SOEs could help drive post-Covid economic recovery, says Ramaphosa
Despite most of SA’s state-owned enterprises (SOEs) remaining in a parlous state, President Cyril Ramaphosa believes they could play an integral role in driving the country’s economic recovery post-Covid-19.
There have been growing calls for the partial or full privatisation of some SOEs that are in a dire state.
Ratings agencies have cited SOEs, particularly Eskom and SAA, which carry debts approaching R700bn, among the main risks to the sustainability of the nation’s finances.
The crises at the entities have put the government under pressure to show its intent on the restructuring of SOEs and reducing the financial burden on the fiscus.
During a parliamentary question-and-answer session on Thursday, Ramaphosa said the government will “seriously interrogate” a business rescue plan for SAA, which was published on Tuesday. The plan proposes a restructured airline that will require a bailout from the government amounting to about R30bn. The restructured airline will employ 1,000 of the existing staff with the remainder retrenched.
DA leader John Steenhuisen wanted to know whether the president will back another bailout for SAA instead of channelling the funds to areas of the economy that will create jobs for millions of people set to be out of work due to the health crisis.
Ramaphosa said all over the world governments were moving to support companies in distress as a result of the health crisis. He cited the recent decision by the German government to grant Lufthansa, that country’s largest airline, a €9bn bailout that gives Berlin a 20% stake.
“We are going to do everything we can to ensure that we reposition our economy and country on a reformed process that ensures the economy functions better. We have said we will pay closer attention to our state-owned enterprises to ensure that they are functioning effectively,” Ramaphosa said, adding that the private sector will also be crucial in reigniting growth.
He said the government was already “exposed to the SAA saga” to the tune of R16bn because the state over time acts as a guarantor of many of the SOEs.
“We have set up the state-owned enterprises advisory council which is going to be advising the government. [We will] take a closer look at all state-owned entities to advance the interests of all South Africans. State-owned enterprises will continue to play an important role in our economy, and this is the case now and post-Covid in other economies as well.”
Ramaphosa said the Covid-19 crisis will create a post-war economic situation.
“The state has to play a critical role [post-Covid-19]. Any post-war situation must be state-led. The state must set policies, give direction and the state therefore is called upon to look at how the market is functioning and structured,” he said.
“Even now, our budgeting process also needs to be looked at. The minister of finance will present an emergency budget and it’s a reset of [the previous budget], and going forward we are already looking at starting at point zero [zero-based budgeting], which is going to be the new order of the day.”
Zero-based budgeting is an approach that requires all expenses to be justified for each new period. It starts from a zero base and every function within an organisation is analysed for its needs and costs.
Ramaphosa also said the Covid-19 crisis creates an opportunity for the government to restructure and create a much more inclusive economy.