Research Conducted by the HSRC (August through November 2011) LEGISLATIVE AND REGULATORY FRAMEWORK REVIEW, THE ROLE OF SOEs IN SKILLS DEVELOPMENT AND JOB CREATION, SOEs CONTRIBUTION TO ENTERPRISE AND SOCIO-ECONOMIC DEVELOPMENT AND THE QUALITATIVE REVIEW OF THE SOEs LANDSCAPE IN SOUTH AFRICA Submission date: 7 December 2011 Document Name 29 November 11 Version: 0.1 Date: RNE-Research Output (Research Conducted by HSRC) Document Name: Legislative and regulatory framework review, the role of SOEs in skills development and job creation, SOEs contribution to enterprise and socio-economic development and the qualitative review of the SOEs landscape in South Africa Document Author/Owner: Kanyane MH, Houston G, Onouha G, Wentzel M, Viljoen J and Sausi K Owner Team: HSRC Electronic Location: Description of Content: Set up report for the Presidential Review Committee. Approval Status (tick relevant option) 1: Full Approval 2: Partial Approval 3: Conditional Approval For 2 and 3, describe the exclusions, criteria, and dates of conditions Document Sign-off Name Position/Work Stream Role Date Signed DOCUMENT CONTROL INFORMATION Nature Effective Version Number & of the Amended By Reviewed By Approved By from Amendment Details Change Version: Description of Major / dd/mm/yy Name Name Name Amendment or Change Minor Date Printed: 29/11/2011 Page 2 of 348 RNE-Research Output (Research Conducted by HSRC) TABLE OF CONTENTS 1. LEGISLATIVE AND REGULATORY FRAMEWORK REVIEW: A REVIEW OF THE CURRENT POLICY AND REGULATORY FRAMEWORK ................................................................................... 7 1.1. Introduction ............................................................................................................................................... 7 1.2. The Policy Framework of State-Owned Enterprises ................................................................................. 8 1.2.1. The Policy framework of state-owned enterprises arising from the constitution ...................................... 8 1.2.2. Social and Economic Policies ................................................................................................................. 24 1.2.3. The Policy framework of state-owned enterprises arising from policies of national government departments ......................................................................................................................................................... 40 1.3. The Regulatory Framework of State-Owned Enterprises ....................................................................... 58 1.3.1. Financial Regulation ............................................................................................................................... 60 1.3.2. The PFMA and MFMA ............................................................................................................................ 60 1.3.3. Protocol on Corporate Governance in the Public Sector ........................................................................ 71 1.3.4. Shareholder compacts ............................................................................................................................ 75 1.3.5. Sector Regulation ................................................................................................................................... 75 1.3.6. Regulation of service standards ............................................................................................................. 95 1.4. Conclusion ............................................................................................................................................ 101 1.5. References ............................................................................................................................................ 103 2. soeS policy FRAMEWORK and GOVERNANCE ................................................................ 107 2.1. Introduction ........................................................................................................................................... 107 2.2. State-owned Enterprises....................................................................................................................... 109 2.3. Protocol on Corporate Governance ...................................................................................................... 111 2.4. SoEs under Dept. of Public Enterprises ............................................................................................... 112 2.5. The purpose and the principles of the Policy on Corporate Governance of SOEs .............................. 113 2.6. The function of the State ....................................................................................................................... 113 2.7. Basic Guidelines on the Corporate Governance of SOEs .................................................................... 114 2.8. King III ................................................................................................................................................... 116 2.9. Key functions of SOEs bodies .............................................................................................................. 117 2.10. The State’s responsibility and its role in SOEs ..................................................................................... 119 2.11. Governance versus socio-economic balances: Case studies .............................................................. 120 2.12. Governance and Remuneration ............................................................................................................ 126 2.13. Universal governance challenges of SOEs .......................................................................................... 128 2.14. Recommended clearer governance framework .................................................................................... 129 2.15. Reference ............................................................................................................................................. 130 3. REVIEW OF SOES: THE ROLE OF SOEs in SKILLS DEVELOPMENT AND JOB CREATION 133 Date Printed: 29/11/2011 Page 3 of 348 RNE-Research Output (Research Conducted by HSRC) 3.1. Introduction ........................................................................................................................................... 133 3.2. Methodology ......................................................................................................................................... 135 3.3. National Skills Development Strategy III ............................................................................................... 135 3.4. New Economic Growth Path (NGP) ...................................................................................................... 140 3.5. The Role of Selected SOEs IN Skills Development ............................................................................. 142 3.5.1. Industrial Development Corporation of South Africa (IDC) ................................................................... 142 3.5.2. Air Traffic and Navigation Services Company LTD (ATNS) ................................................................. 144 3.5.3. Airports Company of South Africa Limited (ACSA) .............................................................................. 145 3.5.4. Alexkor LTD .......................................................................................................................................... 146 3.5.5. Broadband Infrastructure Company (PTY) LTC (BROADBAND INFRACO) ........................................ 147 3.5.6. Denel (PTY) LTD .................................................................................................................................. 148 3.5.7. Eskom ................................................................................................................................................... 151 3.5.8. Transnet Limited ................................................................................................................................... 155 3.5.9. South African Forestry Company Limited (SAFCOL) ........................................................................... 158 3.5.10. Telkom SA Limited 2011 ....................................................................................................................... 159 3.6. Discussion ............................................................................................................................................. 162 3.7. The Role of Selected SOEs in Job Creation......................................................................................... 166 3.7.1. Industrial Development Corporation Of South Africa Limited (IDC) .................................................... 166 3.7.2. Alexkor Limited ..................................................................................................................................... 167 3.7.3. Airport Company of South Africa .......................................................................................................... 167 3.7.4. Broadband Infrastructure Company ...................................................................................................... 168 3.7.5. Denel PTY LTD ..................................................................................................................................... 168 3.7.6. Eskom ..................................................................................................................................................