Wait-and-see attitude on new SOE model


A part of SONA (State of the Nation Address) indicating a new, centralised model for State-owned enterprises (SOEs) was, as with other Presidential pronouncements during last week’s address, criticised more than praised.

According to government’s news agency, SAnews, President Cyril Ramaphosa said the centralised SOE model would ensure a standardised governance, financial management and operational performance framework for all SOEs.

“To support our reform process, the Presidential SOE Council outlined a clear set of reforms that will enable these vital public companies to fulfil their mandate for growth and development,” the news agency quotes Ramaphosa as saying.

“The President added overarching legislation for parastatals will be tabled in Cabinet this financial year and Parliament in the next financial year.

“The mandates of all SOEs are being re-evaluated to ensure they are responsive to the country’s needs and the implementation of the National Development Plan (NDP),” he said.

“South Africa’s SOEs have over the years faced a financial and leadership crisis that have led to near collapse and often required government bailouts amounting to hundreds of billions.”

Troubled Denel is the only SOE in the defence industry sector and it, among others, is facing legal challenges from trade unions while it attempts to sell off loss-making companies and operating divisions to return to profitability.

The Presidential SOE Council held its inaugural meeting in November last year following the naming of its members in June. Its aim, according to The Presidency, is “to support government in repositioning SOEs as effective instruments of economic transformation and development”.

Denel chair Monhla Hlahla is one of nine council members.

Ghaleb Cachalia, the Democratic Alliance’s (DA) shadow public enterprises minister, said the ruling party was “at the root of slow implementation of reforms” adding “another layer of bureaucratic meddling in already dysfunctional SOEs will worsen the challenges”.

African Defence Review director Darren Olivier was not prepared to comment on the presidential SOE pronouncement because both Ramaphosa’s address and the SAnews report did not have “enough information”.

“At face value it seems to be just another case of kicking the can down the road,” he said.

He did, however, lambaste the Department of Public Enterprises (DPE) for not supporting Denel. The company would have sold its 30% share in Hensoldt Optronics South Africa last year but the Department only approved the transaction after the offer expired. This means negotiations have to restart.

“This is infuriating. How can any SOE like Denel possibly be agile enough to save itself when Public Enterprises casually takes more than a year to return an approval for an action  already part of an approved turnaround plan? With no regard for the deadline?

“Denel has no operating capital. One of the only ways it can generate cash is by selling non-core businesses, like the stake in Hensoldt. Denel created a turnaround plan and had it approved by DPE to avoid costly delays, yet those unnecessary and costly delays still happen.

“I’m not one for conspiracy theories, but at this point the sheer neglect and incompetence which the departments of Public Enterprises and Finance are handling the fast-collapsing crisis that is Denel makes you believe they could not care less if it failed,” Olivier maintains.