High cost of ownership by the state

INEFFICIENCIES in parastatal corporations that have shaped South Africa’s economy are cutting growth by between 2% to 3% a year because most are in a state of collapse, an economist says.

Professor William Gumede, of the University of the Witwatersrand’s School of Governance, said: “If we do all the calculations, most probably a lot of the missing growth is because state companies are not working.”

Johannesburg resident Gertrude Nduna would agree.

Her fledgling online perfume shop is facing ruin due to late deliveries by the Post Office, whose slogan is “We deliver, whatever it takes”, but which is tipping into financial failure.

“It is ruining my business and my reputation but I cannot afford to use private couriers,” Nduna said, lamenting her reliance on a postal service that ran out of money for fuel for its delivery vans this month.

Telecommunications Minister Siyabonga Cwele has called it “an aircraft in urgent need of a pilot”.

It is losing R100-million a month due to poor management, despite a R1-billion state loan guarantee.

State-owned companies, which account for about 20% of all capital investment, have arguably always been a drain on state resources.

They have underpinned the economy since the 1920s and by the late ’80s the government directly or indirectly owned almost 40% of industry, greater than that in any country outside the communist bloc.

In 1994, state entities became the engine of efforts to correct racial and economic imbalances, sucking up vast resources to roll out electricity and other essential services to the majority.

But affirmative action under President Jacob Zuma has bloomed into cronyism, analysts say, with competent candidates often overlooked in favour of political appointees, resulting in poor management.