PRESENTATION TO THE PORTFOLIO COMMITTEE 19 th March

PRESENTATION TO THE PORTFOLIO COMMITTEE 19 th March 2010 STRATEGIC PLAN 2010 -2013 CONFIDENTIAL

Mission Statement To optimise the alignment between the role of State. Owned Enterprises (SOE) in the national economic strategy and the performance of the DPE’s portfolio of enterprises through delivering best practice shareholder management services and engaging with stakeholders to create an enabling environment for such alignment. SOE reporting to the DPE are: Alexkor, Broadband Infraco, Denel, Eskom, Pebble Bed Modular Reactor, South African Airways, South African Express Airways, Safcol and Transnet. CONFIDENTIAL

The Role of SOE in Industrial Policy The DPE has identified strategic roles for SOE in three areas of economy: Ensuring the security of supply and the efficient and competitive provision of key economic infrastructure. Facilitating the development of advanced manufacturing capability through: direct investment via current or new SOE investment and procurement programmes strategic partnership engagements with global enterprises. SOE can be used by the State to sort out economically stifling market or regulatory failures especially in the area of network infrastructure. CONFIDENTIAL

DPE also has a secondary, supporting role to the programmes of other National Government departments that it provides through the activities of the SOE: Align skills development programmes within the SOE with the programmes and objectives of the responsible National Government departments. Align investments in and by SOE with the national innovation development programmes of the responsible National Government departments. Supporting government strategies focused on labour absorption and rural development by providing infrastructure investments and SOE-services with marginal commercial viability. CONFIDENTIAL

In order to effectively play its role, the DPE strategy will focus on the following four areas: 1. Integrating Strategic Mandates in Policy § § § SOE economic Impact (e. g development of suppliers and supply chains) Structure of industry in which the SOE operates (e. g role of SOE and private sector) SOE operational and financial performance (e. g efficiency, productivity, profitability and capital investments) 1. Enhanced Coordination Across Government 3. Funding Solutions for SOE 4. Building Shareholder Management Capability CONFIDENTIAL

Strategic Plan of the DPE 2010/2013 The State Owned Enterprise can be a powerful instrument for industrial policy. To optimise the contribution of SOE in industrial policy will require a combination of : rigorous shareholder oversight; a coherent policy and regulatory environment; and well co-ordinated Government programmes to support targeted SOE initiatives. The Department’s Strategic Plan is focused on achieving this combination. CONFIDENTIAL

Organisational Structure as at March 2010 Minister Public Enterprises Deputy Minister Public Enterprises Special Advisor Director-General Special Advisor Public Enterprises DDG Energy & Broadband Enterprises DDG Chief Investment & Legal, Governance, Portfolio Manager & Transactions DDG Manufacturing Enterprises Chief Financial Officer (CFO) DDG Transport Enterprises Head Communications CONFIDENTIAL DDG Joint Project Facility Head Corporate Services OPSCO Chairperson

DPE Budget – Appropriation per Programme Expenditure decreases from R 3. 9 billion in 2009/10 to R 196. 2 million in 2012/13. The significant decline in 2010/11 and in the remaining outer years is as a result of reduced transfer payments to the State Owned Enterprises. The operational budget of the Department remains within the baseline over the period, which is linked to the business plans of the units. CONFIDENTIAL

DPE Budget – Appropriation per Economic Classification CONFIDENTIAL

DPE Budget – Summary of Transfer payments to SOE 2009/10 – 2012/13 The transfer payments for Broadband Infraco and South African Airways have been re-classified from Transfers to public corporations and private enterprises to Payments for financial assets in the Economic Classification on the Standard Chart of Accounts. The reason for the re-classification is that when Government makes an equity investment, Government’s equity position in the entity is enhanced. Accordingly, the transaction directly affects governments financial asset position. Shares are issued for these transactions by the entity. As this was implemented by National Treasury for the first time this year, CONFIDENTIAL the department has had to re-state the

Transfers To SOE From 2004/05 (including amounts approved for 2009/10 and 2010/11) SOE Rand million 2004/05 Alexkor 2006/07 2007/08 2008/09 2009/10 13. 4 2. 0 Broadband Infraco Denel 2005/06 82. 1 72. 7 130. 0 129. 1 36. 0 465. 3 377. 0 208. 5 138. 6 1, 351. 1 627. 0 2010/11 Total per SOE 2, 000. 0 567. 0 1, 154. 0 257. 6 191. 9 4, 170. 5 Pebble Bed Modular Reactor 600. 0 580. 0 1, 204. 4 2, 502. 3 1, 750. 0 1, 737. 8 8, 374. 4 1, 549. 1 2, 293. 5 South African Airways South African Express 445. 0 Transnet (SAX) 140. 0 Total per year 602. 0 2, 593. 4 744. 4 2, 480. 5 4, 473. 3 CONFIDENTIAL 3, 099. 6 3, 816. 3 174. 6 17, 239. 8

