A provisional list of 13 state-owned companies has been identified by the department of planning, monitoring & evaluation for inclusion under a centralised, state-owned enterprise (SOE) holding company to be called the State Asset Management Society Ltd (Samsoc), which will be wholly owned by the state.
These include the Air Traffic and Navigation Services Company, Airports Company, Broadband Infraco, Central Energy Fund, Denel, Eskom, Sentech, SAA, SA Forestry Company, Sanral, SA Nuclear Energy Corporation, Transnet and, surprisingly given its bankrupt status, the SA Post Office (Sapo), which is in business rescue.
This is not an exhaustive list and may be expanded, deputy director-general for state-owned companies, governance assurance and performance Melanchton Makobe told MPs during a presentation by the department to parliament’s planning, monitoring and evaluation committee on the National State Enterprises Bill on Friday.
SOEs not included under the holding company will fall under the different line ministries while they are being prepared for inclusion. Due diligence by Samsoc will be undertaken to see if SOEs are fit for inclusion. This would be a decision for the president and cabinet, Makobe said
ActionSA parliamentary leader Athol Trollip questioned the inclusion of Sapo and asked what conditions would be required for transferring SOEs to Samsoc.
Acting director-general in the department of planning monitoring and evaluation Jacky Molisane said the criteria for inclusion included financial viability, national importance and potential for growth.
The bill provides for the establishment of Samsoc, the role of which will be to ensure that the underlying SOE subsidiaries are profitable, sustainable and operationally efficient, but will also pursue developmental objectives.
MPs were concerned that the bill would repeal the Public Finance Management Act (PFMA), which lays down the rules for sound financial governance in the public sector, as well as the Companies Act, but Molisane said that with regard to the repeal of the PFMA, SOEs needed flexibility and agility because they operated in a competitive space.
Makobe added that while the PFMA would not apply to Samsoc and its subsidiaries, the bill contained the necessary financial management provisions. He said SOEs had complained that the PFMA restricted their ability to act.
The bill provides for a national strategy for SOEs as suggested during public comments on the draft bill published for comment in 2023. An advisory committee appointed by the president will advise on the strategy. To ensure transparency, the public will have the opportunity to comment on the strategy, which will be tabled in parliament.
The national strategy will cover the performance measurement of the holding company and subsidiaries, developmental objectives, financial turnarounds, the disbursement of dividends and the potential for private sector investment.
The president will be the shareholder representative of Samsoc but the shareholder powers can be transferred to a cabinet minister. An annual report must be tabled in parliament on the performance of the holding company and its subsidiaries.
As recommended by the Zondo commission of inquiry into state capture, an independent panel chaired by a retired judge and consisting of two members of the executive approved by the president, representatives of business and organised labour and three present or former CEOs of public companies appointed by the president will oversee the selection of board members of Samsoc.
The Samsoc board will be responsible for the appointment of its CEO and CFO.
The model for a centralised holding company for SOEs as practised in Singapore, Malaysia and China was recommended by the Presidential SOE Council, which argued that such a model would minimise the potential for conflicts of interest and the scope for political interference. It would provide for greater coherence and consistency in the application of corporate governance standards across all SOEs and ensure uniform oversight and performance monitoring.
“The other advantage of this model is that you can leverage on the balance sheets of the SOEs in the portfolio and therefore reduce the dependence of SOEs on the fiscus,” Makobe said.
He noted that the current decentralised model was not in line with global best practice as it resulted in a conflict between ownership, policymaking and regulatory functions and undermined ownership focus, consistency in approach and accountability.
Planning, monitoring and evaluation deputy minister Seiso Mohai recalled that for many years SOEs had faced significant governance challenges, including inadequate oversight, inefficiencies and financial mismanagement. The bill was a response to these challenges.
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