Table of Contents
Presidential Review
Committee
Development & Transformation
Work stream
14 Febraury 2012
Contacts…
*
Siyakha Consulting (Pty) Ltd
Registration Number:
2002/006365/07
Address: Lincoln on the Lake
2 High Street
Parklands
Umhlanga Ridge
4000
Tel: 031 566 2988
Research Paper Submission
Compliance of State-Owned Entities to
Government’s Development and Transformation
Agenda
Submission by
Siyakha Consulting (Pty) Ltd
[DRAFT 1]
1
Introduction
-
Introduction
-
Transformation and Development
-
Case Studies
-
What is a State-owned entity?
3
2
What is a State-Owned Entity
5
3
What are the policies or regulations that influence Transformation?
9
4
Priorities for Development
12
5
What has been done elsewhere?
13
-
Macroeconomic Policy: Economic Stimulus
-
Transformation Policy: Priority Rights of Previously Disadvantaged Groups
-
Australia
-
Malaysia
6
Overarching principles
16
7
Performance of SoE’s to date
17
8
AS-IS ANALYSIS
18
-
Management Control
Employment Equity
Skills Development
Preferential Procurement
Enterprise Development
Socio-Economic Development
9
Questions to SOE’s
26
10
Our recommendations
29
-
Specific implementation plan
A plan for each SOE
A model for measurement
Communication and stakeholder engagement
o Influencing factors
o Cost & Risk Considerations
o Monitoring and Evaluation
2
Introduction
3
This research paper is submitted by Siyakha Consulting (Pty) Ltd in response to the Presidential
Review of State Owned Enterprises (SOEs) research project.
The specific research objectives for this paper are to explore and respond to the following
guiding questions as prescribed in the Terms of Reference:
1. What constitutes the government’s development and transformation agenda?
2. Is there a common understanding of the agenda?
3. What should State Owned Entities (SOEs) do to improve achievement of the
Government’s transformation agenda? Review the SOEs according to the following
classes: regulatory entities; research entities; constitutional entities; service delivery entities;
setas; commercial state owned companies; non-commercial state owned companies;
financial intermediaries.
4. What inhibits SOEs from achieving the government’s transformation agenda? This should
include possible policy and/or legislative conflicts and misalignment.
5. Are the indicators and targets for transformation achieving the sector based
transformation objectives? What should be done differently?
6. Include ay local and international benchmarks where possible.
This therefore is the first draft of this paper…
4
Transformation and Development
In order to undertake this assignment we have undertaken the following process to extract information:
1. Internet research;
2. Information assessment (of that information made available to us by the PRC);
3. Field research (conducted through experiential learning in the work done by the Siyakha
Consulting team during the past 10 years)
4. Consultative research (high-level feedback from key organisations to give input and insight in the
practical experiences of on-the-ground teams in several disciplines)
Case Studies
Our thanks to key individuals and organisations who have participated in this process which include but
are not limited to

Developmental : Noah NPO

Commercial:

