Urgent reforms are needed for South Africa's state-owned companies. But strengthening accountability isn't the same as the outright or fire sale of public assets to private entities, says acting director-general of the Department of Public Enterprises Jacky Molisane.

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The reform of South Africa’s state-owned companies (SOCs) is critical to the country’s economic recovery and future growth. However, it is essential to clarify that reform does not equate to privatisation. Instead, the focus should be on improving efficiency, governance, and accountability within these entities to ensure their long-term sustainability and contribution to the national development goals.

This reform will gain momentum over the coming months as the National State Enterprises Bill was recently presented to members of the Portfolio Committee on Planning, Monitoring and Evaluation. It is anticipated that this bill should be processed by the portfolio committee before the end of the current financial year.

SOCs have historically played a vital role in the South African economy, providing critical services in sectors such as energy, transport, and logistics. They are intended to serve as engines of economic growth, supporting both public and private sector operations. Yet, years of operational inefficiencies, mismanagement, and corruption have weakened their ability to fulfil these roles effectively. Without immediate and comprehensive reform, SOCs will continue to drain public resources and undermine South Africa’s development potential.

President Cyril Ramaphosa underlined the importance of putting SOCs on a higher trajectory when he said during the Opening of Parliament of the 7^th Administration that the new centralised model for state-owned enterprises (SOEs) is non-negotiable as this will "improve accountability, transparency, governance and oversight, while reducing inefficiency and the potential for corruption".

The reform of SOCs is critical to realise the priorities of the government of national unity (GNU).

These priorities are:

• To drive inclusive growth and job creation.
• To reduce poverty and tackle the high cost of living.
• Build a capable, ethical and developmental state.

That is why the GNU has placed inclusive economic growth at the centre of its activities during this term.

Why is reform urgent?

Financial instability: SOCs such as Eskom, Transnet, and South African Airways (SAA) have faced severe financial challenges, requiring repeated explicit and implicit government support that strain national finances. The continued reliance on public funds to prop up these entities is unsustainable. Without addressing the underlying causes of their financial instability, namely poor governance, misaligned leadership, and operational inefficiencies, SOCs will further jeopardise South Africa’s fiscal health.

Economic impact: SOCs are central to South Africa’s economic infrastructure. Failures within key companies like Eskom and Transnet have a ripple effect across the economy, contributing to bouts of load-shedding, transport delays, and higher costs for goods and services. These disruptions reduce investor confidence and erode the competitiveness of South African businesses, particularly in export-driven industries.

Development mandate: SOCs are tasked with driving transformation, ensuring equitable access to resources and services, and contributing to the achievement of national development objectives such as the National Development Plan (NDP). To meet these obligations, they must be reformed to operate efficiently and transparently. The current model undermines these goals, making it difficult for SOCs to contribute to broader societal benefits.

Reform does not mean privatisation

Critically, advocating for reform should not be confused with advocating for privatisation. Reform, in this context, refers to restructuring, professionalising management, and strengthening oversight frameworks to ensure that SOCs are operated efficiently, transparently, and in alignment with their development mandates. Privatisation, on the other hand, would involve the outright or fire sale of public assets to private entities, which may not align with South Africa’s broader socioeconomic goals, particularly regarding equity and access.

Effective reform would focus on:

Improving governance: A key reason for SOC failures is the lack of appropriate governance mechanisms. Introducing more rigorous oversight and ensuring that boards and management are selected by skilled and experienced boards, based on merit and not political patronage, would be a step toward accountability and transparency.

Operational efficiency: SOCs need to become leaner, reducing waste and inefficiencies. This may require restructuring, optimising workforces, and ensuring that internal processes support agile and responsive operations.

Accountability and performance: Performance-based management systems are crucial to holding leadership accountable for delivering on set objectives. Regular audits, adherence to key performance indicators (KPIs), and transparent reporting mechanisms by boards and management are needed to restore public confidence in these entities.

Public-Private Partnerships (PPPs): While privatisation may not be the silver bullet or only probable solution, partnerships with the private sector can bring in the necessary skills and expertise to enhance service delivery. PPPs can be leveraged to inject private sector efficiency while maintaining public ownership and control over strategic assets.

In conclusion, the reform of South African state-owned companies is no longer optional; it is a necessity. The country’s economic recovery, stability, and development depends on how quickly and effectively these reforms are implemented. By addressing issues of governance, operational efficiency, and financial sustainability, SOCs can fulfil their mandate without resorting to privatisation. Reform must be seen as a path toward rejuvenating SOCs as vital drivers of economic growth and transformation, ensuring that they continue to serve the public interest for generations to come.

Jacky Molisane has a background in economics, finance, the public enterprises and investment banking and is currently acting director-general of the Department of Public Enterprises. She holds a BA honours in economics, specialising in Monetary, International and Developmental Economics. She writes in her personal capacity.

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