Howard Barrell, Belinda Beresford and Barry Streek The government failed to satisfy market hopes that it would provide fresh details on its privatisation plans when it unveiled its policy framework for restructing state enterprises in Pretoria on Thursday. But Minister of Public Enterprises Jeff Radebe said there were good reasons for the government’s reticence. “No country in the world that values its integrity has exposed its hand in a potentially volatile investment environment,” he said. Although Thursday’s announcement had long been billed as a “policy framework” for restructuring, the markets had nonetheless hoped and lobbied for details relevant to their investment plans. Radebe did, however, announce that important aspects of the restructuring and privatisation of Denel, Eskom and Transnet would be wrapped up soon. He said protocols and shareholder compacts for the three major parastatals were being finalised and “will be signed within the next month”. Radebe confirmed that Telkom would be listed next year. Financial markets in Johannesburg barely reacted to the announcement. Dealers said the absence of any important new detail on privatisation had left the markets with no reason to trade higher. Significantly, Radebe disclosed that the government had been consulting with the leadership of the Congress of South African Trade Unions and had “reached consensus with them on various aspects included in the framework”.
Minister of Finance Trevor Manuel, who also attended the announcement of the restructuring framework, said the outlook for privatisation meant his department was in a position to revise upwards the revenues it had anticipated receiving in the process over the next three years.
Analysts and opposition parties were less bullish. “Nothing new was said,” commented South African Chamber of Business economist Richard Downing on Thursday, saying he would have to examine Radebe’s comments in greater detail before he could add any more. Opposition parties said there was nothing significant or new in Radebe’s announcement. Raenette Taljaard, Democratic Party representative on privatisation, said it was a “largely theoretical policy framework that lacked the detail and specifics of dates and deadlines investors have been waiting for”. The New National Party’s Willem Odendaal said the African National Congress’s much-vaunted privatisation plan had turned out to be simply “an old plate of reheated food”.
In his statement, Radebe said the Cabinet had approved the Eskom Conversion Bill, which would see the electricity provider incorporated as a limited-liability company as the first step in its restructuring. Legislation would come before Parliament in September to ensure that the restructuring of Transnet was not impeded by its pension-fund debt. Spoornet would be incorporated, with its different business units becoming separate corporate entities. Coallink, Orex, LuxRail and LinkRail would be concessioned, while Spoornet’s general freight business would be commercialised. Denel would also be incorporated, and the process of finding strategic equity partners for Denel Aerospace was “near conclusion”. A similar exercise was under way for Denel Ordnance. The Alexkor diamond mine had been turned around, and was now yielding monthly profits in excess of R500E000. It would be sold once the exploration phase of its marine alluvial and land deposits had been completed.
Taljaard added in her statement that the government appeared to believe in a number of fallacies. One was that it was best placed to turn state-owned enterprises around and restore them to profitability. Another was that investors would be “willing to invest under restrictive government dictate and subject to onerous social obligations”. Manuel said that the estimates in the national budget that privatisation would raise R5-billion this year, and R6- billion and R10-billion over the next two financial years, were extremely conservative in light of the accelerated programme of privatisation. He said the privatisation programme could assist in drawing foreign direct investment into the country and would help the government reduce debts. As a rule of thumb the government estimated that every R1-billion not borrowed freed up resources to the tune of R160- million per year for a decade.