• 25 April 2019
  • USB-ED
  • 5 min

Unpacking the privatisation of South African SOEs

While it hasn't been explicitly stated, unbundling is often indicative of future privatisation plans. In the calm before the elections storm, it seems President Cyril Ramaphosa is floating a few scenarios for South Africans to consider. Plans outlined by SONA and the Budget Speech for the privatisation  of Eskom and South African Airlines (SAA) have sparked nationwide debate, with unions, economists and experts the world-over weighing in.

​There are more questions than answers at this stage, with no government guarantees and things unlikely to move into full-throttle mode until elections are over.

Here are a few thoughts on privatisation and some of the biggest considerations to keep top of mind. 

A general update

The suggestion of splitting Eskom suggests a policy move towards privatisation, which may or may not be a continuation of State Capture or a hope that the private sector is better than the state sector. This has to be proved. However, there are many positives: President Ramaphosa is highly knowledgeable about how businesses and organisations work and seems to believe in good corporate governance principles. We can see this in the move to dismiss certain incompetent and corrupt CEOs, plus the appointment of a new Public Prosecutor who sounds like she means business. 

Irrespective of whether privatisation happens, more 'crooks' need to be removed and to pay for what they have done, and soon. We need clear policies, reasons and long-term guarantees regarding energy deals and prices. The public must not pay for wrong decisions.

The questions raised by the privatisation possibility

Those who believe in Capitalism (with a capital C) will probably favour privatisation. But the notion raises some serious concerns. ​

If privatisation is going to happen, how much will government own and control? How much of it is in the hands of foreign investors? Is nuclear creeping back again?

The global economic situation is wobbly. If international partners assume control of aspects of public enterprises like Eskom, we have to raise questions regarding their integrity and reliability. And how much interference they could potentially have with our political situation. We can't afford any more incidents of State Capture. 

In other countries, privatisation always means price hikes. We can't afford more price increases and lack of stability again. Costs tend to go up for everyone, unless the government has agreements with whoever takes over or establishes strict controls.  

Irrespective of whether we head down the privatisation path, state-owned companies' infrastructure will need to be replaced, following years of corruption and mismanagement. We need to consider any companies Eskom works alongside. We need to conduct rigorous due diligence to ensure these businesses are capable of doing the work to deadline, with fair compensation. 

Will a three-way restructuring split make a positive difference?

We need more details before we can say whether this will work. Right now, we only have questions: What is the ownership? Who benefits? What deals are going on at present? How will they be governed? Who will govern the big picture? What is the protection for the public in terms of price fixing? Another big question concerns the capturing and cascading of institutional knowledge and internal communication. If Eskom can't get this right as one company, how will it do so when split into three? 

Splits only work if the board and executive committees are competent, with strong track records. These can't be political appointments. The selection process needs to be done very professionally, in line with the performance of the organisation. We need ethical people who know what they're doing. Our nomination procedures are in the process of being cleaned up, but we need a totally different way to select, train and coach up top talent.

We need succession planning across our SOEs – this is common good practice. It would be an excellent idea to have objective global experts advise and monitor while these professional standards and systems are established. South Africans don't have the capacity to do this currently. 

What needs to happen from a leadership perspective?

Mentoring, coaching, clear expectations of standards, ruthless action against non-performance and corrupt practices. Clear implementation plans with outlined goals, time scales and updated total quality management across the country. 

We need a complete mind-set change as a country

Even if we went down a completely socialist path, electricity can't be completely free because the government simply can't afford this. We need a mind-set change across the country. We have two populations (rich and poor) simultaneously living two very separate lives. Our poverty population needs to appreciate why it's essential to pay for services like electricity. This needs to be reinforced through policy: people must either pay or not have access to power. This is a massive – and essential – education job. We need less dependence on the state fiscus. 

Right now, there's an overriding sense of anxiety. And a huge number of people who feel disempowered. Leadership has to come from all of us. People need to be hopeful, learn how to take initiative, be creative and take responsibility for their future. Politicians can only do so much.

We need to set new paradigms wherein we rethink how we work together. We need the inspiration to be put back into SA. If we get that right, the willingness would be there. Eskom is a symptom of our disease of the spirit and the soul. 

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