The Restructuring of State-Owned Enterprises In The Current Climate

By Jabulani Mzaliya

The Book, divided into two parts, the Policy Environment and the Recommendations, reviews the South African Government's blueprint for the restructuring of its State-Owned enterprises, the Accelerated Agenda For The Restructuring of State-Owned Enterprises. The document was published in 2000, but a lot has happened, both politically, socially and politically since then. The need for it to be reviewed to be in line with the current conditions is urgent. 

The Book traces the pre-1994 debates as they relate to the management of the State enterprises, but emphasizes that the original intention of privatizing these State entities was not possible because they were needed to assist the post-Apartheid and developmental State.  The fastidiousness of the ideological positions has suddenly changed and there is an acceptance that the State can be a good custodian of the assets as the private sector can be a bad one. Significantly, the trade unions which opposed privatizations have investments, called the Trade Union Investment Companies (TUICs) which compete for some State privatization deals.

Of the current problems which limit the pace of the State to successfully restructure, only a few are given such as decaying infrastructure, the changing policies, corruption and how the Judiciary (the Zondo Commission) has been selective in dealing with it, the hope that things will turn for the better, the dubious pre-1994 privatizations, the policy emphasis on the role of the State and its (restructuring non-ideological nature.

The second part zooms into the Accelerated Agenda and identifies 24 areas that should either be changed or improved in the document. These range from transactions with a human face, ending fronting tendencies, the commitment of the Minister, allowing the entry of Black Chips, Listing in the local bourses, improved communications and marketing, Attraction of foreign investors, easy to understand language as well as extending benefits to vulnerable groups. 

• Language: English
• Publisher: Jabulani Mzaliya
• Release date: Jan 20, 2022
• ISBN: 9798201602123

Jabulani Mzaliya

Jabulani Mzaliya was Special Adviser to the Minister of Energy in the Republic of South Africa. He also served as a Trustee of the Albert Luthuli Centre For Responsible Leadership based at the University of Pretoria. He holds a Doctorate of Philosophy from the University of Zululand (UZULU). He taught Politics at the same University. He has a Certificate in Post-Privatization, which he obtained from International Law Institute, Washington DC. He was Director of Strategic Analysis: Department of Public Enterprises (DPE) from 2001 to 2004. He was Deputy Director-General: Policy at the Department of Transport. He is Director of Transport Policy and Regulation (TRANSPOREG), a company specializing in policy and regulation of the Transport industry. The thoughts in this Paper stem from his nostalgic attachment.

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ABBREVIATIONS

1IR  First Industrial Revolution

2IR  Second Industrial Revolution

3IR  Third Industrial Revolution

4IR  Fourth Industrial Revolution

AA  Affirmative Action

AA  Anglo American

ABET   Adult Basic Education and Training

AbM  AbaHlali basMjondolo

ABSA   Amalgamated Banks of South Africa

ACSA   Airports Company of South Africa

ADR   Aeroport da Roma

AEB  Atomic Energy Board

AEEI  African Equity Empowerment Investments

AFS  Annual Financial Statements

AG  Auditor-General

AI  Artificial Intelligence

AIDS  Acquired Immune Deficiency Syndrome

AIP  Association of Independent Publishers

AMSA  Arcelor Mittal South Africa

ANC  African National Congress

AO  Accounting Officer

APA  American Psychological Association

APEC  Asia- Pacific Economic Cooperation

APF  Agence Press France

API  Active Pharmaceutical Ingredients

APP  Annual Performance Plan

AR  Augmented Reality

ARMSCOR Armaments Corporation (of South Africa)

ASD  Alternative Service Delivery

ASGISA Accelerated and Shared Growth Initiative of South Africa

ATNS  Air Transport Navigation Service

AU  African Union

BAIC   Beijing Automotive Industries Holding Corporation

BBBEE  Broad-Based Economic Empowerment Commission

BBC  Black Business Council

BC  Black Consciousness

BCEA   Basic Conditions of Employment Act

BCG  Boston Consulting Group

BComm  Bachelor of Commerce

BCX  Business Connection

BDP  Botswana Democratic Party

BEM   Black Emergent Miner (Strategy)

BIT  Bilateral Investment Treaty

BLSA   Business Leadership South Africa

BPC  Black People’s Convention

BRICS  Brazil, Russia, India, South Africa

BRP  Business Rescue Practitioners

BSE  Department of Basic Education

BUSA  Business Unity South Africa

BV  Besloten Vennootscap

CAGR  Compound Annual Growth Rate

CALS  Centre for Applied Legal Studies

CASAC  Council for the Advancement of the South African Constitution

CBO  Community-Based Organization

CCFF  Compensatory and Contingency Financing Facility

CCI  Commission for the Control of Interpol’s (Files)

CCM  Chama cha Ma Pinduzi

CD  Chief Director

CDS  Centre for Development Studies

CEC  Central Executive Committee

CEE  Commission for Employment Equity

CEO  Chief Executive Officer

CEO  Corporate Europe Observatory

Ceppwawu Chemical, Energy, Paper, Printing, Wood and Allied Workers’ Union

CER  Centre For Environmental Rights

CFI  Corporate Finance Institute

CFR  Council for Foreign Relations

CGT  Capital Gains Tax

CIO  Chief Information Officer

CITIC  China International Trust and Investment Corporation

CJ  Chief Justice

CNN  Central News Network

CNPTC  China National Petroleum Trading Company

CNR  China North Rail

CODESA Convention for A Democratic South Africa

Compcom Competition Commission

Concourt  Constitutional Court

COO  Chief Operations Officer

COPE  Congress of The People

COSATU Congress of South African Trade Unions

CPS  Country Partnership Strategy

CRA  Credit Rating Agencies

CRI  Corporate Research and Investigations.

