‘All necessary steps – even drastic ones’. These are the lengths to which President Cyril Ramaphosa has assured South Africa that government will go in order to ‘restore’ the country’s State-Owned Enterprises to ‘health’.
Writing in his weekly letter to the public, President Ramaphosa said that the country’s SOEs suffered from various maladies, but had great potential to contribute to development. He said that action had been taken from the time of his assumption of office to deal with their problems. He remarked: ‘An immediate challenge was to end state capture and tackle the corruption that had crippled a number of our state owned companies.’
Among the specific actions taken was the appointment of new boards and senior management. South African Airways was also recently placed in business rescue.
The President wrote that business rescue was not the ‘preferred option’ for dealing with SOEs, but indicated that doing so demonstrated its determination to solve their problems.
It was important to wean SOEs off a dependence on government bailouts. It was possible that private equity might be sought. However, he also made it clear that the state intended to retain ownership of these entities.
The state of the country’s SOEs is a major strategic issue for South Africa, severely stressing the country’s fiscus and contributing to the possibility of further downgrades by credit agencies. It has also become a significant political issue, with many in the ruling African National Congress (ANC) and its allies concerned that they might be privatised. There is a strong belief among them in state ownership, whether for ‘developmental’ or ideological reasons.
A contentious news report on Sunday claimed that President Ramaphosa was preparing to privatise some SOEs as part of a plan to break apart the ANC and emerge as president of a right-leaning coalition.