A1261393223DUstL

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PUBLIC ENTERPRISES BUDGET FOR THE MTEF PERIOD
2008/09 2010/11 27 FEBRUARY 2008
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CONTENTS

• Public Enterprises Budget for the MTEF period
  2008/09 2010/11
• Consolidated Departmental Budget
  
• Economic Classification
• Summary of transfer payments
• Operational funding requested and approved
  
• Programme 1
• Programme 2
• SOE funding requested
• Programme 3
• SOE funding requested
• Programme 4
• SOE funding requested
• Programme 5
• SOE funding requested
• Programme 6
• 2006/07 Audit findings

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DPE BUDGET
ITEMS R thousand BUDGET 07/08 BUDGET 08/09 BUDGET 09/10 BUDGET 10/11
ADMINISTRATION 62 695 65 986 69 542 73 987
ENERGY AND BROADBAND ENTERPRISES 2 511 880 2 137 580 1 973 236 153 253
LEGAL, GOVERNANCE, RISK TRANSACTIONS 96 778 158 163 157 402 29 049
MANUFACTURING ENTERPRISES 1 164 342 11 641 11 853 12 604
TRANSPORT ENTERPRISES 753 995 605 669 19 207 20 040
JOINT PROJECT FACILITY 14 368 28 823 34 451 27 058
TOTAL 4 604 058 3 007 862 2 265 691 315 991
Over the MTEF, expenditure decreases at a rate of
59.1 percent, from R4.6 bn in 2007/08 to R315 m
in 2010/11. Transfers to SOE remain high in the
first two years of the MTEF with a combined
amount of R4.9 bn, of which R3.5 bn is allocated
to the PBMR. The Joint Project Facility is
subject to an increase in expenditure over the
MTEF rising from R14.4 m in 2007/08 to R27 m in
2010/11.
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DPE BUDGET continued
Economic Classification
ITEMS R thousand BUDGET 07/08 BUDGET 08/09 BUDGET 09/10 BUDGET 10/11
COMPENSATION OF EMPLOYEES 62 010 71 492 77 459 83 55
GOODS AND SERVICES 66 606 93 345 97 477 91 826
TRANSFERS 4 473 962 2 842 650 2 090 680 140 710
OTHER - - - -
CAPITAL 1 480 375 75 -
TOTAL 4 604 058 3 007 862 2 265 691 315 991
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DPE BUDGET continued
Summary of transfer payments
R thousand BUDGET 07/08 (Adjusted Appropriation) BUDGET 08/09 BUDGET 09/10 BUDGET 10/11
Alexkor 72 700 130 000 130 000 -
Broadband Infraco - 377 000 210 000 140 000
Denel 1 155 000 - - -
Pebble Bed Modular Reactor 2 502 273 1 750 000 1 750 000 -
South African Airways 744 400 - - -
South African Express - 585 000 - -
TOTAL 4 474 373 2 842 000 2 090 000 140 000
R 2.25 million is included in this amount for
VAT, subject to confirmation from National
Treasury and SARS whether VAT is applicable to a
specific portion of the funding earmarked for
restructuring. R 91.4 million is included in
this amount for VAT, subject to confirmation from
National Treasury and SARS whether VAT is
applicable to the nature of this funding, being
in respect of restructuring costs. In the event
that SARS finds that VAT is not applicable in
these cases the funds will not be drawn.
However, this will once again impact on the
departments expenditure where it will not meet
its target of 2 for the year.
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DPE Operational Funding requested from and
allocated by National Treasury
Item R thousand 08/09 09/10 10/11 Total
Operational funding requested in the MTEF 160 634 158 858 167 154 486 646
Initial allocation December 2007 144 286 158 771 172 859 475 916
Total deficit on 1st allocation (16 048) (87) 5705 (10 430)
Final allocation with inflationary increase January 2008 165 862 175 691 175 991 517 544
TOTAL INCREASE 5 228 16 833 8 837 41 628
During the MTEF process the department requested
an amount of R486 646 million over the three year
period, which included the normal baseline
inflationary increase as well as additional
funding for projects. In December 2007 National
Treasury allocated an amount of R476 216 million,
a deficit of R10 430 million. The allocation for
the first year being in deficit of R16 048
million which meant that projects had to be
re-prioritised to the outer years. However, in
January 2008 National Treasury advised the
department that the allocation had been revised
to include further inflationary projections. The
allocation was increased from R475 916 million to
R517 544 million, a total amount of R41 628
million, comprised of R2 817 million for
personnel and R38 811 million for non-personnel
components of the vote budget by National
Treasury to mitigate inflationary pressures. If
inflation outcomes are above projections, it will
be incumbent on the department to absorb
additional costs within the baseline.
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PROGRAMME 1ADMINISTRATION
ITEMS R thousand BUDGET 07/08 BUDGET 08/09 BUDGET 09/10 BUDGET 10/11
COMPENSATION OF EMPLOYEES 29 014 33 979 37 092 40 033
GOODS AND SERVICES 31 629 30 982 31 695 33 244
TRANSFERS 620 650 680 710
OTHER - - - -
CAPITAL 1 432 375 75 -
TOTAL 62 695 65 986 69 542 73 987
There is very little change to this programme
other than an inflationary increase for
compensation of employees which includes the
remuneration of all 48 interns (26 in 07/08 and
22 in 08/09). Equipment contracts, telephones,
stationery, training, recruitment advertising and
software licences are centralised to this
programme.
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PROGRAMME 2ENERGY BROADBAND ENTERPRISES
