10. Juni 2009

South Africa: Embattled State Firms Could Be Sold Off - Hogan

Barbara Hogan has warned unprofitable state-owned entities that they cannot be bailed out indefinitely Public Enterprises Minister Barbara Hogan yesterday warned unprofitable state-owned enterprises that the new administration might be prepared to sell them if they continued to underperform as the state could not afford to bail them out indefinitely.
She conceded, however, that selling any of the businesses in today's economic environment would be extremely difficult, not to mention the stiff political resistance that such a move would encounter.
In a fundamental shift in policy from the "hold on to them at all costs" approach of former public enterprises minister Alec Erwin, Hogan said yesterday the continued state ownership of unprofitable businesses would become increasingly questionable if they continued to drain the fiscus.
In her first public comments on her portfolio since her appointment, Hogan said at a briefing of Parliament's public enterprises committee on her department's budget that it would be extremely difficult to justify further bail-outs for state companies when there were so many other demands on the fiscus and when revenue was shrinking. She did not single out any of the entities.
Hogan said the economic crisis was not conducive to making a decision about whether state- owned enterprises should remain in state hands. Many of them were in financial distress, and it would be difficult to find an interested buyer.
Nevertheless, she said, the question of ownership was a policy issue that had to be engaged "fundamentally". Each of the enterprises would have to be looked at individually to see what had been achieved and how they had been affected by the recession, before making a judgment call.
The Cabinet and the Treasury would want to know how long the state could support companies that were not performing financially.
"That is a legitimate question, and that is an added consideration that we would have to look at as we started evaluating our portfolio," Hogan said in an interview.
"We are living in straitened times, and don't have the luxury of rising revenues to be able to give a turnaround strategy to take its time to work itself through. We are more constrained at this stage.
"Certainly I do believe that there is no longer space for state- owned enterprises that are running with huge inefficiencies."
At the same time, Hogan emphasised the critical and strategic role Eskom and Transnet played in providing the infrastructural backbone for the economy. This would be a consideration. She supported Eskom's 34% tariff increase, saying the utility had to be able to recover some of its costs.
Democratic Alliance public enterprises spokesman Manie van Dyk welcomed "as a breath of fresh air" her pragmatic, more open- minded stance.
Van Dyk said Hogan's comments indicated she would bring a more disciplined, firmer approach to the performance of public enterprises, and would not give them as much leeway as the "ideologically rigid" Erwin, who had been willing to grant them a lot of turnaround time.
Van Dyk also welcomed her statement that each enterprise would be assessed individually as to its sustainability and viability, and on whether it should be sold.
"For the first time, public enterprises are going to have a minister that is going to keep a finger on them." Van Dyk estimated that R100bn of public money was spent on propping up failing state institutions between 2004 and last year. (Business Day)

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