South Africa’s big plan for state-owned companies hits a wall

South Africa’s plan to change how state-owned enterprises (SOEs) operate has hit a snag in Parliament, but this could be an opportunity for improvement.

President Cyril Ramaphosa previously said that South Africa’s greatest weaknesses lie in its SOEs, as many struggle with significant debt, under-investment in infrastructure, the results of state capture and a shortage of skills.

In January this year, Public Enterprises Minister Pravin Gordhan tabled the National State Enterprises Bill at the National Assembly, with significant changes to how SOEs operate in the country.

The Bill broadly sets out to do the following:

• The development of a strategy for national state enterprises;

• Establishment of the State Asset Management SOC Ltd (SAMco) with the State as the sole shareholder;

• Provides for various mechanisms to operationalise a state-owned holding company for national commercial state-owned enterprises.  

SAMco will hold ownership interests in thirteen key national government commercial enterprises, which can be subsidiaries, and will essentially replace the Department of State Enterprises.

The latest version of the Bill can be found below:

However, with Parliament’s latest term dissolving on 21 May 2024 ahead of the national election, the Bill lapsed in terms of National Assembly rule 333(2).

According to the Parliamentary Monitoring Group, a lapsed bill can be revived via a house resolution.

That said, the House can revive a bill from the stage it reached before lapsing, but this only concerns Bills that lapsed at the end of an annual session of the National Assembly.

The procedure to revive bills that lapse when Parliament is dissolved is not as clear cut.

Moreover, the Bill will have to be reintroduced to a very different-looking parliament.

After losing its majority in Parliament, the ANC is now forming a Government of National Unity with the backing of the IFP and DA.

The ANC can thus no longer push through a Bill through Parliament without the help of its former rivals.

Opportunities

The lapsing could also be a blessing in disguise amid concerns over the second/latest version of the Bill.

Olga Constantatos from Futuregrowth Asset Management, which has had its fair share of controversy involving SOEs, previously said that the second version of the Bill raised additional questions and required clarity.

Although the Bill called for the President to develop a National Strategy with consultation from the newly established Presidential Advisory Committee (PAC), the timeline for such a strategy is unclear.

“We recognise that multiple strategies have been devised by the various administrations for SOEs, but there has been a crippling lack of execution or implementation of these. Consequently, we are concerned that this objective may turn into yet another example of failed execution,” said Constantatos.

In addition, the new version of the Bill addresses concerns over the President’s power to appoint the SOE board by creating an 8-person panel to call for nominations.

Nevertheless, the President is not required to adhere to the panel’s nominations, raising alarms over their power.

There are also question marks over the omission of references to the Public Finance Management Act and Public Procurement Bill, the transfer of land rights between subsidiaries, the President’s ability to transfer their obligations to a Cabinet member and the accountability between the SAMCo Board and the various SubCo Boards.

“Many of our SOEs are a substantial drain on the fiscus. Their reform is paramount for South Africa’s economic recovery,” said Constantinos.

“We doubt that version 2 of the National State Enterprises Bill achieves this and argue that further amendments are needed to ensure that the intended outcomes are achieved.”

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