201415 Annual Performance Report Presentation to the Portfolio

2014/15 Annual Performance Report Presentation to the Portfolio Committee on Public Enterprises 14 October 2015

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Purpose of the presentation • Provide overview on the performance of the Department on predetermined objectives • Outline key challenges on operational performance and lessons learned • Assessment on the resource utilisation (Human and financial resources) • Briefing on the audit outcomes and corrective measures 3

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Strategic direction framework for the Department for the 2014/15 FY To drive investment, productivity and transformation in the Department’s portfolio of State Owned Companies (SOC), their customers and suppliers so as to unlock growth, drive industrialisation, create jobs and develop skills. To provide decisive strategic direction to the SOC, so that their businesses are aligned with the national growth strategies arising out of the NGP g g g Bold Professional Caring Integrity Fun Passion Vision g g Mission Outcome s Values Program mes Objectiv es g g g Unlock Economic Growth Industrialisation Transformation Regional Development Programme 1: Administration Programme 2: Legal & Governance Programme 3: Portfolio Management & Strategic Partnerships Review the shareholder oversight to ensure alignment of SOC to developmental outcomes Promote good corporate governance Build internal capacity to enhance Department’s ability to execute its strategic plan and fulfill its mandate Stabilise our SOC looking at strengthening of balance sheets and funding options Drive economic infrastructure investment to enhance the capacity of the economy with emphasis on the Strategic Integrated Projects 5 Leverage SOC procurement spend to support industrialisation and transformation

Annual performance overview APP Performance Overview 80% 64% 2013/14 • In the 2014/15 FY, the performance of the Department was below the 80% target • The review of performance showed that the Department achieved most of the shareholder oversight related targets. • This performance reflects regression when compared to the 2013/14 FY 2014/15 6

Performance against the targets 7

PROGRESS HIGHLIGHTS PER PROGRAMME 8

Programme 1: Administration Achievements • • Attraction and Retention Policy approved The 3 year Evaluation Plan was developed and implementation of the framework is underway Independent assessment on the IT infrastructure was completed Annual Plan for public participation programme was finalised 4 provincial engagements took place during the year under review Non- achievements • • The idenfication of organisational capabilities to inform the development of the DPE competency model was completed. The raking of the capabilities not yet finalised. Standardisation of SOC performance review will be finalised in the 2015/16 financial year. 9

Programme 2: Legal and Governance Performance overview for 2014/15 FY Achievements • Deregistration of Aventura Non-Achievements • • • Resolution of the 20% State Shareholding in Namaqualand Mines. Government Shareholder Management Bill Risk Modelling Tool 10

Programme 3: Energy Enterprises Performance overview for 2014/15 FY Achievements • Implemented of the MYPD 3 Response Strategy which culminated into the Government Support Package (R 23 billion) • On 6 March 2015 the first power from Medupi was successfully fed into the national power grid • 100 MW of clean power generated from Sere Wind Farm is being fed into the power grid. • Successfully supported the implementation of the REIPPP. • Finalised Position paper on the ICT Broadband Strategy and shared with the DTPS. • Infraco MTEF application submitted as planned. • MOU with DPW signed for Infraco to access properties. Non-achievements • Delays in initiating the assessment of the Eskom generation fleet. • Benchmarking of Eskom’s operational efficiencies was not achieved. 11

Programme 3: Manufacturing Enterprises ACHIEVEMENTS • • • NON-ACHIEVEMENTS Denel’s dependency on the state • Stabilise SOC looking at strengthening of Performance overview for 2014/15 FY guarantees significantly reduced balance sheets and funding options: Alignment between the shareholder and SAFCOL’S New Strategy Do. D achieved on the long term strategic • Leverage SOC procurement spend to and sovereign capabilities that forms part support industrialisation and of Denel’s long term strategy transformation: South Africa’s MRO Support expended to Denel to expand its Services Hub order book Investment into Alexkor has yielded results and production has significantly increased The Alexander Bay Township incorporated into the Municipality 12

Programme 3: Transport Enterprises Performance overview for 2014/15 FY Achievements • • • Assessed Corporate Plans for Transnet, SAA and SAX Assessed Annual Reports for Transnet, SAA and SAX Minister’s addressed for Transnet, SAA and SAX’s AGM were submitted Transnet’s Shareholder Compact for 2015/16 was approved Transnet’s Strategic Intent Statement was developed Quarterly reports for Transnet, SAA and SAX were assessed All PFMA applications that were received were assessed The implementation of SAA’s LTTs 7 SAX’s 20: 20 was monitored Funding requirments for SAA and SAX was defined Non-achievements • • • Strategic Intent Statements for SAA & SAX were not signed off due to the fact that guarantee applications to National Treasury were still pending SAX Shareholder Compact not finalised Quarter 2 & 3 of SAX’s fleet renewal programme were not assessed. Whole of State Policy: The Department could not formulate a way forward as they are dependent on the Departments of Transport and Home Affairs’ assessment of the proposed policies. Quarter 2 and 3 reports for SAA were not assessed due to SAA’s transfer to National Treasury 13

Programme 3: EIPA Performance overview for 2014/15 FY Achievements • • Analysis of SOC quarterly WULs and EIAs applications on Dashboard. Draft Transformation measurement tool developed. SOC socio economic indicators and Shareholder Compact and Corporate Plans defined. Reports on SOC Transformation contribution Non-achievements • • Filling critical positions remained a challenge in the Unit Approval of the process of the Strategic Transformation Framework and guidelines delayed 14