o
The Johannesburg Stock Exchange
o
Mott MacDonald South Africa
o
Tsebo Outsourcing Group
o
Freightliner PLC
o
Tiger Brands
o
ABB
Community : Mkhwanazi Tribal Authority
5
What is a State-owned entity?
The PRC has defined the South African developmental state broadly as a “state that works with private
sector, labour and society in general, to achieve economic growth and development through savings
and investments thereby creating sustainable jobs, improve service delivery, reduce poverty and
inequality, sensitive to environmental issues, improve health of citizens, develop skills and promote
innovation, and reduce crime and corruption”.
In defining SOEs we differentiate between commercial SOEs from non-commercial SOEs. A commercial
SOE, or a government-owned corporation (GOC), or a government linked company, or a quasi
governmental organisation, or a state-owned company, or a state-owned enterprise, or a publicly-owned
corporation, or a government business enterprise, government business corporation or a parastatalis
defined as a legal entity created by a government to undertake commercial activities on behalf of the
owner, the government.(http://e.wikipedia.org/wiki/Government-owned_corporation)
The legal status of a commercial SOE varies from being a part of government to a private company with a
state as a shareholder (http://e.wikipedia.org/wiki/Government-owned_corporation) (Treasury, 19 Jan
2012).
The non-commercial SOE is largely entity that is created and owned by a government to undertake
certain functions of government with the purpose of improving service delivery to the citizens. Typically,
these are government agencies or state entities established to pursue purely non-financial objectives and
they have no need or goal of satisfying the shareholders with return on their investments.
(http://e.wikipedia.org/wiki/Government-owned_corporation)
There are two main sources for determining what might be referred to as the legal definition of SOEs. Such
a definition is arrived at both directly and indirectly. The two sources are: The Public Finance Management
Act of 1999 (PFMA) and The Companies Act 71 of 2008. The PFMA of 1999 is a generic Act for this purpose
and is not a specific enabling or founding legislation for any SOE. Section (1) of the PFMA of 1999 [updated
in 2008, pp 8-10] defines the equivalent of a state-owned-enterprise, which it refers to as “national
government business enterprise” to be “an entity which:
a) is a juristic person under the ownership control of the national executive;
b) has been assigned financial and operational authority to carry on a business activity;
c) as its principal business, provides goods or services in accordance with ordinary business
principles;
d) is financed fully or substantially from sources other than –
6
i.
the National Revenue Fund; or
ii.
by way of a tax, levy or other statutory money;
A provincial government business enterprise is defined in the same manner except that it is under a
provincial government. No definition is given in the PFMA for local government or municipal level business
enterprise. National and provincial levels public entities are defined as follows:
“National Public Entity” means –
a) a national government business enterprise; or
b) a board, commission, company, corporation, fund or other entity (other than a national
government business enterprise) which is :
i.
established in terms of national legislation;
ii.
fully or substantially funded either from the National Revenue Fund, or by way of tax, levy or
other money imposed in terms of national legislation; and
iii.
Accountable to Parliament.
A definition along the above specification is given for a “Provincial Public Entity”. In the two acts nothing is
specified for local government or municipal sphere of government despite the existence of the three
spheres of government. Presumably this is left out because it is covered in the relevant Local Government
Act, the MFMA.
The PFMA of 1999 definition of “for surplus” or “for profit” corporations or companies is not in consonance
with the pervasively used identifying titles such as: “state-owned enterprises”, “public enterprises”,
“parastatals”, etc. The PFMA does not use the concept of a company, specified in the Companies Act 71
of 2008 under which most of the government’s “for surplus” or commercial entities are registered.
According to the dictionary definition (South African concise Oxford Dictionary, 2002), “enterprise” means
business or company, “business” means commercial activity or commercial organisation, and company
means commercial business. From the PFMA, it is also not clear what is meant by company or entity being
“substantively” financed or not financed by government.
The Companies Act 71 of 2008 first classifies companies in term of either being “for profit or non-profit”
companies. According to Chapter 1 Section 1, on Definition, of the Companies Act of 2008, a “stateowned company” means an enterprise that is registered in terms of the Act as a company, and either (a)
falls within the meaning of state-owned enterprise in terms of the Public Finance Management Act of 1999
[PFMA] or is owned by a municipality at the local government in terms of the Municipal Systems Act 2000.
Such a company should end its designation with SOC LTD that is state-owned Company LTD, e.g. Transnet
SOC Ltd.
7
It is important to note that the PFMA refers either to national or provincial business enterpriseand not stateowned enterprises as it is the case with the Companies Act of 2008.
Other definitions from literature include the following:
1. Hans Gildenhuge and others of Stellenbosch University describe public-enterprises or parastatals as
entities “…in which services are delivered by public institutions following the methods of business
rather than the non-profit and total government control approach which is distinctive government
service” [Ibids]. Here government acts “as an economic entrepreneur in producing a variety of
goods on a commercial basis” p. 69. “The concept of parastatal is broad covering public
enterprises (organisations trading goods and/or services) which are wholly or partially owned or
controlled by the states” [p.72]
2. Chris Heymans (1998) defines parastatals as “Any corporate organisation set up, funded, owned,
and/or resource allocation by government would be deemed a “parastatal”. Parastatal are
financed through Development Finance [Mistry 1992 -2] which entails investment in revenue
generating enterprises…. And such enterprises will also operate on the basis of commercial
profitability and viability”.
One of the key findings emanating from the discussion above is that in certain instances different
terminology is used to denote the same kind of entity e.g. Companies Act’s reference to state-owned
enterprise and PFMA referring to the same entity as the business enterprise. There is therefore a need to
establish common terminology that will be used consistently throughout government including all
government documents.
SOE are important participants in the local economy and are active in international markets for the
sourcing of capital equipment, finance and partners. Global drivers of economic output impact directly
on the performance of SOE and it is therefore critical for the DPE to understand the manner in which SOE
manage their performance in this environment.