CRO  Chief Restructuring Officer

CSIR  Centre for Scientific and Industrial Research

CSSE   Centre for Systems Science and Engineering

CTL  Coal-To-Liquid

CWU  Communications Workers’ Union

DAC  Department of Arts and Culture

DBE  Department of Basic Education

DBSA  Development Bank of Southern Africa

DCDT  Department of Communications and Digital Technologies

DCJ  Deputy Chief Justice

DDG  Deputy Director-General

DEA  Department of Environmental Affairs

DEIC  Dutch East India Company

DEL  Department of Employment and Labour

DEU  Drug Enforcement Unit

DFFE  Department of Fisheries, Forestry and Environment

DFI  Developmental Financial Institutions

DG  Director-General

DHA  Department of Home Affairs

DME  Department of Minerals and Energy

DMCC  Dubai Multi Commodities Centre

DOD  Department of Defence

DOH   Department of Health

DOJ and CD  Department of Justice and Constitutional Development

DOT  Department of Transport

DPCI  Directorate of Priority Crimes and Investigations

DPE  Department of Public Enterprises

DPME  Department of Performance Monitoring and Evaluation

DPSA  Department of Public Service and Administration

DRD  Durban Roodepoort Deep

DRDLR  Department of Rural Development and Land Reform

DSD  Department of Social Development

DTI  Department of Trade and Industry

DTIC  Department of Trade Industry and Competition

EA  Executing Authority

EDF  Electricité de France

EDI  Economic Development Institute

EE  Employment Equity

EFF  Economic Freedom Fighters

EIUG  Energy Intensive Users Group of South Africa

EMG  Environmental Monitoring Group

EPG   Eminent Persons Group

ERRP  Economic Reconstruction and Recovery Plan

ESD  Enterprise Supplier Development

ESOP  Employer Share Ownership Programmes

EU  European Union

EUR  Euro

EV  Electronic Vehicle

EY  Ernst & Young

FAPLA  Front African People’s Liberation Army

FDI  Foreign Direct Investment

FEDUSA Federation of Unions of South Africa

FHLMA  Federal Home Loan Mortgage Association

FLMSA  Liberation Movements of Southern Africa

FMF  Free Market Foundations

FNMA  Federal National Mortgage Association

FRELIMO  Mozambique Liberation Front of Mozambique

FSU  Former Soviet Union

GAAP  Generally Accepted Accounting Practice

GCEO  Group Chief Executive Officer

GDP  Gross Domestic Product

GEAR  Growth Employment and Recovery Strategy

GEPF  Government Employee Pension Fund

GFB  General Freight Business

GGA  Good Governance Africa

GI  Geographic Indications

GIBS  Graduate Institute For Business Science

GM  General Motors

GNU  Government of National Unity

GS   General Secretary

GSE  Government-Sponsored Enterprises

GTL  Gas-To-Liquid

GW  Gigawatts

HAI  Historically Advantaged Individuals

HCI  Hosken Consolidated Investments

HDI  Historically Disadvantaged Individuals

HIV  Human Immuno-deficiency Virus

IAR  Industrial Action Report

ICASA  Independent Communications Authority of South Africa

ICE  Intercontinental Exchange

ICESCR  International Covenant on Economic, Social and Cultural Rights

ICM  Integrated Coastal Management (Act)

ICT  Information Communications and Technology

ID  Identity Document

ID  Investigating Directorate

IDC  Industrial Development Corporation

IDEA   Institute For Democracy and Electoral Assistance

IDT  Independent Development Trust

IFC  International Finance Corporation

IFI  International Finance Institution

IFP  Inkatha Freedom Party

IGA  Intergovernmental Agreement

ILO  International Labour Organization

IMF  International Monetary Fund

ING  Internationale Nederlanden Groep

Interpol  International Police

IOD  Institute of Directors

IOL  Independent On-Line

IOT  Internet of Things

IPAP  Industrial Policy Action Plan

IPO  Initial Public Offer

IPP  Independent Power Producers

IRJ  International Rail Journal

IRP  Integrated Resource Plan

ISCOR   Iron and Steel Corporation

ISI  Inter-Services Intelligence

ISS  Institute of Security Studies

ITU  International Telecommunications Union

JET  Just Energy Transitions

JSE  Johannesburg Securities Exchange

KEPCO  Korea Electrical Power Corporation

KKMIC  Kopano KeMatla Investment Company

KNP  Kruger National Park

KPI  Key Performance Indicators

KPMG  Kleynveld, Peat Marwick, and Goerdeler

KPSC  KwaZulu Public Service Commission

LAB  Legal Aid South Africa

LADBSA Land and Agricultural Bank

LCS  Living Conditions Survey

LFS  Labour Force Survey

LGE   Local Government Elections

LGL  Liberty Group (JSE Share Name)

LNM  Lakshmi Niwas Mittal

LON  Lonmin (JSE Share Name)