Programme 3: Strategic Partnership Performance overview for 2014/15 FY Achievements • • • Implementation of the Africa Strategy has commenced SOCs have continued to implement the CSDP and localisation has gained traction The Department has maintained its support to the PICC projects Non-achievements • • Filling critical positions remained a challenge in the Unit The Unit has lost critical skills that have been difficult to secure 15

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Annual Financial Statements Analysis The following table provides a summary of actual expenditure incurred vs budget per programme for the 2013/14 and 2014/15 financial years Programme 2013/14 2014/15 Final Appropriation Actual Expenditure Final Appropriation Actual Expenditure R’ 000 Administration 134 702 133 294 156 859 145 557 Legal and Governance 23 438 23 159 24 331 20 313 Energy Enterprises 17 631 15 991 17 492 15 507 Manufacturing Enterprises 71 596 68 097 80 392 77 541 Transport Enterprises 19 789 14 985 22 453 20 598 EIPA 16 069 9 686 11 570 10 677 Strategic Partnerships 10 914 7 256 9 850 8 253 TOTAL 294 139 272 468 322 947 298 446 17

Analysis of Expenditure Trends - - The department had an allocation of R 322. 9 million and actual spending was R 298. 4 million with a variance of R 24. 5 million (7. 6%) The underspending is a combination of compensation of employees and goods and services The underspending on compensation of R 6. 7 million (4%) is the result of delays in filling of vacant positions and inability for the department to attract the specialised skills required to fulfil the mandate of the Department. The underspending in goods and services of R 17. 6 million (16. 8%) is the result of delays in the commencement of projects such as: - The project to ensure collaboration between SAA and SAX could not be completed because of changes in Department’s mandate Transfer of BBI also had an impact as projects could not be concluded Risk modelling tool was delayed Government shareholder Management Bill project was also delayed 18

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Organisational Structure 20

Human resource statistics – as at 30 September 2015 Total Establishment Post filled Interns appointed 223 200 24 Number of vacancies as at 23 Total exits (01/04/2015 – 30/09/2015) 11 Vacancy rate 10% Shortlist done: 2 Interview conducted: 3 Offer made: 4 Advertised: 1 Appointment memo in progress: 8 Not yet advertised: 5 Target: 10% 21

Employment equity targets as at 31 March 2015 Statistics African Indian Coloured White Disability F M F M Target % 40. 3 39. 2 1. 3 1. 2 4. 5 4. 4 4. 7 4. 5 2 Posts filled 30/9/2015 95 79 4 1 4 6 9 2 4 Achieved % 47 39 2 0. 5 2 3 4. 5 2 2 DPSA SMS Female and Male target = 50/50 DPE SMS Female and Male actual = 48%/ 52% 22

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Response to audited outcomes AUDIT FINDINGS AND ROOT CAUSES RECOMMENDATION & ACTION PLAN 1 Audit Finding: Procurement process not complying to National Treasury Practice Note 8 of 2007/2008 – ito quotations, competitive bidding and procurement award process Recommendation: Management to ensure that the SCM is capacitated in order to strengthen the current controls. 2 Audit Findings: Procurement process not followed in acquiring assets Recommendation: Management to follow procurement policy as well as relevant legislation when purchasing goods and services from a supplier in order to prevent irregular expenditure Action Plan: Checklist process has been introduced in SCM in order to ensure that all the required valid document are obtained from service providers before the order is issued and subsequently payment made. Action Plan: Awareness ito procurement processes 24

Response to audited outcomes AUDIT FINDINGS AND ROOT CAUSES RECOMMENDATION & ACTION PLAN 3 Audit Finding: Appointment not in compliance with Public Service Regulations, 2001 Recommendation: Implementation and regular monitoring systems of internal controls to ensure compliance with PFMA and Treasury Regulations by preventing and detecting irregular expenditure Action Plan: HR to ensure that all relevant processes are adhered (include record check, verification of qualifications and reference checks) to before appointment letters are issued to the candidates 4 Audit Finding: Performance bonuses awarded to SMS staff who were not entitled to receive such bonuses Recommendation: Implementation and regular monitoring to ensure compliance with the SMS handbook to avoid irregular expenditure Action Plan: Ensure that all SMS members completed 12 months performance cycle before consideration for bonuses 25

Response to audited outcomes AUDIT FINDINGS AND ROOT CAUSES RECOMMENDATION & ACTION PLAN 5 Audit Finding: Non compliance with policy on leave: timeliness of leave transactions being captured Recommendation: Implementation and regular monitoring of internal controls to ensure compliance with the PFMA and also ensure that the leaves are authorised in advance and captured timeously Action Plan: Continuous awareness and follow up with units to ensure that the leave forms are captured on time. 6 Audit Finding: Non-compliance with DPSA circular - Vacancies Recommendation: Proper controls to be in place to reduce the vacancy percentage of SMS members and shorten the median period it take to fill these vacancy. Action Plan: Should there be no progress in filling of the vacant post within six months after becoming vacant, the post will be allocated where there is a need 26

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Conclusion • The performance of the Department has regressed when compared to the 2013/14 FY • Actions have been taken to ensure that the challenges identified in the execution Department’s Plans • The first quarter performance of 2015/16 shows that the Department is largely on track 28