Having an entity to manage SOEs is the way to save them, says Ramaphosa

President Cyril Ramaphosa (GCIS)

President Cyril Ramaphosa (GCIS)

President Cyril Ramaphosa said South Africa will benefit richly from emulating the model of Singapore and China of a shareholder management structure to manage its state-owned entities (SOEs) and return them to stability and profitability.

Ramaphosa was replying to questions from Members of Parliament (MPs) during a National Assembly sitting in the Good Hope Chamber of Parliament on Thursday afternoon. The plenary comes after the State Capture Inquiry report illustrated the extent of governance and operational failure at SOEs.

The shareholder management model entails the establishment of an entity to manage the affairs of all other SOEs, operating much like an investment company, and free from political interference.

Ramaphosa first floated the idea of a shareholder management structure to manage South Africa’s most viable SOEs and shield them from political interference in his State of The Nation Address in February.

Inkatha Freedom Party MP Mkhuleko Hlengwa asked the president what the envisaged restructuring plans of the government were for the management of SOEs. He also asked Ramaphosa how he hoped to ensure SOEs’ effectiveness, efficiency, viability, and sustainability.

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Ramaphosa said SOEs were critical drivers of economic growth and social development, but that the State Capture Inquiry report demonstrated the extent of the damage and theft on the institutions.

“We are moving strategic SOEs to fulfill their mandates and economic and social objectives. A holding company as a centralised shareholder management model is the best way to achieve these results,” said Ramaphosa.

Ramaphosa said the Presidential SOE Council is monitoring how to respond to the SOEs in crisis on a case-by-case basis and has found that a model similar to that of Singaporean state-owned investment company Temasek would be beneficial to South African SOEs.

Hlengwa charged that the move to establish another SOE to manage failing utilities was an admission that the Department of Public Enterprises has failed at managing them and should be abolished in favour of having entities housed in their respective Cabinet departments of expertise.

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Ramaphosa said a shareholding management model would achieve universality in the financial management of all SOEs as well as allow a “good cross-pollination” of innovative ideas and best practices.

“We still own a large share of Telkom. It was listed on the Johannesburg Stock Exchange and was one of the top-performing companies on the exchange and pays a dividend to the government every year. China Mobile is listed on the New York Stock Exchange and can raise great capital for the company, allowing it to rely less on the fiscus.

“Today, we are seeking to take our own SAA, having really run into enormous problems, bring in a private sector player with money to inject life into SAA. In that way our enterprises can reach a high level of performance as partners add strength and capability,” Ramaphosa said.

DA leader John Steenhuisen said Ramaphosa’s talk of parastatal reform was hard to take seriously after a week of stage 4 load shedding, and SA having to deal with the problem for 15 years.

“The price of electricity has also gone up 450% in the past ten years. This covers for the poverty cabinet that you continue to defend. How can we justify price increases for South Africans over accountability for the poverty cabinet?” Steenhuisen asked.

Ramaphosa concurred with Steenhuisen’s comments that regulations needed to be improved to allow for cheap renewables to be brought online.

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