SA has about 730 state-owned enterprises (SOEs), and it is crucial to evaluate their performance and explore ways to enhance their efficiency and effectiveness.
In 2019 the Progressive Professionals Forum (PPF) established an SOE review panel to research international models and a proposed way forward was presented to the cabinet. Our position has consistently been for co-ownership of noncore SOEs by entities and shareholders experienced in the respective sectors, and for a dedicated and separate law to govern SOEs.
We welcomed the establishment of the SOE Council in 2020, and are pleased that President Cyril Ramaphosa committed to the drafting of an SOE Act in his 2021 state of the nation address.
In a recent budget vote in parliament public enterprises minister Pravin Gordhan announced a big restructuring plan for Eskom, which aims to transform the power utility’s transmission division into a new entity, the National Transmission Company.
This development aligns with the PPF’s long-standing advocacy for the review of SOE business models. Of all the national carriers globally, fewer than 60 are wholly state-owned, and the majority of these are small countries such as Trinidad, the Cayman Islands and Suriname. Transactions such as the sale of a stake in SAA are therefore in keeping with global best practice.
The PPF SOE review panel has outlined several prerequisites for this co-ownership model. First, ownership must be vested in an entity and shareholder with expertise in the sector to implement a turnaround strategy or facilitate the growth of the SOE.
Second, the shareholding of the private entity should be limited to 30%, ensuring that majority ownership remains with the state. Third, the 30% shareholding must include a black shareholding of at least 26% as well as worker ownership, promoting empowerment and inclusivity.
In addition, the panel recommends the inclusion of a buyback clause, allowing the state to repurchase the shares after a 20-year period. This mechanism is intended to ensure that the state retains control and can reassess the situation in future. Furthermore, the panel calls for the introduction of an SOE Act to govern these enterprises, as legislation such as the Public Finance Management Act and Preferential Procurement Policy Framework Act often conflict with each other when applied to SOEs.
One successful example of a state-owned holding company is the Singaporean model. The city state has a well-established track record of managing its state-owned enterprises through its sovereign wealth fund, Temasek. Through a co-ownership model Temasek Holdings has effectively partnered with private entities, ensuring a balance between state control and private sector expertise.
This has resulted in the successful management and growth of Singapore’s SOEs, contributing significantly to the country’s economic development and global competitiveness. The use of a holding company has also resulted in limited state intervention in Singapore’s SOEs. In fact, it operates on the principle of noninterference and nonpreference. The state’s involvement stops at the appointment of the board of the holding company.
Another notable example is Singapore Power, a state-owned utility company that provides electricity and gas services. Singapore Power operates as a separate entity with a board of directors, allowing for effective governance and strategic decision-making. By embracing private sector practices while maintaining state ownership, Singapore Power has consistently delivered reliable and efficient services to its customers.
These case studies highlight the potential benefits of adopting a co-ownership model for SOEs in SA. By leveraging private sector expertise and maintaining state control we can improve the performance and accountability of our SOEs while stimulating economic growth and job creation.
The PPF remains committed to advocating this co-ownership model, particularly in light of our struggling economy and the fallout from having to bail out SOEs. We eagerly await the implementation of the decision to finalise the SOE Act, along with the establishment of the SOE Holding Company.
The restructuring of Eskom is a positive step forward, reflecting the government’s commitment to transforming and reviving our SOEs. By adopting the co-ownership model we can ensure that these entities are efficiently managed, transparent and accountable. This will not only benefit the state’s finances but also stimulate economic growth, create employment opportunities and empower previously disadvantaged communities.
We encourage all stakeholders, including government officials, business leaders and civil society, to support and collaborate in the implementation of these reforms. By doing so we can lay the foundation for a vibrant and sustainable future for our SOEs, contributing to the prosperity of our nation.
• Wicomb is president of the PPF, which comprises professionals and businesspeople who subscribe to the values of the Freedom Charter and the constitution.
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