SOEs: Time to get them working for the people
30 October 2018
South Africa’s state-owned entities (SOEs) are currently failing to perform their most basic mandates - providing services and opportunities to the citizens of our country. Instead, SOEs stumble from one crisis to another and average South Africans, especially the poor, are left to bear the brunt of the ANC’s continued broken promises.
The reality is that if we do not turn around the current status quo at SOEs, our economy could face possible collapse. Urgent reform of our state entities is desperately needed.
It is evident that South Africa’s SOEs are in serious financial distress. This is largely due to State Capture, corruption, financial mismanagement, poor governance and a general lack of state oversight.
Just because State Capture has been exposed, does not mean SOEs are in the clear. The hard work will only start now.
An effective turnaround strategy is needed to ensure that SOEs get back to the work of service delivery following years of parastatals being abused by Gupta-linked companies receiving dodgy tenders, children of top management getting awarded multi-million rand contracts, and certain ANC politicians and private companies colluding to defraud the state of billions.
High levels of corruption and mismanagement were able to manifest because the operations of SOEs often go unchecked and their dominance is largely uncontested.
The current state of SOEs is also a damning indictment on the lack of clear vision and political will from the ruling party. The ANC does not have the appetite to unlock the true potential of SOEs in order to drive growth and job creation.
Our SOEs need to become depoliticised. Political appointments to the boards of SOEs through the ANC’s cadre deployment policy have come at the expense of exceptionally skilled and knowledgeable candidates.
Often SOE boards and top management lack commercial expertise and requisite skills to create environments in which decisions are made with profitability or sustainability in mind. This can be attributed to the ANC’s policy of cadre deployment and the absence of young graduates at SOEs.
The Department of Public Enterprises (DPE) is the sole or main shareholder of SOEs. This means SOE executives often have to juggle multiple conflicting and opaque financial and social objectives. The result is that profitability and economic sustainability is conflated with ideological and political concerns. Furthermore, SOEs are often shielded from competitive pressures given their monopolistic nature in the market, allowing them to become bloated and inefficient.
The DA’s action plan will go a long way in ensuring that good governance and efficiency is restored in our SOEs.
It is unsustainable for government to continue to support financially unviable SOEs. The Department must accelerate the process of restructuring ownership. This requires the government to look at the partial or full privatisation of a number of SOEs by bringing in private equity partners and disinvesting from non-core SOEs urgently.
Privatisation which can stimulate a more dynamic industrial infrastructure; provide SOEs with the fiscal discipline of the marketplace; and bring in vital cash injections, skills, systems and expertise.
The sales of SOEs would need to be managed by an independent board to prevent oligarchs from forming. Share options for employees can be offered to get buy-in for privatisation from workers. The Competition Commission would need to be strengthened to regulate the sale of SOEs as they are currently under-capacitated to deal with this mammoth task.
It is urgent that we dissolve the ineffective and, frankly, pointless DPE and manage the SOEs under their rightful Departments.
For example, in the case of Transnet, the government should return it entirely to the Department of Transport. Eskom should move to the Department of Energy and Denel should go to the Department of Defence. This would improve the lines of accountability and communication and also align SOEs with the efforts of their rightful portfolio.
Another option would be to move and consolidate SOEs to different departments. Clustering and centralising them in the following groupings: commercial, development finance institutions, statutory corporations, and non-commercial SOEs.
Reducing the number of SOEs and streamlining them where appropriate, would be a necessity. This will mean better synergy and efficiency and it will reduce the demand for monitoring resources.
The reality is that while our SOEs are failing, the biggest losers are the average citizens on the ground, as service delivery is no longer a priority for parastatals.
South Africans deserve SOEs to be proud of. We need reliable public transport services and an efficient power utility, among other crucial services, and the DA’s rescue plan is the first step in improving services to our citizens, especially the poor.
Issued by Natasha Mazzone, DA Shadow Minister of Public Enterprises, 30 October 2018