Many developing countries have used state-owned entities to address a number of developmental issues.
The developed world has also used commercial state-owned entities for further economic development of
their respective countries. There is a long held view, in particular within the private sector that commercial
state-owned entities are inherently inefficient and should be privatised. In his article, “State owned
Enterprise Reforms”, Ha Joon Chang observes that despite this popular perception, and encouraged by
the business media and contemporary conventional wisdom and rhetoric, commercial state-owned
entities can be efficient and well-run. He argues that this may sound like a trivial statement, but it is very
important, given the depth of prejudice against commercial state-owned entities.
8
What policies or regulations
that of
influence
To this, there are many types
transformation?
classifications that are
used to
categorise SOEs. Classification seeks
to group SOEs in a certain logical
sense that enables their proper
management throughout their lifecycle, from establishment to deestablishment. Some of the commonly used classification types include, inter alias, the following:
1. Source of control;
2. Commercial activities;
3. Economic activities;
4. Service delivery activities;
5. Property rights;
6. Source of Funding;
7. Investment types;
8. Legal personality;
9. Functional role e.g. regulator, research entity, etc.
10. Spheres of government ownership e.g. National, Provincial and Local
9
What are the policies or regulations that
influence Transformation?
For the purpose of establishing the legislative and regulatory environment that governs South Africa – and
its effective transformation – a number of policies, acts, public sector strategies and mandates were
considered. While specific focus was given to the intentions of economic and industrial policies and
strategies, we also considered the areas of specific concern around Women, Youth, Children and People
with Disabilities; as well as the overarching Law of the Land – the Constitution.
1. The intention of the Department of Women, Youth , Children and People with Disabilities is to:
a. Comply with National Objectives
b. Facilitate development and quality of life opportunities for Women, Youth, Children and People
with Disabilities
c. Ensure Performance Effectiveness within the department
d. Collaborate with stakeholders to ensure the delivery of rights of Women, Youth, Children and
People with Disabilities
e. Co-ordinate programmes that uplifts the current situation of Women, Youth, Children and
People with Disabilities
2. The intention of the National Skills Development Strategy is to:
a. Increase the employability of the Youth
b. Support SMME, Co-operatives, NGO and Community Trading Initiatives
c. Increase public sector capacity doe improved service delivery and support the building of a
developmental state
d. Career and vocational guidance
e. Achieve fundamental transformation of inequalities linked to class, race, gender, age and
disability
3. The intention of the Department of Rural Development is:
10
a. Increased production
b. Sustainable use of resources
c. The establishment and strengthening of rural livelihoods
d. Economic Development
e. Food security, dignity and improved quality of life for each rural household
4. The intention of the Employment Equity Act is to:
a. Eliminate unfair discrimination
b. Achieve a diverse workforce
c. Facilitate economic development
d. Achieve equality
e. Achieve efficiency of the workforce
5. The intention stated in the Budget for the 2011/2012 Fiscal year is:
a. Job Creation
b. Poverty Reduction
c. Improved and Increased Infrastructure
d. Economic Growth
e. Sustainability
6. The intention of the National Industrial Participation Programme is:
a. Sustainable economic growth
b. Facilitate access to new markets
c. Encourage foreign direct investment
d. Encourage research and development
e. Contribute to Job Creation
7. The intention of the National Industrial Policy Framework is:
a. Increased value-addition in goods and services that compete on export and import fronts
b. Intensification of industrial processes – movement towards a knowledge economy
c. Labour-intensive production – job creation
d. Increasing participation of Historically Disadvantaged Individuals and marginalised regions
e. Building Africa’s productive capability
8. The intention of the Industrial Policy Action Plan (IPAP) is:
a. Enhanced economic interventions: competition regulation
b. Industry specific support programmes: automotive and textiles
11
c. Job creation through investment attraction
d. Reduction in input costs through tariff reductions
e. Environmental considerations – energy efficiency
9. The Intention of IPAP (II) is:
a. Developmental Trade Policies – market interventions
b. Competitive and Regulatory prices that lower costs of production
c. Skills development aligned to sectoral priorities – increasing the employability of people
d. Ambitious sector strategies
e. Job Creation through Investment channeling
10. The intention of Growth, Employment and Redistribution (GEAR) Policy was:
a. Economic growth (through increased Foreign Direct Investment)
b. Increased employment opportunities and job creation
c. Reduced income inequality – through the redistribution of wealth
d. Privatisation and restructuring of State-Owned Enterprises
e. The relaxation of trade tariffs
11. New Growth Path
a. Job Creation
b. Economic Growth
c. Equity
d. Environmental Considerations
e. Sustained expansion of economic opportunities
12. Constitution
a. Heal the divisions of the past
b. Lay the foundation for a democratic and open society
c. Improve the quality of life of all citizens
d. Free the potential of each person
e. Build a united and democratic South Africa
12
Therefore what are the priorities for
Development?
While the policies differ in target areas and focus, there are overarching Development and Transformation
objectives common to all policies, including:
1) Education and Skills Development
2) Employment
a. Job Creation
b. Entrepreneurship
3) Social Equity
a. Poverty alleviation
b. Income redistribution
c. Income equality
4) Economic Development
5) Environmental Considerations
Development and Transformation in a South African Policy and Economy context therefore addresses the
above issues in order to augment the pool of available opportunities, and ensure that the labour pool are
adequately skilled to exploit those opportunities – in order to facilitate sustainable economic development
and create an equitable society.
13
What has been done
elsewhere?
For the purposes of establishing international benchmarks for transformation and economic policy, a crosssection of countries were considered and studied.
A number of countries were found to have implemented Economic Transformation/Stimulus policies as a
mechanism for augmenting their development, and facilitating economic growth and transformation.
Additionally, in line with the UN declaration on the Rights of Indigenous People by the UN Commission on
Human Rights and the UN Committee on the elimination of Racial Discrimination, a number of countries are
seen to priorities the rights of Historically Disadvantaged groups within their populations.
Macroeconomic Policy: Economic Stimulus
While the policy instruments differed somewhat, the overarching objectives of the macroeconomic
interventions of the various countries were strikingly similar.