LRA  Labour Relations Act

M&A  Mergers and Acquisitions

MCOGTA Minister of Cooperative Governance and Traditional Affairs

MD  Managing Director

MDM  Mass Democratic Movement

MEC  Member of the Executive Council

MERG  Macro Economic Research Group

MGX  Micro Global Exchange

MHA  Minister of Home Affairs

MICE  Meetings, Incentives, Conference, and Exhibitions

MITI  Ministry of Trade and Industry

MK  Mkhonto Wesizwe

ML  Machine Learning

MLA  Mutual Legal Agreement

MME  Minister of Minerals and Energy

MNC  Multinational Corporation

MOD  Minister of Defence

MOE  Minister of Energy

MOF  Minister of Finance

MOI  Memoranda of Incorporation

MOP  Minister of Police

MP  Member of Parliament

MPE  Minister of Public Enterprises

MPLA   Movement for the People’s Liberation of Angola

MPN  Multiparty Negotiations

MPRDA  Minerals and Petroleum Resources Development Act

MPW  Minister of Public Works

MTC  Mthunzi Telecoms Consortium

MTI  Minister of Trade and Industry

MTN  Mobile Telephone Network

MW  Megawatt

NACTU  National Council of Trade Unions

NADEL  National Democratic Lawyers Association

NALEDI National Labour and Economic Development Institute

NASREC National Recreation Centre

NDP  National Development Plan

NEASA  National Employers Association of South Africa

NECSA  Nuclear Energy Corporation of South Africa

NEDLAC National Economic Development and Labour Council

NEF  National Empowerment Fund

NEHAWU  National Education, Health and Allied Workers

NEM  Normative Economic Model

NEPAD  New Partnership for Africa’s Development

NERSA   National Energy Regulator of South Africa

NFA  National Framework Agreement

NGO  Non-Government Organization

NGP  New Growth Plan

NIC  New Industrializing Countries

NLM  National Liberation Movement

NMOG   National Macr-Organization of Government

NP  National Party

NPA  National Prosecuting Authority

NPM  New Public Management

NPO  Non-Profit Organization

NRF  National Revenue Fund

NSF  National Skills Fund

NT  National Treasury

NTUC  National Trades Union Congress

NUM  National Union of Mineworkers

NYSE  New York Securities Exchange

OECD  Organization for European Cooperation and Development

OFS   Orange Free State

OPEC  Organization for Petroleum Exporting Countries

OWP  Office of Witness Protection

PA  Personal Assistant

PAC  Pan Africanist Congress

PANYNJ New York Port Authority of New York and New Jersey

PAPPPI   People Against Petrol and Paraffin Price Increase

PARI  Public Affairs Research Institute

PATH  Port Authority Trans-Hudson

PAYG  Pay and You Go

PBMR  Pebble Bed Modular Regulator

PDL  poverty datum line

PFMA  Public Financial Management Act

PIC  Public Investment Corporation

PIC  Public Investment Corporation

PMB  Performance Monitoring and Benchmarking

PMG  Parliamentary Monitoring Group

PMP  Pretoria Metal Processing

POPCRU Police and Prisons Civil Rights Union

PP  Public Protector

PPA  Power Purchase Agreement

PPE  Personal Protective Equipment

PPP  Public-Private Partnerships

PR  Public Relations

PRASA  Passenger Rail Agency of South Africa

PSC  Public Service Commission

PV  Photovoltaic

PWD  People with disabilities

QSM   Quality Service Management

R2K  Right To Know

RDP  Reconstruction and Development Programme

RENAMO Resistencia Nacional Mocambique

RET  Radical economic Transformation

RFP  Request For Proposals

ROI  Return On Investment

ROSATOM  Russian State Atomic Energy Corporation

RSR  Rail Safety Regulator

SA  South Africa

SAA  South African Airways

SABC   South African Broadcasting Company

SACC  Southern African Council of Churches

SACP  South African Communist Party

SACSIS  South African Civil Society Information Service

SACTWU  South African Cotton and Textile Workers’ Union

SADC  Southern African Development Community

SADTU  South African Democratic Teachers’ Union

SAF  South Africa Foundation

SAFCOL South African Forestry Company Limited

SAFMARINE  South African Marine Container Lines N.V

SAG  South African Government

SAHA  South African History Archives

SAHRC  South African Human Rights Commission

SAIRR  South African Institute of Race Relations

SALM  South African Labour Movement

Samancor South African Manganese Corporation

SAMC  South African Marine Corporation

SAMWU  South African Municipal Workers Union

SANDF   South African Defence Force

SANParks South African National Parks

SAPO  South African Post Office

SAPOA   South African Property Owners Association

SAPS  South African Police Services

SAQA  South African Qualifications Authority

SAR  South African Register

SAR&H  South African Railways and Harbours

SARB  South African Reserve Bank

SARP  South African Railway Police

SASO  South African Students Organization

SASOL  Suid Afrikaanse Steenkool Olie

SASSA  South African Social Security Agency

SATAWU South African Transport and Allied Worker’s Union

SATS  South African Transport Services

SBC  Southern Bell Corporation

SCAW  Steel and Ceilings Aluminium Works

SCM  Supply Chain Management

SCOPA  Select Committee of Public Accounts

SEC  Securities Exchange Commission

SEP  Strategic Equity Partners

SFA  Singapore Football Association

SFF  Strategic Fuel Fund

SG  Secretary-General

SG  Statistician-General

SIHOLD SADTU Investment Holdings

SIM  Sekunjalo Independent Media

SITA  State Information Technology Agency

SIU  Special Investigations Unit

SJN  Social Justice and Nation-Building

SLM  Sanlam (JSE name)

