Cape Town - It is necessary to drive investment,
efficiencies and transformation in state-owned enterprises (SOEs), their
customers and their suppliers to unlock growth, create jobs and develop skills,
Public Enterprises Minister Malusi Gigaba said on Wednesday.
"The department is embarking on a paradigm shift to
ensure proper alignment between SOE performance and executive or directors'
remuneration," he told the National Assembly during debate on his budget
vote.
However, this shift required patience and careful
consideration to ensure ultimate successful implementation.
Gigaba said the rationale for SOEs was the developmental
mandate they had which related to services provided in poorer parts of the
country, skills development, industrial opportunities they created for local
suppliers and many more.
There was therefore a need for innovation in SOE governance if the new vision was to be achieved.
These innovations would focus on five key areas that
related to planning, funding, procurement, productivity improvement in the SOEs
and integrating SOE developmental initiatives more effectively with overarching
government programmes.
The sharp decline in public investment in infrastructure in
South Africa between 1976 and 2004 had led to a significant backlog in
infrastructure investment. This created a significant constraint to investment
and growth in key SOE customer sectors, he said.
As commercial enterprises, the SOE plans were based on the
funds they could raise off their balance sheets.
"Clearly there is a funding gap between the required
investment to unlock growth in customers and these existing investment
plans."
Secondly, a narrow approach by SOEs would ignore what
economists referred to as positive externalities.
These could be, for example, the societal benefits to the environment of
moving more passengers and cargo from road to rail, the foreign exchange
benefits of reducing the nation's fuel bill and improvement to commuter safety.
"Consequently, the department will continue to put
considerable effort into the formulation of a new development-focused planning
paradigm."
No single institution, including the fiscus, could fill the
funding gap, he said.
"We need to start engaging creatively with key
stakeholders in the private sector to see how we can qualitatively increase the
rate of investment to fill this gap.
"Our economy is characterised by very large mining,
industrial and financial services companies that have the most to gain from an
accelerated infrastructure programme, and with whom we need to forge social
compacts to unlock their balance sheets and actively build funding partnerships
to speed up the rate of investment in infrastructure and in our strategic
customer sectors.
"We need to begin this dialogue that aligns private
sector players with our national economic objectives through concrete investment
processes," Gigaba said.
Another area of focus pertained to leveraging capital and
operational procurements to promote investment in relevant industrial
capabilities.
"Consequently, we have implemented the competitive supplier development programme that requires the SOEs to integrate supplier development considerations into the heart of the procurement planning and execution processes."
This had been complemented by the fleet procurement approach
that aimed to provide a 10- to 15-year consistent demand platform for building
advanced industrial capabilities in relevant supply chains.
Both programmes had the objective of moving from a
transactional relationship between the SOEs and their local and international
suppliers to longer-term developmental partnerships, based on the continuous
building of national industrial capabilities.
"We realise that the quality of service delivery of
some SOEs is below acceptable levels in key areas," he said.
It is necessary to ensure that SOE operational efficiency is
continuously improving, even as investment programmes are rolled out.
"Improvements in productivity simply mean that we are
using our assets more efficiently - producing more with less."
Consequently, a programme of bi-monthly meetings with the
chairs and CEOs of the SOEs is being implemented.
These meetings will systematically identify areas requiring
productivity improvements, and define interventions in these areas.
The design and implementation of these interventions will be closely monitored by the department.
This forum will also focus on concrete targets for the developmental mandate of SOEs, Gigaba said.