Gordhan: We can make SOEs 'exemplary', but opposition parties are in denial over state capture

Minister of Public Entreprises Pravin Gordhan says they are not going
to liquidate SAA and business rescue practitioners must turn it
around. Photo by Misheck Makora
Minister of Public Entreprises Pravin Gordhan says they are not going to liquidate SAA and business rescue practitioners must turn it around. Photo by Misheck Makora
  • Members of Parliament on Thursday debated the financial burden of sustaining non-profitable state-owned enterprises.
  • Minister Pravin Gordhan says that in the next few years, government will make sure that SOEs are no longer reliant on the fiscus.
  • The minister hit back at DA MPs for not presenting solutions but resorting to critiquing and forgetting the damage caused by state capture on these entities.

Government is working to make sure that in the next few years state-owned enterprises will not be dependent on the fiscus, but it will take time and the damage of state capture to these entities must first be addressed, said Public Enterprises Minister Pravin Gordhan.

The minister on Thursday was responding to a debate on the financial burden of sustaining non-profitable state-owned enterprises (SOEs) during a sitting of the National Assembly.

Earlier on Thursday, President Cyril Ramaphosa chaired a virtual inaugural meeting of the Presidential SOE Council (PSEC). Ramaphosa had appointed the panel in June to support government in repositioning SOEs so that they could be effective in their mandates of economic transformation and development. The inaugural meeting discussed the country's economic reconstruction and recovery plan, as well as an overview of SOEs and the terms of reference of the Council, the Presidency said in a statement. 

Following the meeting the Presidency said that the Council resolved to set up work streams in response to areas of priority that are identified and to commence work immediately. The Council will report back to the president by January 2021, when the next meeting is expected to be convened. The President had called on the Council to ensure the prioritisation of SOEs which "can have a greater impact on the economy, mobilisation of private capital, and increased operational efficiencies in support of improved national output." 

The council is expected to undertake a rationalisation process of the SOEs. Finance Minister Tito Mboweni told Parliament on Wednesday that government has an obligation to keep SOEs running, but to ensure they do not drain financial resources.

Last week Mboweni announced that national carrier SAA would receive R10.5 billion to support its business rescue process. The decision has been met with criticism - as funds had to be reprioritised from other national departments, their entities and conditional grants to provincial and local governments. Both Mboweni and Gordhan have said the allocation does not constitute a bailout.

Gordhan has said that restructuring the airline would be far more beneficial than liquidation - it could preserve jobs, maintain competitiveness in the aviation sector so that consumers won't be price takers and it would avoid negative knock-on effects to other industries reliant on the aviation sector. 

During the debate on Thursday Gordhan reiterated views that the R10.5 billion to SAA is not a bailout – it was intended to pay out retrenchment and voluntary severance packages, to refund consumers tickets for unflown flights, among other things. He said the DA's opposition to the funding was akin to telling SAA's customers to "go to hell" and lose their money.

Gordhan also said that government was not blind to the "fiscal realities". "We will make sure reliance of SOEs on the fiscus will be done away with," he said. He said SOEs have the potential to be "exemplary" institutions, but hard work is required to undo the damage of state capture - which some opposition parties, namely the DA, is in "denial" about.

He suggested that perhaps the DA was too afraid to take on the "monster" of state capture and do the hard work of taking on individuals which cost the country billions.

He ripped into the speeches presented by DA MP's Geordin Hill-Lewis Alf Lees and Ghaleb Cachalia, saying that they did not propose solutions but instead resorting to critiquing and rehashing problems everyone was already aware of.

In his address to the debate Hill-Lewis described how past bailouts and possible future bailouts have brought the country's finances to ruin.

"Transnet can't run a railway network … Eskom can’t produce enough electricity, SAA cannot fly, Denel is insolvent and the Land Bank ahs defaulted," Hill-Lewis said. "Every SOE is broken and bankrupt."

ANC MP and chairperson of the public enterprises committee Khaya Magaxa however said that what the DA described as bailouts was recapitalisation – something which is normal in many countries. He said the funds have conditions attached to them and are not straight out bailouts. He said the R10.5 billion for SAA is a temporary measure to stabilise and ensure its operational and commercial efficiency.

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