SMP  Strategic Management Partnerships

SNO  Second National Operator

SNPTC  State Nuclear Power Technology Corporation Limited

SOE  State-Owned Enterprises

SONA  State Of The Nation Address

SPCA  Society for the Prevention of Cruelty to Animals

SSA   State Security Agency

STANLIB Standard Bank and Liberty

STATSSA Statistics South Africa

Stratcom Strategic Communications

SWAPO  South West African People’s Union

SWOT  Strengths, Weaknesses. Opportunities and Threat

TA  Transaction Advisers

TB  Tuberculosis

TEC  Transitional Executive Council

TFR  Transnet Freight Rail

TI  Transparency International

TIC  Transvaal Indian Congress

TMA  Turbomerca Africa

TOR  Terms of Reference

TPF  Transnet Pension Fund

TRALAC Trade Law Centre

TRANSNET Transportation Network

TRC  Truth and Reconciliation Commission

TRIPS  Trade-Related Aspects of Intellectual Property Rights

TUIC  Trade Union Investment Company

TVA   Tennessee River Authority

UBPL  upper-bound poverty line

UCT  University of Cape Town

UIF  Unemployment Insurance Fund

UK  United Kingdom

UKZN  University of KwaZulu-Natal

UNISA  University of South Africa

UNITA  União Nacional para a Independência Total de Angola

UP  University of Pretoria

US  United States

US  University of Stellenbosch

USPTO  US Patent and Trade Mark Office

USSR  Union of Socialist Soviet Republics

UZULU  University of Zululand

VAT  Value Added Tax

VOA  Voice of America

VOC  Vereenigde Oostindische Compagnien

VVIP  Very Important People

WARC  World Anti-Racism Conference

WEF  World Economic Forum

WITS  University of Witwatersrand

WMC  White Monopoly Capital

WSSA  Water and Sanitation Services South Africa

WTO  World Trade Organization

ZANU-PF Zimbabwe African National Union-Patriotic Front

ZAR  South African Rand

ZAR  Zuid Afrikaansche Republiek

TABLE OF CONTENTS

ABBREVIATIONS

EXECUTIVE SUMMARY

1. INTRODUCTION

2. APPROACH AND METHODOLOGY

3. THE POLICY ENVIRONMENT

3.1 Introduction

3.2 The Mischief/The Problem

3.3 The Historical Perspective

3.4 The Shifting Policy Tectonic Plates

3.5 The Decaying Infrastructure

3.6 Race: The Monkey On SA’s Back

3.7 Corruption Hisses Like A Snake

3.8 The Zondo Commission

3.9 The Judiciary and A Misdiagnosed Discontent

Case Study 1: THE SIN OF BEING ZUMA

3.10 Things Will Change: Zizojika Izinto

3.11 Sources Of and Contestation For Statistics

3.12 Contrived Narratives

CASE STUDY 2: THE FEAR OF THE CONSEQUENCES OF INADEQUACY

Case Study 3: BLOOD DOES NOT MATTER: MOELETSI’S VICTIMIZATION

3.13 Pre-1994 Dubious Transactions

CASE STUDY 4: THE STEEL THAT BENDED

3.14 SA is a Developmental State

3.15 Immigrant Tensions and Other Vulnerabilities.

Case Study 5: ANGOLANS AND MOZAMBICAN WHITE REFUGEES

3.16 Left Or Right: The Restructuring Proceeds

CASE STUDY 6: THE OTHER BLINDSIDES: WATER

3.17 The State’s Role .... The Creator Principle

4. RECOMMENDATIONS

4.1 Introduction

4.2 Formalization Of The Oversight Committee (OC)

4.3 Ministerial Commitments

CASE STUDY 7: SHARES BEING TOSSED AROUND

4.4 Opposition To Restructuring From Labour

4.5 Non Performing, Non-Aligned and Non-Core Assets

CASE STUDY 8: THE ADVENTURE OF AVENTURA

4.6 Walking Away From Pension Fund Obligations

4.7 Discouraging Fronting Tendencies

4.8 Foreign Workers and Fake Qualifications

CASE STUDY 9: THE MAY ACCIDENT IN NOVEMBER

4.9 Strengthening The Black Chips

4.10 Taking Charge Of SA Inc.

4.11 Regulatory Powers

4.12 Board Excellence and Improvements

4.13 Transacting With A Human Face

4.14 Listing at Securities Exchanges

4.15Visible Results Of Restructuring

4.16 Development Financial Institutions And Their Role

4.17 Communicating and Marketing Restructuring

4.18 Improved Services

CASE STUDY 10: COLEMAN ANDREWS: THE DESTRUCTIVE MESSIAH

4.19 Transparency

4.20 Language Sensitive Framework

4.21 Transaction Advisers (TAs)

4.22 Property And Foreign Investors

4.23 Attracting Foreign Investors

4.24 Vulnerable Groups

4.25 Future State Assets and New SOEs

4.26 Work Flow Charts

5. CONCLUSION

EXECUTIVE SUMMARY

1

The Review stems from the Policy Framework, An Accelerated Agenda Towards the Restructuring Of State-Owned Enterprises Policy Framework (Ministry of Public Enterprises, August 2000), which states that restructuring is a dynamic process requiring monitoring and evaluation.

A fisher must know his river before he casts his net or rod. Pilots need to understand their skies, even when air traffic controllers chaperon the flight from take-off to landing and taxing.

Restructuring cannot be understood outside its socio-political context. Issues are interlinked, but SA’s are more interlinked than other jurisdictions. The environment informs the success of restructuring, or climate, under which it occurs.

These interlinks are evident in various issues in this document. The recurrent issues speak to a papered-over past, and a Band-aided wound before healing. The deficiencies predict an uncertain future for the State-Owned Enterprises (SOEs).

Since the Policy Framework was introduced, there have been new developments in SOE restructuring. The Framework does not capture all the issues to render it watertight and responsive to new challenges.

The Review explains a transition from the past (pre-1994) to the present and emphasizes the continuity of SOE and State-Owned Companies (SOC) restructuring as bridging the two divides, albeit with foci determined by each Administration’s priorities. South Africa (SA) is currently in its 6th Administration.

The Framework’s time frames were optimistic. Market forces, the attainment of objectives, satisfying development requirements all determine the pace of SOE restructuring.

The 2004 deadline pressured the Department of Public Enterprises (DPE) for unachievable standards and difficult goals. Government attempted to stick to the date, but there was a midstream change.

An internal DPE document about the Department’s future was being developed simultaneously as Transnet was developing its own on how it would look after 2004. These draft documents were referred to as the End-State.

The End-State avoided a post-restructuring shareholding regime. It aimed to dispose of assets, including strategic ones, at basement price amidst the poverty of Black people to participate.

Had the documents been adopted as Government policy, the SOEs would have perpetuated the past economic inequalities.

The Executive/Cabinet should manage the debate between the hard left, the State and free-marketists on restructuring and globalization without changing fundamental values.

Pre-1994 SOE management was antithetical to capitalist principles, although it was sold as a capitalist project to comfort Western interests.

These restructurings were based on ethnic Socialism, catering for one White group, the Afrikaners. Other White groups were roped in to strengthen the preferred group’s domination.

The Review obliges the State to all its economic responsibilities. It motivates the State to continue fulfilling its duties despite pressures from anti-Statist and free-marketist lobbies.

One responsibility is to be a Developmental State, which requires calculated interventions not demanded of other States. All States intervene, but the South African State requires more intervention because of its history.

For streamlined restructuring, the Oversight Committee (OC), managed by the DPE and which prepares for all restructuring processes, is recommend for more muscle through a proclamation or another instrument to demonstrate the State’s commitment.

The Review recommends that SOEs be exempted from Section 189 of the Labour Relations Amendment (LRA) Act. The Section pertains to the dismissal of workers based on operational requirements.

Labour representation on SOE Boards should be enhanced. If labour is represented on company Boards or are offered company shares through Employee Share Ownership Schemes (ESOPs), worker industrial action is reduced.

