A radical reappraisal of the funding model for state-owned entities, including listing, has been proposed by the Phiyega committee, which has been studying how to rationalise more than 700 institutions.
MPs considered the presidential review committee’s (PRC’s) report on funding and the financial viability of the entities yesterday. Much of its focus is on unsustainable state-owned enterprise (SOE) debt.
The PRC, headed by national police commissioner Riah Phiyega, was critical of servicing infrastructure debt by relying on “exorbitant increases” in tariffs “as exemplified by funding methods being used… by Transnet, Eskom, Airports Company SA and those proposed by theSA National Roads Agency for Gauteng’s freeways”.
It suggested adoption of the Chinese model, where the state took “full responsibility” for infrastructure investment rather than relying on crippling “short duration debt”.
While recent figures were not available, MPs were informed that over a 10-year period to 2010, SOE and water utility-listed domestic debt rose from R63.3 billion to R183.3bn. A KPMG study, reported the committee, found total debt was R723bn, up from R225bn.
The PRC, set up by President Jacob Zuma, said the scale of the debt “is not sustainable so that SOEs will have to pursue other options to fund the [government’s] projected colossal infrastructure requirements”.
One of the options proposed to Performance Monitoring Minister Collins Chabane is “open market listing on the JSE. Partial listing can offer the equity finance option,” the report proposed, noting that the private sector should partner with SOEs “to deliver on the provision of both economic and social infrastructure”.
The committee said it was concerned that the JSE had initially rejected the use of a “golden share”, which would give the government additional rights that other shareholders did not enjoy. However, the review committee consulted with the JSE, which said it would reinstate it “for a limited period for listings by SOEs”.
The JSE could not comment.
A golden share is a nominal share that can outvote all others in specified circumstances. It is normally held by a government organisation or company undergoing privatisation and changing into a stock company.
Concern in the government that it could lose control over SOEs would be assuaged by a golden share and also through “policymaking leverage” or shareholding control through retaining a controlling interest.
South Africa has 715 state-owned institutions, including eight super-enterprises that fall under the Department of Public Enterprises.
Committee deputy chairman Glen Mashinini said: “At the start of its investigation, the PRC received a list of recognised SOEs from National Treasury [of] 300 entities. This figure may increase as further investigations are conducted.”