Pravin Gordhan has reportedly been working on the Bill for the past five years Photo NDTV
South Africa – The recently released National State Enterprises Bill is considered one of the most substantial reorganisations of state-owned companies in over two decades. The proposed law entails dismantling the Department of Public Enterprises and establishing a new overseeing entity, State Asset Management SOC Ltd. Nevertheless, this move has sparked apprehension among the public and experts, prompting debates on whether it will herald positive transformation or succumb to the pitfalls of previous government initiatives.
To comprehend the significance of this new state-owned company, it’s crucial to understand the dire state of South Africa’s existing state-owned enterprises (SOEs). Currently, the country is burdened with approximately 800 SOEs, many of which, like Denel, Eskom and South African Airways, are grappling with severe financial, operational, and governance challenges.
The need for reform
Is it necessary? Given the troubled state of South Africa’s SOEs. Professor Sam Koma, Governance Expert , believes that reform and the bill is urgently needed albeit with a few tweaks.
“The National State Enterprises Bill proposes that SOEs should now consider the issue of ensuring long-term commercial sustainability in addition to the other objectives that they are supposed to pursue. So it remains to be seen whether once this bill is enacted into law we will see a major turn around with the management and governance of these state-owned enterprises. The Bill is short of a clear mechanism on how the directors of the board will be appointed. The Bill speaks about professionalism, merit and all that but the best way to select and appoint members of the board will be if we have some process that is similar to how the Judicial Service Commission interviews and also considers the recommendation of appointment of judges.”
What is important to note is the Bill specifies that either the President or a Cabinet member is the “sole representative of the holding company”. In other words, they are the shareholder. The board of directors is then appointed by the said “shareholder” as the Bill states. In other words, these will still be political appointments.
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Political landscape come 2024
It is understood that Public Enterprises Minister, Pravin Gordhan, has been working on this Bill for at least the past five years alongside the Presidential State-Owned Enterprises Council. The Bill is currently open for public comment which means making the Bill law will be in the hands of whoever is running the country after the 2024 elections.
“The incoming Parliament will be the one that will be seized with the issue of having to finalise and also ensure that this Bill is adopted but they are just setting up a process to allow different stakeholders to make input into this Bill with a view that’s come 2024 this Bill will now become a legislation or a law.”
As previously stated, the Department of Public Enterprises will undergo dissolution upon the enactment of this Bill. Additionally, the government is actively exploring avenues to decrease the quantity of SOEs which may involve downsizing or merging these entities. However, such measures could potentially entail job cuts, a prospect that unions are likely to vehemently oppose. Consequently, it remains uncertain whether the Bill will endure scrutiny or face the possibility of being discarded prior to the upcoming election season.
A shift towards business-like operations
Prominent figures in the business world, including Busisiwe Mvuso, the CEO of Business Leadership, underscored the paramount significance of SOE reform. Mvuso highlighted the substantial influence of these enterprises on both the business landscape and government fiscal health. She expressed support for the establishment of a new state-owned holding company with the authority to institute reforms and attract private investors, a sentiment shared by Kamo, who believes the Bill has the potential to achieve these goals.
“These state-owned enterprises, once you have this holding company, they should become business-like in the manner in which they operate. Meaning they need to ensure that their commercial principles are adhered to, they ensure long-term commercial sustainability so that they rely less on taxpayers to become sustainable. They have to go out in the market, attract private investment, and attract foreign direct investment in terms of buying stakes in the SOEs.”
Realising this goal hinges on the appointment of top-tier individuals, which is why Kamo advocates for public involvement in demanding a transparent process for selecting the board of directors and other key positions. A transparent process would help ensure that qualified professionals, free from political influence, lead these organisations effectively.
The reaction from other parties
The Bill has received mixed reactions from parties and labour unions. The Democratic Alliance, while happy about the private sector involvement, the creation of a holding company to oversee it all is “undesirable”. They believe the “government’s penchant for centralization and control has spoiled the well intentioned” Bill. For the DA, it would have been far better if the Bill’s “sole focus was to create pathways through which the private investment could start flowing into the SOE sector”.
Mmusi Maimane, leader of Build One South Africa Movement, believes this Bill is typical of the ANC. A government that cannot solve the problems of SOEs.
“SOEs are not the problem. They need capable leadership and a governance framework but here we see a plan that centralises power and entities are not capacitated. There needs to be a proper corporate governance framework and SOEs must be optimised for accountability and governance.
Cosatu has welcomed the Bill believing that the government has been hamstrung in its handling of SOEs and the major shareholder was not a “major” issue.
Ahmed Munzoor Shaik Emam, Member of the National Assembly of South Africa for the National Freedom Party, said the only way to actively fix SOEs was to keep politicians out of the appointment and tender process.
“All the boards of the state enterprises have failed and they were meant to be the oversight bodies. What makes us think that an independent body will solve the problem? Everywhere politicians are involved with the private sector and officials, there is looting, maladministration and corruption.”
The National State Enterprises Bill represents a substantial reorganisation of South Africa’s state-owned companies, addressing the critical need for reform in these entities. While the bill is open for public comment, its fate ultimately rests in the hands of the incoming Parliament after the 2024 elections. The proposed changes include the dissolution of the Department of Public Enterprises and a shift towards more business-like operations in SOEs. The creation of a holding company, State Asset Management SOC Ltd, aims to enhance commercial sustainability and attract private investment. However, concerns persist about political appointments and centralization of power. Achieving meaningful reform will hinge on transparent processes and capable leadership, free from political influence, as SOEs seek to overcome their longstanding challenges.
