SOEs set for shake-up to end losses

inlPicsCopy of SI_SI pravin gordhan0 EPA Finance minister Pravin Gordhan

Johannesburg - The country’s state-owned enterprises (SOEs) are set for a shake-up if President Jacob Zuma fulfils his undertaking to implement the recommendations of the Presidential Review Commission's investigation into SOEs.

These include passing a specific law to govern SOEs, the State Owned Entities Act, disinvesting from underperforming SOEs, and selling off parts of those failing to be profitable.

Zuma announced in his State of the Nation address this week that SOEs which were no longer serving the country’s developmental agenda would be phased out, without mentioning specific ones.

“For the state-owned companies to contribute to the successful implementation of the National Development Plan, they must be financially sound.

“We have to streamline and sharpen the mandates of the companies and ensure that where there are overlaps in the mandates, there is immediate rationalisation. Those companies that are no longer relevant to our development agenda will be phased out,”said Zuma.

This was one of the recommendations contained in the commissionâ’s report, which goes further to propose private ownership in entities that are struggling to be financially viable.

“The government should address the issue of financially non-viable commercial SOEs. This must be done by considering injecting private- sector practices and therefore gradually phasing them into commercial entities with a mix of public and private equity ownership,” the commission said.

This week Finance Minister Pravin Gordhan said the involvement of the private sector did not amount to privatisation.

“What we are looking at is co-investment. There are many examples of this with independent power producers, where we have seen a R194 billion investment through the Independent Power Producers' Programme.

“There are opportunities for the private sector to be involved. We are partnering with them, not privatising,” said Gordhan.

The commission noted the rationale for commercial entities was their ability to command market-related revenues, to have a bankable balance sheet and to post profits.

Another recommendation was to dispose of them as state entities or absorb them into their line function departments.

The commission also recommended keeping a sharp eye on the appointment of the boards running the SOEs. In many instances these have led to instability and the collapse of governance at entities like the SABC, South African Airways, Eskom and PetroSA.

The commission has recommended a transparent and merit-based recruitment and appointment process for board members.

While acknowledging concerns about some SOEs, Zuma cited SA National Roads Agency, Transnet and the Trans Caledon Tunnel Authority as examples of entities that were operating well.

Political analyst Moeletsi Mbeki said Chinese state-owned enterprises have for years had a so-called co-investment which means they take 20 percent of their shares and list them on the stock exchange.

The state, however, Mbeki said, controls the industries.

“Our state-owned enterprises are badly managed, they are managed by political appointees, and it doesnâ’t matter how much money you put into them, they won't change.”

Mbeki said privatisation could no longer be rejected out of hand.

“The reality is that the SOEs are a huge drain on the taxpayer and therefore on the welfare of the people of SA , and they enrich a few elites - the chief executives, the board members and politicians.”

Sunday Independent

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