The Kenyan Model aims to achieve Job Creation and Poverty Alleviation through measured Fiscal Expansion – which
included an increase in public sector expenditure on various industrial projects to improve infrastructure and create jobs;
and measured tax reductions to encourage demand-side economic activity.

The Canadian Model aims to achieve Skills Retention and Job Creation through Fiscal expansion – which included
investment in infrastructure, enterprise development activity and general support for (local) Business.

The Indian Model aims to achieve Skills Retention through the classical application of the Keynesian Model of
augmenting aggregate demand by reducing taxation; and offering incentives and subsidies to the Manufacturing industry
in order to attract Investment within and into said Industry.

The American Model aims to achieve Job Creation and Skills Retention through Fiscal Expansion and reduced taxation.
Public sector expenditure and investment is focused around the areas of Energy, Science and Technology Infrastructure;
Education and Health – with particular emphasis on a “Buy American” campaign to augment aggregate demand for locally
produced goods.

The Australian Model aims to achieve “Nation Building”, Job Creation and Skills Retention through Fiscal Expasion – and
particularly investment in infrastructure.

The Malaysian Model aims to achieve Economic Growth through fiscal expansion and the opening of their economy.
Their focus is on infrastructure development, entrepreneurial support, reducing bureaucracy and the liberalisation of
trade barriers.
Transformation Policy: Priority Rights of Previously
Disadvantaged Groups
A number of countries are seen to have adopted transformation policies to facilitate the participation of
Previously/Historically Disadvantaged groups in their mainstream economy. Among these countries are all of
those that participated in the America Convention, under the UN declaration on the rights of Indigenous
People; Australia, New Zealand, Philippines and Malaysia.
Under the America Convention:

Bolivia commits to protect the social, economic and cultural rights of Indigenous People through the
prioritisation of their rights in all instances

Brazil commits to the distribution (and protection) of land rights to Indigenous People, and the
provision of economic and/or entrepreneurial support in order for those People to benefit from the
land

Chile commits to the protection of land rights of the Indigenous People

Colombia commits to the protection of land rights of the Indigenous People, and their prioritisation in
all instances (including entrepreneurial support).

Ecuador commits to the prioritisation of economic participation of Indigenous People and ensured
participation in benefits from economic activity on traditional land.

Mexico commits to the protection of land rights of the Indigenous People, and the provision of
economic and/or entrepreneurial support in order for those People to benefit from the land and
receive the greatest benefit from the use of productive resources

Nicaragua commits to the protection of land rights of the Indigenous People

Canada commits to the protection of land and resource rights of Indigenous People

USA commits to the protection of land and resource rights of Indigenous People, where feasible, and
the compensation and suitable relocation of Indigenous People where the land rights have already
been compromised or redistributed.
Following the America Convention, countries (including Australia, Malaysia, Philippines and New Zealand)
undertook to protect the land and other economic rights of Indigenous People and Minority Groups.
15
Australia
Australia’s transformation policy prioritises the rights of Aboriginal and Torres Strait Islander People and their
access to:

