Minister Lynne Brown calls for State-Owned Companies to be properly recapitalized

21 May 2015

Public Enterprises Minister Lynne Brown has said Government must find creative ways to recapitalize State-Owned Companies. Failure to do this will result in these utilities being unable to live off their balance sheets.

Minister Brown introduced the Department’s Strategy and Annual Performance Plan to the Select Committee on Public Enterprises and Communications in Cape Town.

“State-Owned Companies are operating in an environment where the performance of the economy has been below expectations, the fiscus is under pressure and the electricity grid is constrained. However, policy frameworks are taking shape to respond to this state of the economy and set these entities on the road to financial stability. This would also require Government recapitalizing the companies to put them on the path of financial independence,” said Minister Brown.

Minister Brown was supported by the Acting Director-General of the Department, Matsietsi Mokholo, who said in her presentation that the State-Owned Companies’ financial position and the state of the fiscus require the Government to explore opportunities to attract additional resources into these companies. This must be informed by the individual company needs rather than adopting a blanket approach for all. And the private sector therefore has a role to play in supporting these companies to execute their respective mandates.

“The private sector’s involvement in divisions at Denel is a classic example of a successful public private partnership model which the Department of Public Enterprises wants to offer to the country."

"Government retained its 100 percent stake in Denel as a holding company, while it allowed private sector participation in the company’s divisions like aviation, aero-structures and land systems. This is essential to ensure the State retains control of the company enabling better to leverage it to effect transformation and support other developmental imperatives.

“At divisional level, Denel allowed the divisions to look for strategic partners to unlock funding, improve their capabilities and ensure that the company strengthens its international footprint. Today we talk of a company with an order book of excess of R30billion and gradually weaning itself of Government guarantees,” said Mokholo.

She added as resolved by Cabinet in February,  the Department is currently working on an institutional model for State-Owned Companies that will bring consistency, predictability, accountability, agility and ensure responsiveness from both Government and its companies. This model will be presented to the Cabinet Lekgotla in July.

Statement issued by Colin Cruywagen, Department of Public Enterprises, May 21 2015