Board representation should not reduce the workers’ voice but should embrace their views in all SOEs matters.

Representation should enhance the ownership of production and embrace workers as SOE co-owners. The power distance between the State and workers, the State and management and the management and workers does not bode well for harmony.

Despite this slowly happening, government officials on SOE Boards should be confirmed by the Framework. Officials identified for this responsibility should add value to the Boards beyond being the Minister’s eyes and ears.

SOEs should be au fait with Corporate Governance. Directors should be familiar with these improvements even before the State legislates them. Directors need Corporate Governance training to be effective oversight authorities over the efficiencies needed in these SOEs.

The Review recommends the disposal of under, or non-performing businesses, except when these are strategic ones needing State funding. The assistance should go beyond financial injections to include change management.

The inherited SOE Pension Fund reflected mismanagement. It became a poisoned chalice for the 1994 Government. The Review recommends changing these pension obligations, which are currently in serious decline and do not fully represent the interests of all workers.

Reference is made to the media-driven narrative that protects the elite officials and transgressors while hard-hitting on Black SOEsexecutives. SOEs continue to exist under pressure that had they been run like the private sector, they would be successful businesses.

The media is a powerful game-changer, for better or for worse. In SA) it serves elite interests. Much, or all media perceptions, stems from its ownership patterns.

It intends to portray Black executives as incapable of managing. Three major SOEs, The South African Post Office (SAPO), Eskom and Denel, replaced Black Chief Executive Officers (CEO) with White executives. These three SOEs have deteriorated.

When the Judicial Commission of Inquiry into Allegations of State Capture, Corruption and Fraud in the Public Sector, including Organs of State (known as the State Capture Commission or the The Zondo Commission), sat, a sentiment developed that it was targeting individuals. The shorter name, Zondo Commission, will be preferred to the long name.

The Commission is relevant because it connected the SOEs corruption and became enmeshed with their financial mismanagement. Besides its connection with the SOEs, the Commission has far-reaching implications for the State/Government and society. In a broader brush, the outcomes will affect how the South African economy performs in future.

The individuals in SOE management and boards, and business persons outside them, were accused of being corruptly aligned to either the former President Gedleyihlekia Zuma (one man) or the Gupta brothers (one family).

Preceding his Presidency, Zuma had been targeted as a leader given to the predations of corruption. No sooner is he expected in Court than another appearance is required of him. Certain NGOs and political parties have made it their mission to reapply to reinstate charges when the Courts throw them out.

The targeting is deliberate to market the narrative, under the pretext of the rule of law, that under the watchful eye of 60 million South Africans, SA’s vigilant security structures, respected judicial structures, a vibrant anti-corruption sector, a rational voting population, one man, and one Indian family, can cause such ructions to undermine SA’s economy and its new democracy.

The sellers of the narrative of a one-person one family national fiscus high robbers are sometimes contrite when selling such a dubious proposition. They sometimes add the acolytes of these highway robbers.

The accusation has its downside: anybody who defends or questions the probability is classified as an acolyte. Several innocent South Africans have been besmirched by this association, including eminent legal minds and other professionals, as will be shown.

In jurisdictions with weak organs of democracy and dictatorships, it is possible, and there is sufficient evidence that one man or one family can do havoc to the country’s economy. Suharto of Indonesia, Mobutu of Zaire, Marcos of the Philippines, Abacha of Nigeria, Duvalier of Haiti are examples.

It is an improbable narrative in a SA with democratic checks and balances, but the gullible readily believe it.

The believers are few, but they are well-projected because they also control communications. There is a possibility that the believers may not believe but are using the improbability to shield their nefarious interests.

The one man and one family corruption are repeated ad naseum. The more it is repeated, the more it gains the semblance of truth. Those who think it is improbable are robbed of airtime or open themselves to character assassination.

The Indian family and one man were scapegoats. They facilitated a blind eye to the real corruption, including White collar crime and crime committed by White executives and companies.

The view is strengthened by the fact that even when the Indian family has escaped the law and is now presumed to be safely ensconced in Dubai, and the former President is now out of office, corruption has continued unabated, and some say it has now reached higher levels in the 6th Administration than the 5th.[1]

The Review’s reference to the Zondo Commission includes the July 2021 Unrest after former President Zuma’s incarceration. The Commission and the July Unrest were interlinked, argued later.

The interlinkages were strengthened by how the 2021 July Unrest was misclassified. One misclassification was an insurrection, attempted insurrection, or failed insurrection. The misclassification was so intense that it forced President Ramaphosa to recycle (instead of reshuffle) his Cabinet.[2]

Commissions have sat before and after 1994. None was as badly handled to lead to unrest (or the above-mentioned categorizations) as the Zondo Commission. The connection between the Commission and the July Unrest is not acknowledged, a weakness that complicates the fraught decisions of SA’s society.

The Commission was well-marketed because of its target, Zuma, who was blamed for all the country’s economic and political woes and numerous faux pas. For example, during the Western Cape’s devastating drought, WhatsApp trolls joked that the former President had stolen even the rain of that Province.

The country’s past is residual and affects the present, and will impact the future. The Review admits all SA corruption and racism are enduring and are existential threats. They need correction through various interventions.

As a Government intervention for equality, Broad-Based Black Economic Empowerment (BBBEE) cannot be faulted. However, it may be used for fronting. It has not been broad enough because it benefits the usual suspects.

The Review proposes applying the law should partners misrepresent their bids or are fronting.

Some foreign workers misrepresent their reasons for being in SA. The misrepresentations include their academic qualifications for employment in SOEs and residence in SA. The fraud is assisted by rogue Department of Home Affairs (DHA) officials, at the ports of entry and in their various administrative offices.

Some SA employers employ foreign workers to avoid compliance with SA labour regulations. Illegal foreign workers are easily exploited. They are blackmailed, threatened with dismissal and reported to authorities for being illegal immigrants.

They then fear demanding their rights and accepting lower wages to displace SA work-seekers. Employers hide them to the Department of Employment and Labour (DEL) and avoid paying their Unemployment Insurance Fund (UIF).

The Review argues that there is nothing wrong with the employment of foreign workers within the limits of scarce skills legislation.

