South African state-owned enterprises (SOEs) are overall in “a good state” although performance has been uneven in the past financial year, the chairperson of the public enterprises portfolio committee reported on Tuesday.
Yunus Carrim also argued that the government was correct to keep these enterprises, which are involved in key sectors of the economy, in state hands “instead of privatising them”.
In a letter to the media at Parliament, Carrim said the committee’s consideration of the annual reports of the enterprises “suggests that in general where government provides SOEs with a clear mandate and supervision and ensures that they have effective and drive boards and managements, SOEs can be quite successful”.
“[SOEs] have a major contribution to make to the country’s growth and development — and they are, in general, beginning to do so,” he said.
Turning to the weaker entities in the parastatal stable, Carrim noted that Denel suffered a loss of R1,3-billion during the 2006 financial year — down from a loss of R1,5-billion during the previous year.
Noting that it needed R5,17-billion for its recapitalisation, of which it had received R2,85-billion from the national fiscus, Carrim said new strategy “overall is sound, and progress in the first year of its implementation good. It will be a very long haul.”
The state diamond company, Alexkor, reported an operating loss in the past financial year of R38,1-million — up from R1,5-million the previous year, mainly due to the reduction in the number of “sea days” for marine mining and the costs of its non-core activities, Carrim reported.
“We feel that Alexkor could perform better even now. Government also needs to provide greater clarity on what its long-term aims are for Alexkor,” he said.
He noted that South African Airways’ (SAA) profits were down from R648-million to R65-million in 2006, mainly “due to competition from the low-cost carriers and a huge, 51,5% increase in [the] fuel price”.
Carrim reported that the committee found “it difficult to tell how much of SAA’s difficulties flow respectively from factors beyond its control, legacy issues and weaknesses of the present management”.
The South African Forestry Company Limited (Safcol) recorded a profit of R168-million during an adjusted nine-month financial year, compared with the previous 12-month year’s profit of nearly R233-million. “Whereas the weighted average cost of capital is about 14% for the forestry industry worldwide, Safcol achieved a 15,4% return on capital.”
Carrim also praised the achievements of the parastatal giants Eskom and Transnet.
He noted that from a loss of R6,3-billion in 2004, Transnet recorded profits of R6,5-billion in the 2005 financial year and R4,5-billion in the 2006 financial year. Eskom reported a profit of R4,6-billion in 2006, he noted. — I-Net Bridge