Purpose Of Transfers (1) Alexkor 2004/05 Valuating Alexkor’s business units (R 2 million). The valuation was done in support of Gove 2005/06 Costs incurred by Alexkor during the cancelled strategic equity partnership process (R 13. 4 2006/07 Working capital shortfalls and exploration (R 32. 9 million), township establishment (R 20 mi 2007/08 Working capital (R 44. 7 million), restructuring (R 16. 1 million) and VAT (R 11. 9 million) 2008/09 PSJV capitalisation (R 100 million) and township establishment (R 30 million). Part of land c 2009/10 PSJV capitalisation (R 100 million) and township establishment (R 29 million). Part of land c 2010/11 Township establishment (R 36 million) Broadband Infraco 2006/07 R 627 million to establish Broadband Infraco, including the purchase of the full service netw 2008/9 -2010/11 R 727 million of capital will be injected into Broadband Infraco to expand South Africa’s ICT

Purpose Of Transfers (2) Denel 2005/6 R 2 billion for recapitalisation 2006/7 R 567 million for recapitalisation 2007/8 R 220. 969 million indemnity claim for SAAB Aerostructures and R 933 million for recapitalistat 2008/9 R 257. 64 million indemnity claim for SAAB Aerostructures 2009/10 R 191. 866 million indemnity claim for SAAB Aerostructures SAA 2006/7 Labour restructuring (R 744 million) 2009/10 Grounding of Boeing 747 aircraft (R 1 549 million) Transnet (SAX) 2008/9 Payment to Transnet for SAX purchase (R 140 million) SAX 2008/9 Recapitalisation for aircraft financing (R 405 million) and working capital (R 40 million). Share CONFIDENTIAL

Purpose Of Transfers (3) PBMR 2004/5 R 600 million to fund operations. 2005/6 R 580 million to fund operations. 2006/7 R 1, 204. 4 million to fund operations. 2007/8 R 2, 502. 3 million to fund operations 2008/09 R 1, 750. 0 million to fund operations. 2009/10 R 1, 737. 8 million to fund operations.

Transfers Per SOE As Proportion Of Total Transfers From 2004/05 (including amounts approved for 2009/10 and 2010/11) CONFIDENTIAL

Government Guarantees Issued (1) Guarantor institution Guarantee in respect of: Original Guaranteed Capital Amount R’ 000 T 001 Bond T 018 Bond 6, 000 Euro-Rand medium term note (Tranche 1) SAA Unlimited 2, 000 Euro-Rand medium term note (Tranche 2) 1, 500, 000 Aircraft Boeing B 747 - 400 (Loan 60 A) ^ 444, 703 Aircraft Boeing B 747 - 400 (Loan 60 C) ^ 145, 342 SAA Recapitalisation 1, 300, 000 Going concern support 1, 600, 000 Perpetual Subordinated Loan 1, 560, 000 B 747 -400 ZS-SBK 787, 381 B 747 -400 ZS-SBS 787, 381 B 747 -400 ZS-SAK 681, 474

Government Guarantees Issued (2) Guarantor institution TOTAL Guarantee in respect of: Original Guaranteed Capital Amount R’ 000 420, 000 880, 000 550, 000 14, 104, 464 8, 068, 000 7, 257, 354 4, 000 3, 800, 000 9, 990, 111 10, 630, 000 76, 506, 210

PROGRAMMES PRIORITY AREAS AND EXPECTED OUTCOMES CONFIDENTIAL

For the period under review, the Department and SOE have indentified key measurable outputs. These include: Delivery of new Electricity Generation capacity by Eskom according to its approved build plan and as directed by the Integrated Resource Plan (IRP) Facilitation of the introduction of Independent Power Producers as determined by the IRP Restructuring the Pebble Bed Modular Reactor Company The restructuring of Denel The creation of a Remuneration Panel that will promote appropriate remuneration policies and practices for Chief Executives and the Boards of Directors of SOE The appointment of CEOs and Board Members to SOE and ensuring that vacancies are filled with minimum delays Agreement on a way forward with the Richtersveld Community to ensure that the lives of the community are improved CONFIDENTIAL

Continued… Pursuing completion of the land settlement claims at Safcol and to have concrete plans regarding the future of the SOE Rail reform policy process and implications for Transnet Freight Rail Efficiency improvements on the main freight corridors Create scope for multi-operator involvement in under-utilised branchlines Assessment of strategic options for a future SAA and alignment to African Aviation Strategy Continuing to leverage SOE as instruments of industrial policy to achieve the State’s social and economic development objectives The creation of a clear path of sustainability for the SOE, thus reducing their dependence on the fiscus Leveraging private sector investment to retain momentum in the infrastructure build programme and to promote competition in targeted areas. CONFIDENTIAL

