Public enterprises under scrutiny

Cabinet has ordered the Ministers of Finance and Public Enterprises to prepare a report on the state of State Owned Enterprises (SOE) “with particular reference” to shareholder compacts, the state of their finances and turn-around strategies.

In addition they might make recommendations about the number, size, merger and future of such entities.

SOE answering to Public Enterprises minister Barbara Hogan include loss-making state arsenal Denel, currently in “turn-around” as well as South African Airways, SA Airlink and others. 
Cabinet spokesperson Themba Maseko said Hogan was also directed to re-institute the Inter-Ministerial Committee on State Assets (IMCSA) to oversee the functioning of these entities. 
“Some of them seem to be experiencing some financial and governance difficulties. It was Cabinet`s view that we needed to come up with a structure that will enable government to have an insight of how these entities are operating and what their challenges are.”
Maseko added this was “because as and when they run into financial difficulties, they come to Cabinet for funding to address their financial difficulties.”
The IMCSA, which Maseko called a “task team” is “to make sure that we can begin to have early warning signs to say, in this particularly entity there could be problems and intervention is required at an early stage so that we can intervene in a much more pro-active manner that we have been doing in the past.”
He said the IMCSA would include Hogan, finance minister Pravin Gordhan and transport minister Sbu Ndebele. “…there maybe a few others that might be added. But the core of the Committee will be those ministers.”
Maseko added the IMCSA would also monitor state corporations not under the Public Enterprises ambit including the state broadcaster about which Parliament this week expressed its deep shock “at the monumental failure of the executive management to properly, prudently and judiciously manage the finances and records of the broadcaster.”
It appears IMCSA will also monitor entities such as Armscor, the defence department arms acquisition agency. “The mandate is much broader to say, all entities that fall under the State,” Maseko said. 
In addition the IMCSA might – or might – not make recommendations about the number or the size of such entities and whether they should be merged or not.
“It may or may not make certain recommendations about the number or the size of these entities and whether they should be merged or not,” Maseko said. “That`s a discussion that the Committee is going to have to look at. The mandate of the Committee has not been defined to that extend. At this stage, it`s still open.”
Soon after assuming office in April defence minister Lindiwe Sisulu suggested Denel be moved from Hogan`s department to her own. Nothing has been heard of this proposal for some months.
There has also been suggestions that Armscor be merged into the defence department`s Defence Materiel Division to save costs. There has been no action on this so far.
Power producer Eskom, Denel and Armscor have had to field searching questions from MPs this week after annual reports published this month showed massive benefits paid out to chief executives and other directors while the entities were either asking for or already receiving Treasury bail-outs – and were asking for more – in bids to keep their bottom lines out of the red, in the words of The Mercury newspaper.
Gauteng economic development MEC Firoz Cachalia this week also complained about lawlessness in state departments. Cachalia, appointed in April, has found a “common trend of noncompliance with the PFMA (Public Finance Management Act) and lack of controls.
“We have a problem in the control environment. I don`t understand how contracts are entered into without following the country`s laws,” Cachalia said.
Pic: Public Enterprises Minister- Baraba Hogan