Minister of Public Enterprises Jeff Radebe plans to sell R170-million in state assets by 2004. Donna Block and Mungo Soggot report
In a move aimed at speeding up the privatisation and restructuring of state assets, the Department of Public Enterprises is not renewing its contract with the banking group HSBC Simpson McKie, the government’s adviser on privatisation for three years.
The department says it wants to expand its own internal brains trust on privatisation and recruit separate advisers for specific sell-off transactions rather than have a single catch-all adviser.
The department’s representative, Zaid Nordien, said this week that HSBC’s departure fitted in with the government’s plans to step up its privatisation drive, which, he said, was likely to include the sale of R170-billion in state assets by 2004.
HSBC was appointed under the former minister of public enterprises, Stella Sigcau, on a R12-million a year contract. Nordien said the problem with relying on one adviser was that the adviser “could serve a number of different clients”.
“We need to be able to assess whether the advice is in our best interests. We will get specialists where we need external advice, but we also need the capacity to investigate options placed before us.”
Nordien said HSBC’s role over the past three years would not preclude it from getting involved in privatisation deals. He said HSBC was currently wrapping up its existing work for the department.
Since his appointment in the June Cabinet reshuffle, Minister of Public Enterprises Jeff Radebe has signalled several times his intention to speed up the government’s privatisation plans.
Apart from repeating his 2004 target, Radebe is pushing ahead with plans to privatise the state forestry company, Safcol – albeit amid a lack of international interest – and also recently announced plans to sell off a string of small assets such as Abakor, the state abattoir operation, and some of the state’s national park interests.
Radebe is also awaiting the proceeds of the R1,4-billion stake in South African Airways (SAA) that was sold to Swissair; the deal still has to be ratified by the European Union. The transaction was announced by President Thabo Mbeki at his inaugural address to Parliament, a sign of the president’s own political commitment to state sell-offs.
HSBC was appointed in 1996 after much debate over whether the Department of Public Enterprises needed a catch-all adviser or separate sectoral advisers. The department with which HSBC had to work is widely regarded as having been ineffective, having presided over several major hitches.
There is the sale of Sun Air, which fell apart after infighting between SAA and the consortium that bought the airline.
The sale of the state’s holiday resort arm, Aventura, suffered a similar fate: the union investment company that bought it could not pay for it within the agreed deadline.
And then there is the current controversy at Alexkor, the state diamond mine, where the public enterprises department is still negotiating with Nabera, the company awarded a management contract for the mine in February.
Nabera has to date failed to comply with its contractual obligations, and has now lost the key empowerment company in its consortium – Mmkau Mining, the company headed by Bridgette Radebe, the minister’s wife, who has pulled out of the contract.
Radebe’s department has borne criticism for being excessively lenient with Nabera, but it has a good excuse: the contract drawn up by Sigcau’s department is hopelessly vague in crucial areas, especially how and when Nabera must comply with their contractual obligations.
One indication of the low esteem in which Sigcau’s department was regarded was that Radebe brought across his director general and other key civil servants from his previous portfolio, public works.
As a staunch member of the South African Communist Party, Radebe will be well placed to deal with the inevitable union hostility that will meet the government’s privatisation drive.
HSBC did not respond to numerous requests for comment.