Programme 1: Administration Purpose: Achieve the Department’s strategic objectives through providing overarching management and key supporting functions and processes. Priorities (Operations): Monitoring in-year cost-saving initiatives Attraction and retention of relevant specialist sector skills Internal Risk Management Effective and efficient knowledge management Enhancing departmental performance management reporting Continued compliance with relevant legislation e. g. PFMA and Treasury Regulations including tender and procurement processes Secure and stable IT environment CONFIDENTIAL

Chief Investment & Portfolio Management (1) Purpose A portfolio approach applied to the management & shareholder investment process of all SOE falling under the purview of the DPE to ensure SOE commercial sustainability & attainment of desired strategic outcomes & objectives by the SOE Building on frameworks developed, focus on effective investment processes for shareholder value optimisation and SOE commercial sustainability Outcomes Synchronized logical planning, monitoring and evaluation process to link national strategic priorities to SOE delivery and ensure effective shareholder oversight management and achievement of desired strategic outcomes and objectives by all SOE. Application of consistent SOE performance monitoring and shareholder risk management Portfolio equity interest and contingent liability exposure management Ongoing transaction advice and input on financial, legal, governance and risk issues relating to SOE CONFIDENTIAL

Logical Planning, Monitoring & Evaluation Process (2) CONFIDENTIAL

Chief Investment & Portfolio Management (3) Key Projects Measure/Indicator 2010/11 Target/Milestone Strategic intent statements Capital structure framework All SOE strategic intent statements issued by end Shareholder compacts All SOE shareholder compacts signed annually by Corporate plan analysis SOE corporate plans assessments and feedback t Performance monitoring and evaluation SOE quarterly reports reviewed Investor Briefs Investor briefs issued to SOE Boards every quarte Fully populated Isibuko Dashboard and reporting Quarterly Shareholder briefs to board on performa Shareholder risk management framework Risk management framework for detection, monitoring and mitigation of cross-cuttin SOE performance, sector and economic impact 5 year review of SOE performance, sector and eco Investment policy for SOE commercial sustainabili Capital structure and dividend policy Financing Instruments Framework SOE capital restructuring assessments CONFIDENTIAL

Chief Investment & Portfolio Management (4) Key Projects 2010/11 Target/Milestone Measure/Indicator Economic and regulatory cohesion for network infrastructure employed for infrastructureon regulatory frameworks employed for infra Regulatory frameworks Study investment Benchmarking Industry, sector and national economy benchmarks SOE performance indicator and target setting Shareholder value enhancement Portfolio valuation Methodological framework for measuring shareho Specialist advisory Transaction advice and input Ongoing transaction advice and input on financial, Quarterly monitoring and reporting of government Portfolio equity interest and contingent liability shareholder loans and guarantee office Share, exposure management Register and safe custody of government guarante CONFIDENTIAL

Chief Investment & Portfolio Management (5) Alexkor Key Projects Alexkor strategy Measure/Indicator Pooling and Sharing Joint Venture Township infrastructure upgrade Environmental rehabilitation Review of Alexkor future post-PSJV CONFIDENTIAL 2010/11 Target/Milestone Definition of role and form of Alexkor post-PSJV an

Programme 1 – Administration There is very little change to this Programme other than an inflationary increase for Compensation of Employees which includes the newly established office of the Deputy Minister as well as provision for remuneration of 21 interns per annum for the period. Goods and Services has increased slightly to accommodate the requirements of the Office of the Deputy Minister which was established during the 2009/10 financial year. As in previous years support services such as in-house printing and reproduction services, training, bursaries, stationery, information technology services, software licences, computer equipment , leasing of vehicles, office accommodation, communications, audit fees and telephones, are centralised in this unit. CONFIDENTIAL

Programme 2: Energy & Broadband Enterprises (1) Purpose: Provide shareholder oversight of Eskom which includes the generation, transmission and distribution of electricity, with a particular emphasis on the execution of its infrastructure progamme and the optimisation of current operations. Provide shareholder oversight of Broadband Infraco which includes development of a sustainable business model, assessing the business plan and monitoring the commissioning of the full service network (FSN). Provide shareholder oversight of PBMR. CONFIDENTIAL

Programme 2: Energy & Broadband Enterprises (2) Priorities: • • Monitor Eskom’s system adequacy and the delivery and funding of its capital expenditure programme (Generation, Transmission and Distribution) Enable and support the execution and implementation of the Inter. Ministerial Committee on Energy workplan, leading the facilitation of a Strategic Equity Partner for the Kusile new build project as well as the development of a sustainable coal haulage solution. Resolution of Infraco’s licensing and the development and implementation of an associated sustainable business model Rationalisation of PBMR whilst protecting skills and intellectual property of value to South Africa’s possible future Nuclear Fleet Build Programme CONFIDENTIAL

