SOEs can be fixed, say the CEOs of some of the ailing enterprises
SAA's Jarana believes the airline can be turned around despite it posting losses since 2012
CEOs of some of SA’s ailing state-owned enterprises (SOEs) believe the entities are fixable if there is political will to transform and put more competent boards in place.
They were speaking during a discussion hosted by Deloitte on whether reforms proposed by the Treasury to increase private sector participation could help turn around some of these fiscal-dragging businesses.
Evidence presented at the Zondo commission of inquiry has shown how SOEs, including Eskom and Transnet, had become instruments that facilitated state capture and looting by certain ministers and private individuals.
The Treasury, which is working on a framework to transform SOEs, on Wednesday said once it has stabilised these entities in the next six to 12 months, it will start enforcing some of the proposed reforms which include merging some, closing those that no longer serve their purpose, and increasing private participation.
SA Airways CEO Vuyani Jarana said “SOEs are fixable” if SA can see the transformation framework through. He said SAA could be turned around despite the airline posting losses since 2012 and still expecting more guarantees from the Treasury to stay afloat in the current financial year.
Finance minister Tito Mboweni announced in the annual budget that the government has revised the contingency reserve upwards to R13bn to respond to possible requests for financial support from entities, including SAA.
Jarana said SAA realised that the argument about it being a high strategic asset for SA was no longer that strong and therefore it needed to fight for its existence purely on the basis of profitability. “We are at a point where we are not profitable. There’s a big push for us to get ourselves to a profitable quadrant,” he said.
Jarana said he realised many people do not see what strategic value SAA was delivering and, given that pressure, the airline has to be profitable so that it can at least argue that it is an investment case. But he said this will take some time.
“As much as there is impatience and many South Africans are fed up about the state of SOEs , we have to recognise that we are where we are and we did not get here overnight. It’s been a process of systemic degradation over a period of time,” said Jarana.
SA Post Office CEO Mark Barnes said SOEs could function like private companies without being privatised if management was given the power to make quick decisions when they need to react to competition. “We are no longer monopolies or utilities. There’s an alternative courier, there’s an alternative postal delivery service,” said Barnes.
Airports Company SA acting CEO Bongiwe Mbovu said there were good technocrats in the SOEs who were good at their jobs.
“What we’ve experienced as state-owned companies is a situation where you have shareholder representatives, the boards. But they struggle to differentiate in terms of their fiduciary duties. They come to our boards and they are not sure whether they are there for the shareholder or the company. They sit there thinking about their appointments whereas there is a company here that needs to be run,” she said.