Ramaphosa looks to Malaysia’s model for the future ownership of state-owned enterprises

The government is pressing ahead with the plan to establish a company that will hold the shareholding of all state-owned enterprises (SOEs) — from Eskom to Transnet — aimed at improving oversight of the companies.  

A centralised shareholder model was proposed by President Cyril Ramaphosa during his State of the Nation Address (Sona) on Thursday, in which the ownership or shareholding of SOEs is housed under one company instead of being fragmented through government departments.

For example, Eskom, SAA, Transnet and others currently report to the Department of Public Enterprises, while the South African Broadcasting Corporation (SABC) reports to the Department of Communications and Digital Technologies. Ramaphosa wants SOEs to report to one holding company instead of reporting to various and fragmented government departments. 

This is the direction recently adopted by Malaysia, which has established a company that holds all the equity or shareholding in SOEs, and has a view of selling some of the entities to private sector players. A similar direction has been taken by South Africa, which is increasingly embracing the private sector in the ownership model of SOEs.  

The proposed state-owned holding company would hold all the equity, some of which would later be sold to private sector partners or the entities listed on the stock exchange to raise capital. Having SOEs housed under the holding company would speed up the process of deal-making, especially in identifying SOEs that are deemed less strategic to the government’s economic ambitions and are subject to be sold.  

It is intended that the SOEs under the holding company would be able to stand on their own, raise capital (like private sector companies on the stock exchange) and not depend on taxpayer-funded bailouts for survival. Most of the SOEs fall under the Department of Public Enterprises in terms of their operational and governance structures.