Programme 2: Energy & Broadband Enterprises (3) Outcomes (Across Eskom, PBMR and Infraco): § Shareholder Compact and Corporate Plan alignment to government objectives for the Energy & Broadband Sector. § Alignment and delivery against key objectives of Infrastructure IMC outcomes based approach. § Guidance to Minister on Annual General Meeting and associated Shareholder rights. § Appropriate skills mix on the Eskom, Infraco and PBMR Boards. § Assessment of performance against agreed compact targets. Outcomes (Eskom): § Delivery of Eskom’s infrastructure expenditure programme as planned and directed by the Integrated Resource Plan and the optimisation of its maintenance and operational practices. § A sustainable coal haulage solution. § The introduction of a Strategic Equity Partner for Kusile. § Facilitation of the introduction of Independent Power Producers. CONFIDENTIAL

Programme 2: Energy & Broadband Enterprises (4) Outcomes (Infraco): § § Infraco’s impact on Broadband Pricing in South Africa. Development of a sustainable business model for Infraco to achieve its mandate. Infraco’s execution of projects to complete the terrestrial cable network. Implementation of the International Submarine Cable (West Africa Cable System). Outcomes (PBMR): § PBMR successfully restructured. CONFIDENTIAL

Programme 2: Energy & Broadband Enterprises (5) Broadband Infraco Key projects Special Programmes 2010/11 Target/Milestone Measure/indicator Annual Reports, Corporate Plan, Shareholder Compact § § § Analysis and Assessment of the Annual Report and Corpora Negotiation and approval of Shareholder Compact Preparation of the Quarterly Investor Brief Shareholder Strategic Intent Communiqué in preparation for Assessment of SOE Board Achievement of MTEF targets § § Assessment of PFMA Applications Explore and facilitate access to debt and alternative funding Infraco performance review § § § Perform Infraco 3 year performance review (based on previo Analysis of Infraco’s 3 year performance Input to DPE SOE 5 year review publication § Compile Benchmark: Price, Service level, Capacity, etc Assessment of Infraco’s Impact on Broadband Pricing in South Africa § Assessment of Broadband pricing in South Africa, outside S § Analyse industry results on South African Broadband pricing Capital Expenditure Programme: International Submarine Cable and Terrestrial Network CONFIDENTIAL § § Monitor Implementation of the International Submarine Cabl Monitor execution of projects to complete the terrestrial cabl

Programme 2: Energy & Broadband Enterprises (6) Eskom and Pebble Bed Modular Reactor Key projects 2010/11 Target/Milestone Measure/indicator § § § Analysis &Assessment of Annual Report and Corporate pla Negotiation and approval of Shareholder Compact Preparation of the Quarterly Investor Brief Shareholder Strategic Intent Communiqué in preparation fo Assessment of SOE Board Achievement of MTEF targets § § Assessment of PFMA Applications Explore and facilitate access to debt and alternative funding SOE five year performance review § § § Perform 5 year performance review Analysis of 5 year performance Input to DPE SOE 5 year review publication Annual Reports, Eskom’s Generation adequacy Corporate Plan, assessment Shareholder Compact Monitor the restructuring of PBMR with the § Monitor and facilitate the implementation of restructuring pla intention of preserving critical skills and intellectual property. Participate in EDI facilitated process towards establishment of REDs § Monitor progress of implementation of Regional Electricity D Continue to participate in the Coal Transport Logistic Working Group haulage road to rail migration plan an § Monitoring of the coal Engage with Eskom on its maintenance and operational practices margin § Monitor the reserve CONFIDENTIAL

Programme 2 : Energy & Broadband Enterprises (7) Expenditure decreases from R 1. 96 billion in 2009/10 to R 14. 9 million in 2012/13. This is due to no further funding being made available to PBMR. Broadband Infraco is expected to raise funding on the Capital Market for its capital expenditure projects for the years 2011/12 and 2012/13 , thus no further funding from government. The operational budget in this Programme remains within the baseline over the medium term. CONFIDENTIAL

Programme 3: Legal, Governance & Transactions (1) Purpose: To provide effective and sound legal advice to the Department that will highlight and manage potential legal risks; and to develop effective corporate governance frameworks that will promote transparency and good corporate governance by SOE. Outcomes: Transfer Diabo Trust assets to the beneficiaries and wind up the trust Transfer remaining Aventura resorts and wind up Aventura Internal legal advice to minimise DPE’s legal risk (e. g. adequate legal protection in contracts with service providers) Successfully resolve all litigation in government’s favour Continuously improve DPE adherence to applicable legislation through developing templates for legal and regulatory compliance (e. g. PAIA, PAJA and PFMA Compliance framework) CONFIDENTIAL

