Command Economics Spoils National State Enterprises Bill

Dear Editor

The ANC government’s penchant for centralization and control has spoiled the well intentioned National State Enterprises Bill (‘the Bill’). While the Bill seeks to enable private equity investment in ‘strategic’ state owned enterprises (SOEs) – a welcome development that aligns with long standing DA policy, the Bill’s provision for a new shareholding company to oversee the dysfunctional SOEs is counterproductive and renders it undesirable.

Establishing a brand-new SOE – with its own bureaucracy and costly operating budget, as the panacea that struggling SOEs need to get back on track is merely proposing another vehicle to perpetuate corruption and maladministration by connected cadres.

The Bill would have been beneficial if its sole focus was to create pathways through which private investment could start flowing into the SOE sector, as originally intended. The DA’s stance has always been that SOEs should either be privatized entirely or opened up to public/private partnerships to improve efficiencies and increase innovation.

In response, the ANC government has opted for more state control and centralization of the SOE sector. This will drive away the badly needed private equity investment, leaving these crisis ridden companies exclusively dependent on taxpayer funded bailouts. The challenge is, these bailouts will become increasingly difficult to come by as national Treasury has effectively told the country that the state coffers are empty and everyone needs to tighten their belts.

If SOEs are not losing money by the fistful, due to corruption and maladministration, they are sitting on piles of debt that could render them insolvent were debtors to come asking for their money back at once. But instead of pursuing a systematic reform process that would make them attractive to private investment, the ANC is choosing the gatekeeper approach to appease unions at the expense of the economy.

The destructive impact of SOE dysfunctionality is best captured by the cumulative negative effect of the Eskom and Transnet death spiral. Estimates from the South Africa Reserve Bank project that loadshedding may have knocked off 3,2% GDP growth from the country’s economy in 2022 – a figure which is likely to be higher in 2023 as the rate of electricity blackouts has almost doubled. On the other hand, independent estimates have surmised that Transnet inefficiencies are likely to knock 5% off GDP in 2023.

State controlled central planning, corruption, state capture and maladministration have been responsible for the downward spiral in the SOE sector. Sadly, the proposed National State Enterprises Bill, in its current form, will only perpetuate the crises in the sector and shrink the South African economy even further.

Regards

Ghaleb Cachalia MP
DA Shadow Minister of Public Enterprises