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Brown: Corruption allegations at SOEs must be probed

Jun 14 2017 19:00
Carin Smith

Cape Town - It is imperative that allegations of corruption regarding some state-owned enterprises (SOEs) be investigated by appropriate legal processes, if required, Minister of Public Enterprises Lynne Brown said on Wednesday.

She told the National Council of Provinces that SOEs are a critical tool in the hands of the developmental state.

"We must confront and overcome the allegations and counter-allegations of corruption in SOEs and set about our transformative journey in a climate of the highest ethics and responsibility, thus contributing to the rating agencies reversing their recent decisions in the shortest possible time," said Brown.

"Eskom’s reputation has been torn to shreds. The facts of its financial turnaround; that it has used only R200bn of its government guarantee; that the build programme is ahead of its revised schedule; that it is making do with a 2.2% tariff hike; and that memories of load shedding are fading, are totally lost to the state capture discourse."

READ: ANALYSIS: Eskom’s revolving door, endless scandals cloud SA’s energy future

She said the Director-General of the department has already met with the head of the Special Investigation Unit (SIU) and they are working on a structured process. This process would culminate in a presidential proclamation to take the process forward.

She also expects the task team appointed by National Treasury to submit proposals on the end-state for government’s airline assets - South African Airways, Mango and SA Express.

With regards to Denel, Brown said it continues to grow its revenue and that its acquisition of Land Systems South Africa will enhance its capability to design and manufacture multi-purpose armoured vehicles that will enable it to compete in lucrative international markets.

ALSO READ: Gordhan leads the charge against Denel on Gupta links

Furthermore, the development of the Small African Regional Aircraft (SARA) is proceeding according to plan and Denel’s Aerostructures’ delivery on the Airbus A400M contract continues with on-time and on-specification deliveries.

Regarding Denel Asia, she requested Denel to mothball the company until the minister of finance decided on its section 51(g) application as prescribed in the Public Finance Management Act. Brown said she has requested a meeting with the finance minister to discuss Denel’s proposal.

Well-managed SOEs

In her view, well managed and maintained SOEs are uniquely positioned to contribute to addressing the chasm between rich and poor South Africans.

She referred to President Jacob Zuma's call for radical socio-economic transformation and said fundamental change in the structure, systems, institutions and patterns of ownership, management and control of the economy in favour of all South Africans, especially the poor are needed.
Therefore, SOEs in the Department of Public Enterprises (DPE) portfolio, namely Eskom, Transnet, Denel, SA Express, Alexkor and SAFCOL – "have been given their marching orders to deliver on this mandate".
"The larger companies in my department’s stable are among the key economic levers available to the state to give effect to its transformative, developmental agenda," said Brown.

READ: Zuma's grip loosened by Eskom chaos

"While many private companies were forced into their shells over the past nearly-10 years of economic sluggishness, SOEs have undertaken massive infrastructure (and job-creating), projects." 

She pointed out that the overwhelming majority of goods and services supplied to Eskom, Transnet and Denel - the "Big Three" - are not supplied by black-owned or empowered companies.
"There is enormous scope to transform the profile of suppliers, bring in new companies and convince owners of existing suppliers to enter into profit-share arrangements with workers, among other measures," said Brown.

Brown pointed out that the debts of large SOEs are linked to the sovereign credit ratings.
"It is clear that SOEs’ improvement in performance is non-negotiable. Structural reforms must be accelerated to improve efficiency and strengthen Government’s role as shareholder," said Brown.

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