Programme 3: Legal, Governance & Transactions (2) Outcomes: • • Develop SOE legal and governance frameworks to • Align SOE governance to developments in corporate governance regulation (e. g. Companies Act, 2008, King III) • Contribute towards shareholder and Board effectiveness (Owner’s Manual; Board Database) Oversee SOE adherence to corporate governance principles to promote stronger Boards (including improving reporting on SOE Board and CEO remuneration) Promote transparency and accountability of governance processes through annual governance audits and strengthening SOE governance reporting requirements Ongoing monitoring of SOE acquisition and disposal of subsidiary list

Programme 3: Legal, Governance & Transactions (3) Legal & Transactions Key projects 2010/11 Target/Milestone Measure /indicator Legal advice The Department’s Legislative Compliance Presidential Public Liaison Unit Respond to queries from the Presidential Public Liaison Unit. Aventura Implementing and monitoring of the winding up process Diabo Trust Transfer Trust assets to Government File for deregistration of Trust Trace and payout to beneficiaries Londoloza /Paharpur (Litigation) Review and conclude Pleadings Pre – trial proceedings Conclusion of Litigation Nabera Review alternative measures to conclude the litigation Shareholder Management Practices Legislative Review Implementing Companies Act corporate governance tools e. g. standard Memorandum of incorporation for all SOE Provide support to the Inter Ministerial Oversight Committee Oversight Special Projects CONFIDENTIAL

Programme 3: Legal, Governance & Transactions (4) Governance Key projects Measure /indicator 2010/11 Target/Milestone Governance Toolbox and Audit Monitor SOE adherence to corporate governance principles Owner’s expectation manual Finalise manual with SOEs and obtain Minister’s and Cabinet SOE Board and Executive remuneration Monitor and oversee SOE remuneration SOE Subsidiary Lists Monitor acquisition and disposal of subsidiaries by SOE Board Appointment Database for potential SOE Board members Shareholder Management Practices Legislative Review Implementing Companies Act corporate governance tools e. g. standard Memorandum of incorporation for all SOE Provide support to the Inter Ministerial Oversight Committee Oversight CONFIDENTIAL

Programme 3: Legal, Governance & Transactions (5) The operational budget in this Programme increases slightly as a result of additional funding required to cover anticipated legal costs for a number of transactions as well as inflationary increases in Compensation of Employees. The transfer payments to Alexkor in 2009/10 and 2010/11 are earmarked for the capitalisation of the pooling and sharing joint venture and the establishment of the Alexander Bay township. These form part of the land claim settlement obligations. CONFIDENTIAL

Programme 4: Manufacturing Enterprises (1) Purpose: Provide shareholder oversight of Denel which includes business turnaround and sustainability, alignment with the strategic requirements of the Department of Defence and its contribution to government objectives such as skills development and advance manufacturing. Provide shareholder oversight of SAFCOL which includes assessing the business plan and the future role of SAFCOL in the economy and other government objectives. CONFIDENTIAL

Programme 4: Manufacturing Enterprises (2) Outcomes (Denel): The key outcome is a financially sustainable company. Monthly / Quarterly / Annual Interventions: Approved and aligned Corporate Plan, Shareholder Compact, Annual Reports and effective Board control Shareholder Strategic Intent communique Quarterly investor brief to the SOE Board Key Deliverables In conjunction with dti, NT, DST, Do. DMV: Resolution of Denel’s going concern status and long term solvency issues Oversee Denel’s turnaround plan and business growth strategy Alignment of Denel’s restructuring plans with Do. D’s requirements DPE will facilitate: Denel’s programme delivery Skills development and transformation The role of Denel in advance manufacturing Equity partnerships for Denel entities CONFIDENTIAL

Programme 4: Manufacturing Enterprises (3) Outcomes: Future state of Denel Finalisation of Rooivalk programme Multi year orders from Do. DMV Right sizing / restructure the Denel Group CONFIDENTIAL

Programme 4: Manufacturing Enterprises (4) Outcomes (Safcol): The key outcome is to finalise SAFCOL’s future post the land claims. Monthly / Quarterly / Annual Interventions: Approved and aligned Corporate Plan, Shareholder Compact, Annual Reports and effective Board control Shareholder Strategic Intent communique Quarterly investor brief to the SOE Board Key Deliverables In conjunction with DAFF, DRLR, Water & Environmental Affairs, DST, Economic Development, Industrial Relations and Co-operation: Resolve SAFCOL’s future post the land claims – Cabinet Memorandum will be submitted Finalisation of IFLOMA divestures Finalise the transfer of minority shares DPE will monitor SAFCOL’s financial position and borrowings CONFIDENTIAL

