Defence and technology conglomerate Denel was one of more than 20 state-owned companies (SOCs) which this week sent chief executives to the Union Buildings to talk economic revitalisation and development.
The meeting was called and chaired by President Cyril Ramaphosa. According to government news service SANews, he wanted to hear the views of the executive leadership of strategic state entities on challenges implementing their mandates and opportunities identified to strengthen SOCs.
In addition to Denel, senior executives from ACSA (Airports Company of SA), Alexkor, Armscor, ATNS (Air Traffic and Navigation Services), Central Energy Fund, DBSA (Development Bank of SA), Eskom, IDC (Industrial Development Corporation), Land Bank, NECSA (Nuclear Energy Corporation of SA), PetroSA, PRASA (Passenger Rail Agency of SA), Rand Water, SA Express, SAA, SABC, SAFCOL (SA Forestry Company Ltd), Sanral (SA National Roads Agency Ltd), SA Post Office, Trans-Caledon Tunnel Authority, Transnet and Umgeni Water also attended.
The President emphasised the critical role of SOCs in meeting social needs and driving economic growth. He reaffirmed government’s determination to strengthen these entities and ensure their sustainability. He noted several entities face severe financial and operational challenges posing great risks to the national economy.
In their contributions, a number of the senior executives highlighted the need for a better definition of mandates of state-owned companies and for government policy to more effectively support achieving these mandates.
The executives raised concerns about the legal and regulatory environment in which SOCs operate. These are often ill-suited to specific needs and constrain innovation. They also raised challenges about the exercise, by government shareholder representatives, of oversight responsibility and inconsistency in appointing boards.
The meeting recognised SOCs considerable resources and capabilities which, if better co-ordinated and managed, could impact positively on economic growth and job creation.
“This engagement raised several critical areas that limit the ability of SOCs to drive growth and development. These range from inadequate capitalisation and poor governance to outdated legislation and political interference. As government, we are committed to work with the SOC leadership and stakeholders to address these difficulties.
“I appreciate the frank and open manner in which executives raised their concerns. Their insights and suggestions are refreshing and will assist efforts to revitalise state-owned companies and ensure they perform properly,” Ramaphosa is reported as saying.
Inputs made at the meeting will form part of the initial programme of the Presidential SOC Council, announced earlier this year, to provide political oversight and strategic management to reposition and revitalise SOCs as catalysts for economic growth and development.
Denel has experienced difficulties with reputational damage and a liquidity crisis that saw the company make an operating loss of R1.7 billion, in the 2017/18 financial year, with revenue down by 38%.
In its latest annual report, Denel said for the 2017/18 financial year, revenue was down from R8 billion to R4.9 billion. This was largely due to the impact of the liquidity crisis and reputational damage suffered through association with state capture on all aspects of the business. Denel’s total debt has increased by R354 million to R10.1 billion (compared to R9.8 billion in 2016/17).
The company is struggling to turn around, in spite of a new board, appointed in 2018, and a new Chief Executive Office (Dane du Toit) starting this year.