PUBLIC SECTOR INSIGHTS | 12 MARCH 2018

Why state owned companies
need private sector involvement

Absa | Corporate and Investment Banking > Insights and Events > Why state owned companies need private sector involvement
Stephen Seaka Author

Steve Seaka

ME: Public Sector and Growth Capital

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All over the world, the debate between those who want more government involvement, and those in the private sector who believe prosperity and job creation can best occur with less government, is happening.

South Africa has more than 700 State-Owned Companies (SOCs) which together make the government an important player in the economy – or rather, should be.

Ratings agencies have said that if the country did not have ailing SOCs, we would not be downgraded. With ailing track records, it is clear that change is required.

Malaysia is one success story of how SOCs can be run efficiently

The correct way of doing business is to set the standards at CEO level. There is a need for the executive committee to have a mix of people with business backgrounds, as well as those who specialise in that particular industry.

South Africa struggles with this – the government needs to change laws to allow for more private sector people to be brought in as Ministers.

A cross pollination of people with private sector experience taking roles in public service is unusual in South African – rare examples include Mark Barnes at the helm of the Post Office, and Kevin Wakeford Chief Executive of Amscor.

There are also examples where CEOs don’t listen to their boards and instead take instruction and receive protection directly from senior people in government.

For SOCs to be successful, management must be able to perform its duties without political interference. Government is now talking about selling non-core assets, an unpopular choice five years ago but one which there is little option about in the current economy.

Infrastructure investment in the water and sanitation sector needs a helping hand from a variety of role players

Already, Nomvula Mokonyane, the Minister of Water and Sanitation in South Africa, has proposed private-public sector partnerships will help keep SA’s taps and pipes open. A national dialogue around water security has started, and Absa is talking to a number of municipalities about how alternative water source projects can be financed.

In Gauteng, without any seawater to desalinate, we are in discussions with Rand Water about cleaning up acid mine drainage and purifying these water sources. Broadly-speaking, Absa believes municipalities must diversify their sources of funding and become part of the bond programme to raise cash. There is a much of appetite from investors in this space, as we have seen from previous City of Cape Town and Rustenburg Municipality deals.

Absa is committed to working towards making a real difference to people’s lives, and has been building relationships with public sector organisations for well over a decade.

It is apparent that the ultimate solution is neither total reliance on government nor the private sector, but rather, a public-private partnership to bring prosperity and economic progress to our citizens.

Stephen Seaka Author
Steve Seaka

ME: Public Sector and Growth Capital

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