Education

Health Care

Land

Employment Opportunities

Social Security
The land rights of Indigenous People have been tables a key transformation objective by government, but
the implementation of transformation policy is determined at a state/territorial level. Thus land right policies
are area specific.
Malaysia
The fundamental differences of the Malaysian Model in respect to their Transformation policy, and the
implementation thereof, of is the timeframe around which expectations are based and the positioning of said
policy from a marketing perspective.
The “1 Malaysia” policy has national unity and ethnic tolerance as its mission; improving access to healthcare,
technology and food security as primary social objectives; and sustained economic growth as its primary
economic objective.
The Malaysian policy infers that both social and economic objectives can be met though the improvement
of public sector (including SOE) efficiencies and productivity; coupled with reduced bureaucracy throughout
the government sector – in order to create an enabling setting through which market-forces can ultimately
generate a conducive and sustained growth environment.
“1 Malaysia” was implemented with overarching marketing and education strategy – in order to generate
buy-in from all social and economic levels, thus ensuring that everyone understands subscribes to the
concept.
Furthermore, the policy was initially implemented at public sector level – ensuring that government and SOEs
met the compliance requirements first – before imposing similar requirements on the private sector.
Transformation objectives form part of each Civil Servant’s Key Performance Indicators – and a wide-reaching
skills development initiative was implemented in order to ensure that all Civil Servants were adequately
equipped to educate and assist in the application and implementation of the strategy.
16
The Malaysian government set up NGO’s to drive the social transformation aspects of the policy – the 1
Malaysia Foundation and the 1 Malaysia Youth Fund – while these organisations are predominantly funded by
the government, development specialists are tasked with distributing the funds effectively, monitoring and
reporting on performance regularly.
Overarching principles
It is difficult to discuss the recommendations without consider the economic factors and the influence that
Transformation has on these elements. Several important questions need to be asked SoE’s exist in order to
provide
1.
Security
a.
The trend of investing in assets as a strategy for national security became a trend after World War II. The guiding
principle was that a country did well to safeguard those elements that could pose a threat to national security in
the event that there were privately held and therefore able to be manipulated or influenced.
2.
Income
a.
A government’s predominant source of revenue is from taxation. In South Africa our tax-paying population is far
smaller than the country requires to support its’ growing population. Profitable, commercial entities provide an
alternative source of income to taxation. In South Africa where the tax contributions are generated from less
than 10% of the total population, this component has particular strategic importance.
3.
Provision of Essential Services
a.
Basic services such as water, energy, housing and social infrastructure are the responsibility of Government and
State Owned Enterprise play a role in providing the essential services provided to the general population.
Therefore if the purpose of SOE is to provide an essential service, secure national assets and basic services
and provide a source of income, then the priority for these entities should be on operating efficiencies and
profitability to achieve these objectives.
The income that is provided from these entities should provide a source of revenue for Government to fulfil its
purpose which includes providing for its entire people.
17
Performance of SoE’s to date
In considering the current performance of SoE’s to date two elements have been considered
a) The real performance (data that is verified independently and is reviewable and measurable)
b) The perceived performance (the views of public sector, private sector and NGO’s)
For the purposes of this study, we consider the compliance of State-Owned Enterprises with Broad-Based
Black Economic Empowerment – as a measure for their compliance with the Government’s Development
and Transformation Objectives.
State-owned enterprises are measured in terms of the Adjusted Generic Scorecard within the ambit of the
Broad Based Black Economic Empowerment Generic Codes of Good Practice.
DESCRIPTION
Weighting
Overall BEE Score
100%
Direct Empowerment
15%
Equity Ownership
n/a
Management & Control
15%
Human Resource Development
35%
Employment Equity
15%
Skills Development
20%
Indirect Empowerment
35%
Preferential Procurement
20%
Enterprise Development
15%
Residual
15%
Socio-Economic Development
15%
The Adjusted Generic Scorecard is characterised by the exclusion of the Equity Ownership considerations,
and the increased emphasis on the Socio-Economic Development element.
18
AS-IS ANALYSIS
Of the 248 listed State Owned Enterprises, a sample of 60 was selected across the categories.
Of the sample, 10% had readily available BEE certificates that measured their level of compliance. With only 6
SOE BEE certificates being furnished (or being publically available) for analysis. The 6 respondents are as
follows, and unfortunately all fall within the “Commercial Entity” category:
1)
Denel (Pty) Ltd
2)
Telkom SA Limited
3)
ESKOM
4)
South African Airways (Pty) Ltd
5)
South African Express (Pty) Ltd
6)
PetroSA
6
5
5
5
4
3
3
3
2
2
2
1
0
DENEL (Pty) Telkom SA
Ltd
Limited
ESKOM
South
South
African
African
Airways (Pty) Express (Pty)
Limited
Limited
PetroSA
Petro SA and Eskom exhibit the best BEE status – with Level 2 B-BBEE compliance – while South African Airways
and South African Express exhibit the poorest performance with Level 6.
19
Management Control
The primary objective of the Management Control element is to encourage real microeconomic
participation by black individuals – and specifically black females – through the holding of positions of control
within organisations.
The Management Control element is measured in respect of 3 sub-indicators, and in terms of number of
individuals and proportion of voting rights:

Board participation

Top Management

Independent Non-Executive Board Members
There are a total of 16 points (15 + 1 bonus point) awarded for this category.
18
16
14
12
11.25
16
16
South
African
Airways
(Pty)
Limited
South
African
Express
(Pty)
Limited
15
12.51
10.83
10
8
6
4
2
0
DENEL Telkom SA
(Pty) Ltd
Limited
ESKOM
PetroSA
All the respondents are seen to perform exceptionally in the Management Control element – with South
African Airways and South African Express achieving full points in the category.
20
Employment Equity
The primary objective of the Employment Equity element is to encourage a workforce that is representative of
the South African population through the encouragement of the employment of Black individuals –
specifically black females and black individuals with disabilities.
Employment Equity is measured in respect of 4 sub-indicators, and as a proportion of total workforce in the
management categories:

Black employees with disabilities as a proportion of all employees – using the Adjusted Recognition for Gender

Black employees in Senior Management – using the Adjusted Recognition for Gender

Black employees in Middle Management – using the Adjusted Recognition for Gender

Black employees in Junior Management – using the Adjusted Recognition for Gender
The Adjusted Recognition for Gender calculation emphasises the ideal that at least 50% of the workforce should be
female – based on South African gender demographic statistics.
A total of 18 points (15 + 3 bonus points) are awarded for this category.
20
18
16
14
12
10
8
6
4
2
0
17.56
17.56
13.03
10.18
8.79
0
DENEL (Pty) Telkom SA
Ltd
Limited
ESKOM
South
South
African
African
Airways (Pty) Express (Pty)
Limited
Limited
PetroSA
Denel’s nil score indicates that they failed to meet the subminimum requirements in each management
category –and therefore did not qualify to score points in the category.
Their score for may be indicative of the skills mismatch that characterises our deepening problem of
unemployment and unemployed graduates in the country. Denel’s workforce is comprised of highly skilled
individuals in the specific fields of Mathematics and Science.
21
Skills Development
Skills development and Employment Equity are essential counterparts in the measurement of human resource
development within measured entities. Skills Development lays at the heart of Broad-Based Black Economic
Empowerment as it is emphasises the education and up-skilling of Black employees, specifically black female
employees and black employees with disabilities, as a mechanism of facilitating transformation.
The Skills Development Element is measured in respect of 3 sub-indicators, and as a proportion of payroll, and
total workforce:

Skills development expenditure on learning programmes for black employees – using Adjusted Recognition for Gender

Skills development expenditure on learning programmes for black employees with disabilities – using Adjusted
Recognition for Gender

Number of black employees participating in Learnerships (or learnership equivalent programmes) – using the Adjusted
Recognition for Gender
A total of 20 points are awarded for this category.
20
18
16
14
12
10
8
6
4
2
0
17.34
16
13
10.4
6.22
DENEL (Pty) Telkom SA
Ltd
Limited
ESKOM
6.22
South
South
African
African
Airways (Pty) Express (Pty)
Limited
Limited
PetroSA
22
Preferential Procurement
The Preferential Procurement element is the key driver of Broad-Based Black Economic Empowerment
compliance – as the entities score depends on their procurement from B-BBEE compliant suppliers. An entity’s
level of procurement recognition is entirely dependent on their B-BBEE level:
Procurement Recognition Level
B-BBEE Level
Qualification
Level One Contributor
> 100 points
135%
Level Two Contributor
> 85 but < 100
125%
Level Three Contributor
> 75 but < 85
110%
Level Four Contributor
> 65 but < 75
100%
Level Five Contributor
> 55 but < 65
80%
Level Six Contributor
> 45 but < 55
60%
Level Seven Contributor
> 40 but < 45
50%
Level Eight Contributor
> 30 but < 40
10%
< 30
0%
Non-Compliant
The procurement element is measured in respect of 4 sub-indicators:

B-BBEE Procurement spend from all suppliers

B-BBEE Procurement spend from Qualifying Small Enterprises and Exempt Micro Enterprises

B-BBEE Procurement spend from suppliers that are 50% black owned

B-BBEE Procurement spend from suppliers that are 30% black-women owned
A maximum of 20 points are awarded for this category.
25
19.79
20
16.24
15
12.75
12.13
12.69
12.69
10
5
0
DENEL (Pty) Telkom SA
Ltd
Limited
ESKOM
South
South
African
African
Airways (Pty) Express (Pty)
Limited
Limited
PetroSA
23
Enterprise Development
Enterprise Development is said to be the element that is most likely to result in the long-term sustainability of
Black Economic Empowerment. Statement 600 of the B-BBEE Codes of Good Practice specifies that the
specific objective of Enterprise Development amounts to the “assisting or accelerating the development,
sustainability and ultimate financial and operational independence of that beneficiary.”
Enterprise Development is measured with respect to the entities contributions to Enterprise Development
initiatives as a proportion of Net Profit After Tax – the target is 3% of Net Profit After Tax and a maximum of 15
points are awarded in this category.
16
15
15
15
15
14
12
10
8
6
4
2
0
0
0
DENEL (Pty) Telkom SA
Ltd
Limited
ESKOM
South
South
African
African
Airways (Pty) Express (Pty)
Limited
Limited
PetroSA
24
Socio-Economic Development
The objective of the Socio-Economic Development element is the promotion of sustainable access to the
economy.
And, is measured with respect to the entities contribution to Socio-Economic Development
Initiatives as a proportion of Net profit After Tax – the target is equivalent to 1% of Net Profit After Tax and a
maximum of 15 points are awarded in this category.
15
16
15
14.25
14
12
10
8
5
6
6
6
South
African
Airways
(Pty)
Limited
South
African
Express
(Pty)
Limited
4
2
0
DENEL Telkom SA
(Pty) Ltd
Limited
ESKOM
PetroSA
Measurement of Perception
In understanding the common perception of SOE’s key questions were asked with relatively consistent
feedback.
What do you believe are or should be the Development and Transformation objectives of SOE’s?

Employment Equity

Broad Based Black Economic Empowerment

Fostering of diversity

Sustainability

Basic services provision

Social Upliftment

Job creation

In-service training

Improve the quality of life for South African citizens

The BEE Act (good corporate citizenship).

SOE’s should follow the BBBEE Codes using King III as a point of reference for best practise

The Employment Equity Act
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
Questions to SOE’s
SOE’s should be governed,
managed and run along the same
principles as a commercial business

SOE’s should be setting the
example to the business sector and
the rest of society

Business objectives of planet,
people and prosperity

Application of best practice,
knowledge of the law, management
of the state’s assets and meeting the
business objectives

If business is good then you can address developmental or secondary needs by the primary objective
is making money or meeting service delivery targets
26
What do you believe the SOE’s are doing well in respect of meeting the State’s
Development and Transformation objectives?

Upgrading transport routes

Access to electricity

Recruiting and promoting previously disadvantaged employees

Improved infrastructure in some areas

Fast-tracked the appointment of previously disadvantaged staff in some areas

Some SOE’s have turned around financial performance (such as Denel) through part-privatisation of
application of private sector principles. The State needs to grow the one’s doing well and retain key
skills to allow for continuity. Need to highlight the positive more.
What do you believe SOE’s should be doing more of, in respect of addressing Development
and Transformation objectives within government?

