SA is undergoing reforms to deepen investment and accelerate the country’s economic growth and development. The reform of state-owned enterprises (SOEs) is one of the undertakings that will ensure SA is better placed to meet its developmental and economic goals.
Following President Cyril Ramaphosa designating to me the responsibilities of finalising the National State Enterprises Bill, we worked hard to engage stakeholders about the importance of the reforms proposed in the bill. We also engaged deeply with countries that implemented a centralised ownership model for the management of SOEs.
These have been important undertakings that will ensure we afford ourselves the best opportunities to unlock the potential of our SOEs to be effective in the market economy and contribute substantively to the country’s developmental agenda.
Listing SOEs on the stock exchange
As the government advances the proposed National State Enterprises Bill, which is going through parliamentary processes, we have had to consider ways in which SOEs can reduce their financial dependence on the government and improve their operational capacity. It is critical that SOEs are effective players in the market economy, yet it is also important that policies and legislation are put in place to protect the developmental mandate of SOEs. This is what the National State Enterprises Bill seeks to do, providing uniform oversight and performance monitoring of SOEs while weaning the SOEs off their dependency on the fiscus.
Recently, I visited the JSE to engage on the markets and the exchange’s initiatives that focus on development. This visit also explored ways in which the government can further collaborate with the JSE, advancing the call for collective action in fostering inclusive growth and development in the country. One of the potential areas of collaboration that has been raised is the listing of SOEs on the JSE. This idea has often sparked debate about whether such a move constitutes privatisation or is merely a strategic capital-raising exercise. In the context of SA’s constrained fiscal space and the pressing need for economic growth, it is important to recognise that listing SOEs on the JSE is not privatisation in the traditional sense, but rather an innovative funding model to ensure sustainability and improved performance of these entities.
Privatisation vs capital raising
Privatisation typically refers to the transfer of ownership and control of a public enterprise to private investors, often intending to reduce the role of the state in the economy. This is accompanied by a significant shift in the mandate of the entity, prioritising profitability over public service delivery. However, listing an SOE on a stock exchange such as the JSE does not necessitate relinquishing majority ownership or control. Instead, it involves selling a minority stake to private investors, allowing the state to retain its strategic role while leveraging public markets to raise capital.
The distinction lies in the purpose and structure of the transaction. By maintaining majority ownership, the government ensures that the core mandate of the SOE remains aligned with national developmental priorities, such as providing critical infrastructure, enabling economic growth and addressing socioeconomic inequalities. Listing could therefore serve as a mechanism to attract much-needed investment without undermining the state’s developmental objectives.
Addressing SA’s constrained fiscal space
SA’s fiscal position has been under significant strain, worsened by sluggish economic growth, high levels of public debt and the fiscal pressures of addressing socioeconomic challenges. SOEs such as Eskom, Transnet and SA Airways (SAA) have historically relied on government guarantees and bailouts to fund their operations and investments. However, this model is no longer sustainable given the current fiscal environment.
Listing SOEs on the JSE provides an alternative funding model that reduces dependence on the national fiscus. By selling shares to institutional and retail investors the government can raise significant capital to fund infrastructure development, modernise operations and enhance service delivery. This approach allows SOEs to tap into a broader pool of resources while relieving the Treasury of the burden of continuous bailouts, thereby creating fiscal space for other critical social and economic priorities.
Enhancing transparency and accountability
One of the advantages of listing SOEs on the JSE is the increased transparency and accountability that comes with being a publicly traded company. Listed entities are subject to stringent reporting and governance standards, including regular financial disclosures, external audits and compliance with stock exchange regulations. This heightened scrutiny, which also aligns with the corporate governance standards proposed in the National State Enterprises Bill can help to address some of the governance challenges that have historically plagued SA’s SOEs, such as mismanagement, corruption and inefficiency.
Transparency also fosters investor confidence, which is crucial for attracting both local and international investment. A well-managed and transparent SOE is more likely to secure long-term capital at favourable terms and conditions, reducing the overall cost of funding. Moreover, the discipline imposed by market forces and shareholder expectations can drive operational efficiencies and innovation within SOEs, ultimately benefiting the broader economy.
