President Cyril Ramaphosa says the government was not ready to totally dispose of its loss-making core assets, including cash-strapped entities Eskom and South African Airways (SAA).
In his weekly newsletter, Ramaphosa said the government would retain ownership of all state-owned enterprises (SOEs) that were deemed strategic.
Ramaphosa said despite severe financial difficulties and operational problems, SOEs had great assets, a large and diverse cohort of skilled people, and solid track records.
He indicated they had the potential to contribute to economic growth and job creation.
“Where necessary, and where appropriate, we will seek strategic equity partners to assist with raising capital, injecting skills and technology, and improving efficiency,” Ramaphosa said. “This must be done transparently and in a manner that strengthens – rather than weakens – the ability of the state to meet the development needs of the people.”
Ramaphosa’s view is likely to ease tension between the government and labour, as trade unions fear that the ruling party wants to privatise SOEs and retrench workers.
Some of the problems at SOEs had been caused by outdated business models that were no longer fit for purpose. Tough decisions needed to be made over the future of South Africa’s struggling SOEs and how to turn them around.
“Despite the depth of current challenges, none of our SOEs is lost. They can all be saved. But it will take extraordinary effort and, in some cases, tough decisions,” he said.
Last week, SAA’s board placed the airline in voluntary business rescue to save it from liquidation.
The government had to back the airline with post-commencement finance amounting to R2 billion outside what was budgeted for in the medium term, and another R2bn guarantee to ensure its financial and operational sustainability.
Ramaphosa noted the financial crisis at SAA had become so grave that the only way to secure its survival was to take this extraordinary measure.
“This is why we supported the decision last week to place SAA into business rescue. There was no other viable and financially workable option for a credible future for the airline,” he pointed out.
Eskom has began rolling out controlled power cuts in a bid to alleviate the load on the grid as the troubled power utility experiences increasing unplanned breakdowns.
The government has appointed former Nampak chief executive Andre de Ruyter to steer Eskom out of trouble while the power utility is being unbundled to make it more efficient.
Ramaphosa said a vital part of the turnaround effort was to reduce the dependence of SOEs on bailouts and guarantees from government.
“It is for this reason, for example, that Eskom is in the process of establishing three separate entities for generation, transmission and distribution,” he explained.
“This will not only help Eskom overcome some of its financial and operational challenges, but it will contribute to a more efficient, cost-effective and sustainable energy sector.”
Business Unity SA (Busa) chief executive Cas Coovadia said that load shedding had a detrimental impact on business, particularly when businesses were looking forward to a festive season boost.
“This impact is particularly hard on medium businesses. That there’s stage 4 load shedding immediately after some cold weather is indicative of the fragility of the electricity infrastructure,” Coovadia said.
He added: “That this is a further sign of the crisis at Eskom and a warning that the government must enable the chief executive designate the space and authority to take the tough decisions necessary to address the issues.” -BusinessReport
