Fin24

Gigaba: Private firms fuel debate

2011-09-07 12:14

Johannesburg - The conduct of some private companies is fuelling the debate on nationalisation, Public Enterprises Minister Malusi Gigaba said on Wednesday.

"There is a growing underlying legitimacy crisis regarding whether the private enterprise is a 'socially responsible' institution, capable of both developing the economy in a sustainable manner and equitably sharing the benefits of economic growth and development," Gigaba told the Black Business Summit in Johannesburg.

"I think it is this legitimacy crisis that underlies calls for nationalisation and such like," he said in a speech prepared for delivery at the event.

"The behaviour of a range of private companies, including some privatised state-owned enterprises, is providing plenty of fuel for this debate."

He was referring to the debate on whether to nationalise South Africa's mines and banks, after calls by ANC Youth League leader Julius Malema.

In response, the ANC is conducting an independent study on whether nationalisation is viable and will discuss the findings of the study next year.

Gigaba said he was regularly asked whether state-owned enterprises (SOEs) should be privatised.

"Somehow, there is that old assumption, ideologically informed, that SOEs are inherently inefficient, incompetent and corrupt relative to the private sector and that therefore if they were privatised, they would discard all these bad habits.

"If we may be allowed to pose the question: is there anything intrinsic in the private sector that makes it more efficient and competent? or, posed differently, is there anything in the public sector that makes it intrinsically antithetical to all of this."

SOEs had an important role to play in developing vital economic infrastructure, managing state assets, and driving the transformation of customers and suppliers, he said.

Gigaba asked whether it made sense to privatise national assets, or to allow foreign multinationals to take control of strategic industrial capabilities.

"I think there is little doubt that we will be extremely cautious in the future around who do we trust with the ownership of strategic national assets."

Gigaba compared the behaviour of SOEs with that of private companies, saying SOEs invested their free cash to support growth.

"This is in strong contrast with the reality that private companies are sitting on cash equivalent to 18% of GDP."

SOEs were also building new industrial capabilities, contributing to skills training and involving local communities.

Gigaba recognised that SOEs had their problems, such as inefficiency, not transforming fast enough, and not investing fast enough to make up for the historic infrastructure gap.

"However, what is indisputable is that as government we have the will and the intent to create businesses that are supporting our long-term economic development agenda for the benefit of the society as a whole."

Gigaba said the ANC supported a mixed economy approach where both the public and private sectors played a vital role in support of economic growth and the creation of equality.

"But the fundamental issue in determining whether the state needs to make a direct investment in a commercial enterprise is whether the private sector can be trusted to behave responsibly in developing a sector, particularly if government regulatory capacity is weak," he said.

Comments
  • ZumaGabe - 2011-09-07 12:36

    Ja bru, dont display your absolute ignorance of economics and business so in public. This is a nice debate to have with your mentors Lenin, Stalin, Chavez and that old fart in cuba. Can you believe the utter stupidity from a cabinet minista ?

  • Dr. Zeek - 2011-09-07 12:47

    No, Minister, the issue is whether Government is the legitimate custodian and distributor of a Trillion Rand in tax revenue. A further issue is whether Gov should be entrusted with any "strategic national assets" AT ALL, when one notes the complete and utter chaos at the landbank, transnet, SAA, hospitals, military, police, schools, transport, roads, justice...in fact, EVERYTHING Gov touches is an unmitigated disaster. Except, of course, that lovely, insulated Gravy Train you all ride one with such flatulent grace.

  • Nasdaq7 - 2011-09-07 12:57

    Private companies get money from private individuals and foreign investors - the world's wealthy individuals have trillions of dollars in savings which they can invest anywhere in the world. Government gets its money from South Africans in the form of taxes. Our savings and taxes provide a limited source of income for the government while foreign investment from wealthy individuals in the world is virtually unlimited. You won't get 7% growth a year if you rely on the savings and taxes of South African individuals. Government controlled companies cannot raise investment to expand their businesses from taxpayers alone. If you ask these types of questions you have no clue how an modern economy works.

  • Gierg Seiznem - 2011-09-07 12:59

    "If we may be allowed to pose the question: is there anything intrinsic in the private sector that makes it more efficient and competent? or, posed differently, is there anything in the public sector that makes it intrinsically antithetical to all of this." Yes, it's called the profit motive, which forces private firms to produce as efficiently as possible or get better by a competitor. SOEs don't have this because a) government officials have terms of office i.e. they aren't concerned about long-run objectives (or at the very least, have the short-term to medium-term as the priority); b) public entreprises are funded by the taxpayers i.e. the temptation exists from government's to run business inefficiently because they don't face the risk of competition or can legislate away serious competitive activity; c) the main interest of the government is (or should be) the will/interests of the people (the majority of citizens) - obviously, therefore, social goals are government's aims, not the efficient use of resources (the efficient use of resources is important so that unnecessary waste, in all senses, isn't generated); d) government officials have less risk of losing there jobs based on poor performance (a fact we see all to often in the media). There are other reasons, and more depth to each suggested, but these are some thoughts on the issue.

  • buckie1917 - 2011-09-07 13:07

    To answer your extremely naive question Mr. Gigaba: Private sector companies are owned by shareholders who have their wealth invested in those companies and not only care about results but take action when they are not good. Public sector companies are owned by government whose employees have nothing to lose if those companies don't perform, don't care about their results, and are largely incompetent to effect change.

