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GLOBAL ratings agency Moody’s this week warned South Africa’s state-owned enterprises (SOEs) to learn to generate more wealth and in the end become self-sufficient.
This statement was made against the backdrop of these entities’ poor performance, with some like SAA needing bail-outs and becoming a constant drain to state coffers.
But according to Deputy President Cyril Ramaphosa, not all 700-odd SOEs are performing poorly.
READ: Not all SOEs performing badly - Ramaphosa
“Some of them are even able to pay a dividend to the fiscus. A few are operating in difficult markets: airlines, post office, energy. These are very difficult markets,” he told Parliament on Wednesday.
“We are going to straighten them out and they are going to start performing well,” he said. At least Ramaphosa agrees that something has to be done to fix these entities.
But the problem of poorly performing SOEs is not only unique to South Africa. There have been countless instances of ineffective parastatals all over the globe, including in the developed world.
But even though fire-spitting capitalists do not like to believe this, there have been several successful state-owned businesses right through the history of capitalism.
History tells us that during the 19th -century, Japan and Germany started state-run factories in a bid to jump-start shipbuilding and steel industries, which were considered too risky for private sector investment.
For the 50 years following the end of World War Two, many European states used SOEs to advance technological industries.
A good example of this is France, which used SOEs like construction firm Saint-Gobain, telecommunications equipment firm Alcatel, carmaker Renault and Thales, an electronic systems company, to boost its economy. Other European countries like Finland also had self-motivated SOEs.
It does not end there.
Singapore, the world’s fourth-biggest commercial centre, is the most spectacular model. It has a truly serious state-owned economy.
In Brazil Petrobas, the country’s state-owned oil firm, is among those few companies leading the pack in deep-sea drilling sector. And the list goes on and on.
No doubt some of South Africa’s SOEs can compete with the best in the world, as long as they are well run.
The speed with which South Africa is being pushed towards deepening privatisation can be slowed down when it becomes clear to all and sundry that the history of capitalism is filled with very effective SOEs.
The ruling ANC and its alliance partner, the SACP, have tried to put this case forward but the poor performance of these assets have not helped.
However, it came as great relief this week to hear Ramaphosa say the country is currently scrutinising the Chinese model of running SOEs.
China has accomplished a remarkable feat and its state-owned firms played an important part in developing its economy.
Ramaphosa’s comments will give something of lasting benefit to South Africa.
With an unemployment rate of over 25%, South Africa needs to do everything in its power to improve the moribund economy. Let the proponents of privatisation think again about SOEs.
*Mzwandile Jacks is an independent journalist. Opinions expressed are his own.