Better planning and objectivity in overseeing implementation plans

Adopting and adhering to principles of good corporate governance

Being transparent about how decisions are made and where money is going

Skills development

Enterprise Development (job creation)

Addressing inefficiencies, fraud and corruption

Increasing the performance of employees

Changing the present mindset of “doing my job” into a service culture for citizens

Job creation : they should be awarding tenders and procuring supplies and resources through
Enterprise Development and the non-Government Organisation Sectors and not awarding tenders
and procurement to “pals” with huge tenders thus making a few people wealthy
27

They should be promoting that all that they do is working towards building social fabric and the
development of our country

More communication to the public and business sector showcasing success in transformation

Follow through on the plans that are made and announced

Stability with the Directors that perform and highlighting the successes alongside identifying the
development areas

Ministers are stretched beyond reality and not able to service all of the needs of society – the plans
needs to be simplified to be achievable with high impact
What do you believe hampers the achievement of the Development and
Transformation objectives of the Government?

Prevailing attitudes about performance and customer services

Governance and ethical behaviour

Education and training

Professional skills

Labour legislation is restrictive for all business

The regulatory environment makes it difficult and expensive for small business to perform and
succeed. Not remove, but simplify regulatory environment.

Objectives of a developmental state seen merely as a compliance issue – lack of true buy-in or
commitment

Corruption/lack of governance within SOE’s

Lack of consistency in one model for development

Lack of understanding of the developmental objectives by the majority of employees

Undeveloped skills and a sense of entitlement

Inefficiencies
What is you one recommendation as to how the State and SOE’s can better
meet their Transformation and Development objectives?

Skills Development - Succession planning and grooming

Enterprise Development

Source and secure the services of experts to develop a well-thought-out plan broken down into
implementation. Too often SOE’s just fail to deliver and they know that if it fails then the state will bail
them out. They must be governed and managed as a business.
28

I believe that the level of governance needs to be questioned, clearly the people serving in roles of
governance are not going to improve service delivery of SOE’s in my opinion as they are doing it for
fees

Move away from being hot on demand and cold on obligations – do the basic well instead of doing
everything badly

Engage with Stakeholders and the Private sector to share knowledge and gain commitment

Understand the environment we are living in and create a realistic plan. We need to be competitive,
drive the creation of relevant skills, promote the transfer of skills, encourage foreign professionals to
work here with a measurable programme for skills transfer, encourage deeper investment, create
definitive mining laws that promote growth within the sector.

Don’t destroy the success stories, if we see role models we feel aspirational about trying to emulate.
29
What are our recommendations?
We believe that the most simple, priority-driven solution will achieve the greatest results. The priorities would
be
1. Engagement with stakeholders
2. Regular communication and trust
3. Common understanding of the developmental objectives
4. A common, uniform approach to measurement and application
5. Accountability for results and performance
6. Monitoring and evaluation
7. Consequence for performance
Specific implementation plan
Common Understanding of the objectives
The UN Millenium Goals suggest the emphasis should be on

