Organised business lobby group, Business Leadership SA (BLSA), which has some of SA’s top listed companies as members, has cautioned against the proposed shareholding model of SOEs in the National State Enterprises Draft Bill where the state remains the majority shareholder.
BLSA CEO Busisiwe Mavuso said the government should rather allow for the state to have minority shareholding similar to its shareholding in Telkom where it has a 39% stake.
“Such an entity could ensure proper commercial principles were applied in running the SOEs, while the rest of government concerned itself with policy and regulatory issues,” Mavuso said.
“A state holding company that was fully empowered to do what is necessary to turn around and manage state-owned enterprises, bringing in private shareholders and even disposing of them if that were deemed optimal, would be welcome.”
The government’s plans to establish a single holding company for state-owned enterprises has gained momentum and was approved for public comment by the cabinet.
The draft legislation was released on Friday and paves the way for the establishment of the State Asset Management Company which would be used to phase out the department of public enterprises and move strategic SOEs from government departments to the holding company.
The legislation also comes as many SOEs — including Eskom, Transnet and Denel — remain in dire straits and are a drain on the country’s finances, prompting calls for them either to be privatised or closed down.
The SOE plan, based on models used in countries such as Malaysia and Singapore, will result in the dissolution of the department of public enterprises. It was recommended by the Presidential State-Owned Enterprise Council.
Benefits of a new ownership model, according to the department, include enhanced shareholder value, increased transparency of SOE operations and reduced conflicts of interest as it separates ownership functions from policymaking and regulatory functions.
Many SOEs follow a decentralised ownership arrangement, with policy ministries assuming responsibility for the shareholder function, the department said, adding that the practice differed from international best practice. A holding company would “enable better co-ordination, resource allocation and oversight”.
“All business can take from the legislation as tabled is that the new holding company might be a good thing, but it also might not, depending entirely on how it is implemented. Indeed, the worst fear is that it becomes yet another expensive white elephant that adds no value,” Mavuso said.
“It [the SOE company] needs a board of accomplished, experienced professionals with extensive corporate expertise and not political cronies. In turn, it must have authority over the boards it appoints to manage the SOEs, and to monitor performance and ensure delivery. While it must report to a suitable government department, it should also have a line of accountability to parliament.”
The draft legislation does not detail which SOE would be moved to the State Asset Management Company but Business Day understands that only state companies at national level would be considered for the migration and not those at provincial and municipal level.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.