The privatisation of South African state-owned enterprises (SOE) seems to have stalled, which, given independent research consultancy BusinessMap Foundation’s 2002 annual review title of A Sense of Movement, is very ironic.
“Restructuring” — in the true sense of the word rather than as a synonym for privatisation — of SOEs is proceeding, with a new management team in place at transport utility Transnet, for example, and the groundwork laid for private-sector concessions of port operations.
Also, local government restructuring is no done deal, opening the door for the quiet “privatisation” that public-private partnerships represent. These should proceed apace during 2004.
BusinessMap’s 2003 review is therefore titled A Change of Pace. Reg Rumney, the information services director at BusinessMap, also said it may be in the government’s interest to preserve the perception that privatisation has stalled, as 2004 is an election year.
“The major reversal on the privatisation front occurred not in 2003, but in 2002 with the decision to listen to union concerns and halt the concessioning of Spoornet commodity lines. This was widely seen by the union movement and the left in South Africa as victory against neo-liberalism,” Rumney wrote in the review.
No grand privatisations were announced during 2003. The major event was the continued sale of shares in telecommunications utility Telkom and its listing on the stock exchange. Also, Aventura was finally disposed of.
Where black economic empowerment (BEE) is concerned, actual privatisation has delivered little when compared to the potential to use SOEs for black advancement in management and in procurement.
For example, Telkom’s Khulisa scheme was devised to prefer black bidders for Telkom shares. However, the Khulisa offer accounted for less than 1% of Telkom’s shareholding. Moreover, empowerment consortium Ucingo previously held 3%, set aside for it from the initial privatisation, but this reverted to financiers because of Ucingo’s inability to finance the shares. The net result is that Telkom has no significant block of empowerment shareholding.
However, while privatisation itself has not significantly advanced BEE, public sector financing is set to play a key role, with the Industrial Development Corporation and the National Empowerment Fund as the state’s main vehicles to finance empowerment.
South Africa’s BEE drive nevertheless hit a new high in 2003 with more than R30-billion-worth of deals concluded compared with the previous peak of R21-billion reached in 1998 and only R8-billion in 2002.
The implementation of the mining and financial services sector charters by the private sector and the government is seen as the driving force behind the new impetus on empowerment deals. The finalisation of the two charters removed a cloud of uncertainty around private-sector empowerment.
The BusinessMap Foundation’s sectoral review revealed that restructuring — in the sense of reshaping the economy to be more competitive — indeed stalled in 2003.
While Telkom’s listing went ahead, the state is heavily involved in telecommunications through the Eskom and Transnet shares of the second national operator (SNO), and through its holding in Telkom, which is involved in cellular telephony through Vodacom, 50% owned by Telkom.
Telkom continues to retain a stranglehold on the sector according to BusinessMap. Cheap bandwidth remains elusive. Competition — which legally could have started on May 7 2002 — has been delayed in all quarters.
The SNO and the underserviced area licences were still not licensed by early October 2003, and new services from wholly state-owned Sentech were limited.
Legally, businesses could do little to cut telecoms costs. Use of innovative technologies such as voice-over-internet orotocol is restricted.
More positive is that the information and communication technology sector embarked on creating an industry BEE charter.
Elsewhere too, there appeared to be a reluctance to let go of ownership.
Privatisation of Eskom electricity generation itself is understandably being handled with kid gloves, while competition has been introduced in electricity generation in a small way.
But what of the continued state ownership of Eskom Enterprises, Eskom’s private sector arm? Eskom Enterprises’ status as a state-owned company, blazing a path in Africa by taking advantage of African countries’ privatisation drives, has not gone unnoticed.
Again, why is state information technology (IT) firm Arivia.kom, which competes with other IT firms in the private sector, not a candidate for privatisation?
On a positive note, the energy sector is one of the clearest examples of how the government is tying industry restructuring and the entry of private players to the advancement of its empowerment goals.
In this sector, the year has been one dominated by actual and proposed legislation, rather than concrete transactions. However, these legislative proposals signal profound changes for the energy sector.
Participants in the industry are facing a stream of important new initiatives and there is a tension between achieving demonstrable progress while overcoming constraints on resources.
Furthermore, many of the changes are likely to increase the administrative burden on the state, a fact that is explicitly recognised through estimates of additional costs for the Department of Minerals and Energy.
There is thus a price to pay for restructuring the industry — and restructuring does not so far automatically mean less state intervention, unlike elsewhere in the world.
The broad principle remains that state ownership should have a purpose, such as supplying services the market cannot supply.
Otherwise the risk is that the public sector will suppress the development of the private sector by using its relationship with the state to stifle competition.
If an entity can truly achieve “delivery” while serving its main shareholder, the state, by delivering profit, why should that entity continue to be state-owned? — I-Net Bridge