Radebe:Privatisation to yield R12-billion

Government is fast-tracking its partial privatisation drive this year through major changes to arms manufacturer Denel – including the sale of a third share in the business – and the drawing in of private-sector skills in running South Africa’s main port at Durban.

Privatisation receipts are expected to yield R12-billion in the current financial year.

Minister of Public Enterprises Jeff Radebe announced in Parliament on Thursday that R375-million had been paid by British global systems company BAE Systems for a 30% stake of Denel, and that plans were afoot to issue invitations to apply for the concession of the Durban port.

Radebe added: “Generically, the financial position and economic impact of state-owned enterprises are beginning to show a marked improvement over previous years.”

He indicated that a black economic-empowerment stake would also be provided in Denel, and that government was open to other strategic equity partners in the future, particularly in its commercial operations. He noted that since 1997 proceeds to the fiscus had amounted to R20-billion for “restructuring” – the government’s buzzword for its semi-privatisation philosophy.


For the period 2000-2001 proceeds to the fiscus amounted to R7,5-billion, mainly from Sasria, the state-owned riot-insurance company, and MCell.

This year’s proceeds will include contributions from Telkom, which is expected to be listed this year, proceeds from the sale of Safcol forests, and the sale of Alexkor, the state-owned diamond mine.

The defence deal – approved by the Cabinet on Wednesday but only announced in Radebe’s National Assembly Budget vote a day later – is the second this month involving Denel. The first was the sale of a majority stake in its Airmotive division to Turbomeca, a French company that specialises in military aircraft engines.

BAE Systems designs and manufactures military aircraft, surface ships, submarines, space systems, radar, avionics, communications, electronics, guided weapons systems and a range of other defence products.

Radebe said the deal was particularly important in opening up export opportunities for Denel.

The government would retain “a golden share” in the enterprise, which would remain at 70% for the time being.

He also indicated that his department was considering a listing for Denel.

Department officials have suggested this could be done via a dual stock-market listing, much like that of the Telkom initial public offering (IPO). This will see the current state telephone monopoly – already semi-privatised – listed on the New York and Johannesburg exchanges.

Briefing journalists ahead of his budget vote, Radebe said that the government was “not satisfied” with Denel remaining as it was. “[There are] various options, including the issue of an IPO,” he said.

Turning to the concessioning of the Durban port, Radebe noted this would be a model for similar approaches in Port Elizabeth and Cape Town.

It would see the Durban container terminal leased, while the port estate would remain under state ownership. Operating rights for pre-determined periods and subject to specific terms “will be transferred shortly through lease and rental contracts, regular concession contracts and concession contracts where the responsibility for development is transferred to the private sector through build-, operate- and transfer-type concessions”.

New concessionaires would give labour job security for a minimum period of three years “that respected current conditions”.

Radebe acknowledged that Durban’s harbour was now “unhappily classified as a congested port by all container lines. Exporters have been prevented from accessing markets. Costs related to production in general and exporting in particular have risen sharply and undermined competitiveness,” he said.

He gave as an example the fact that the United States was able to secure 14-day transit times out of Shanghai, compared to Durban’s 21 days.

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