Collapse of SOEs an outcome of ANC’s political, economic policy failures

By Trevor Ngwane

“Things fall apart; the centre cannot hold” might best describe what is happening to the ANC government and the state-owned enterprises (SOEs) it runs.

Eskom has thrown the country into a dark hole of rolling power cuts that disrupt all aspects of everyday life. Since 2013, the Passenger Rail Agency of South Africa (Prasa), forced an estimated 80% of train users – 550 000 people – to abandon rail and turn to more expensive modes of public transport. In 2021, the government relinquished its controlling stake in SAA, its flag carrier airline, after many years of financial losses that culminated in the suspension of operations and voluntary business rescue.

The spectacular failure of some key SOEs in South Africa have become grist to the mill of free marketeers who espouse privatisation. The neo-liberal ideologues want the withdrawal of the state from key sectors of the economy and the surrender of state ownership and control of SOEs to the private sector. Their ideas are finding resonance in the light of the mismanagement, corruption, financial distress and state bailouts that have become closely associated with Eskom, Prasa, SAA, the South African Post Office, Aleksor, and other SOEs.

Like the electricity blackouts, the mess around the SOEs could be another nail in the coffin of the ANC’s electoral fortunes in 2024.

The irony is that it is mostly the black working class and the poor – ANC voters – who benefit from efficient and well-run SOEs, and who suffer the most when the entities are badly run, corrupt and a drain on the public purse.

Under apartheid, the twin objectives of SOE establishment, which are socio-economic development and financial sustainability, largely benefited a small white minority through job reservation and the promotion of white business. Well-managed, efficient SOEs can provide the population with crucial goods and services at affordable prices. Just like they did under apartheid for whites only, SOEs should perform non-commercial functions such as cheap credit, affordable housing, clean energy, safe public transport and reliable postal services, for all.

South African SOEs play an important role in the sectors of energy, mining, communications, air and rail transport. They are crucial in the country’s economic growth and development strategy. They provide services and infrastructure necessary for the optimal operation of the private sector as the debilitating power failures have dramatically shown. SOEs also contribute to the diversification of the economy.

All this requires SOEs to operate efficiently. When they are ridden with poor governance, mismanagement and corruption, this has negative economic consequences including reducing economic growth, lowering incomes and leading to job losses and increased poverty.

Globally, at least 10% of companies are SOEs, defined as those in which the government owns more than 50% of the shares. They are regarded as entities that facilitate the realisation of the state’s economic, social, strategic and, sometimes, even foreign objectives. In South Africa, according to the National Development Plan, they ought to “address the country’s developmental objectives in areas where the executive arm of government or private enterprise were unable to do so effectively”.

Historically, there has been a strong state presence in the country’s infrastructure sector which must extend to address and redress the continuities of past injustices and inequalities. In other words, the SOEs must facilitate the provision of goods and services to the impoverished areas, classes, races and genders of the country. They should help in the redistribution of wealth.

The failures of the ANC government go beyond the SOEs. The dysfunctionality of the SOEs, including the failure to reach their developmental goals, is best understood in the context of the ANC’s broader economic and political failures. The party’s economic policy has tended to favour the rich and powerful, the capitalists and not the workers. Unemployment has increased exponentially. Everyday life for the working class and the poor has become a crisis. Hardship and suffering for the masses have been normalised. The rich have become richer and the poor poorer.

The ANC does not want to challenge the power of those who benefited from colonialism, apartheid and capitalism. It prefers to co-operate with vested interest and to facilitate the formation of an aspirant black bourgeoisie through the use and abuse of state levers of political and economic power. The ANC government has lost its way. The vision of a better life for all, not a few, has been forgotten. It is in this context that the SOEs have been reduced to the sorry state that they are in. Could it be that the ANC leadership has shifted so much away from the goals of national liberation that it may be impossible for it to implement reforms that would rid the SOEs of mismanagement and corruption?

In the quest for reform, President Cyril Ramaphosa has established the Presidential State-Owned Enterprises Council which has recommended the adoption of a centralised shareholder model whereby ownership will be separated from policymaking and regulatory functions, thus minimising political interferences. A centralised SOE model will be implemented which will ensure standardised governance, financial management and an operational performance framework for all SOEs. Significantly, a new state-owned asset management company will be established which will manage a diversified portfolio of assets and will, ultimately, report directly to the president.

A better solution lies in struggling to reorient the SOEs towards serving the country’s strategic developmental goals. Best practice in the running of SOEs that prioritises care, honesty, worker and community participatory democracy and control for public servants and the public must be mainstreamed. Self-enrichment, corruption and mismanagement must be punished. Efficiency, accountability and financial responsibility must be rewarded. Hope, trust and solidarity must reign.

The President’s SOE Council has arguably adopted a private sector model that prioritises commercial interest over developmental goals when it recommends that a profit-driven asset management company should take charge of the SOEs. This is not the right solution for a country that owes millions a better life and needs to roll back the legacy of past injustices. It seems the ANC is destined to fail the people again.

*Trevor Ngwane is the Director of the Centre for Sociological Research and Practice, University of Johannesburg.