Privatisation in South Africa lost momentum last year as the ruling African National Congress deferred to its trade union ally, suggests a new report by the BusinessMap Foundation.
Launched in Johannesburg on Thursday, the report, Restructuring 2004: A Change of Pace, suggests that the ANC, reluctant to provoke the ire of the Congress of South African Trade Unions, has allowed key privatisation and restructuring projects to be shelved. It points out that a general election is looming.
The government frequently cites the poor market conditions and state of the global economy as reasons for not pressing ahead with privatisation.
The biggest and most successful privatisation exercise last year was that of telecoms monopoly Telkom. The company was listed in March and its share price has moved from R28 to more than R70.
However, the year also saw the labour movement achieve victories in the area of port and commodity railway line concessioning to private operators. The former process has been delayed by about 18 months.
The report estimates that since 1997, when six SABC radio stations were sold, the sale of state assets to the private sector has raised R21-billion, with R12-billion accruing to the Treasury.
The report also highlights the difficulties of driving empowerment through privatisation. As part of its listing, Telkom set aside a block of shares for Khulisa, a discount purchase scheme targeted at previously disadvantaged groups. That shareholding now constitutes only 1% of Telkom’s issued share capital.
In addition, Telkom had a 3% shareholding by Ucingo consortium from its earlier privatisation. The consortium has had to cede the stake to financiers as it was unable to finance it at listing price levels.
Empowerment successes in privatisation have been in areas such as forestry, which boosted black ownership and brought benefits to adjacent communities. There is also the indirect success that resulted from the liberalisation of the telecoms market. The formation of Cell C increased competition and led to the creation of a company with a 40% empowerment shareholding.
The report notes that state-owned enterprises have been key contributors to black economic empowerment (BEE) in terms of employment equity and procurement.
It points out that although no company listed on the JSE Securities Exchange has a black CEO, parastatals boast black and female talent in abundance. The latest of these appointments is former Treasury director general Maria Ramos to the helm of Transnet.
The report estimates that R9-billion of R34-billion in procurement contracts handed out by Transnet and arms manufacturer Denel have been BEE-oriented.
BusinessMap estimates that state- owned enterprises have an asset value of R312-billion and a turnover of R156-billion, or 14% of gross domestic product at 2002 market prices. But their workforce has been steadily contracting. This sector had about 187 000 employees last year, 11 000 fewer people than in 2001.
More than 20 restructuring projects will have to be tackled by the government after the election. These include the sale of 51% of diamond mine Alexkor for no more than R150-million. The sale has been delayed by the land claim case brought by the community of Richtersveld.
Also on the agenda is the restructuring of Transnet, involving the conversion of the parastatal into an integrated logistics company, with the National Ports Authority and South African Airways ultimately moved out of the business.
Eskom has also been earmarked for a restructuring exercise that will entail handing over its power distribution assets to six regional distributors and introducing a foreign investor and an empowerment partner to the generation side of the business, which is targeted for competition.
The report questions why Eskom’s unregulated business arm, Eskom Enterprises and IT company Arivia. kom, are not being considered for privatisation.
Another area the report suggests will gain prominence is that of public-private partnerships. These are increasingly being used in the privatisation of municipal services, principally water supply. Â Â
The report notes that restructuring at municipal level has some way to go and needs to address the crucial area of lack of delivery capacity. “There is tangible proof of investment opportunity arising from years of consolidation,” it says.
It also notes that exploring these will require “further legislative clarification by national government and greater exploration of opportunities by [development finance institutions], municipalities and the private sector”.