Sandton, South Africa, July 26, 2022 (ECA) -The United Nations Economic Commission for Africa, Subregional Office for Southern Africa (ECA-SRO-SA) in collaboration with the Wits School of Governance of the University of the Witwatersrand on July 26 convened a High-Level Policy Dialogue on Governance of State-Owned Enterprises (SOEs) in South Africa, based on a study that ECA-SRO SA had undertaken on the performance and governance of SOEs in the Southern Africa region, using South Africa as a case study; in light of challenges that most SOEs encounter.
In his opening remarks, South Africa’s minister of public enterprises, Mr Pravin Gordhan, argued that SOEs operate within a political-economic context in which the State’s role has shifted from catering to the needs of a White minority to catering for the welfare of the entire society. “During the shift, mistakes were made in which the ruling elite was allowed to use the occasion for self-enrichment leading to the era of state capture that severely undermined the performance of key SOEs, especially those with huge procurement budgets” he said.
Mr Gordhan said that even as the country has embarked on SOE reforms for better performance and service delivery, the reforms continue to be buffeted by individuals who had benefited from corruption and are trying to prevent transformation. “This is the contextual environment that the country faces currently in which SOEs are still poorly serving the country and needing huge and unaffordable government financial bailouts to continue their operations,” the minister added.
The minister praised the role of investigative journalism in revealing corrupt practices within the SOEs and encouraged academics to continue coming up with constitutional frameworks that will guide the SOE reform agenda. He said that the state should ensure that he current fifty per cent of the population who are without basic services such as water and sanitation, do get such services.
The minister further confirmed and reiterated the important role SOEs have played over decades and continue to play in the socio-economic development agenda of the country and the region. For example, South Africa’s SOEs had been at the forefront of major technological innovations in various fields such as medicine and agriculture, as well as infrastructure development in the country and region. At the core of SOE reforms currently underway, Mr Gordhan said, was the need to ensure that SOEs are fit for purpose, especially given the additional impact of climate change on the economy as well as the frequency and intensity of external shocks witnessed in recent times. “The reforms would be underpinned by a more inclusive SOE model designed to benefit the entire population and foster faster and more inclusive growth” he said.
The Deputy Vice Chancellor of Systems and Operations of the University of the Witwatersrand, Prof. Ian Jandrell, said that the performance of SOEs was dependent on the availability of resources and capabilities at their disposal. He noted that many SOEs in South Africa were devaluated during the period of state capture, a systemic corruption that not only led to economic underperformance but also compromised skills within the institutions. Prof. Jandrell said some of the SOEs may not be suited to be under state control as this might have adverse fiscal implications and may cause government to redirect resources away from other critical social and economic areas. However, he highlighted that many SOEs are of strategic importance and if managed well they will help the country achieve its developmental goals.
In addressing possible ways to improve the governance of SOEs, Prof. Jandrell called for improved corporate governance framework including strengthened oversight of SOEs by a well-qualified and independent board of directors. He said that this will create safeguards against poor governance.
“Reformed SOEs can be a catalyst for the much-needed dynamism in the economy that can spur development. This is not an easy path, but it is crucial to boost economic activity,” Prof. Jandrell emphasized. He pointed out that the Wits University has, in recent years, supported government reform processes, saying that “The University is an agent for sustainable societal change hence the need for continued collaboration with various institutions on governance issues”, he said.
In his address, the senior minister and special advisor to the Prime Minister of Ethiopia, Dr Arkebe Ogubay, argued that SOEs should be guided more by stakeholders’ rather than shareholders’ interests. In highlighting how the government-fully-owned Ethiopian Airlines thrived during the Covid-19 lockdowns, the minister emphasized that investment, innovations and professionalism are the determining drivers of SOEs’ performance, rather than their ownership structure.
Earlier, the ECA-SRO-SA director, Ms Eunice Kamwendo, in her welcoming remarks, said the challenges faced in South Africa are similar to experiences in the sub-region, providing a platform for sharing of experiences. She noted that SOEs remained critical for economic growth and service delivery and that a reform agenda has to consider those twin objectives while adapting to new technological advancements and ensuring that they are not a drain to an economy.
Amidst the doom and gloom, the director pointed to some successful SOEs around Africa, citing Ethiopian Airlines, especially given the innovation applied to manage its operations in the COVID-19 period. She also highlighted the Botswana’s Diamond industry. “The Diamond SOE has managed to capture a global market as it has moved towards value addition,” said Ms. Kamwendo, underscoring the need for reform and adaptability in order to stay relevant and profitable.
In closing, she said that despite SOEs being a responsibility of the government, the reform agenda is a whole-of-society agenda thus the need for constant dialogue. The Director reassured participants of ECA SRO SA’s support to SOE reforms in the sub-region in responding to its inclusive industrialization mandate – a development objective shared by most SOEs, which is key to reducing poverty and inequality in the region.
The dialogue which was moderated by the Acting United Nations Resident Coordinator in South Africa, Dr. Ayodele Odusola - was attended by high-level officials representing public and private sectors, labour movement organizations, civil society organizations, representatives of SOEs and academia.
Issued by:
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Economic Commission for Africa
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