Can SOE drain be plugged?

We have plans for recovery

It will take time, courage to save SOEs – but save them we will

State-owned enterprises (SOEs) have played an important role in the economy. The well-operated and financially sound enterprises are and have been crucial for infrastructure services such as energy, transport and water, all of which are necessary to grow our economy and ensure equity.

But, in recent years, SOEs have been honey pots of State Capture, largely because of their large procurement spend. We are still recovering. We are hard at work to reform and restructure the SOE sector. It will take time, courage and huge energy to achieve. But achieve it we will.

This year we will witness changes to the architecture and direction of SOEs. Structural reforms are being introduced to ignite growth and to address our capacity challenges that have been compounded by the Covid-19 pandemic. These include:

Energy security and Eskom

Restoring Eskom to operational and financial health and accelerating its restructuring process is central to this objective. The Department of Public Enterprises will work with the Department of Mineral Resources and Energy and other departments to ensure that all sources of energy are accessed.

Eskom will continue to maintain power stations, improve emissions compliance, and complete Medupi and Kusile. It will rapidly develop and deploy new, clean sources of electricity. It will participate in building renewable energy – and private sector partners must build a significant part of that. We will expedite restructuring into three subsidiaries: Generation, Transmission and Distribution.

Transnet

Our ports and rail must become efficient and competitive. We need to lower the cost of doing business. Transnet will implement third-party access on freight rail lines. The three Transnet port terminals – Cape Town, Richard’s Bay and Durban – are the focus for opportunities for new entrants to drive transformation in port operations.

Durban will become a hub port for southern hemisphere shipping. Transnet, the National Port Authorities and Transnet Port Terminals will initiate the process to concession Point Terminal for construction and operation.

Denel

The success of Denel is dependent on a clear national vision of the role of defence and related industries in a globalised world. Denel will be restructured to be fit for purpose, commercially sustainable and not dependent on the fiscus. We anticipate that Denel will enter into strategic partnerships with original equipment manufacturers to add value to the local economy while benefiting from a growing and untapped international market.

SAA

South African Airways has been in business rescue for just over a year. It is time for the business rescue practitioners to exit. The restructuring, we believe, will result in the emergence of a competitive, viable and sustainable national airline that will not need further funding from the fiscus. We are nearing finality on the appointment of a strategic equity partner to fund the new airline and introduce technical expertise.

Recovering stolen money

We are also taking decisive steps to recover assets, money and intellectual properties stolen from SOEs as part of State Capture.

Most of the money has been sent out of the country using complex financial mechanisms with the participation of lawyers, financial advisers and institutions. The stolen money belongs to the people of SA. It is required to maintain and upgrade SOE operations such as supplying electricity to homes and factories, getting rail passengers to work on time and then back home in the evening, and for moving freight across the country.

Reviewing procurement

Procurement processes and contract management were deliberately collapsed; billions were paid by SOEs with no services rendered or zero value accruing to the state. So SOEs continue to review existing contracts, and corrupt contracts will be set aside.

Embracing localisation

Localisation drives growth in jobs and economic output. For example, the Department of Public Enterprises has contracted all SOEs in its portfolio to spend 75% of their procurement on locally manufactured products, 15% on companies owned by women, and 10% on entities owned by black youth.

No bailouts, no corruption

The government aims to stop the reliance of SOEs on the fiscus. We expect SOEs to boost the economy and play an entrepreneurial role. We are determined to root out corruption and all vestiges of State Capture. We shall give no quarter to those bent on retaining the status quo to advance their self-interest. We must collectively, as one nation, reclaim our sovereign assets – human and material. These institutions belong to South Africans. They must serve the national purpose – equality, jobs, to eliminate hunger, and to develop SA’s people.