---
title: "Liberalisation of the state-owned dinosaurs will be Ramaphosa’s central challenge"
description: "President Cyril Ramaphosa’s toughest task: How he manages the nefarious political objectives within the ANC and the SOEs to create entities which are commercially viable within credible private sector hands."
type: "OpinionNewsArticle"
publisher: "Daily Maverick"
site: "https://www.dailymaverick.co.za"
section: "Opinionistas"
author: "Natale Labia"
author_url: "https://www.dailymaverick.co.za/author/natale-labia/"
canonical_url: "https://www.dailymaverick.co.za/opinionista/2024-07-02-liberalisation-of-the-state-owned-dinosaurs-will-be-ramaphosas-central-challenge/"
published: "2024-07-02T21:44:06"
updated: "2024-07-02T21:44:07"
lang: "en-ZA"
word_count: 839
---

# Liberalisation of the state-owned dinosaurs will be Ramaphosa’s central challenge

> President Cyril Ramaphosa’s toughest task: How he manages the nefarious political objectives within the ANC and the SOEs to create entities which are commercially viable within credible private sector hands.

By Natale Labia · Published 2 July 2024, 23:44 SAST · Updated 2 July 2024, 23:44 SAST

## Content

What can we read into the appointment of a Cabinet? Such announcements transcend the mere allocation of ministerial positions. They provide insights into a government’s objectives, allowing us to discern the strategic priorities of a national executive. This is particularly true of the African National Congress (ANC). With its storied past, diverse stakeholders and fragmented power base, the ANC is notoriously opaque.

President Cyril Ramaphosa’s announcement late on Sunday evening therefore provides insights into what will be his second administration’s agenda. From this, it seems that liberalisation of state-owned enterprises (SOEs) could finally be key.

Other than the sops thrown to the former opposition – such as the tragi-comic appointment of Gayton Mackenzie as Minister of Sport, Arts and Culture – the most extraordinary detail of the announcement was this: “There will no longer be a Ministry of Public Enterprises. The coordination of the relevant public enterprises will be located in the Presidency during the process of implementing a new shareholder model.”

#### **State Capture’s epicentre**

If there is one ministry emblematic of the corrosion of the South African state it is Public Enterprises. The appointment of Malusi Gigaba by Jacob Zuma in 2010, replacing Barbara Hogan, fired the starting gun on State Capture.

The more than 700 entities which it controlled – chief among them Eskom and Transnet – have not only been the epicentre of the industrial-scale extraction, rent-seeking and corruption witnessed over the past 15 years, but have also been the crumbling nodes which have hobbled the South African economy.

As Thabo Mbeki did in the late 1990s when he created a super-ministry within the presidency, the latest reshuffle is yet another step by Ramaphosa in his efforts to centralise power.

The Presidency now straddles pretty much all aspects of government administration; intelligence, state security, administrative reforms under Operation Vulindlela, and now state-owned enterprises. The President has already had influence on these failing entities through the State-Owned Enterprise Council since 2021. This “new shareholder model” is simply a further consolidation of power.

Ramaphosa seems determined to push through the reform, liberalisation and potential privatisation agenda of SOEs in the next three years, preferably before the ANC national conference in 2027. This will not be straightforward; there are major entrenched interests that have blocked any meaningful changes to the status quo over the past five years and will continue to do so.

Ramaphosa will have hopefully learnt from the failures of the past. First, bloated SOEs are not, in their current state, either attractive assets for the private sector to buy into or indeed organisationally feasible for reinvention within private hands.

Before embarking on a process of privatisation it is critical to reconstruct the entity, reshaping it into something which could be of interest to private investors. Otherwise capital will not be interested.

#### **SAA – a compromised beast**

The privatisation of SAA, which went into business rescue at more or less the same time as Italian national carrier Alitalia, is instructive.

Alitalia was comprehensively dismantled, with a new company (ITA Airways) being created out of its ashes to take on some of its assets and, under new contracts, some of its employees. Its debt was paid down by the Italian government, leaving a new, lean operator ready to be taken over by a private sector investor (in this case, German airline group Lufthansa).

By comparison, SAA limped on as a deeply compromised beast; an uninvestable chimera beset with institutionalised corruption.

Second, transparency is key. Until now negotiations on the liberalisation of SOEs have been opaque. The obscure contractual dealings between SAA, the Department of Public Enterprises and the Takatso Consortium, backed by Harith General Partners, is an example of how these processes should not be managed.

Finally, when it comes to the power generation of Eskom, parts of Transnet and SAA, partners should not only be transparent – they should be credible.

If liberalisation requires that BBBEE or transformation objectives be secondary, so be it. Such will be the conditions of any serious industry player. It is here that Ramaphosa will be pushed furthest – how will he manage the nefarious political objectives within the ANC and the SOEs, to create entities which are commercially viable within credible private sector hands?

During his time in the private sector in the late 1990s Ramaphosa proved himself an adept dealmaker, albeit under enormously favourable conditions (many of which were of his own design). Getting the deals done to liberalise or privatise the state-owned dinosaurs of the South African economy will be the central challenge of the next three to five years of his presidency.

While these transactions will not be easy to get across the line, the future of the South African economy depends on comprehensive liberalisation of the millstones which have hobbled the country.

We can only wish him well. **DM**

Daily Maverick’s*journalism is funded by the contributions of our Maverick Insider members. If you appreciate our work, then join our membership community. Defending Democracy is an everyday effort. Be part of it.*[*Become a Maverick Insider*](https://www.dailymaverick.co.za/insider/?utm_source=dm_website&utm_medium=article&utm_campaign=cabinet_announcement)*.*