Government improves confidence in SOEs

Thursday, August 24, 2017
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The ongoing implementation of State Owned Enterprises (SOE) reform is one of the measures put in place by government to improve confidence in SOEs, says Deputy President Cyril Ramaphosa.

In his replies to Parliamentary Questions in Cape Town on Wednesday, the Deputy President said SOE reform aims to stabilise finances, governance and operations, amongst other things.

As part of the Presidential Review Committee recommendations, the Inter-Ministerial Committee (IMC) chaired by the Deputy President has developed several measures to advance the reform of SOEs.

In July 2017, the Minister of Finance provided time frames for the implementation of 14 critical measures to rebuild investor confidence, including steps to stabilise and reform SOEs.

Cabinet has also considered guidelines for the remuneration of SOE directors and executives and a guide for the appointment of SOE boards and executive officers.

These, the Deputy President said, are intended to ensure consistency, transparency and probity in all matters relating to appointments and remuneration.

Cabinet has also considered a private sector participation framework, which provides guidance on how to involve the private sector in new public infrastructure programmes.

The Deputy President said the IMC is also coordinating work on the development of a new shareholder policy for government that will improve coordination, oversight and the effective allocation of resources.

“The first phase of the reform is focusing on the major commercial SOEs that are the backbone for our infrastructure development.

“The IMC has approved a structure that categorises SOEs into nine sectors to allow for the optimisation of State intervention in each sector.”

He said the prioritised sectors have been identified based on their potential to contribute to re-industrialisation and create jobs. 

He said the work being done in the short to medium term is consolidation, realignment and possible merger of certain SOEs concentrating on the airlines, state mining assets and telecommunications.

The development of the optimal structure for South African Airways (SAA), SA Express and Mango has been concluded, and the Ministers of Finance and Public Enterprises will present the proposed recommendations to the IMC and Cabinet soon.

“There are also proposals for financial support to some SOEs. In light of what is envisaged in the draft Shareholder Policy, providing financial support to SOEs must be matched against the entity's potential to remain sustainable and wean itself off government support.”

He said the IMC is considering various alternative and innovative instruments to fund SOEs, including leveraging on the private sector participation framework on which National Treasury is engaging with various departments and state owned enterprises.

The criteria for support is currently being developed and, once finalised, the Deputy President said it will be taken through the necessary approval processes and present them to Cabinet.

He said SOEs have significant potential to drive higher levels of economic growth, job creation and development.

“Through the work being done by the IMC on SOE reform, we are confident that we will soon be able to more effectively realise that potential.” -

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