The albatross around South Africa's neck: why SOEs aren't working

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Poorly managed state-owned entities (SOEs) are depleting South Africa’s budget. The government continues to offer them an expensive lifeline in the form of multi-billion rand bailouts.
When Cyril Ramaphosa became South Africa’s president in February 2018, many were hoping that his administration would usher in a glorious new era of clean governance. The president called it a “new dawn”.
Ramaphosa gave a rousing speech during his inaugural State of the Nation Address which raised expectations and created excitement that things would change for the better. To say that speech “ignited the nation” would be an understatement. It was presidential, and it represented a new kind of leadership style that was severely lacking during the previous administration under former president Jacob Zuma.
Ramaphosa’s predecessor misused his presidential powers to deploy allies to key government ministries in order to exert influence on how the portfolios were run. The hope was for Ramaphosa to reverse this trend.

Presidential appointments

It is estimated that South Africa runs more than 200 SOEs, ranging from municipal water boards and provincial gambling boards to the heavyweights like the national power utility, Eskom; railway operator, Transnet; arms manufacturer, Denel; the national carrier, South African Airways (SAA); and many others, according to data from the University of the Western Cape’s Dullah Omar Institute.
The institute is working with civil society organisations to conduct a series of studies on SOEs. They are analysing the country’s legal framework for SOEs, hoping to identify the contradictions that have enabled a culture of misgovernance to flourish.
One of the areas under the microscope is the capture of SOEs under the Zuma administration, which was facilitated through the appointment of pliable ministers and boards. Zuma appointed his most loyal supporters to senior positions, and they performed their duties in line with his whims. This was especially true at Denel, SAA, Eskom and Transnet, which were run down under Zuma. When Ramaphosa appointed a host of new boards at several SOEs, there was renewed hope that things would turn around.

Bleeding the nation dry

Instead, Denel, SAA and Eskom were handed multi-billion-rand financial bailouts by finance minister Tito Mboweni during his medium-term budget policy statement in October. That’s in stark contrast to government’s call for fiscal discipline at a time when the country is running huge deficits and has developed an over-reliance on borrowing.


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