ANALYSIS | Ministers have their work cut out on SOE reforms

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Public Enterprises Minister Pravin Gordhan  Picture: Getty Images
Public Enterprises Minister Pravin Gordhan Picture: Getty Images

Efforts to turn SOEs around will be naught if the legislation is not cutting-edge and the oversight structure is depoliticised, writes Bheki Mfeka.

Plans without implementation are a little more than a wish list.

Traditionally the State of the Nation address (SONA) should be about real plans and real implementation. When it comes to SOE reforms, we should not blame President Cyril Ramaphosa alone if his plans on reforms become a mere wish list as we continually observe or monitor progress or lack thereof in economic restructuring.

Credit rating agencies are not alone in measuring the credibility of promises - all of us should be concerned.

According to section 85 (2b, c, and d) of the Constitution, the President exercises the executive authority together with other members (Ministers) of the Cabinet by "developing and implementing national policy", "coordinating functions of state department and administrations", and "preparing and initiating legislation" - he can therefore be forgiven for thin or non-existent detail on implementation of reforms.

During SONA, the President sets out the high-level goals for the budget cycle and financial year, and ministers are responsible for execution.

Now the spotlight must be on the key ministries that are responsible for State Owned Enterprises (SOEs), development finance institutions (DFIs) not being spared scrutiny.

READ | Sona: Ramaphosa looked to cast a spell on an ailing economy and it will be tested

Key ministries that host these SOEs include Public Enterprise, Transport, Telecommunications and Postal Services, Water and Sanitation, among others. Often the focus is on Public Enterprises, yet SOEs are scattered all over government and ministries in its three spheres. Hence, the intention to centralise oversight is well overdue in that regard.

With South Africa under pressure to implement reforms, which are fundamental to economic restructuring and recovery, we had high expectations for the President to outline specific challenges facing SOEs and provide urgent, specific and cogent implementation targets.

Junk status 

Recovery alone to pre-Covid-19 levels will not be sufficient to get us out of the woods, since we were already downgraded to junk status by all major rating agencies and were in a recession before the Covid-19 hard lockdown started in March 2020.

We know very well that SOEs were gasping for oxygen, most of them showing signs of insolvency and worsening revenues already.

Failure to pay salaries in SOEs like SAA, Denel, SABC, Land Bank, and Post Office, and in several instances, failure to publish annual financial statements are a serious indication of solvency challenges, questioning to the core their going-concern status.

Indeed, much of it has to do with corruption and looting, but we must also agree that even more has to do with changed market conditions; outdated business models and mandates; and weak oversight capacity.

The major grey area in the SONA, which we hope the Minister of Finance and other ministers will tackle sufficiently, is the short to medium-term survival/turnaround interventions especially for those SOEs which may be deemed strategic for South Africa's development and growth trajectory.

While the President and the SOE Council contemplates the legislation and centralised oversight model, which, in our books, will take not less than four years to come to fruition; it's important for the Council and all ministers concerned to vigorously start the groundwork on strategic SOEs immediately.

The National Planning Commission (NPC) has done excellent examination, for example, of infrastructure SOEs and what is required to align them for implementation of the infrastructure programme considered by the President as key to his Recovery and Reconstruction Plan. This therefore calls for intensified two-pronged and aligned implementation of SOE reforms.

On one hand, clarifying by gazetting strategic SOEs to the Recovery and Reconstruction Plan and National Development Plan with dedicated resources and capacity provisions for their turnaround.

In the case of Eskom, for instance, a clear roadmap to cost-cutting, debt-reduction, and improvements in efficiency evidenced by elimination of load shedding, and increased revenues.

The gradual implementation of electricity market reforms and unbundling must not be to the detriment of Eskom's sustainability as a going concern. Again, Eskom is too big to fail; we should not dare do what we did at SAA to Eskom.

Weak and disparate legislation

On the other hand, the SOE Council and concerned ministers must find a way of implementing the SOE legislation and centralised oversight model on an emergency basis.

This must be premised on the understanding that the state of SOEs is a state of the emergency. I was actually very worried when the President said the legislation will be presented to Cabinet in the next financial year, and to Parliament the year after. This means governance improvements are likely to happen after five years, if at all.

This is worrisome considering that at the core of challenges facing SOEs is weak and disparate legislation and oversight which has paralysed governance through the public sector since 1994.

READ | Ramaphosa must show he can take hard decisions at SONA says business lobby group

All efforts at turning around SOEs will turn into naught if the legislation is not cutting-edge and the oversight structure is depoliticised and top-notch quality human capital and technology are not employed.

Having mentioned all of this, ministers will need to make a complete departure form planning to implementation of plans.

The Minister of Public Service and Administration (DPSA) will be well-positioned to drive in the importance of understanding what implantation and capacity to implement SOEs reforms is beyond intentional statements on building state capacity.

This is important to avoid the whirlwind of normal and traditional government politics and bureaucracy that hamstrung implementation.

In the same vein we must understand that SOE reforms will not happen all at the same time in the shortest period, it will require shared leadership objectives beyond one government administration, and across political divide.

With South Africa's election calendar rendering political office effectively to two years (national and provincial; local government elections and political party internal elections in-between) uninterrupted focus, implementing reforms must be harnessed by leadership across the board, in the same manner there was unanimity on the NDP's Vision 2030.

- Dr Bheki Mfeka, is the Economic Advisor and Strategist at SE Advisory; and former Project Manager for Research, Presidential SOEs Review Committee. His twitter handle is @bhekimfeka

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