entities and Consultants in designing this Business Model.
For instance, we have established a Project Office at Ariel Technologies. The entities have seconded both full-time and part-time managers to work with consultants. The restructuring branch, through our project managers, is co-ordinating the overall project. We expect to finalise the Business Model by the end of October 2000 that will be submitted to Cabinet for approval during November. The latest date for the new Company to start operations is 1 January 2001.
In the meantime, we have agreed with the senior management of these entities that the entities will continue to work together and explore business opportunities where possible. We have also agreed that all efforts will be made to ensure that ongoing intern al restructuring and filling of senior posts do not adversely affect the consolidation project and that any substantial moves will be communicated to the Department of Enterprises and other relevant players.
Denel A number of restructuring initiatives that affect Denel are already in the Cabinet's committee system. These include proposals for the future location of Mechem, the status of Swartklip, and the critically important consideration of proposals for the restructuring of Denel Aerospace and Ordnance and decisions on which company or companies we shall invite to participate in negotiations for strategic equity partnerships with these latter two divisions. I am not going to provide further details on these Denel questions today and will do so only once the Cabinet processes are complete.
Let me just indicate that the preparatory work has been extremely thorough, and we have been able to engage all possible stakeholders in an open manner. We have had the opportunity to engage these potential partners as recently as last week. With the evident turnaround in Denel's business and marketing activities already we believe that there are exciting years ahead for the company. In this regard Denel plans to release its financial results for 1999/2000 shortly and a media alert will be released in due course.
Transport I have already referred to the importance of the Transnet Pension Fund Amendment Bill and my intention to reserve comments until the debate in parliament.
Spoornet's restructuring continues to steam ahead! I reflected on the financial turnaround of this entity at the release of Transnet's financial results and would refer you to those comments. Government's initiative to introduce a package solution that included enhancing Spoornet's managerial capacity, bringing in a turnaround specialist, and making strategic appointments, has paid handsome dividends. From an almost lost cause, Spoornet's future now looks assured. We have rolled back the completion of the due-diligence for Spoornet to December 2000 as the comprehensive report on the turnaround strategy, amongst other things, will only be completed by the end of October. The complexities of Spoornet's operations require some time to ensure thorough examination.
Government is currently considering which model of restructuring should be followed in the further restructuring of ACSA. The Department of Transport is working with us.
The Departments of Public Enterprises, Transport, Trade and Industry, and Finance, in conjunction with Transnet / Portnet have initiated discussions on the steps that need to be taken in the transformation of Portnet, before any restructuring can commence. Alongside this process is the completion of a Ports Policy document that will outline the need for globally competitive ports to support trade and economic development, the separation of port authority and port operations functions, regulatory issues, and so on. We expect to release the document for public and stakeholder discussions by November 2000.
Eskom Enterprises Government is in a process of finalising the transfer of assets from Eskom to Eskom Enterprises. Models for the further capitalisation of Eskom Enterprises are still being investigated. Further details will be made available shortly. During the recess I also released statements about developments around the Power Grid concept for Southern Africa.
Forestry I am delighted that my colleague, the Minister of Water Affairs and Forestry, Ronnie Kasrils, has joined me this morning so that we can report together on what can only be described as very exciting Safcol developments.
Of critical importance in the new agreements are essentially three items: community involvement and development benefit, agreements on a fixed period of labour retention, and decisions directly suited to environmental protection. You will recall that Government was roundly criticised for its earlier decision to stall the processes around Safcol and this was held up as one of the so-called "failures" of restructuring. We believe that that decision was correct. The details of today's announcement show quite clearly the value of not engaging in firesales, and the silliness of those who urge us to engage in a mad rush to privatise everything without any consideration for the benefits to workers, communities or the environment.
The Safcol details are contained in a separate, joint statement.
For further info contact: Dr Ian Phillips 082 469 1553
Mr Andile Nkuhlu 082 675 8277
Appendix 2: DEPARTMENT OF PUBLIC ENTERPRISES 14 September 2000
RESTRUCTURING OF STATE FOREST ASSETS
The Minister of Public Enterprises, Jeff Radebe, and the Minister of Water Affairs and Forestry, Ronnie Kasrils, have today announced substantial progress in the restructuring of the state's forest assets. Speaking at Minister Radebe's parliamentary media briefing in Cape Town the Ministers announced that:
1. Forestry will be phased out of 12 000 hectares on the Eastern and Western shores of Lake St. Lucia. The land will be transferred to the Greater St. Lucia Wetland Authority and will be incorporated into the conservation area falling under the World Heritage Site. Forest plantations will be phased out within 5 years and thereafter the land will be incorporated into the Greater St. Lucia Wetland Park.
