On June 11 2020, President Cyril Ramaphosa announced the appointment of a star-studded advisory council to help him fix SA’s rapidly collapsing state-owned enterprises (SOEs).
As with most of his other advisory councils, the work of the SOE council, which boasts big private sector names (most with no SOE or public sector experience), has been opaque. The council, which was tasked with recommending a new shareholder and management model, failed to slow or prevent the implosion of Eskom and Transnet, two major entities that are strangling SA’s economy.
Curiously, the president appeared to have had preconceived ideas about the outcome of the council’s work. In the 2020 announcement one of his expectations was an “overarching act”, a new law of some sort.
In his state of the nation address in 2023 he gave a glimpse into what was being cooked up by the SOE council. Two ideas were crystallising: he announced that the public enterprises department, which oversees both Transnet and Eskom, would be discontinued after 2024’s general elections; and a new entity, an SOE holding company, would be established instead.
Neither of these ideas is related to any of the ANC’s national conference resolutions. For years the governing party has been calling for the SOEs to be overseen by line function departments. For example Eskom, as an energy utility, would be overseen by Gwede Mantashe’s department of mineral resources & energy, not public enterprises.
This call, which was confirmed at last December’s ANC conference, gained more currency as the wrangling over Eskom’s declining performance grew between Mantashe and public enterprises minister Pravin Gordhan.
The ANC’s economic transformation subcommittee is furious at the lack of consultation, including the disregard of conference resolutions. It’s hard to see how the government can fudge its way out of the corner it has painted itself in.
On September 15, Gordhan published the draft National State Enterprises Bill. The public has until mid-October to comment on the bill, which provides for the establishment of State Asset Management Company, the holding company Ramaphosa referred to in his February speech.
It remains unclear whether the holding company will house only the entities now being overseen by the public enterprises department. Nor is it clear whether it is will target only entities with a commercial mandate.
If the bill is passed into law, the president or his delegate will become the shareholder representative in this 100%-owned state company. This is already the case with Telkom: the government’s shareholding is held in the name of the president of the republic.
The government will appoint the nonexecutive directors of this mooted new company and, interestingly, the government as shareholder — not the board — may also step in to appoint an administrator to run the affairs of the company.
Proponents of the bill say it is aimed at curbing political meddling and at attracting the private sector to inject capital into the ailing SOEs. But this is a contradiction in terms. Replacing a minister with the president will hardly depoliticise the process of appointing the board or reduce political interference.
Political interference is alive and kicking in SA. For instance, telecommunications & digital technologies minister Mondli Gungubele is busy meddling in the SOEs that report to him. He has fired the boards he inherited from his predecessor, Khumbudzo Ntshavheni, at the State Information Technology Agency and Postbank.
Broadly speaking, the bill is confused and confusing, and it’s hard to see what problem it seeks to solve. For example, if crowding in the private sector to inject capital or run underperforming SOEs is the intention, it’s difficult to understand why profit-driven investors would be attracted to provide capital and skills if the government or, more precisely, the anti-business Luthuli House, is still calling the shots.
The bill assumes the state is functional and capable, when we all know this is not the case. The president himself frequently acknowledges this reality. More and more public functions are being performed by a patriotic private sector. It was the private sector that ensured the Covid-19 vaccine was administered, for instance, and that unemployment benefits were paid out when the state failed.
The reason China is successful in running its SOE-dominated economy is that it is both capable as a state and decisive. SA’s administration is neither. The government has a poor track record of setting up and/or restructuring institutions. Two cases in point are the move to split Eskom into four entities (a holding company with subsidiaries for generation, distribution and a monopoly for transmission), which is well behind schedule as auditors, consultants and lawyers mint it by hour; and the corporatisation of Transnet National Ports Authority, which has also been delayed.
With the house clearly on fire, the government apparently sees no urgency in appointing a full-time CEO for the embattled Eskom. SA’s SOEs are poorly managed. They have governance, leadership and capital structure problems. The bill provides no solutions to any of these chronic issues.
• Dludlu, a former Sowetan editor, is CEO of the Small Business Institute.
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