The Review calls for a stringent assessment for foreign workers not to have an advantage over South Africans. Misrepresentations should be punished without raising xenophobia.

There are private sector pressures to raise transaction shares to 50 plus to SOE Strategic Equity Partners (SEP). Shareholding is determined in transaction-by-transaction negotiations. It conforms to and confirms SA’s case-by-case and the balance-of-evidence approaches closest to scientific determinations.

There is a concern when the SEP majority share trumps the State’s golden share. Are Denel’s current problems caused by mismanagement, the market, or the 51% stake awarded to Germany’s Rheinmetall?

Could there be deliberate asset destruction to offload SOEs to the politically connected? To what extent is running down the asset deliberate to compromise the State’s defence capabilities in a geostrategic competition? Pointedly asked, is Denel a South African or a German company?

The State’s golden share should not be assumed but assured. The Review recommends its inclusion in the Framework.

Sufficient dividends have accrued to the National Revenue Fund (NRF) over the years. When SOEs make profits, they are reluctant to declare a dividend but reinvest it into the entity.

Despite each transaction’s particularity, it should be axiomatic that the sharing should favour SOEs (and the State) rather than awaiting the Cabinet’s approval. While awaiting approval, market forces can shift to harm the transaction.

The State’s shareholder power should be exerted by maximally using mandatory tools. These tools are Annual Reports, Shareholder Compacts, Performance Agreements, Protocol On Corporate Governance, Memoranda of Incorporation (MOI), and King Codes. The eagle-eyed and often overarching Public Finance Management Act (PFMA) needs strict compliance.

Failure to submit Annual Financial Statements (AFS) should be treated as a dismissable offence. Some SOEs apply to Ministers year after year to postpone their AFS tabling. The State obliges but still fail to disclose the reason such a leeway.

These applications to Ministers should be reviewed. If the SOE fails to submit its AFS, what was the yearlong work of its CFOs and their offices? What is there to hide? If the entity runs at a loss, it should still be known.

The State should be absolved from litigation when it expels Boards or its members for underperformance, malfeasance, conflict of interest, and corruption.

Many Board members serve SOEs with patriotic dedication. However, self-serving ones depredate the asset. These depredating Board and executive members are embedded in the entity and want to stay forever.

Even after they have finished their terms, they resist being removed. They become litigious and take Ministers to Court.

The SOE Shareholder Compacts are confidential. The Review warns that transparency is necessary to enhance SOE profitability.

SOE budgets and transactions are bigger than controlling Departments’ resources. The comparatives may cower Departments to cede their authority to the SOEs’ whims and wishes.

Outcomes and control measures are overlooked when money talks. The Review recommends tighter oversight of SOE finances without being intrusive to control them. SOE finances become public when their AFS are submitted.

The Review recommends hierarchical organograms to correct a mistake that SOE Executives are overlords. Like all businesses, SOEs have key shareholders (Government alone or mixed with private sector investors), stakeholders, investors, regulators, and customers/clients.

There should be space for interested and concerned parties since SOEs belong (or should) to all South Africans.

The Review recommends that Cabinet sanctions all SOE external involvement through a Cabinet Memorandum to align SOE with Government’s Continental political objectives.

The Review recommends humane transactions. There should be no feeling that one party has gained at the other’s expense. It is defendable humaneness within the acceptable norms than an opportunistic and dishonest State.

The SAA buyback from SWISSAIR, the ICIng of MCell, and the Aero-Porto da Roma (ADR) shares baffled the market and doubted the State’s bona fides.

The Review encourages SOEs to show confidence in the economy by listing at the Johannesburg Securities Exchange (JSE) and considering a secondary listing in other bourses.

Other SOES did not emulate the Telkom listing. They should be encouraged to use Telkom’s success as an example.

Securities bodies’ compliance is taxing and comprehensive. Many private-sector mindsets had to be internalized for the first State stock listing in SA (Telkom).

The knowledge and experience gained for listing at the JSE, and the New York Securities Exchange (NYSE) should be retained.

The listings have been far and in-between. There was none after Telkom. The officials who executed this left the public service and are getting old, leading to the SOE relying on external experts.

SA’s Development Financial Institutions (DFI) avoid retrenched workers. They set up high qualification standards for their offerings. These institutions should assist in drafting social plans and provide financial assistance to applicants.

Weak communications misrepresent the benefits of restructuring. The rationale, challenges, benefits, and successes are wrongly or not communicated at all, perpetuating the Government’s failure to communicate.

Communication can be assisted by linking restructuring proceeds to visible projects beyond NRF proceeds. SEP’s should identify a project, such as a rural school, road, or clinic, to prove social dividends. If this is not done, restructuring will be the exclusive domain of the rich.

The Review examines the role of multinational corporations (MNCs) in light of their financial muscle and undue influence over developing States. They reject developing States’ terms and conditions. They demand changes to the investee States’ Constitutions and regulations.

When withholding their investments (investment strike), they cite policy and regulatory uncertainties. The Review should correct this perception of policy. The absence of policy certainty is an excuse. Policy and regulations do exist. However, they are those not favourable to the intending investors.

Policy problems (and their solutions) are interdependent. A policy problem (and solution) in one area affects policy in other areas. Problems are parts of whole systems of problems best described as a mess. The State must end the mess at best or reduce it at worst.

It is not as if the South African economy’s problems are secret. Cartoonist Rico captured the problems in the instructive 2020 cartoon. When the Minister of Finance, Tito Mboweni, checked in at the 2020 World Economic Forum (WEF) in Davos, Rico showed him carrying extra luggage.

The luggage/suitcases were each labelled with one SA economic problem. The unfortunate porter cannot even push the Mboweni’s trolley. These problems were zero growth, corruption, failing infrastructure, debt, stalled restructuring plans, failed economic policies and SAA.[3]

The Review refers to quality service management. Despite this being in regulatory and competition bodies’ competence, DPE should supervise this task regarding SOEs reporting to them. All shareholder Departments should enforce this on their direct report SOEs.

