DA rejects Ramaphosa’s proposed ‘patronage SOE’

12 February 2023

The proposed new state holding company to house all commercial SOEs, as announced by President Cyril Ramaphosa in his State of the Nation address (SONA), will do nothing to fix the bankrupt SOE sector but will only serve as a new deployment station for ANC cadres.

The DA rejects Ramaphosa’s ‘patronage SOE’ and calls for increased private sector participation in the SOE sector to address the systemic issues that have turned them into a financial burden on South African taxpayers.

It is telling that, for a President who has constantly beaten the drum of structural reform to increase private sector investment in the economy, his response to addressing the crisis in the SOE sector is to pursue more state control and create a new SOE to manage collapsing SOEs.

Thinking that deeply entrenched operational and financial mismanagement issues currently affecting SOEs can be solved through a new holding SOE company is not only naïve but reckless. The least that the government should be doing now is to be preparing SOEs for the unavoidable eventuality of private sector participation.

Despite the insistence on more state control, the rot in most SOEs has become so bad that they have now been forced to open their operations for private sector participation. Recently, Transnet announced plans to bring in a private partner to take over the running of its Durban/Johannesburg corridor for the next 20 years, as a precursor to a path to privatization.

By finally embracing the private sector as potential partners in efforts to improve operational efficiency, Transnet has essentially admitted that the state-led SOE model has failed. The impact of this failure is widespread, as all major SOEs, from Transnet, Eskom, SABC, Denel and PRASA are on the verge of financial ruin and are looking to Treasury for bailout in one form or the other.

Ramaphosa’s proposed ‘patronage SOE’ should be vehemently rejected and binned before it can see the light of day. SOEs were bankrupted and brought to the edge of collapse by the architects of state capture and the country cannot afford to keep applying band aid in the vain hope that they will become profitable again.

Issued by Ghaleb Cachalia, DA Shadow Minister for Public Enterprises, 13 February 2023