SOE reform is imperative for sound Budget
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JOHANNESBURG - FINANCE Minister Tito Mboweni could outline further privatisation of the government’s non-core assets when he tables his Budget next week in a bid to boost investor confidence and private participation in the economy.
The government has begun disposing of its poorly performing non-core assets in its state-owned enterprises (SOEs) to lessen its financial burden following their shrinking balance sheets on Covid-19 impact.
The Airports Company South Africa (Acsa) last week started seeking advisers to investigate options to monetise its R7.7 billion investment property portfolio to mitigate against the adverse impact of Covid-19 although Acsa has said it won’t sell assets.
Acsa has also sold its 10 percent stake in Mumbai International Airport for roughly R1.2bn after 15 years of investment.
SA Express has also been sold to a consortium made up of former employees, Fly-SAX, for R50 million after the regional airline was placed into provisional liquidation in April 2020. Though Mboweni has been a proponent of privatisation, both the Department of Public Enterprises and National Treasury were mum on whether these were the first of many sales.
Mboweni has previously hinted at selling the government’s stake in fixedline operator Telkom as well as prime properties on the Cape’s waterfront to raise funding for struggling SOEs.
The government is already looking for private equity partners for the grounded SA Airways following another R10.5bn bailout and cutting of more than 3 000 jobs.
State arms manufacturer Denel is one of the government companies that has been struggling to pay salaries from month-to-month for the past two years due to mismanagement.
Economists on Friday said that the move to sell some non-core state assets would not only boost investor
confidence, but save taxpayers a lot of money in the long run.
Old Mutual Investment Group chief economist Johann Els said more private sector involvement in the economy would also show that the government was open for business.
Els said privatisation was not about making money, but about creating an environment where the private sector can thrive and create jobs while the
government remained as a regulator.
“It’s all about creating confidence. It should be about economic growth and creating jobs. Nobody is going to pay the money those companies are worth in real terms,” Els said.
“Privatisation is also going to reduce the drag in fiscal positions as private sector companies will most likely run these industries better than the government.”
The sale of government assets has been a thorny political subject in South Africa, with some stakeholders fearing minority business takeover at the expense of taxpayers.
Anchor Capital’s investment strategist Nolan Wapenaar said it was unfortunate that well-performing state-owned companies like Acsa had been forced into financial turmoil by the impact of the Covid-19 in the aviation industry.
Wapenaar said one of the consequences of state capture was the hollowing-out of expertise, resulting in the government’s ability to run these institutions being greatly diminished.
“The selling of some government assets will be received well by private sector players,” Wapenaar said. “Ultimately, a lot of investors are of the view that the government must provide the rules and the private sector must run businesses. The government never has the money to bail these entities out.”