  • Nasdaq7 - 2011-09-07 13:27

    JSE listed companies also follow the strictest of accounting standards, thus limiting corruption because their financial results are independently audited by accounting firms quarterly. They focus on profit - the more profit the faster the businesses can grow and the more jobs they can create - they are not influenced by politicians. Politicians would for example forbid certain companies to expand outside the borders of the country - see Eskom not building new power plants, forbid firing of workers, eventually those businesses stagnate in the long run due to political interference because they do no focus on profit, only winning the electorate, look at the SABC's billion R losses, Eskom's R385bn shortages, Telkom's poor performance, compare their performance to that of global giant MTN ... this is common knowledge. South Africa should stop swapping ministers in unrelated sectors. The minister of education becomes minister of Defense, etc. You shouldn't do that. Promote skilled, specialized and educated people as ministers so that they can use their skills, education and experience in a specific field.

      Appietrader - 2011-09-07 18:02

      Noble idea of skilled ministers, where dot you get them from??? The ones that was qualified to do the job was "fired" only the yes boss lot remained, with an education an skills that leaves much to be desired???

  • MidmarMile - 2011-09-07 13:27

    The goal of a private company is to maximise shareholder's returns over the long term. This results in efficiency being one of the main driving forces. The goal of the state owned enterprise (SOE) is to "develop vital economic infrastructure, manage state assets, and drive the transformation of customers and suppliers". This not not maximise efficiency at all. Recent case in point: Murray & Roberts ran at a loss and the media (print and radio) went to town on it; SAA runs at a loss and none of us bat an eyelid!

  • Totman - 2011-09-07 13:45

    The idea of protecting what is yours is very noble, but nowhere is there one example that we can use to say that it will be the right thing to do. What make us so special? I can't think of any reason that gives us a better change. To the contrary, we are on a worst foundation than other countries that failed. I belief you find corruption and strange dealings in the public as well as the private sector, but for some reason the private sector create profits and still develop/expand more than their pubic counter parts. When a public sector expend it becomes more uncontrollable and costly. I would rather suggest that we allow private companies to make there profits, but build some development conditions in, into their rights. If we like it or not, money will always rule. Why are we not rather using that to our benefit.

  • oistar - 2011-09-07 13:53

    The conduct of some black people is also fuelling the race debate.

      lungiez@24.com - 2011-09-07 15:37

      Black only?

  • braamc - 2011-09-07 13:53

    "If we may be allowed to pose the question: is there anything intrinsic in the private sector that makes it more efficient and competent? or, posed differently, is there anything in the public sector that makes it intrinsically antithetical to all of this." Yes, public sector top positions are given to black politically connected but incompetent individuals while private sector top positions are given based on the individuals past performance not skin colour or political affiliations.

  • Appietrader - 2011-09-07 14:10

    State controlled enterprises provide jobs only for pals and are 100% corrupted. How can private owned businesses fuel this stupid nationalization nonsense. They do what they must do, do business. Social welfare are the state's job not private enterprise. What is the Minister smoking/drinking?

      Gore - 2011-09-07 15:26

      Probably, Johnnie Walker Blue, Bells etc

  • Bobby - 2011-09-07 14:44

    just dont get it do you? The state is suposed to create the environment in which business can grow and create jobs. YOU'RE NOT DOING THAT!

  • GT - 2011-09-07 15:01

    The failure of the state to deliver services with the MASSIVE funds they have is to blame. I have not seen 1 minister ever fired for incompetence in 17 years... THAT is the problem

  • Gore - 2011-09-07 15:34

    There should be standing qualification to be a minister. With questions like these, thats why everything goes down when a Minister is clueless. At times media should just tell a minister - nothing will be published when they are called to non events like these.

  • zackie - 2011-09-07 15:41

    the anc govt has not proven their ability to run any state co eskom, transnet etc..without some form of major corruption or scandal

  • W Mukori - 2011-09-07 17:08

    It is not a matter of political ideology that SOE have failed to delivery masses prosperity; it is a historic fact. All State who imposed SOE, do so in the name of the masses. The tyrannical regimes silence the protestations of the people suffering the adverse effects of the wasteful nature of SOE. Minister Gigala, your ANC government has failed to meet the economic aspirations of the people because your party did not have the visionary leaders required to harness SA’s full economic potential and deliver the mass prosperity. As if that was not bad enough, the regime’s failure to deal with corruption was allowed this curse to infect and spread rendering the government impotent to act and defend on matters of public interest and common sense. Corrupt and opportunistic individuals like Malema are “cashing-in” on the ANC’s failure to deliver decent housing, jobs, etc. to the majority by offering them a short-cut out of their lives of poverty and want; the forced take over of white owned farms, mines, etc. Of course this will turn the bad economic situation of the masses into a complete nightmare as happened in Zimbabwe. Minister Gigala and his fellow ANC leaders will very soon embrace nationalisation and all the other Malema hare-brain schemes for no other reason other than that it is politically expedient to do so. But of course Minister Gigala can not admit that and so has to cast it as an ideological shift!

  • Boerseun - 2011-10-05 09:46

    Gigaba face the truth: The ANC is a failure and most people will never be better off under your silly policies. It's time to shove off and give someone else a chance to do what is right.

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