Political manoeuvring among ministers has been behind the delay in appointing privatisation advisers, writes Mungo Soggot
Now that the government has finally named its privatisation adviser, it transpires that the endless delays over the appointment stemmed in part from a political struggle over who will control restructuring and privatisation.
The outcome of the battle appears to be that parastatals, and the government departments responsible for them, will have a greater say and the Public Enterprises Department a more supervisory — or “train-station” — role.
Last week, the government said Simpson McKie HSBC (a tie-up between the local stockbrokers and international banking group HSBC) had won the prized R10-million, one-year contract — put out to tender last year — to help it reshape policy on shaking up state assets. Some commentators have expressed surprise at the choice; a recent Euromoney privatisation poll does not even list HSBC in the top 10 sell-off specialists.
The R10-million is seen as a relatively small amount — indeed this week the public enterprises department indicated it was keen to up the amount and therefore the size of the role.
The advisers will report to Public Enterprises Minister Stella Sigcau. Although they will advise on all restructuring and privatisation, parastatals and the online ministries such as Transport and Mineral and Energy Affairs will be able to appoint their own advisers. Telkom already has, in the form of Goldman Sachs, and Post and Telecommunications is preparing to do the same. Simpson McKie will clearly not be allowed to execute transactions, a job that will be left to banks hired by individual parastatals or ministries.
Observers say both the heads of parastatals and some online ministries would have been keen to prolong the appointment as long as possible to give themselves room to manoeuvre. They might also have been keen to limit Sigcau’s advisers’ role to give themselves as much as lee-way as possible.
Evidence of the tension within government over the issue is the struggle concerning Transnet between Transport Minister Mac Maharaj and Sigcau. The parastatal falls into both ministers’ domains and the struggle has at times spilled over into the public.
As far as parastatals are concerned, it appears their various bosses have very different approaches and might want to be as free from government control as possible. Behind the fuzz of carefully worded statements on privatisation and restructuring it appears Transnet’s preparations for privatisation are, for example, burdened by its massive pension fund deficit and allegations of corruption. Some senior Eskom officials, however, are believed to be quite keen on privatisation.
Over the past year, there have been several instances of parastatal management attempting to push ahead with privatisation and restructuring plans with little effort to consult the government. Mossgas management came under fire from the Chemical Workers Industrial Union for pushing through a hefty belt-tightening programme ahead of a possible sale. There were also claims that state diamond company Alexkor was beavering away at a privatisation drive with little consultation with either the government or the unions.
Last month, Business Map disclosed that management at the government’s loss-making holiday resort chain Aventura had come up with a detailed privatisation plan after discussions with the unions. The plan, drawn up with consultant Price Waterhouse, involved selling 75% of Aventura on the open market, 23% to employees and 2% to current workers as a gratuity. Business Map said the proposed sale price is R70- million to R80-million for all 15 resorts — R50- million for settling debt and sprucing up the resorts and R20-million for the workers’ trust. The scheme means the government gets no money from the sale.
Business Map argued a number of objectives of the sale were murky — in particular, why there was no attempt to cash in on Aventura’s potential as a vehicle for black economic empowerment; the inclusion of management in the employee trust which apparently secured its position; and how the sale price was worked out.
The case study was used by Business Map to examine how the government and the unions are faring on squeezing the most out of privatisation. The body said the unions had adopted a vague, rhetorical approach to the issue, but the government was not blameless — several key ministers failed to turn up at privatisation meetings.
One observer close to the process told the Mail & Guardian that although various ministers and parastatal bosses would have been keen to stall the process, Sigcau’s team was not skilful enough to use the appointment process to strengthen its power base. Most observers are unflattering of Sigcau’s performance on privatisation.
Simpson McKie HSBC said this week its role would involve helping the government to review the plans suggested by various sectoral task teams on privatisation, prioritise these objectives, examine the existing regulatory framework for state assets and develop a communication strategy that will keep all “stakeholders abreast of developments”.