Programme 4: Manufacturing Enterprises (5) Denel Key projects 2010/11 Target/Milestone Measure/indicator § § § Annual Reports, Corporate Plan, Shareholder Compact SOE Performance Monitoring Assessment of the Annual Report and Corporate plan Negotiation and approval of Shareholder Compact Preparation of the Quarterly Investor Brief Shareholder Strategic Intent Communiqué in preparation for De Assessment of SOE Board § Assessment of PFMA Applications § Explore and facilitate access to debt and alternative funding str Achievement of MTEF targets § Finalisation and Implementation of Denel Future State Process Retention of strategic and sovereign capabilities in areas Submission of follow up Denel End-State cabinet memorandum. § agreed to with Do. D § Ongoing alignment between Denel and SANDF § Align Denel’s strategy with Industrial policy Entering into design-to-build contracts or lines of business in sectors identified in sectoral strategies § Identify key DTB and/or new Lo. B opportunities Resolution of Denel’s going concern status and long term Adequately funded Business by March 2011 § solvency issues - Self funding sustainable organisation Development of new business/growth strategy for Denel Implementation / monitoring of the growth strategy § Special Programmes -Resolution of A 400 M industry support § Establish government position on the required support for the Implementation of DSA turnaround § Agreement on the future of DSA and the turnaround plan -Oversee conclusion & execution of equity transaction in DDM § Cabinet memorandum on the equity transaction with MBDA -Oversee consolidation within the landward sector § Monitor the process and progress to consolidate the landward Productivity & capabilities comparable to world class level Part of turnaround and growth strategy § Full compliance by Denel with all applicable legislations§and regulations Ongoing monitoring of compliance CONFIDENTIAL

Programme 4: Manufacturing Enterprises (6) Safcol Key Projects 2010/11 Target/Milestone Measure/Indicator § § § Assessment of the Annual Report and Corporate plan Negotiation and approval of Shareholder Compact Preparation of the Quarterly Investor Brief Shareholder Strategic Intent Communiqué in preparation for S Assessment of SOE Board Achievement of MTEF targets § § Assessment of PFMA Applications Explore and facilitate access to debt and alternative funding st Conclude share transfer agreement Transfer of minority shareholding out of SAFCOL Finalisation of SAFCOL future post land claims Definition of role and institutional form of SAFCOL post land claim Conclude disposal transaction of KLF Dependant on finalisation of Land Claims process Annual Reports, Corporate Plan, Shareholder Compact SOE Performance Monitoring Special Programmes Define Land Claims Settlement Model Implement Land Claims settlement Model Establishment of divesture process and governance structures Establishment of a Joint SA and Mozambique Team Adherence by SAFCOL with key legislation CONFIDENTIAL Ongoing

Programme 4: Manufacturing Enterprises (7) There are no transfer payments planned for Denel must embark on an operational turnaround any future recapitalisation must be for growth and not working capital. Furthermore, the decrease in transfers are because future claims cannot be quantified in advance. The expenses have to be incurred and then audited to verify validity of the claim. . The operational budget increases substantially in 2010/11 due to an increase in Goods and Services which is mainly made up of expenditure for specialist services for the Competitive Supplier Development Programme in partnership with UNIDO. Compensation of Employees increases slightly in line with the normal annual inflationary increases. CONFIDENTIAL

Programme 5: Transport Enterprises (1) Purpose: Align the corporate strategies and performance of Transnet, South African Airways and South African Express Airways against government's objectives. Outcomes – Transnet, SAA and SAX: Alignment of Shareholder Compact and Corporate Plan to Government objectives for the transport sector Guidance to Minister on AGM and associated shareholder rights Appropriate skills mix on the Transnet, SAA and SAX Boards Assessment of performance against agreed Compact targets CONFIDENTIAL

Programme 5: Transport Enterprises (2) Outcomes – Transnet Work with Do. T to achieve: Greater transparency between infrastructure and operations in ports, Multi-operator involvement (including BBBEE) in container terminal operation in order to improve efficiency, and Multiple operators on the branch line rail network in order to open rural areas to effective rail supply. Monitor efficiency improvements on the main freight corridors Turnaround of Transnet Freight Rail (TFR) and development of restructuring options Assessment of Transnet infrastructure provision to meet market demand Competitive local railway supplier industry through the DPE’s CSDP process Monitor implementation, levy allocation and cost containment of NMPP Develop options for structural change to Transnet to align to Government policy and retain financial sustainability CONFIDENTIAL

