Government says its expanded public works programme (PWP) has the potential to kickstart the economy. The full list of mega projects under consideration by Government is currently worth an estimated R3.2tn. This includes dams, roads, trains and ports. At a recent presentation delivered by Transnet CEO Brian Molefe, he said that the total budgeted and already approved for public sector infrastructure projects over the next three years in South Africa totals R844.5bn. Transnet alone will spend R300 bn over the next seven years.
Another company that has a huge role to play in this capex rollout is Eskom. The company’s current ongoing build programme is worth R340 bn. This mainly speaks to the two new coal-fired power stations under construction.
Malusi Gigaba, the minister under whose stewardship Eskom and Transnet operate, says it’s critical that SOEs are run and managed optimally in order to meet the needs of the economy. For that to happen, greater shareholder oversight is necessary.
“We sit with hundreds of SOE’s, some even owned and run by municipalities,” he says. “Many are not being controlled efficiently as shareholder oversight may be lacking.”
He says this optimisation is part of the reason why the DPE has been under a process of review by the Presidential Review Commission (PRC), which was established in 2009.
“The PRC is looking at all SOEs and will make recommendations on all. Some recommendations may be to sell off some SOEs and to consolidate others.”
Two SOEs that may be consolidated are Sentech and Broadband Infraco.)
“Other recommendations may be to consider a company like Safcol (State -owned forestry company) and look at the untapped potential that exists. That company can lead to a lot of jobs in deep rural areas.”
Gigaba says another issue that the PRC is considering is the continuing role of DPE as a separate department in Government.
“The department was only ever really established in the early Nineties to look at what to do with SOEs. It never truly had a clearly defined mandate.”
Gigaba says in theory there are three options about what to do with SOEs.
“We can keep going as we are and maintain the status quo. This is not optimal. Second, we can shut down DPE and shift relevant SOEs to other portfolios, eg Eskom to the Department of Energy. This is probably an even worse option as the other departments are already constrained with many responsibilities. The last option is to consolidate commercial SOEs into DPE and leave non- commercial SOEs – e.g. the SABC and Metrorail – in their existing portfolios. This will ensure that commercialised SOE’s can be optimised properly with due oversight from the shareholder as we’ve seen at Eskom and Transnet. We could call this an SA model for SOE’s.”
Gigaba also says that a decision on SA’s nuclear future is expected very soon.
“We can’t allow the economy to be kick-started by the Government and then within months there’s no electricity,” he says. “Security of supply is critical.”
He says Eskom is currently reviewing its possible role in nuclear power generation.
“Eskom is determining if it has the expertise and experience to manage a bigger nuclear programme rollout,” he says. “Government would prefer having a complex programme like nuclear given to a trusted source like Eskom to manage. Eskom has been doing nuclear successfully for decades.”
A nuclear rollout programme could cost South Africa more than R1trillion. Nuclear is already built into Government’s Integrated Resource Plan (IRP2010), according to which the first new nuclear-generated electricity will be needed in the grid by 2023.
James Styan
Here’s an idea – sell off the SOE’s by listing them on the Stock-exchange, with a minority share held by the employees and government. Utilise the capital generated to fund the expansion plans and recapitipise the SOE’s. Sell licences to competitors in industries where there are monopolies. Most are currently not being run very efficiently, and would benefit from getting rid of the beaurocracy stifling growth. Eskom and Transnet are just two of the examples. This is nothing new – look at what happened to Genmin after it was sold by the state – it is now a core part of BHP Billiton…