State-owned enterprises are important for South Africa’s growth – Gordhan

Public Enterprises minister Pravin Gordhan believes that well-run SOEs are important as the free market “is not a panacea for resolving economic and institutional challenges.”

In an opinion piece for the Sunday Times, Gordhan said that the government is focused on fixing SOEs so that they can play a critical role in the recovery and growth of the economy.

“The restructuring and reform programme for the SOEs is pragmatic and devoid of any ideological fundamentalism,” said Gordhan.

“In moments of crisis, well-run SOEs are important for economic growth and contribute to the prosperity of countries.”

Gordhan also highlighted that government has formed the Presidential State-Owned Enterprises Council in an attempt to fix SOEs.

“One of the key measures of the work of the council will be to develop an appropriate governance framework to implement across all SOEs in the country to ensure alignment of governance principles,” said Gordhan.

Gordhan said that the government’s goals regarding SOEs include repositioning Eskom for energy security (including the increased use of renewable sources), repositioning Denel with a new business model, and selecting a strategic equity partner for SAA.

SAA financial woes

SOEs have become notorious in South Africa for being run poorly and amassing billions of rand in debt.

Consequences of the poor running of SOEs include Eskom’s grid problems and SAA’s recent fall into business rescue.

SAA’s financial woes resulted in it receiving a bailout of R10.5 billion last year as part of business rescue proceedings.

This money was desperately needed by the embattled SOE if it were to be saved, as it has struggled to pay many of its expenses.

For example, SAA employees have reported not receiving their salaries for about a year, forcing employees to take on debt and move out of their homes.

“My husband had to sell his car and take his old car back from his sister,” said one SAA employee.

“It has been a nightmare because we have been literally thrown to the dogs.”

Problems at Eskom

A preliminary forensic report claims that over R2 billion was stolen from Eskom thanks to a network of non-existent service suppliers and Eskom officials.

The network allegedly included Mpumalanga businessman Jerry Zitha as well as at least three Eskom officials.

The SIU is investigating certain issues relating to this report.

“The report has been reviewed by the SIU’s assessment committee and the Eskom investigation team. Limited areas that fall within the SIU’s current mandate were identified from the report,” said SIU spokesperson Kaizer Kganyago.

In his state of the nation address last month, President Cyril Ramaphosa explained the plan to save Eskom.

“Eskom has been restructured into three separate entities for generation, transmission and distribution,” Ramaphosa said.

“Eskom is making substantial progress with its intensive maintenance and operational excellence programmes to improve the reliability of its coal fleet.”

Government is also taking extraordinary action to improve generation capacity, including increased opportunities for independent power producers.

“The necessary regulations have been amended and the requirements clarified for municipalities to buy power from independent power producers,” Ramaphosa said.

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State-owned enterprises are important for South Africa’s growth – Gordhan