Programme 5: Transport Enterprises (3) Outcomes – SAA and SAX Monitor alignment of SAA and SAX with African Aviation Strategy Monitor sustainability and turnaround of SAA including ability to effectively replace aircraft (sustainable funding of Airbus transaction without recourse to government funds) Assess route network and the suitability of fleet deployment of SAA and SAX. Assessment of strategic options for a future SAA Ring-fence SAA business units and review of their business plans and strategic alignment Establishment of SAAT as a multi-airline focused African maintenance hub Assess sustainability and future of Mango as a subsidiary of SAA CONFIDENTIAL

Programme 5: Transport Enterprises (4) Transport Key projects 2010/11 Target/Milestone Measure/indicator § Assessment of the Annual Report and Corporate plan § Negotiation and approval of Shareholder Compact Annual Reports, Create scope for multi – operator involvement in under- utilised branchlines. Preparation of the Quarterly Investor Brief Corporate Plan, § § Shareholder Strategic Intent Communiqué in preparation fo Shareholder Compact § Assessment of SOE Board § § Achievement of MTEF targets Quarterly and annual monitoring Assessment of PFMA Applications Annual General Meetings - Advice to Minister on exercise of shareholder rights § AGM agenda and shareholder response SOE five year performance review §Analysis of 5 year performance §Input to DPE SOE 5 year review publication Finalise transaction structure with Do. T Agreed process for private sector involvement and execution of transaction Request for proposal Establishment of institutional structure Framework for concessions New operators on the branch line network CONFIDENTIAL Concession and rollout of first wave of concessions

Programme 5: Transport Enterprises (5) Transport Key projects Measure/indicator 2010/11 Target/Milestone IT system in place RBCT Agreed indicators Capecor (i) Develop National Corridor Performance Measurement (NCPM) tools and indicators Population and monitoring of system data Sishen Saldanha Business intelligence outputs Northern Cape – PE Monitor compliance to budget Monitor rollout of Transnet’s capex Assess impact of changes in plan programme Annual assessment Leverage of Transnet capex in the development of local supplier industries Implementation of Competitive Supplier Development Programme Monitor implementation Review option for restructuring of Ports Investigate integrated freight infrastructure policy impac Implementation of the National Ports Act, 2005 of the National Ports Authority and to provide for matters referred to in the Act , as part Establishment Active engagement with DOT workstreams Undertake financial modeling exercise to ascertain viab Levy payments to Transnet Implementation of Transnet levy for pipelines and corporatisation of Transnet Pipelines disbursements Monitor levy Scenario Schedules CONFIDENTIAL

Programme 5: Transport Enterprises (6) Transport Key projects 2010/11 Target/Milestone Measure/indicator Rail reform policy process & implications for Transnet Freight Rail Operational & financial efficiencies Active engagements with DOT workstreams Develop turnaround strategy for TFR Review Transnet financial statements and corporate Consideration of Transnet corporate structure options aligned to government policyand financial modeling Develop scenarios and scenarios Board appointments Cabinet approval of board appointments CONFIDENTIAL Appropriately skilled and representative boards

Programme 5: Transport Enterprises (7) Aviation Key projects Review SAA and SAX route network, 2010/11 Target/Milestone Measure/indicator Annual Reports, Corporate Plan, proposed future scenarios Shareholder Compact § Analysis and Assessment of the Annual Report and Corpora § Negotiation and approval of Shareholder Compact § Preparation of the Quarterly Investor Brief and associated fleet § Shareholder Strategic Intent Communiqué in preparation for § Assessment of SOE Board Achievement of MTEF targets § § Quarterly and annual monitoring Assessment of PFMA Applications Annual General Meetings - Advice to Minister on§exercise of shareholder rights AGM agenda and shareholder response SOE five year performance review § § Analysis of 5 year performance Input to DPE SOE 5 year review publication Test alignment of SAA Africa Development Plan § Implementation of Strategy and SAX African Hub the African Aviation Strategy by SAA Agree business plans CONFIDENTIAL Assessment of the business plans

Programme 5: Transport Enterprises (8) Aviation Key projects Measure/indicator Develop a strategic scenario planning model for of strategic options Assessment SAA 2010/11 Target/Milestone Financial model developed and scenarios assessed Ring-fencing of selected SAA business units and strategic equity investments Development of an independent business focus andwith SAA to develop business plan for selected b Work new strategic alignment (Voyager, Air Chefs, Galileo and Cargo) Assess options for establishing South African study Feasibility Airways Technical as a multi-airline focussed African maintenance hub Assessment of feasibility of SAAT as a separate SOE Consumer Protection and ATL Guarantee Establish adequate consumer protection CONFIDENTIAL Review consumer protection requirements and reduce

Programme 5: Transport Enterprises (9) The significant reduction in the budget for this Programme is attributed to the decrease of transfer payments, the final transfer to South African Airways being in 2009/10. There is no substantial increase in the operational budget in this Programme. A greater part of the budget over the next three years (2010/11 to 2012/13) will be spent on the National Corridor Performance Management (NCPM) project. CONFIDENTIAL

