Worldwide, state-owned enterprises (SOEs) have had a significant influence on the economies of both developing and developed countries. They are essential components of economic strategies in many Western nations, offering services, employment opportunities, and financial gains at various governmental levels. Many of these SOEs have expanded their operations to become prominent players in the global market. Research conducted by the OECD revealed that between 2010 and 2011, 204 out of the Fortune 2000 companies were predominantly state-owned and conducted business in 37 different countries.

By Themba Khumalo

SOEs are invaluable assets that drive economic development by creating job opportunities and fostering technology transfer, ultimately leading to innovation and advancement across industries. Their positive impact on domestic and global competitiveness is a key driver of economic growth.

They play a vital role in economic development through their active promotion of industrialisation. These enterprises are able to focus on strategic sectors such as energy, transportation, telecommunications, and manufacturing, which are essential for driving economic growth. By investing in these areas, state-owned enterprises help diversify and expand a country’s industrial base, ultimately contributing to overall economic progress.

This contribution not only boosts domestic production but also helps reduce dependence on imports, contributing to a more sustainable and self-sufficient economy.

Furthermore, state-owned enterprises are major employers within an economy. These entities often have a large workforce that provides stable jobs to individuals across various skill levels. This aspect is important for developing countries like South Africa, which seek to reduce unemployment rates and improve living standards.

By offering secure employment opportunities with reasonable wages, SOEs contribute to poverty reduction efforts and ensure a more equitable distribution of wealth within society.

In addition to job creation, state-owned enterprises also have a significant role in fostering technology transfer.

Given their long-term objectives and financial capabilities, SOEs can invest heavily in research and development activities. This enables them to develop or acquire advanced technologies that might be otherwise inaccessible for private firms due to high costs or a lack of resources. The dissemination of these technologies enhances productivity within the firm, spurring innovation across industries and driving economic growth.

Moreover, state-owned enterprises tend to have a broader perspective on national interests rather than merely focusing on profit maximisation like private enterprises. They focus on achieving broader socio-economic goals rather than just pursuing short-term financial gains. This allows SOEs to prioritise investments that boost infrastructure development, provide essential services to the population, and maintain stability in strategic sectors. By undertaking these roles, SOEs contribute to the country’s overall competitiveness and support sustainable economic growth.

By understanding their significance and leveraging their potential efficiently, the government can harness the power of state-owned enterprises to drive development and realise broad socio-economic objectives.

There is a misconception that fixing state-owned enterprises requires privatising them. However, it is crucial to refute this myth punted by egotistical capitalist opportunists who believe privatisation is the only way for organisations like Transnet and Eskom to succeed.

Nothing could be a million miles from the truth. Privatisation often leads to increased costs for consumers, job losses, and lack of accountability. Instead, the government should focus on implementing effective regulations and improving management within state-owned enterprises.

One key aspect of fixing state-owned enterprises is addressing corruption and mismanagement within these organisations. It is essential to hold individuals accountable for their actions and establish transparent processes that prevent any form of malpractice. By taking this action, we can guarantee that these enterprises are managed effectively and efficiently.

Furthermore, investing in the training and development of employees is crucial to enhancing the performance of state-owned enterprises. By providing the necessary skills and knowledge, employees can become more productive and contribute to the success of their respective organisations. This investment in human capital will not only benefit the enterprise but also promote economic growth at a broader level.

In addition to internal improvements, collaboration with private sector entities can also play a significant role in fixing state-owned enterprises. Partnerships with reputable companies can bring in expertise, technology, and innovation that may be lacking within the public sector. Such collaborations can lead to improved efficiency, increased competitiveness, and ultimately better services for citizens.

Moreover, it is crucial to ensure that state-owned enterprises have clear objectives that are aligned with national development goals. This alignment will enable these entities to contribute effectively towards socio-economic progress while meeting the needs of the population they serve. Regular monitoring and evaluation should be conducted to assess their performance against set targets.

Furthermore, fostering a culture of transparency and open communication within state-owned enterprises is paramount. This will create an environment where employees feel comfortable reporting issues or concerns without fear of retaliation. By encouraging dialogue and feedback from stakeholders, these organisations can identify areas for improvement and implement necessary changes promptly.

Our nation has had a troubled history involving SOEs, characterised by pervasive corruption and mismanagement that have had severe consequences.

In the past five years, Pravin Gordhan, the Minister of Public Enterprises, has created major upheaval in the management of SOEs by causing chaos among both the executive and board members. As a result, many entities have operated with temporary boards, interim CEOs, or no permanent executive leadership. When permanent executives are selected, Gordhan frequently opts for inexperienced candidates for these positions.

Gordhan’s term, characterised by inefficiency, has had widespread negative effects that go beyond the leadership levels of the board and management to impact the financial stability of SOEs. Various reports have shown that over the past five years, the seven SOEs under the Department of Public Enterprises – such as Eskom, Transnet, Denel, Safcol, Alexkor, SAA, and SA Express – have amassed billions in irregular expenses and unproductive and wasteful spending.

This deterioration is in line with the findings of the Auditor General, who reported to Parliament highlighting ongoing financial losses, failure to implement audit recommendations, consistent inability to meet objectives, and an overall lack of service delivery.

Gordhan’s inability to ensure the implementation of financial controls and responsible financial management is a strong indictment of his efforts to reform state-owned enterprises (SOEs) affected by corruption and looting during the so-called State Capture scandal. Gordhan’s failure to stop financial losses and his lack of a clear plan to address the unstable financial state of these organisations have worsened the situation.

In the last five years, the seven state-owned enterprises (SOEs) have undergone multiple audits that failed to meet the necessary standards. The majority of the unfavourable audit results comprised nine qualified audits and two disclaimers. Notably, entities such as Eskom, Alexkor, SAA, and Denel have faced challenges submitting financial reports on time.

Despite these obstacles, South African taxpayers have allocated billions of rands in bailouts to these struggling SOEs since 2019. Gordhan has consistently advocated for these bailouts, despite persistent issues of mismanagement and corruption leading to the misallocation of taxpayer funds.

The repercussions of Gordhan’s ineffective leadership are evident in the deterioration of Transnet’s goods rail and port systems, causing a significant decline in crucial export revenues and straining the national budget. The degradation of Eskom, marked by frequent power outages, has further impeded South Africa’s economic progress. In light of substantial evidence of failure, Gordhan has exacerbated the situation and undermined accountability within the SOEs.

In a nutshell, fixing state-owned enterprises does not require resorting to privatisation, as advocated by profit-driven capitalists. Instead, it demands a holistic approach focused on combating corruption, enhancing management practices, investing in human capital, fostering collaboration with the private sector, aligning objectives with national development goals, and promoting a transparent and communicative culture.

By implementing the above measures, we can ensure that state-owned enterprises operate efficiently and effectively for the benefit of South Africa.

Leave a Reply

Your email address will not be published. Required fields are marked *