Update: The draft bill presented in this article is the original draft of the plan as well as the criticisms by business on that draft. The Department of Public Enterprises has provided a clarification and update on the bill here.
Cabinet has approved the Draft National State Enterprises Bill for tabling in Parliament.
The Bill is set to create a new state-owned holding company – the State Asset Management SOC Ltd – which will manage the finances of the nation’s various state-owned enterprises (SOEs) after the Department of Public Enterprises closes.
According to the original draft bill, which was tabled in September, the government aims to do the following with the bill:
- To establish the State Asset Management SOC Ltd;
- To provide for the State as the sole shareholder of a holding company;
- To consolidate the State’s shareholdings in state enterprises;
- To provide for the powers of the shareholder on behalf of the State;
- To provide for the phased succession of state enterprises to the holding company;
- To provide for the holding company’s powers as shareholder of subsidiaries;
- To provide for the restructuring and management of subsidiaries for developmental purposes;
- To provide for appropriate and effective performance monitoring mechanisms over subsidiaries;
- To provide for the corporatisation of those state enterprises that are not registered as companies;
- And to provide for matters connected therewith
The Draft Bill can be found below:
A serious player
Business Leadership South Africa CEO Busisiwe Mavuso said that the State Asset Management SOC Ltd will have the power to turn around the nation’s struggling SOEs. It will also allow the government to focus on policy and regulatory issues whilst focusing on the commercial aspects of running SOEs.
“To achieve that, the holding company would need a level of independence to be able to make operating decisions that ensure the financial performance of the SOEs. It should have budgetary autonomy, and its legislation should give it full authority over the operating and financial affairs of the SOEs,” she said.
“It needs a board of accomplished, experienced professionals with extensive corporate expertise and not political cronies. In turn, it must have authority over the boards it appoints to manage the SOEs and to monitor performance and ensure delivery.”
She said that it is positive that the Bill allows the holding company to have oversight over SOEs and that it allows for the corporatisation of state enterprises that are not yet technically companies as per the Companies Act.
“But one disappointment is that the legislation envisages the holding company being only sole or majority shareholder, leaving out the option of minority ownership, which may sometimes be optimal, as the Telkom example illustrates,” she said.
Another concern is that the President is the sole representative of the company and not the Minister of Finance – who would prioritise financial sustainability.
“All business can take from the legislation as tabled is that the new holding company might be a good thing, but it also might not, depending entirely on how it is implemented. Indeed, the worst fear is that it becomes yet another expensive white elephant that adds no value,” she said.