Revitalising our State Owned Enterprises – The DA’s 6 point plan

Issued by Natasha Mazzone – DA Shadow Minister of Public Enterprises
22 May 2018 in News

In the 2016/17 financial year, 38% of all SOEs made losses totalling a staggering R53.7 billion. South Africa’s SOEs are in serious financial distress.

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.

What our SOEs require is a complete turnaround strategy and DA has a sound six-point rescue plan which will revitalise our parastatals.

1.  De-politicalising SOEs

Political appointments to the boards of SOEs through the ANC’s cadre deployment policy must come to an end.

Board members should be:

  • Appointed based on their business knowledge and expertise;
  • Vetted for political connections and conflicting business interests;
  • Subject to lifestyle audits every year;

 2. Introduce professional expertise

SOE boards and top management must have commercial expertise and requisite skills to create environments in which decisions are made with profitability or sustainability in mind.

Ou State Owned Entities should have:

  • A greater emphasis on graduate recruitment programmes;
  • A revamp of employee-compensation systems in line with international best practices; and
  • Rewards and promotions based on merit, not tenure.

3. A focus on becoming competitive

The Department of Public Enterprises is the sole shareholder of SOEs.

The result is that profitability and economic sustainability is conflated with ideological and political concerns.

  • SOEs should have clear mandates that set financial objectives and sustainability as primary goals;
  • Key performance indicators that contribute to the creation of a performance-based culture;
  • Profit and non-profit objectives of SOEs must be clearly defined and matched to industry standards and best practices;

4. Good governance based on transparency

SOEs must become more transparent in order to minimise the opportunity for corruption.

  • SOEs should communicate regularly on progress achieved with regard to KPIs and on social and financial objectives to maintain public support and buy-in;
  • Performance agreements with executives must be publicly available and executives must be held accountable for these;
  • The tender awarding process for contracts over a certain value should be made open to the public;
  • Procurement oversight at SOEs must be strengthened through the creation of internal procurement oversight committees.

5. Accelerate the introduction of private equity partners

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.

6. Streamline government oversight

It is urgent that we dissolve the ineffective and pointless Department of Public Enterprises and manage the SOEs under their rightful Departments.

Transnet should return 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.

South Africa cannot afford to continue down the downward spiral of underperforming and financially distressed parastatals.

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.

The DA’s action plan will go a long way in ensuring that good governance and efficiency is restored in our SOEs.