2. The remaining 20 000 hectares of forest plantation in the KwaZulu-Natal package will be sold to the Siyaqhubeka Consortium comprising Mondi Limited and Imbokodvo Lemabalabala, a black empowerment company representing communities living near the forest plantations. This area will be sold for a consideration of R100m in addition to the lease rentals which are valued at R48m. The bidders have agreed to take over all operational staff and have undertaken not to retrench any of these staff for a minimum period of three years. The transaction is subject to Competition Board approval.
3. As already announced by the Minister of Public Enterprises, the Eastern Cape North package will be sold for a total of R45m to Singisi Forest Products which is a consortium involving Hans Merensky Holdings and community groups living in the areas adjacent to the forest. The involvement of the communities has been facilitated by the Eastern Cape Development Corporation. The bidders have agreed to take over all staff and have undertaken not to retrench any of these staff for a minimum period of three years The transaction is subject to Competition Board approval.
4. Three parties have been shortlisted to bid for the Mpumalanga/Northern Province area which has now been consolidated into a single package. The three shortlisted bidders are GMO Renewables Resources of the USA, Pahapur of India and the African Forest Consortium of South Africa. These parties will now enter a bidding process.
5. An in-principle agreement has been reached between South African National Parks (SANP) and the management of the South African Forestry Company Limited (Safcol) that the Tokai and Cecilia plantations situated within the Table Mountain area will be incorporated into the Cape Peninsula National Park. The areas will however continue to operate as commercial timber plantations and Safcol will manage these on an agency basis. Tourism facilities will operate under the National Park and the plantations will continue to serve as important public recreational areas. The parties will now work on a detailed agreement which will involve the Department of Water Affairs and Forestry, the Department of Environment Affairs and Tourism, Safcol and the Cape Peninsula National Park. The parties aim to sign an agreement by the end of 2000.
6. Forestry will be phased out of 15 000 hectares in the Boland area of the Western Cape and 30 000 hectares in the southern Cape currently managed by Safcol. These plantations are not commercially viable and timber no longer represents the best land use option in these areas. This will open opportunities for other land uses including agriculture (particularly fruit and grapes), tourism and conservation. The process of conversion will be carefully managed over a period of 10-15 years. Various studies are now underway to examine the best mechanisms for making this land available. The remaining forestry areas (3000 hectares in the Western Cape and 30 000 hectares in the Southern Cape) will be managed by Safcol and may be re-offered in coming years.
7. Negotiations have been suspended until further notice in the Eastern Cape South package. Progress on this package has been hamstrung by the fact that members of the bidding consortium have unpaid debts with Safcol. Sale discussions cannot continue until these can be resolved.
The Ministers pointed out that this particular transaction has been complex and expressed satisfaction with progress. The Ministers pointed out that the process involved not simply a disposal of assets but a true restructuring. This includes far- reaching decisions to remove forestry from 57 000 hectares of land (17% of the area) in favour of better land uses. It is particularly important that the 12 000 on the shores of Lake St. Lucia will be transferred to the Greater St. Lucia Wetland Park. This gives impetus to the establishment of the World Heritage Site. This reflects Government's commitment to the environmental and will encourage tourism investment through the Lubombo Spatial Development Initiative. The matter has been extensively discussed with the Minister of Environmental Affairs and Tourism and the Minister of Trade and Industry.
The Ministers expressed their satisfaction that international bidders are again involved in the process for the Northern Province/Mpumalanga package which at 135 000 hectares is the largest asset on offer. This involvement echoes recent private sector indications of international interest in South Africa's forest sector.
The Ministers also expressed satisfaction that communities are being incorporated in the process. In both the KwaZulu-Natal and Eastern Cape North transactions the communities will become shareholders and in the Mpumalanga/Northern Province package community trusts will be established to warehouse the 10% community shareholding.
The Ministers also paid tribute to labour and the various trade unions involved in the process. The unions have been strongly involved in the process and have added value to the restructuring. The restructuring process involves a merger of Safcol and the forests managed by the Department of Water Affairs and Forestry in certain regions. As a result of this, a portion of DWAF workers will transfer to Safcol. In the process they have accepted Safcol wages and working conditions. The unions have been willing to be flexible under difficult circumstances and Government in turn has been willing to enter into a real partnership with the unions.