Potential SOE reforms still in early stages - Mogajane

Cape Town – National Treasury Director General Dondo Mogajane says he was misunderstood when he was asked to comment about whether plans existed to privatise state owned enterprises (SOE).

Speaking at the University of Cape Town’s Graduate School for Business on Tuesday afternoon, Mogajane said National Treasury was merely entering the next phase of re-assessing state owned enterprises.

Former minister of finance – now Minister of Home Affairs – Malusi Gigaba used his first medium term budget policy framework last year and his subsequent budget speech in February to stress that the holiday was over for mismanaged and under performing state owned enterprises looking for government guarantees.

Returning Finance Minister Nhlanhla Nene is expected to put paid to government guarantees, in line with Gigaba's tough talk. 

Eskom interim CEO Phakamani Hadebe told Parliament on Tuesday morning that the power utility did not expect to approach government for a guarantee after the finance market showed a strong appetite for its R72bn borrowing requirement.

READ: Eskom to tighten screws on municipalities

Mogajane told the audience at his panel discussion that there were currently no definitive plans to change any parastatal. He said the private sector would need to become increasingly involved in SOEs'  work as well as the functions they served in the economy.

“I am the last person to call for privatisation. Cabinet approved a private participation framework. It is evidence based and calls for when and how the private sector can work with SOEs to make them work. It is important to look at them with a view of maximising value for government,” said Mogajane.

Mogajane said state owned enterprises were complex in the challenges they presented to the fiscus.

Eskom's financial vulnerability is widely considered the single biggest risk to South Africa’s economy, not only because of recent mismanagement, but because of financial strains created by an growing debtor book and narrowing scope tariff increases.

READ: Ramaphosa sounds warning to SOE boards

“Addressing the boards is one thing. These companies have liquidity challenges. We should decide if we have money to throw at the companies or try to reposition them. Someone who has worked for Eskom for 30 years will tell you that it hasn’t changed,” Mogajane said.

He left the answer open-ended for what would eventually happen to the worst performing parastatals, adding that government would conduct comprehensive studies into whether this would improve the prospects of the ailing entities.

“There will be instances where we have to look at state owned companies. We can’t give away money for nothing. Would we have to close any down? Maybe yes, maybe no. Would we have to close some down or sell them all together is something that must be informed by research,” he said.

He said state owned business models from countries including Singapore would be considered.

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