South Africa’s embattled state-owned entities will enter a new era after the elections as the government seeks to end years of looting and mismanagement under state capture.
The government has doled out billions in guarantees and bailouts to SOEs, including Eskom and SAA, over the past three decades.
Rail and ports company Transnet is implementing a major turnaround plan that will see the private sector roped in to help run port terminals and rail operations.
Now a bill before parliament could result in the department of public enterprises ceasing to exist in favour of a holding company that will manage SOEs on behalf of the government.
Deputy director-general in the department of public enterprises Melanchton Makobe said the bill, which seeks to establish a State Asset Management Company, would draw the necessary expertise to revive and manage SOEs.
A centralised shareholder model represents a paradigm shift in the way the government will manage SOEs.
— Deputy director-general in the department of public enterprises Melanchton Makobe
“The new approach is also vital for crowding in the best experts in finance, commercial practices, different industry sectors, commercial legal expertise, contract management, and procurement among others.
“It will also give greater coherence and consistency in the application of corporate governance standards across all SOEs and greater transparency and accountability for SOE operations, by enabling effective oversight and performance monitoring.”
He said the National State Enterprises Bill presents an opportunity for a clean break with the past in which SOEs were hamstrung by discordance in the government policy, regulatory and legislative framework.
“Thus, a centralised shareholder model represents a paradigm shift in the way the government will manage SOEs going forward. It is not about what we want to achieve in the next three or six months, but about laying the foundation for a multigenerational process which will benefit generations to come.”
Over three decades, Eskom went from being an award-winning power utility to implementing regular rolling blackouts. In 1992, Eskom had a net income of R1.2bn and had 260 electrification projects under way.
Transnet’s recent port and rail constraints cost the economy R504.8bn in 2022 according to the Journal for Transport and Supply Chain Management.
In 1999, Transnet finalised its restructuring as it had seven transport businesses under one company — SAA, Spoornet, Portnet, Petronet, Autonet, Fast Forward and Metrorail.
SAA entered business rescue at the height of the Covid pandemic, only to have its strategic equity partnership with the Takatso consortium, aimed at injecting capital into the troubled national carrier, collapse.
Speaking at the release of the Equilibrium quarterly bulletin this week, Equilibrium economist Sanisha Packirisamy said state capture during the Jacob Zuma era targeted SOEs that played a lead role in providing electricity, transport, telecommunications, and water.
“In my opinion, we are seeing a de facto privatisation of Eskom with the effective unbundling under way, which will improve competitiveness and lower costs for the end consumer. Ultimately, we will also see this in the transportation sector should the freight logistics roadmap be fully executed in its current form.”
She said the bill represents a paradigm shift.
“Only strategic SOEs will be moved to the State Asset Management Company but the classification of strategic SOEs still needs to be determined as there are currently more than 700 SOEs.
“In my view, more private sector participation is needed, while the consolidation of less strategically important SOEs will also help to increase efficiencies.”
She said the possibility of a coalition government after the elections could undermine overall policy, including reforms aimed at resolving SOEs' troubles, if the participating political parties were not ideologically aligned.
Citing SBG Securities data, she said an ANC-DA coalition was deemed to be the “most market-friendly” scenario if the ANC gets less than 42% of the vote nationally, as opposed to a coalition with the EFF or MK Party.
Efficient Group economist Dawie Roodt said the quality of management of SOEs was critical, whether under the current model or a national holding company.
“There are many analysts who suggest that it is not a good idea to put all these companies into one, single [holding] company. I am not really particularly concerned about that. The major problem is that we have a government that is misusing these state-owned enterprises.”
He said South Africa continues to pay the price for the government’s mismanagement of SOEs over recent years and that the management and quality of appointees to head strategic parastatals undermined the SOEs and the economy at large.
“If you look at what has been happening over the past 30 years, the state-owned enterprises [and] other institutions like the local authorities have all just about been run into the ground financially, and operationally.”
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