Categories: GovernmentNews
| On
2023-12-07 7:58 AM

South African Government’s Struggle to Revive State-Owned Enterprises

  • South African state-owned enterprises (SOEs) have received substantial government bailouts, but Auditor General findings reveal persistent underperformance, with only one out of 19 major SOEs achieving a clean audit, indicating a critical need for improved financial and performance management.
  • Public Enterprises Minister Pravin Gordhan acknowledges the challenges faced by these entities, citing State Capture as a major factor impacting their operations. He highlights ongoing efforts and strategic plans, emphasizing bailouts and specific initiatives aimed at revitalizing SOEs like Eskom, Transnet, and Denel.
  • Despite government interventions and outlined strides, the Auditor General's report underscores the necessity for sustained efforts in transparency, ethical governance, and operational effectiveness within these SOEs, highlighting the need for comprehensive strategies and consistent leadership to achieve financial sustainability and improved performance.
By Miriam Matoma

The commitment of the South African government to revitalize and sustainably manage state-owned enterprises (SOEs) has been the focus of significant investment and strategic planning. Despite consistent financial injections, the performance of these entities has raised concerns, as highlighted by the recent audit outcomes delivered by Auditor General Tsakani Maluleke on November 29, 2023.

Over the years, billions of rands have been infused into these enterprises, aiming to steer them toward financial stability and enhanced efficiency. However, the Auditor General’s report depicted a distressing picture of underperformance among key SOEs, with only one entity, the Development Bank of Southern Africa (DBSA), achieving a clean audit. This glaring disparity underscores the urgent need for substantial improvements within South Africa’s state-run companies.

Auditor General Maluleke emphasized that high-impact auditees, those entities with a significant influence on both the populace and government finances, are lagging behind in critical financial and performance management disciplines. This disappointing revelation has sparked concerns about the overall sustainability and efficacy of these enterprises.

Among the major SOEs evaluated, entities falling under the Department of Public Enterprises, including Eskom, Transnet, Alexkor, South African Airways (SAA), South African Forestry Company Limited (SAFCOL), and Denel, exhibited concerning shortcomings in their audit outcomes. While some managed to produce quality financial statements, they struggled with performance reports and legislative compliance, while others failed to submit essential financial documentation on time.

Public Enterprises Minister Pravin Gordhan, responding to queries regarding the underperformance of these entities, emphasized their ongoing path toward recovery. He attributed the setbacks to the adverse effects of State Capture, highlighting the boards’ concerted efforts to restore these entities to operational effectiveness.

Gordhan outlined various strides and plans aimed at the revitalization of these SOEs. Specifically, he referenced the substantial bailouts, such as the R9 billion allocated to Denel, as tangible demonstrations of the government’s commitment to reinvigorate these groups. He further elucidated on specific initiatives undertaken by each SOE:

For Eskom, Gordhan highlighted the ambitious goal of achieving a 65% Energy Availability Factor (EAF) by March 2024, along with maintenance efforts at the Kusile Power Station and restructuring plans for three subsidiaries.

Regarding Transnet, the Minister stressed urgent measures taken to address port and rail issues, including seeking private sector aid for various capital projects, exemplified by an identified international partner for the development and operation of a container terminal at the port of Durban.

Gordhan also pointed out apparent progress at other SOEs, citing a forensic investigation at Alexkor, SAFCOL’s financial responsibility, and transparency reflected in its audit outcomes, and Denel’s marked improvement in market sentiments due to government support.

Despite these articulated plans and purported successes, the ongoing challenges facing these entities remain a focal point for stakeholders. The government’s persistent commitment to transparency, ethical governance, and financial sustainability is commendable. However, tangible results in terms of improved performance, profitability, and operational efficiency are eagerly awaited.

The Auditor General’s findings underscore the imperative for a comprehensive and sustained effort from both government bodies and the leadership of these SOEs to implement robust strategies, fostering accountability and fostering a culture of excellence within these critical enterprises.

As South Africa navigates its way through these challenges, the resilience and adaptability of its state-owned enterprises stand as pivotal determinants of the nation’s economic trajectory. With continued oversight, strategic planning, and a collaborative approach, the aim of achieving robust, efficient, and profitable SOEs aligned with the country’s growth objectives can be realized.

Join Our Newsletter
Subscribe to our newsletter and stay updated.


Start trading with a free $30 bonus

Unleash your trading potential with XM—your gateway to the electric world of financial markets! Get a staggering $30 trading bonus right off the bat, with no deposit required. Dive into a sea of opportunities with access to over 1000 instruments on the most cutting-edge XM platforms. Trade with zest, at your own pace, anytime, anywhere. Don't wait, your trading journey begins now! Click here to ignite your trading spirit!

Miriam Matoma

Miriam is a freelance writer, she covers economics and government news for Rateweb. You can contact her on: Email: Twitter: @MatomaMiriam