The Accelerated Agenda was incomprehensible to the poor and uneducated. It gave the impression of being elitist and thus excluded many affected people. The poor are at the tail end of receiving their restructuring benefits, if at all.

The Review recommends their inclusion. Poor people are bamboozled by the language of transactions. It is a language above their heads. The Review calls for sensitive language and appropriate translation.

The Review notes that Transaction Advisers TAs (usually banks, legal, auditing and accounting firms) have conflictual relationships with their SOE clients. They adopt a know-all attitude and direct transactions towards their preferred SEP, usually their major clients.

The Review requires TAs to declare their interests. It calls for their rotation to avoid intoxicating serialism evident in transactions, where the Big Four auditing firms dominate. Restructuring can transform itself and its service providers through appropriate appointments and interventions.

These transformation requirements are in place, but they are ignored. The Terms of Reference (TOR) for TAs should include marketing the SOEs under restructuring. The TAs should not bad mouth a restructuring SOE.

For Corporate Governance, the Review calls for the SOE Directors’ declaration of interest and emoluments as required from political office bearers or close to it. Not all declarations will be favourable to the transaction.

In privatization models, foreign investors’ property rights are contested. Emphasis is placed on lease arrangements and rents. In SA, property and land sales to foreigners have been debated in light of growing property purchases.

The Review recommends a reconsideration of property and land-related investments. The DPE should be seized with this together with theDepartment of Rural Development and Land Reform (DRDLR) and the Parliament’s Section 25 process.

Reconsidering property relations should be balanced with attracting foreign investment.

The Review argues for the relaxation of taxation laws such as corporate income tax, value-added tax, special business tax, transfer fees, and stamp duties to attract DFIs. However, this should be within limits.

Attracting Foreign Direct Investment (FDI) is a competition between investee nations. It is fiercer amongst the developing nations who desperately need it. Even developed countries compete with developing countries for DFIs.

The Accelerated Agenda refers to Black people, women and rural, but these are all grouped under BEE (before BBBEE) in transactions. The grouping creates an exclusion within an exclusion. The Review separates and empowers each of them. These are separate from ESOPS.

The inclusion of Black people in transactions was started earlier, but restructuring is still saddled with and blamed for enriching a few Black serial BBBEE beneficiaries.

The vulnerable were belatedly included, but the addition is still selective. The progressive realization inclusion marginalizes and still dogs the vulnerable.

The State will have enduring ownership of some entities. When new State assets are being established or consolidated, the State should adopt them immediately. Nothing stops the State from establishing new SOEs.

The Work-Flow Charts, a guide rather than an enforced workflow, were ignored because the Big Four (Transnet, Eskom, Telkom and Denel) had already been analysed.

However, many other entities had not been analyzed, and no privatization/restructuring model was developed.

Short of being the Ten Commandments, flow charts are only a guide. If two steps can be achieved simultaneously, the transactions should allow this.

1. 

INTRODUCTION

It would be easy to list the 45 Recommendations of this Review. However, the list would have been a summary contextually devoid of how Recommendations are reached.

Contextualizing the issues accounts for the length of this Review.

The struggle for South Africa’s democracy was a difficult but rewarding affair. Many lives were lost, and many careers were forsaken. Families were separated. Winning democracy has its challenges.

Similarities are drawn between climbing the mountain as a challenge but staying on top as more difficult than climbing it.

Staying on top of democracy has always been a challenge. The Rico (Mboweni) cartoon caricature of the current SA leadership’s problems and challenges are more apt to show these challenges.[4]

SOEs are products of their societies. Any discussion should go beyond moving cargo trains of Transnet,) grinding iron-on-iron of the Passenger Rail Agency of South Africa (PRASA), and the beef or chicken choices from SAA air hostesses to their passengers.

It is about how these impact society. After all, these entities were established to serve it (society). One scary impact is anticipated when a former media critic of Eskom, and now Eskom’s spokesperson, is introduced on TV for a special announcement. It is always about load-shedding.

The privatization vs nationalization debate ended a long time ago. However, the participants stoically hold onto their original positions for grandstanding rather than acknowledging the practicality of SA life.

Contestants have abjured their ideological beliefs in privatization and restructuring, as the Review will show later. The world has moved on, with both ideological positions taking place simultaneously.

The world has now fewer ideologues than before. Many of them have ditched their pertinacious pretences that there are either..or. They have embraced the inevitable fact that the world is now both.. and.

SOE restructuring occurs in a dynamic social, political, and economic environment. The environment is multi-ideological as South Africans are spread throughout the political spectrum.

The topic’s first portion, Restructuring of SOEs, is not as controversial as the second portion, in the Current Climate. The reading of the current climate may be controversial and may not find favour with one group on the other.

The emphasis is that the current climate has dramatically changed since the Accelerated Agenda was introduced. These changes will be discussed.

At an ideological level, the market fundamentalism that drives the privatization debate’s profit motive was strengthened by Milton Friedman’s views, who had based his views on Adam Smith’s invisible hand of markets which correct themselves for the public good.

Fifty years later, Friedman’s’s seminal essay is not as strong as it was then but still has its fervent adherents. However, this Review aligns with the anti-Friedman revisionist articles which surfaced in August 2021. These articles will be quoted in various sections.

From left to right, all South Africans expect the SOEs to provide them with one or another public service. The expectation arises that these SOEs are sustained through taxpayers’ contributions.

The end of ideology when the SOEs must deliver on its mandate forms the basis of this Review. One example is sufficient to display the inevitable connectedness to SOEs.

Socialists argue that the State must hold onto its entities, while the capitalists argue for its exit. Yet when they meet arguing for their positions, a power load-shedding midway their meeting elicits the same outcry: Eishkom!

Two disclaimers are stated upfront to avoid straying into competencies of other State organs, even when there is consensus that State organs are sometimes intertwined, some more than the others.

This Review deals with the foundational policy of restructuring. It accepts many other business re-engineering processes undertaken by other Departments for entities reporting to them or by the entities on their own.

The DPE has undergone structural changes that lead to three programmes: Programme 1: Administration; Programme 2: Governance, Assurance and Performance; and Programme 3: Business Enhancement and Industrialization. The 2000 structure when the Accelerated Agenda was introduced was different.

