After the Bell: South African SOEs — one corporate ring to rule them all

The government is considering restructuring its portfolio of state-owned enterprises (SOEs), and putting the major corporations into a single vehicle, taking its cue from the approach of other countries, particularly Singapore, China and Malaysia.

The essential thinking behind this idea is to try to reverse the massive flight of skills and human capital that has reduced a whole range of once-proud entities into dysfunctional, uncompetitive and degraded organisations. But will putting all the SOEs into a single pot make it boil? Or will this be another complicated reshuffling of the deckchairs on these ships that won’t keep them from sinking?

Internationally, state-owned enterprises had a moment in 2015 when people around the world started to realise how important the sector was. At that point, there were some 142 SOEs on Fortune magazine’s list of the top 500 companies, up from 64 a decade earlier. Revenue of these companies had increased from about $3.5-trillion to a little over $7-trillion during the same period.

It seemed, for a moment, that a new form of business might be emerging, one which might balance private interests with those of the populace in general, as represented by the state. By far the biggest contributor to this expansion was the Chinese government-owned companies, whose revenue constituted about 15% of the total revenue of those 142 companies. The revenue of all the other companies combined was more or less static over the period.

This was such a contrast with the 1990s and the early 2000s, when all the movement seemed to be in the opposite direction, and much of the European policy direction was the other way around, towards private rather than government ownership. The privatisation drive in Europe and particularly the UK was mirrored by increasing private sector inclusion into state-owned enterprises all over the developing world.

Since 2015, the situation has more or less plateaued. Today there are still about 141 SOEs on the Fortune 500. But the global enthusiasm for SOEs has waned, I would guess, although the previous enthusiasm for privatisation has not returned.

Over this period, movement on this front in South Africa was gelatinous. The Department of Public Enterprises, established in the 1990s by the departing apartheid government to sell down the assets, just got stuck in aspic. The only logic behind putting, for example, Transnet into a ministry separate from the transport ministry was that the government didn’t expect it to be part of the government for long. But nothing happened. For years. And the whole package exists to this day almost unchanged in the public enterprises ministry. There were some slight movements during the Mbeki administration: SAA got a private shareholder, as did the Airports Company of SA.

It seemed for a moment that SA might join the global community, but alas, the ANC’s left-wing stalwarts just couldn’t get their heads around the idea of partial private ownership, never mind full privatisation. You do slightly have to wonder where Eskom would be today if people like Alec Erwin and Blade Nzimande had not slammed the door on partial privatisation in late 2010. They have an enormous amount to answer for.

Bankruptcy