South Africa’s State-Owned Enterprises could be partially or wholly “divested” from if proven to be under-performing, this comes from a report presented to President Jacob Zuma as recomendations to make the country more efficient and accelerate growth.
Zuma announced at the State of the Nation Address yesterday that interventions would be made on SOEs based on the Presidential Review Commission (PRC).
The report states that the PRC was tasked with making recommendations that would ensure that SOEs would be “more efficient and effective in accelerating the country’s growth and development aspirations”.
This also comes after the World Bank said South Africa would struggle to stabilise its debt-to-GDP ratio because of bailouts to state-owned companies running into the billions and slow growth.
“For the state-owned companies to contribute to the successful implementation of the National Development Plan, they must be financially sound, be properly governed and managed,” the president said during the SONA.
Recommendation number 17 of the report reiterates this view, suggesting that under-performing SOEs be “divested” from or absorbed into government departments.
“Government should rationalise its holdings by focusing on those SOEs that provide public goods and those deemed to be strategic, namely serving national interests, national security and priority sectors.
This must be done either by:
• exiting from those sectors where market failure no longer exists and/or that can be adequately provided for by the private sector, or the mandate is no longer justifiable; or
• divesting either fully or partially from those SOEs observed to be under-performing that are competing unsuccessfully against private operators; or
• absorbing those entities whose functions can be cost-effectively carried out by Government departments by incorporating them into line function department programmes.”