The Framework creates space for flexibility, whereas Policy (proper) is inflexible and often leads to accusations (and litigations) of deviations from it (policy).

Avoiding litigations does not mean wide deviations from the Framework on reliance that is not pure policy. It means that activities should be within the Framework.

Restructuring is a slow process. Investors wait to seize the moment for a favourable deal. It is not that security guards are deployed to manage the long suitors’ queues as soon as an asset is announced for restructuring. Investors weigh their options.

Quick privatization alone is not entrenchment of democracy. It is insufficient to determine the speed demanded. It may hinder restructuring even when democracy is marketed to be based on the fairest government method.

Many political parties characterise SA’s political system, albeit with disparate representations, ideologies and sizes.

Fourteen political parties are represented in Parliament. One of them has only one position contested amongst its leaders. Political pundits think SA’s future politics is in coalitions, but previous coalitions have not shown good signs.[5]

How the electorate will shape future governments will impact the debate. However, the substance of restructuring will not change. Only the nuance will show the political ideologies determined by the electorate.

According to the Independent Electoral Commission (IEC), there are 671 national political parties in the county. Their voices are amplified by deploying media strategies for a megaphone effect.

The media is extensively involved in the debate. At certain times it tends to dictate the direction of Government, as shown in Contrived Narratives in Chapter 3.7. At others, it is indirect in determining its direction.

SA is a multiparty system, but the electoral margins lead to three or four big parties. Even amongst the three big parties, the gaps are huge.

One party is big but gradually loses support. After elections, the other two parties rejoice, not for winning but for whittling away the majority party’s numbers. The media rejoices and reports positively on losing parties as if they have won.

This rejoicing is linked to two narratives. The first is of the National Liberation Movements (NLM) losing power after a certain period to be discussed later.

The second is the narrative that SA’s future is in coalition governments, despite their risks.[1] These types of governments are the electorate’s will, as it happened after the 2016 and 2021 Local Government Election (LGE).

The importance of restructuring is that the dominant party’s policies (as they change and are changed for the better or worse) determine how to deal with SOEs.

The length of restructuring is not determined by all political parties but by the ruling party, the trade unions, big business and investors.

Restructuring is not ideal and should be improved. There should be vigilance against grandstanding and deliberate delays.

The Review castigates the single causation narrative as a weak excuse to explain away SA problems. The real culprits sometimes escape. Without real culprits, wrong people and wrong reasons produce wrong diagnoses. Wrong diagnoses produce wrong prognoses.

Business, including SOE business, is still a dog eat dog environment. SOE leadership does not fall over for injurious deals. They, too, went through all the motions without destroying their entities.

When the investor wants to perform due diligence, the SOE must do its due diligence of interested investors. It is a two-way process. What is good for the goose is good for the gander.

There is pressure to ignore the due diligence of investor companies. By investing in SA, they are doing the country a favour. Investors do not invest out of love for SA. They want to make money. Investment should benefit both parties. The benefits need not be equal but equitable.

Private and public restructuring is similar. In Corporate Restructuring. The companies will face competition, and there will be financial challenges, there will be conflicts, ownership will be debated, corporate governance will have to be paramount, the firms must evolve new business strategies.

The leadership may have to change and be assisted by technology deployment. The human resource department will have to cater for the new staff challenges.[6]

The badmouthing of privatization as the ANC Government’s all-consuming intention is unfortunate. In most cases, these debates are engaged by a gaggle of people who have little or no interest in the debate’s intricacies.

There is a directionless loquaciousness that uses a legitimate process for self-serving motives, which is entertained for the veneer of consultation.

The debate should avoid semantics, but chosen terms bring doubt to the State’s intent to give everything away to the private sector.

Privatization is only a restructuring option. Like privatization in other countries, the DPE uses concessions, SEP, Strategic Management Partnerships (SMP), Public-Private Partnerships (PPP), equity-linked products and flotations, or combinations of them.

If the challenges face the ANC, they face the country. If they face the country, they also face the SOEs. The State, Party, and Society confluence is unfortunate, but SA’s reality.

It stems from the ANC’s self-assertion as a leader of society. It is also the satisfaction of society’s expectations. When SA faces a challenge, the ANC is expected to do something about it.

There must be early admissions of bad taking place in SOEs. There are two most glaring ones.

Firstly, SOE’s productive capacities have been reduced. They belong to the same Creator, the State, but are not biological brothers and sisters.

They seek their independence as a child would at 21. At others, they seek the parent’s assistance like a prodigal child. They lead double lives.

Secondly, it does not justify the many shenanigans, wrongdoing, and current dysfunctionalities in restructuring State assets.

Dysfunctionalities are caused by human greed, currently being exposed at Commissions and Inquiries. Dysfunctionalities are not from policy shortcomings. They should be dealt with by appropriate consequence management.

SA’s debates are heated. The country has many analysts and experts. Political analysts are available by the dozen. Many languish in the labyrinth of their spaces, such as universities, foundations and research institutions. They are unleashed in spasms, particularly during elections.

The writer is neither. However, he was closer to restructuring when a DPE Director between 2001 and 2004. His association with this Department informs this Review.

From 2004 to 2009, he was employed by the Department of Transport (DOT) with 13 (and growing) SOEs reporting to it. He was also employed by the Ministries of Justice, Performance Monitoring and Evaluation (DPME) and Energy.

He attended a Post-Privatisation Course at the International Law Institute in Washington, D.C. In 2014 he attended the African Presidents Advisors’ Seminar in Beijing, China. He served for a short time on two SOE Boards; the South African Forestry Company Limited (SAFCOL) and the Air Traffic and Navigation Services (ATNS).

A defence SOE subcontracted him to demilitarize obsolete, old, unstable, and defective 5.9mm to 12.7mm calibre ammunition to turn them into scrap metal.

This was an Enterprise Supplier Development (ESD) initiative, which gave the company its much-needed transformation credits, including youth employment.

Any Review needs a problem analysis - the mischief. Solutions must first determine the problem you are trying to solve? There