ITEMS R thousand BUDGET 07/08 BUDGET 08/09 BUDGET 09/10 BUDGET 10/11
COMPENSATION OF EMPLOYEES 6 474 6 915 7 444 7 992
GOODS AND SERVICES 3 133 3 665 5 792 5 261
TRANSFERS (PBMR and Broadband Infraco) 2 502 273 2 127 000 1 960 000 140 000
OTHER - - - -
CAPITAL - - - -
TOTAL 2 511 880 2 137 580 1 973 236 153 253
The slight increase in the operational
expenditure in this programme over the MTEF
period is mainly due to projects in the sector
commencing in 2009/10. Over the MTEF period, a
total of R727 million has been allocated for
Broadband Infraco and R3.5 billion for the PBMR.
However, overall expenditure in this programme
decreases due to the decline of transfer payments
to the SOE. In his budget speech the Minister of
Finance indicated that an amount of R60 billion
has been set aside in a contingency fund for
Eskom over the next 5 years. R20 billion of which
is the anticipated requirement over the MTEF.
The department will advise the Committee as soon
as this allocation has been clarified by National
Treasury. The functions and funds in the Mining
sub-programme (Alexkor) which previously resided
in this programme, has been moved to Programme 3
Legal, Governance, Risk and Transactions.
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Funding requested from and allocated by National
Treasury for State owned Enterprises Broadband
Infraco
Item R thousand 08/09 09/10 10/11 Total
Broadband Infraco requested 1 131 000 872 000 92 000 2 095 000
Broadband Infraco allocated 377 000 210 000 140 000 727 000
Total Excess / shortfall (754 000) (662 000) 48 000 (1 368 000)
In the 2008 MTEF the department requested an
amount of R2 095 billion over the period which
was in respect of the national long distance
network and the undersea cable. An amount of R727
million was allocated over the period in respect
of the States contribution. A significant
equity contribution is critical if the
substantial decrease in broadband costs targeted
are to be achieved. The further funds requested,
mainly for purposes of investing and constructing
a State initiated undersea cable, were not
approved by National Treasury. The National
Treasury raised major concerns about the extent
of Private Sector Participation (PSP) in the
cable. There will be significant PSP as will be
demonstrated by the Infraco team.
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Funding requested from and allocated by National
Treasury for State owned Enterprises PBMR
Item 08/09 09/10 10/11 Total
Pebble Bed Modular Reactor - requested 3 763 500 5 470 400 5 529 200 14 763 100
Pebble Bed Modular Reactor - allocated 1 750 000 1 750 000 - 3 500 000
Total Excess / shortfall (2 013 500) (3 720 400) (5 529 200) (11 263 100)
In the 2008 MTEF the department requested an
amount of R14 763 100 billion being in respect of
funding requirements for operating expenses for
payments to contractors for design, development
and licensing etc in addition to payments for
capital assets. This request was not approved,
an amount of R3.5 billion was however approved,
being the balance of the R6 billion that was
approved by national Treasury during the 2007
MTEF. The Minister has indicated that this is
acceptable as further funding will be generated
from private investors or other shareholders.
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PROGRAMME 3LEGAL, GOVERNANCE, RISK AND
TRANSACTIONS
ITEMS R thousand BUDGET 07/08 BUDGET 08/09 BUDGET 09/10 BUDGET 10/11
COMPENSATION OF EMPLOYEES 13 954 13 550 14 576 15 682
GOODS AND SERVICES 10 108 14 613 12 826 13 367
TRANSFERS (Alexkor) 72 700 130 000 130 000 -
OTHER - - - -
CAPITAL 16 - - -
TOTAL 96 778 158 163 157 402 28 049
Operational expenditure in this programme
increases in 2008/09, as a result of additional
funding for the legal costs for the Alexkor and
Safcol transactions, but remains stable for the
following two years. The sub-programme
Transactions was created specifically for this
purpose. At the same time the transfer payment
to Alexkor was shifted from Programme 2 to
Programme 3 for oversight of the implementation
of the Richtersveld settlement, the final payment
being in 2009/10. The historical figures between
the Programmes were adjusted accordingly.
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Funding requested from and allocated by National
Treasury for State owned Enterprises Alexkor
SOE R thousand 08/09 09/10 10/11 Total
Alexkor requested 260 000 - - 260 000
Alexkor allocated 130 000 130 000 - 260 000
Total Excess / shortfall - - - -
In the 2008 MTEF the department requested R260
000 million to be paid in the 2008/09 financial
year. The full amount was allocated, however this
was split for disbursement over two years in
accordance with the court settlement agreement
and is made up of R200 million for States final
contribution to the Joint Venture to be created
between Alexkor and the Richtersveld Community
and an amount of R60 million as the balance of
the funds required for the development of the
township. The funds will be paid over only after
the turnaround strategy for the entity has been
agreed upon and a viable business plan together
with progress reports on the implementation of
the settlement have been submitted to National
