SONA 2023
Ramaphosa looks to Malaysia’s model for the future ownership of state-owned enterprises
The future ownership or shareholding of state-owned enterprises will be housed under one company instead of being fragmented through government departments. This is aimed at improving oversight of the state-owned enterprises.
The government is pressing ahead with the plan to establish a company that will hold the shareholding of all state-owned enterprises (SOEs) — from Eskom to Transnet — aimed at improving oversight of the companies.
A centralised shareholder model was proposed by President Cyril Ramaphosa during his State of the Nation Address (Sona) on Thursday, in which the ownership or shareholding of SOEs is housed under one company instead of being fragmented through government departments.
For example, Eskom, SAA, Transnet and others currently report to the Department of Public Enterprises, while the South African Broadcasting Corporation (SABC) reports to the Department of Communications and Digital Technologies. Ramaphosa wants SOEs to report to one holding company instead of reporting to various and fragmented government departments.
This is the direction recently adopted by Malaysia, which has established a company that holds all the equity or shareholding in SOEs, and has a view of selling some of the entities to private sector players. A similar direction has been taken by South Africa, which is increasingly embracing the private sector in the ownership model of SOEs.
The proposed state-owned holding company would hold all the equity, some of which would later be sold to private sector partners or the entities listed on the stock exchange to raise capital. Having SOEs housed under the holding company would speed up the process of deal-making, especially in identifying SOEs that are deemed less strategic to the government’s economic ambitions and are subject to be sold.
It is intended that the SOEs under the holding company would be able to stand on their own, raise capital (like private sector companies on the stock exchange) and not depend on taxpayer-funded bailouts for survival. Most of the SOEs fall under the Department of Public Enterprises in terms of their operational and governance structures.
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The minister of public enterprises, Pravin Gordhan, previously said establishing a company that would hold the shareholding of all SOEs would have the advantage of separating the state’s ownership functions from its policy and regulatory functions, minimising the scope for political interference, and introducing greater professionalism into the entities.
In doing so, Ramaphosa appointed an SOE Council that sits within the Office of the Presidency and includes experts from big business, state organs and academia.
The council’s work is ongoing and its members cannot speak publicly about it because they signed confidentiality agreements with the Office of the Presidency. Another challenge is that its mandate is wide, as the members have to explore the state of SOEs — all 700-odd of them — and no deadline was given to the council’s work when it was assembled by Ramaphosa. But Ramaphosa, during his Sona, gave a glimpse into the work of the SOE Council, which comprises private sector businesspeople, economists and one or two independent policy analysts.
“We will implement the recommendation of the Presidential SOE Council to establish a state-owned holding company as part of a centralised shareholder model that will ensure effective oversight of SOEs.
“Separately, I have instructed the Presidency and National Treasury to work together to rationalise government departments, entities and programmes over the next three years.
“National Treasury estimates that we could achieve a potential saving of R27-billion in the medium term if we deal with overlapping mandates, close ineffective programmes and consolidate entities where appropriate,” said Ramaphosa during his speech on Thursday.
But the proposal to introduce a holding in the SOE universe is yet to be approved by the ANC National Executive Committee. Ramaphosa is confident that it will pass muster with his ANC and government colleagues.
“The process of restructuring the government will give us an opportunity to determine the positioning of various areas of responsibilities, and how best the various ministries and departments can best serve our national objectives. We are focusing our attention on the energy crisis right now and will address the restructuring of government in due course.
“This is necessary because an effective response to this crisis involves several different departments and entities that require coordination from the centre of government,” he said, but there was no mention of a previously mentioned plan to move SOEs to their line government departments.
It would mean crucial SOEs such as Eskom and Transnet would be moved from the Department of Public Enterprises to the Department of Mineral Resources and Energy, and the Department of Transport, respectively.
It would be a step change, considering that the Department of Public Enterprises was specifically created in 1999 to house SOEs to drive their success and accelerate their restructuring, professionalisation and good governance.
Some SOEs already report to line departments, including the SABC and SA Post Office, which account to the Department of Communications and Digital Technologies; and Prasa and Sanral, which report to the Department of Transport. But this was not mentioned during Ramaphosa’s Sona. DM/BM
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There is huge difference the way Asians governments run their countries and those in Africa run theirs. Need I say more.
Look at the Singapore model – MPH
Meritocracy
Pragmatism
Honesty
Merit and honesty are considered un-South African. Corruption is considered to be a western concept.
This new single SOE ownership entity should be housed in a cooperative that is ‘owned by the country’s citizens.
Why would citizens wish to own shares that are valueless?
Yet another daft idea ! How can one company solve the problems of every SOE being run badly – this is not the answer.
Oh yes…Mugabe bought into the Malaysian Fund run by the Government as a way to hide his billions stolen from the Zimbabwe/ Rhodesian people!
I wonder which Superperson will be the CEO of this new SOE entity? In the normal world, a CEO needs some knowledge about the company’s business. Where do we find a super person who has industry knowledge of 700 business entities? Also, my understanding is that the Department of Public Enterprises is exactly what the proposal now is for this new entity. Why not just take that and list it on the JSE? The problem is clueless people running these enterprises. Not the structure they fall under. Fix that.
Another overpaid gang to prey on the fiscus. While the anc “rules” we are doomed. Closing our small business as we speak. By the tome there is action, sMMES will be history as will tourism and hospitality
Put Helen Zille in charge; she is an acknowledged expert on the Singapore Model.
This is probably the most worrying aspect of SONA-signalling ANC intent of continuing, in fact doubling down, on state ownership and control of the entities which are critical to the functioning of a modern nation.
In risk management terms these are the greatest exposures and impediments for business to just survive let alone thrive.
They simply don’t get ( or blindly refuse to see) that the notion of state ownership is defunct unless irrevocably tied to the same competence, leadership and integrity that govern and drive private or publicly listed enterprise.
As said previously, for as long as the ANC govern South Africa, there is no hope of recovery-plan accordingly.
Bumiputera was the Malaysian policy towards their economy, and, for a time was the basis of their economy. Their “problem”and situation was not so very different to South Africa’s. Simply, the Chinese portion of the population, had the capital, or certainly more of it on a per capita basis, were smarter, worked harder and knew how to successfully run businesses.
So the Bumiputera policy was born. Fundamentally it gave the bumiputera, or the Malays within Malaysia, what we here would call BEE status. It was an abject failure, the economy contracted, race relations severely exacerbated and the economy was thrown into turmoil.
I do hope that President Ramaphosa, in looking at Malaysia foe a lead, has properly studied his history.
Incidentally, during this time, I was living in SE Asia and acting as an economist in an advisory capacity so saw it all first hand. Malaysia only started to prosper when it embraced the Singapore model for economic development.
Yet more dithering by a bewildered cadre-President. The ANC deliver as much as Bafana Banafa, lots of hype but zero results. The evils of ANC-cadreship are so entrenched that only the loss of the ANC’s majority will give the space the authentic leadership and diligent oversight require to emerge in SA’s political landscape.