/ 19 September 1997

Desperately seeking privatisation

strategy

Madeleine Wackernagel : Taking Stock

News that Stella Sigcau, Minister of Public Enterprises, has a masterplan for the restructuring of Transnet raises more questions than answers. Far from setting out the nuts and bolts of government intent with regard to the transformation of the transport giant, the ministers statement only served to confuse the privatisation issue further. Granted, hers is no easy task, and she makes the point that her department has been bending over backwards to accommodate labours concerns. In the face of very stiff opposition, remarkable progress has been made.

But while some observers are only too pleased that the process is happening at all, however slowly, it is time to go back to first principles.

When the government first announced its intention to adopt privatisation as part of the growth, employment and redistribution strategy, the business community was euphoric. A year on, frustration is more the order of the day. Not because of the delays in getting the process up and running Sigcau now no longer expects any more deals this year than those already completed, Telkom and Sun Air but because of the muddled thinking guiding it.

We are all aware of the dangers of replacing a state monopoly with a private equivalent, or putting valuable strategic assets into foreign hands: price increases, job losses and unfettered monopoly behaviour, are just a few of the possible spinoffs

On the plus side, there is the potential for increased efficiencies and hence profitability; and a boost for state coffers, through the sale proceeds and reduced subsidies.

The real problem is not privatisation per se but government strategy or lack thereof. Government says the state has no business being involved in certain companies, such as Aventura and Safcol. Fair enough. But what then is it hoping to achieve?

The British experience is often derided, but no matter what ones ideological or economic problems with that policy, at least the government had a plan and followed it through. The Thatcher administration wanted to make various state-owned industries more competitive and productive. It needed to bolster the states finances; and in order to win more voters, it sought to create a nation of small shareholders. Sid, the ordinary man-in-the-street targeted in promoting the British Gas sell-off, would be less inclined to complain about job losses if his shares were doubling in value. And he might even feel that he had a legitimate stake in the economy.

By the time Thatcher was pushing through her reforms, she had broken the back of the union movement. Sigcau, on the other hand, has to involve the labour constituency every step of the way, a valid consideration in the light of South Africas unemployment problem.

Under the terms of the National Framework Agreement, all restructuring plans are debated by representatives from government, the relevant union and the company itself. It is tempting to blame labour for holding up the process, yet most participants come away from the reconstruction committee meetings more confused than ever. Just what are the governments objectives?

At this stage, a time-frame for implementing the policy is less important than elucidating the policy itself. Will SAA be partnered in a strategic alliance, along the lines of Telkom? Will the government retain a golden share in some parastatals, so that it too gets a dividend windfall as the business becomes more profitable? Will there be a public share issue? Or will whole operations be sold to the highest bidder?

There are good reasons for wanting to direct some state-owned industries towards the market. But the government risks being impaled on its own flagstaff. Without a strategy for each and every parastatal on the disposal list, it courts derision. Lack of transparency gives rise to suspicion, and cynicism which the government should want to avoid at all cost.

We dont know what Sigcau is doing. Is her department driving the process at all and in what direction? The public and potential investors have a right to know. If Ms Sigcau could please contact this column first, I would be most grateful.