Treasury
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PROGRAMME 4 MANUFACTURING ENTERPRISES
ITEMS R thousand BUDGET 07/08 BUDGET 08/09 BUDGET 09/10 BUDGET 10/11
COMPENSATION OF EMPLOYEES 5 041 5 788 6 224 6 694
GOODS AND SERVICES 5 316 5 853 5 629 5910
TRANSFERS 1 155 000 - - -
OTHER - - - -
CAPITAL 16 - - -
TOTAL 1 165 373 11 641 11 853 12 604
There is no significant increase in the
operational budget for this Programme. The
substantial decrease reflected over the period is
due to Denel having received a transfer payment
amounting to R 1.155 billion in 2007/08, with no
further transfers allocated over the MTEF period.
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Funding requested from and allocated by National
Treasury for State owned Enterprises Denel
Item 08/09 09/10 10/11 Total
Denel - requested 79 000 215 000 116 000 410 000
Denel - allocated - - - -
Total Excess / shortfall (79 000) (215 000) (116 000) (410 000)
In the 2008 MTEF the department requested an
amount of R410 million to fund Denels
consolidation costs at ORTIA (R241 million) and
interest costs for the Domestic Medium Term Note
(DMTN) (R169 million) over the MTEF period. This
request was not approved and National Treasury
did not give any reasons for this in the MTEF
allocation letter. This is of grave concern given
the interest cost associated with Denels DMTN
borrowing programme which commences at the
beginning of 2008/09.
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PROGRAMME 5TRANSPORT ENTERPRISES
ITEMS R thousand BUDGET 07/08 BUDGET 08/09 BUDGET 09/10 BUDGET 10/11
COMPENSATION OF EMPLOYEES 5 212 6 243 6 714 7 221
GOODS AND SERVICES 4 367 14 426 12 493 12 819
TRANSFERS (SAA and SAX) 744 400 585 000 - -
OTHER - - - -
CAPITAL 16 - - -
TOTAL 753 995 605 669 19 207 20 040
Operational expenditure increases substantially
in 2008/09 and thereafter remains stable, as the
department will be retaining specialist technical
expertise that was previously funded by the
Department for International Development (DFID),
under the Support for the Restructuring of Public
Enterprises in South Africa (SPRESA) programme as
well as initial funding received from the SOE for
the Pipeline project in the Joint Project
Facility which has shifted to this programme. The
National Corridor Performance Management project
also commences in this period. The slight
decrease in the budget in 2008/09 is attributed
to a reduction in the amount allocated for
transfer payments. In 2007/08 an amount of R
744.4 million was allocated to South African
Airways (SAA), whereas an amount of R585 million
is allocated for South African Express Airways
(SAX) in 2008/09. The long term capitalisation
of SAA will be resolved over this financial year.
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Funding requested from and allocated by National
Treasury for State owned Enterprises SA Express
Airways
Item 08/09 09/10 10/11 Total
South African Express Airways - requested 104 000 - - 104 000
South African Express Airways - allocated 585 000 - - 585 000
Total Excess / shortfall 481 000 - - 481 000
In the 2008 MTEF the department requested an
amount of R104 million for aircraft acquisition
transactions. This request was approved as well
as a further R481 million in respect of
re-imbursement of Transnet loans granted to SA
Express (SAX) which constitutes part of the
transfer of sale of SAX to Government, which
increased the total amount to be transferred to
SA Express to R585 million in 2008/09. This
amount is payable after SA Express has been
legally transferred from Transnet to Government,
outstanding issues on ownership and the transfer
of assets and liabilities have been finalised and
confirmation has been submitted to National
Treasury to this effect.
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PROGRAMME 6JOINT PROJECT FACILITY
ITEMS R thousand BUDGET 07/08 BUDGET 08/09 BUDGET 09/10 BUDGET 10/11
COMPENSATION OF EMPLOYEES 2 315 5 017 5 409 5 833
GOODS AND SERVICES 12 053 23 806 29 042 21 225
TRANSFERS - - - -
OTHER - - - -
CAPITAL - - - -
TOTAL 14 368 28 823 34 451 27 058
The overall increase in this Programme is to meet
the objectives of the unit, which includes the
commencement of the SA Power Project which will
leverage the Eskom build programme to enhance
manufacturing, technology and skills base  The
Competitive Supplier Development Programme in
2008/09 to research Eskom and Transnet key
commodities and South African capability UNIDO
benchmarking and participating in global supplier
exchange programme and Regional Supplier
Development Programme enabling the integration of
regional suppliers to regional and global value
chains, the upward trend in continues into
2009/10 and then reduces in 2010/11 as various
projects are completed.
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2006 / 07 Auditor General Report
The department achieved an unqualified audit
opinion without emphasis of matter for the
2006/07 financial year. 4 Audit Committee
meetings were held over the 2007/08 financial
year, with an average attendance of 90. At the
commencement of the year under review the
committee comprised 5 members, however during the
year one member resigned.
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