Programme 6: Joint Projects Facility (1) Purpose: To provide project management support for a number of projects that aim to identify and unlock synergies among State Owned Enterprises, and to coordinate cross-cutting projects that leverage the assets, activities and capabilities of SOE to the benefit of the enterprise and the economy as a whole. Outcomes: Skills Development, TSAPPRO and CSDP: Leveraging of SOE build programmes to promote investment in plant, technology and skills so as to increase the level of national economic activity and decent employment through inclusive growth. Environmental Oversight: Reduction in delays associated with environmental authorisations for the Build Programmes whilst ensuring integrity of environmental assets and natural resource protection. Property Project: Release of SOE non-core property ensures state’s right of first refusal for developmental benefits (e. g. contributes to sustainable human settlements) and land use optimisation. CONFIDENTIAL

Programme 6: Joint Project Facility (2) Key projects Measure/indicator 2010/11 Target/Milestone Skills Development: Monitoring and evaluation Reporting, monitoring and evaluation of skills development: within SOE and SOE supplier network for the build and maintenance Trainee artisans, technicians and engineers placed within SOE and SOE suppliers SOE-College and Industry partnerships as appropriate to increase national pool of artisans. Alignment of FET NCV curricula as required for select scarce and critical skills to meet industry need Ensure targeted skills development facilitationworkplace guidelines approved by relevant regulatory body. Integrated Implementation FET College graduates placed by SOE and suppliers for work experiential learning component. SETA commit workplace experience grants. SOE train artisans over and above their needs to Optimisation of SOE training facilities Investigate surplus training capacity and facilitate nece increase national pool of artisans. Facilitate the implementation of new SWH Ensure training institution preparedness. SWH skills development for accelerated SWH geyser installation and maintenance in support of Eskom’s Rebate Programme qualifications within training institutions (for semi. Improved learning tools skilled and new entrants to plumbing industry). Training fundraising. CONFIDENTIAL

Programme 6: Joint Project Facility (3) Key projects Measure/indicator Management Learning Programme Institutionalisation of MLP. 2010/11 Target/Milestone MLP launch by UCT Graduate School of Business Learning Programme for Parliamentary Portfolio and Select Committees for Portfolio and Select Committees. need. Hosting of annual learning programme Tailor programme according to Nuclear Procurement: - Funding Strategy Fleet is fundable. - Risk Management Framework accepted by government - Institutional Strategy for procurement Implementation Institutional decision taken. - Procurement Framework Cabinet approval of procurement framework. - Continuous oversight of procurement Alignment of procurement and build with and build process government objectives. Renewables Financing Initiative: - Institutional design completed - Technology strategy completed - Subsidy structure finalised. Funding mechanism launched. International support for fund. National business support for fund. CONFIDENTIAL Design of institutional and funding mechanism and techn

Programme 6: Joint Project Facility (4) Key projects Measure/indicator 2010/11 Target/Milestone CSDP: - DPE-dti alignment and thought Leadership coherence leadership Joint DPE-dti workshop with Brazil held - Development of buyer requirement Monitoring and evaluation database and buyer use of supplier Establishment of databases database - Development and implementation of Complete policy comprehensive Enterprise and Definition of policy and its adoption Shareholder Supplier Development Policy - Continued SOE supplier development Monitoring and evaluation planning and implementation SOE supplier development plans defined and monitored - Design and implementation of five Component hubs established by SOE First fleet procurement designed fleet procurements Fleet procurements designed and implemented CONFIDENTIAL

Programme 6: Joint Project Facility (5) Key projects Measure/indicator Africa: Regional Supplier Benchmarking Programme To be determined pending outcome of reevaluation. 2010/11 Target/Milestone Re-evaluation of RSBP. Property: Disposal of SOE non-core property. Land released in support of national objectives. Facilitation. Non-core property disposals on open market. Monitoring and evaluation. to support core operations. Determination of property. Development of strategically located SOE non-core optimal development of strategically located properties. Review approach to, property for development. Environmental Issues: ` Alignment of infrastructure build plans with environmental planning. Assessments Streamlined Environmental Impact Monitoring, evaluation and facilitation. for Strategically Important Development. CONFIDENTIAL

Programme 6: Joint Project Facility (6) The operational budget for this Programme decreases substantially over the medium term due to the completion of some of the projects and programmes , such as the Aerostructures, Technology Management Framework (TMF) and ICT/Marine Cable projects. The oversight and implementation of components of other projects such as the Africa programme and TMF have shifted to the relevant SOE teams and other departments. CONFIDENTIAL

The End CONFIDENTIAL