This is the DA’s plan for Eskom and other SOEs

On Monday (18 June), Eskom announced that it will take 10 days for the national power grid to recover from the effects of the illegal strike action by Eskom employees, who were demanding a 15% wage increase.

“Although the current load shedding has been exacerbated by the industrial action, the reality is that the years of mismanagement at Eskom lies at the root of this crisis,” said the DA’s Shadow Minister of Public Enterprises, Natasha Mazzone at a press conference in Parliament on Monday.

“Load shedding is the direct result of State Capture. For years, under the watchful eye of the ANC, ineffective executives streamlined dodgy contracts for the benefit of the Gupta family,” she said.

As part of her statement, Mazzone referred to a state-owned enterprises (SOE) document that focuses on turning around the struggling and financially crippled SOEs in South Africa, and confirmed that the party was looking at a Private Members Bill with the ultimate goal of making the energy sector more competitive.

According to the document which was released in May, the DA plans to do the following as apart of complete turnaround strategy for the country’s SOEs:

De-politicalising SOEs

The DA said that the country’s state owned companies need to depoliticise, including appointments to the boards of said SOEs.

To this end, the DA would advocate for board members to, among other things:

  • Be appointed based on their business knowledge and expertise;
  • Be vetted for political connections and conflicting business interests with the SOE and its suppliers;
  • Lifestyle audits should be carried out annually; and
  • A Codes of Good Practise should be instituted.

Introduce professional expertise

Often SOE boards and top management lack commercial expertise and requisite skills to create environments in which decisions are made with profitability or sustainability in mind, the party said.

Some of the DA’s proposals in this regard are:

  • To place a greater emphasis on graduate recruitment programmes and the hiring talented immigrants, who can bring much-needed skills;
  • To revamp employee compensation systems in line with international best practices, which is linked to stringent performance criteria; and
  • That rewards and promotions be based on merit, not tenure.

A focus on becoming competitive

The Department of Public Enterprises (DPE) is the sole or main shareholder of SOEs. This means SOE executives often have to juggle multiple conflicting and opaque financial and social objectives. The result is that profitability and economic sustainability is conflated with ideological and political concerns, the DA said.

For this reason, the DA proposes that:

  • SOEs have clear mandates that set financial objectives and sustainability as primary goals;
  • Key performance indicators (KPI) are selected, contributing to the creation of a performance-based culture;
  • Profit and non-profit objectives of SOEs must be clearly defined and matched to industry standards and best practices for financial targets;
  • Non-core activities and assets need to be examined and if necessary sold off, franchised, outsourced, or terminated; and
  • SOEs must pursue an operational campaign focusing on improved technical capabilities and a more effective working culture with excellence at its core.

Good governance based on transparency

A major reason for the corruption is the lack of clear and transparent procurement of contracts and tenders for politically connected parties which have hampered service delivery, the DA said.

The DA would see that:

  • SOEs communicate regularly (monthly) on progress achieved with regard to KPIs and on social and financial objectives to maintain public support and buy-in;
  • Performance agreements with executives must be publicly available and executives must be held accountable for these;
  • The tender awarding process for contracts over a certain value should be made open to the public at the adjudication stage to avoid cases of political interference; and
  • Procurement oversight at SOEs must be strengthened through the creation of internal procurement oversight committees, consisting of selected internal auditors that would report to the board.

Accelerate the introduction of private equity partners

It is unsustainable for government to continue to support financially unviable SOEs, the DA said.

“The Department must accelerate the process of restructuring ownership. This requires the government to look at the partial or full privatisation of a number of SOEs by bringing in private equity partners and disinvesting from non-core SOEs urgently.

“Privatisation which can stimulate a more dynamic industrial infrastructure; provide SOEs with the fiscal discipline of the marketplace; and bring in vital cash injections, skills, systems and expertise.

“The sales of SOEs would need to be managed by an independent board to prevent oligarchs from forming,” it said.

Streamline government oversight

It is urgent that we dissolve the ineffective and frankly, pointless, Department of Public Enterprises and manage the SOEs under their rightful Departments, the DA said.

“For example, in the case of Transnet, the government should return it entirely to the Department of Transport. Eskom should move to the Department of Energy and Denel should go to the Department of Defence. This would improve the lines of accountability and communication and also align SOEs with the efforts of their rightful portfolio.

“Another option would be to move and consolidate SOEs to different departments. Clustering and centralising them in the following groupings: commercial, development finance institutions, statutory corporations, and non-commercial SOEs,” it said.

Read: Why it will take Eskom’s grid up to 10 days to recover from strike action

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This is the DA’s plan for Eskom and other SOEs