Eradicating extreme poverty and hunger

Achieving universal primary education

Promoting gender equality and promoting women

Reducing child mortality

Improving material health

Combating HIV/Aids, malaria and other diseases

Ensuring environment sustainability

Development a global partnership for development
Within the MDG’s framework, the national government announced specific development goals and targets
for the next decade. The important issue is for each and every public service official to understand these
goals, to understand the mandate of their organisation and to understand how their role plays a part in
achieving this mandate.
A plan for each SOE which considers W,W,W,W (Who, What, When, Why)
The strategic priorities of government for the mandate period (2009 – 2014) were defined as
1. Ensuring more inclusive economic growth, decent work and sustainable livelihoods. The main
objective with regard to this priority is to respond appropriately, promptly and effectively so that
30
growth in decent employment and improvements in income security are reinforced, and investment
sustained to build up national economic capability and improve industrial competitiveness.
2. Economic and social infrastructure. In the period ahead government will continue with the
infrastructure investment programme aimed at expanding and improving social and economic
infrastructure to increase access, quality and reliability of public services and to support economic
activities whilst also considering environmental sustainability and pursing maximum employment
impact. The aim is to ensure sustained investment growth over the medium-term so as to achieve the
target of a fixed investment ratio above 25% of grow domestic product (GDP) by 2014. This will look at
projects that are spatially-referenced, planned for and implemented in an integrated manner.
3. Rural development, food security and land reform. Between 10 and 15 million South Africans live in
areas that are characterised by extreme poverty and underdevelopment. Recognising the diversity of
our rural areas, the overall objective is to develop and implement a comprehensive strategy of rural
development that will be aimed at improving the quality of life of rural households, enhancing the
country’s food security through a broader base of agricultural production, and exploiting the varied
economic potential that each region of the country enjoys.
4. Access to quality education. Education has enjoyed the largest share of the national budget
throughout the past 15 years. This significant investment in building human capital and capabilities has
gradually improved the country’s human resource and skills base. However progress has not been
optimal and the achievements have not taken place at the required scale. Our objective is thus to
focus our skills and education system towards the delivery of quality outcomes. The focus will be,
amongst learner outcomes, early childhood developments (ECD), improving schools management
and M&E systems and supporting and developing a high quality teaching profession.
5. Improved healthcare. In the current MTSF period government aims to transform the public health
system so as to reduce inequalities in the health system; improve quality of care and public facilities,
boost human resources and step up the fight against HIV and AIDS, TB and other communicable
diseases as well as lifestyle and other causes of ill-health and mortality. Government aims at phasing in
of a National Health Insurance system over the next 5 years and increasing institutional capacities to
deliver health-system functions and initiate major structural reforms to improve the management of
health services at all levels of healthcare delivery, including particularly hospitals.
6. Fighting crime and corruption. Government is determined to curb levels of crime and corruption.
Contact crimes, crimes against women and children and organised crime remains a key focus and so
is the combating of corruption.
31
7. Cohesive and sustainable communities. Social cohesion is important if we are to achieve
developmental success. However, inequalities of condition and opportunity and weaknesses with
regard to a sense of being part of a common enterprise, is placing severe stress and strain on social
cohesion. In this MTSF period, we aim to meet our target of halving poverty and unemployment by
2014 and, in conjunction with other priorities, to strengthen the human capabilities, promote shared
values and social solidarity and strive to reduce overall inequality.
8. Creation of a better Africa and a better world. Over the medium term, the main goal with respect to
this priority is to ensure that our foreign relations contribute to the creation of an environment
conducive to economic growth and development domestically, within Africa and in other developing
countries. Implementing New Partnerships for Africa’s Development (NEPAD), promoting Southern
African Development Community (SADC) regional integration, strengthening South-South relations
and pursuing a developmental and investment-orientated approach to engagements with the North
are key aspects related to this priority.
9. Sustainable resource management and use. Like the rest of the world, we are vulnerable to the
impacts of climate change, biodiversity loss and diminishing water resources. Interventions will include,
amongst others, diversification of the energy mix in pursuit of renewable energy alternatives, and the
promotion of energy efficiency, enforcing a zero tolerance approach to illegal and unsustainable
exploitation of resources, supporting local and sustainable food production, and promoting
sustainable water use and preserving the quality of drinking water.
10. A developmental state including improvement in public services. In the previous mandate period,
government committed itself to improving the capacity of the state for growth and development.
Whilst progress has been made, there has been a continuation to face significant challenges in
transforming the system of governance. Challenges include capacity gaps in both local government,
poor quality of some public services; declining trust and confidence in public institutions such as the
judiciary, legislatures and the executive branch of government; and weak planning capacity across
the three spheres of government. The long-term goal remains the building of an effective and
accountable state as well as fostering active citizenship.
With the end of this period fast looming, the reality is that many of these objectives had not been met, or
there is insufficient data to support the measurement of results. The priority needs to be on achieving the
objectives of point 10 above, but with due consideration for points 1 – 9 to link back into the original strategy
and ensure that the commitments made are able to be measured, reported against and show progress.
32
A model for measurement
The common method for measurement of Transformation has been the BEE scorecard. The balanced
scorecard approach to Transformation was intended to be indicative of all of the objectives of the
Transformation agenda. However when one analyses the commitments of Transformation, we need to
consider that there are two elements to transformation
1. Internal transformation
The adaptation of the internal environment to consider diversity in all of its forms.
a. The inclusion of Youth, women, people from rural areas and previously disadvantaged groups
within the workforce of each parastatal.
b. The elimination of discrimination in respect of
i. Diversity
ii. Sexual discrimination
iii. Pay parity
c. Supplier Development programmes to increase the number of suppliers who are local, who
are representative of the demographic of South Africa and specifically who apply a broadbased approach to transformation (i.e. drill-down of the obligation for participation at all
levels)
d. Enterprise Development commitments that are
i. Supplier-focused
ii. Developmental in nature
iii. Are supported by measurement of results
iv. Specifically develop nominated beneficiaries
e. SED commitments that are aligned to Government’s strategy and focus on health, education,
poverty alleviation for nominated beneficiaries
2. External Transformation
This component refers to the SOE’s fundamental purpose and the impact that their day-to-day
operations has on the environment around them. The external influence is the very purpose of the
SOE, be it a SETA who supports the access to training and development within the country, Eskom who
supports the provision of electricity to every South Africa or a funding agency that needs to prioritise
alignment to the national strategy.
The emphasis for external transformation should all pull back to the same 10 priorities that are listed in
point (insert) above. Each SOE needs to understand these priorities and comment on where and how
their organisations meets influences or gives input to the 10 priorities, how this is achieved and who,
within the organisation is responsible for delivery and when this will be measured to ensure progress.
33
Communication and stakeholder engagement
As indicated in the reports that were provided, individuals who are in the public service often lack clarity of
the mandate of their organisation. Without this clarity of purpose, it is difficult to see how the individual role
meets the ultimate organisational objectives. Our recommendation therefore is that SOE’s would each be
required to submit a Transformation plan. This plan would define how they will achieve their developmental
goals over the next 5 years but broken down into annual targets and assigning responsibilities to the
individuals, departments and/or stakeholders within their
Influencing factors
Cost & Risk Considerations
Monitoring and Evaluation
34