Aligning with global best practice
SA is not alone in exploring the listing of SOEs as a funding mechanism. Many countries have successfully adopted this model to raise capital while retaining state ownership. For instance, Singapore’s Temasek Holdings has listed several of its portfolio companies, such as Singapore Airlines and Singtel, while maintaining significant government ownership. Similarly, in China major state-owned companies such as PetroChina and the Industrial and Commercial Bank of China have been listed on stock exchanges, enabling them to access global capital markets without compromising state control.
These examples demonstrate that listing SOEs can strike a balance between public ownership and private sector efficiency. SA can draw valuable lessons from these experiences to design a framework that ensures the success of its SOE listings. This includes clear articulation of the strategic objectives, robust regulatory oversight and mechanisms to protect the interests of both the state and minority shareholders.
In China the integration of SOEs into the market economy has also been balanced by the country’s development mandate. This has been underpinned by supervision by the state, and has seen enhanced efficiency, which has strengthened and optimised that nation’s world-class SOEs. These are lessons we aim to apply in SA through the proposed National State Enterprises Bill as we seek to optimise the efficiency and performance of our SOEs, while ensuring that they continue to prioritise their developmental mandate. Yet this goal needs to also consider creative and sustainable measures to raise capital for the country’s SOEs.
Addressing concerns about privatisation
Critics of listing SOEs often raise concerns that such a move could pave the way for full privatisation or undermine the developmental mandate of these entities. However, these fears can be mitigated through well-defined safeguards. For instance, the government can establish golden shares or other mechanisms to retain veto power over critical decisions, ensuring that the strategic direction of the SOE remains aligned with national priorities.
Moreover, listing does not imply abandoning the social responsibilities of SOEs. Instead it can enhance their capacity to fulfil these responsibilities by providing the necessary resources for investment and growth. For example, improved financial performance resulting from market discipline can enable SOEs to expand access to essential services, create jobs and contribute more effectively to economic development.
Unlocking the potential of public-private collaboration
Listing SOEs on the JSE creates opportunities for public-private collaboration, which can bring significant benefits to the SA economy. By attracting private sector investment and expertise, SOEs can leverage innovative solutions, improve operational efficiencies and enhance their competitiveness. This is particularly important in sectors such as energy, logistics and telecoms, where technological advancements and infrastructure development are critical for long-term sustainability.
Private investors also bring a focus on performance and accountability, which can drive cultural and organisational change within SOEs. This shift can help to overcome some of the historical challenges that have hindered the effectiveness of these entities, such as bureaucratic inefficiencies and resistance to change.
Catalysing economic growth
The successful listing of SOEs on the JSE can have a ripple effect on the broader economy. By raising capital for infrastructure projects and operational improvements these entities can stimulate economic activity, create jobs and attract additional investment. For example, investments in Transnet’s rail infrastructure can reduce logistics costs and improve the competitiveness of SA exports, while investments in Eskom’s generation capacity can support energy security and industrial growth.
Furthermore, a vibrant market for SOE shares can deepen SA’s capital markets, providing new investment opportunities for institutional and retail investors. This can enhance financial inclusion, thereby ensuring transformation and the contribution to the development of a robust and dynamic financial sector, which is essential for long-term economic resilience.
Listing SOEs on the JSE is not privatisation, but it is a strategic capital-raising exercise that offers an alternative funding model for SA’s development. In a constrained fiscal environment, this approach allows the government to leverage private sector investment while retaining control over strategic assets. By enhancing transparency, accountability and operational efficiency, listing can address some of the historical challenges facing SOEs and unlock their potential to drive inclusive economic growth, thus transforming society and improving the lives of our people.
Drawing on global best practices and implementing robust safeguards, SA can ensure that the listing of SOEs aligns with its developmental objectives while creating value for investors and the broader economy. This innovative funding model represents a pragmatic and sustainable solution to the financial and operational challenges facing SA SOEs, positioning them as catalysts for inclusive growth and national development.
• Ramokgopa is minister in the presidency for planning, monitoring & evaluation.
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